By Svea Herbst-Bayliss
BOSTON (Reuters) – Investors pulled $ 2.9 billion out of Och-Ziff Capital Management in the last four months but strong returns may prompt a rethink among clients in the future, the hedge fund company's chief executive said on Wednesday.
“We believe that our multi-strategy (fund) flows will be driven by how we perform,” Daniel Och said on an earnings call after the company reported that its flagship OZ Master Fund surged 8.8 percent in the first seven months of 2017.
The average multi-strategy fund rose roughly 3 percent in the first half, according to Hedge Fund Research data.
On Aug. 1, Och-Ziff managed $ 32 billion in assets. That's down from $ 33.2 billion at the end of the second quarter and $ 42 billion at the end of the second quarter of 2016.
Och-Ziff has faced heavy redemptions in the last year in the wake of a bribery probe, but this year's strong returns have proved a bright spot, helping lift second-quarter earnings.
The company reported distributable earnings of $ 53.3 million, or 10 cents a share, far outpacing Wall Street's consensus estimate for 3 cents a share, according to Thomson Reuters. Stronger incentive income, fueled by the funds' better returns, strengthened earnings.
The OZ Asia Master Fund gained 17.9 percent while the OZ Europe Master Fund was up 4.8 percent in the first seven months of the year, the company said in a statement on Wednesday.
In the first six months of the year, the firm's OZ Credit Opportunities Master Fund gained 5.7 percent and it has returned 19.5 percent in the 12 months to June 30, the company's second- quarter earnings report shows.
Och-Ziff had long been a favorite with pension funds but many left, concerned about headline risk as details of the long-running bribery probe emerged. The company paid more than $ 400 million to settle charges with the U.S. government that it had bribed officials in several African countries.
Redemptions totaled $ 4.8 billion in the first quarter and slowed to $ 1.4 billion in the second quarter.
Och sounded a positive note on Wednesday, suggesting the pace of redemptions would continue to slow.
“We believe that the redemption cycle that started in the second quarter of last year has largely ended,” he said. “We believe that multi-strategy flows will return to being primarily driven by our performance and broader industry trends.”
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