Och-Ziff Capital Management, one of the first hedge fund managers to go public last year, has reported a USD774.6m fourth-quarter loss that it attributes to a USD3.3bn in
Och-Ziff Capital Management, one of the first hedge fund managers to go public last year, has reported a USD774.6m fourth-quarter loss that it attributes to a USD3.3bn in costs incurred by its initial public offering. Och-Ziff, which reported a USD453m profit for the fourth quarter of 2006, says the cost of the IPO will continue to impact its results for several years.
So-called distributable earnings, which measure profit from the firm’s main hedge fund business without adjusted income taxes, beat analysts’ estimates, boosting its stock price. Assets under management rose to USD33.4bn in 2007; management fees increased 53 per cent to USD135.1m, while performance fees fell 3 per cent to USD625.3m.
Och-Ziff continues to be upbeat about privately negotiated transactions that typically span the area between short-term deals and longer-term buyouts, which are the domain of private equity. The New York firm committed USD7bn in capital to 150 such deals, which typically last between six and 24 months and generate gains of more than 20 per cent with little leverage.
Founder and chief executive Dan Och told analysts in a conference call that the firm has increased its allocation to credit strategies to roughly 10 per cent of assets, comprising senior debt, secured loans and mortgages. Previously Och-Ziff had totally sidestepped the sector, which was upended last summer, but it is likely to add to its positions over the next six to 12 months.
Around two years ago, the firm bought a controlling stake in Residential Credit Solutions, a sub-prime mortgage servicing company, to provide better market insight in troubled times. This unit has bought the mortgages so far and keeps the risk associated with the assets on its own balance sheet.
Members of the US House of Representatives will next week question Snehal Amin, a founding partner of The Children’s Investment Fund, over what has become a bitter boardroom battle between the London hedge fund manager and CSX, a US railway operator. Amin has agreed to voluntarily appear at a March 5 hearing of the sub-committee on railroads where Michael Ward, CSX’s chairman and chief executive, will also be on hand to answer questions.
TCI, which is CSX’s second-biggest shareholder, wants to install five directors of its choice on the company’s board, including TCI founder Chris Hohn, and also wants to split the roles of chairman and chief executive, but CSX is resisting its demands. Congresswoman Corrine Brown, who represents the third Congressional district in CSX’s home state of Florida, will lead the hearing. Among issues likely to be discussed is foreign ownership of US infrastructure assets.
Fortress Investment Group has offered to buy UK-listed firm Mapeley, which buys property portfolios outsourced by the government or corporates and collects rental income from them. The New York manager already owns 50 per cent of Mapeley’s shares; it backed its creation by Jamie Hopkins in 1999 and helped take it public in June 2005. Mapeley is expected to refinance GBP260m of its debt in April, which might prove to be difficult in the current market conditions.
BlackRock‘s investment chief of fixed income expects banks in Asia and Europe to take more credit-related write-downs. Scott Amero told journalists that the impact of such moves should be muted since the market has already priced in additional losses, and expected rate cuts by the European Central Bank would also help alleviate the future blows. BlackRock’s chief equities strategist Robert Doll said investor sentiment toward the battered financial sector remained negative partly due to uncertainty about additional write-downs.
A new report from the US Government Accounting Office warns that the use of multiple prime brokerages by large hedge funds could prove to be risky as no one broker may have all the data necessary to assess the total leverage they employ.