Och-Ziff Suffers Record Redemptions In First 4 Months Of 2017 As AUM Plunges

One year after Och-Ziff Capital settled a bribery case that led to jump in redemption requests and an exodus in high profile executives, on Tuesday the hedge fund reported that it suffered record net withdrawals in the first four months of the year, extending several straight quarters of outflows.

The firm reported net redemptions of $4.8 billion in the first quarter and an additional $2.1 billion from April 1 and May 1. At the same time, assets under management declined from $37.9 billion as of December 31, 2016 to $32 billion as of the beginning of May, a record $5.9 billion decline, and a 24% drop from a year earlier.

As discussed at the time, and as Bloomberg reminds this morning, the redemption wave started when the hedge fund settled a five-year bribery probe and saw founder Dan Och singled out by regulators for ignoring red flags and corruption risks. Och-Ziff agreed to pay more than $400 million in September to settle U.S. charges that it paid bribes to gain business in Africa. Its OZ Africa Management GP unit pleaded guilty to conspiring to bribe officials of the Democratic Republic of Congo.

This led to client withdrawals of over $8 billion.

As Bloomberg adds, the bulk of this year’s withdrawals occurred on Jan. 1, when the company fulfilled redemption requests for the end of 2016. With the decline in assets, Och-Ziff’s revenue from fees plunged by about a fourth in the period compared with a year earlier. Management fees were down 44% to $80.8 million, even as performance fees rose almost 70% to $51.6 million.

Pradoxically, the multi-strategy OZ Master Fund rose 4.1% in Q1, and the OZ Credit Opportunities Fund was up 3.2% but even that was not sufficient to placate investors who juts want to recover their funds once lockups terms expired.

Some highlights from the call, courtesy of Bloomberg, suggest that a trace of optimism may be returning:

  • OCH: ONE QUARTER AWAY FROM END OF SETTLEMENT IMPACT ON FLOWS
  • OCH: AFTER NEXT QUARTER INFLOWS WILL DEPEND ON PERFORMANCE
  • OCH: WE THINK INVESTORS ARE COMFORTABLE WITH OUR PRICING
  • OCH: WE BELIEVE WE'RE IN A POSITION TO DO WELL GOING FORWARD
  • FIRM DOESN'T SEE ANYTHING ABNORMAL IN EMPLOYEE TURNOVER LEVELS
  • HEDGE FUND SAYS IT FEELS GOOD ABOUT RETENTION OF WORKERS

However it remains to be seen if a turnaround is in the cards. Meanwhile, the biggest losers are shareholders who have seen OZM stock drop some 27% in just the past four months to $2.41.