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August 3, 2010 7:30 pm
The conservatively managed, listed US hedge fund group bucked an industry-wide trend that saw global hedge fund-managed assets shrink by $20bn and the average manager lose 2.5 per cent in the three months to the end of June, according to data from Hedge Fund Research.
Total assets under management at New York-based Och-Ziff remained stable at $25.3bn over the same period, rising to $25.9bn as at August 1 on the back of $300m of net inflows and $300m in performance-related gains, according to a filing on Tuesday with US regulators.
Distributable earnings – a measure of the company’s core profitability – rose to $57m in the three months to the end of June up from $12.6m for the same period in 2009. Earnings of 14 cents per share came in ahead of analysts’ consensus forecasts of 12 cents.
“We remain confident that the long-term, secular growth drivers of assets under management remain intact for the hedge fund industry,” said Daniel Och, the chairman and chief executive, who founded the company in 1994 to manage the Ziff publishing fortune. It was opened to outside investors in 1999.
“Despite recent market volatility, we believe the capital allocation cycle is under way and confidence among institutional investors in this sector remains strong,” he said. “Our performance demonstrates the benefits of our active risk-management process, investment portfolio diversity and consistently low use of leverage.”
Increased income from management fees – a charge of 2 per cent annually on clients’ monies invested – was the principal source of revenue growth in the period. Management fees came in at $107m for the quarter, a 27 per cent increase on the same period in 2009.
Shareholders are still burdened with the cost of the company’s ill-timed listing in 2007, however, at the peak of the credit boom.
With the ongoing costs included, the company suffered a loss of $89.4m, or $1.05 per share thanks to a quarterly charge of $411.8m. It has signalled that IPO-related costs will continue to push it into a net loss for the next two years.
Och-Ziff is still far short of managing the amount of money it did at the peak of its success – $33.8bn in June 2008 – and must swell assets under management if it is to surpass its IPO price of $32 per share, say analysts.
Och-Ziff declared a $0.11 dividend per share. The shares rose 5.39 per cent to $15.12 in New York.
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