Och-Ziff has $6.9 Billion in Outflows in First Four Months

(Bloomberg) -- Och-Ziff Capital Management Group LLC, the hedge fund that settled a bribery case last year, suffered net withdrawals in the first four months of the year, extending several straight quarters of outflows.

The firm had net redemptions of $4.8 billion in the first quarter and an additional $2.1 billion from April 1 and May 1, the company said in a statement Tuesday. Assets under management declined to $32 billion as of the beginning of May, a 24 percent drop from a year earlier.

Last year, clients pulled about $8 billion as 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. Several executives also left the firm earlier this year as it struggles to hold onto assets.

The bulk of this year's withdrawals occurred Jan. 1, when the company fulfilled some redemption requests for 2016. Due to clients' varying liquidity arrangements and redemption windows, the company is one quarter away from all clients having had an opportunity to pull their money following the announcement last May that settlement talks were wrapping up, Och said on a conference call Tuesday.

“We're one quarter away from that impact ending,” Och said. “From that point forward we believe that multi-strategy flows will return to being primarily driven by performance and broader industry trends.”

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, excluding certain items, were $80.8 million, down 44 percent, even as performance fees rose almost 70 percent to $51.6 million.

In its quarterly earnings report today, Och-Ziff reported distributable earnings of $35.7 million, or 7 cents a share, beating estimates of 2.5 cents and compared to a loss of $142.5 million, or 27 cents, a year earlier.

Chief Financial Officer Alesia Haas said there was nothing abnormal about the level of turnover in the first quarter, when bonuses are paid and employee departures are typically at their highest.

Bloomberg reported earlier this year that executives Sebastien Mourot, Drew Gillanders, James Keith "JK" Brown and Paula Drake departed the firm. Last year Joseph Samuels, Och-Ziff's head of U.S. equities trading, left.

“If we look at our MDs, EMDs, the investment professionals running businesses, senior infrastructure, we feel very good about where our retention has been,” Och said. 

The multi-strategy OZ Master Fund rose 4.1 percent in the first quarter, and the OZ Credit Opportunities Fund was up 3.2 percent.

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.

Shares of the firm fell 2.9 percent to $2.34 at the close of trading. They have dropped 29 percent this year.

To contact the reporter on this story: Katia Porzecanski in New York at kporzecansk1@bloomberg.net.

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Vincent Bielski