Daniel Och’s Och-Ziff Capital Management announced a quarterly loss on Tuesday and revealed that it added another $214.3 million to the $200 million reserve it established last quarter in anticipation of settling an ongoing bribery investigation by the U.S. government. Och-Ziff also said that some of its partners are in talks to commit up to $500 million to the firm to go toward funding any settlements. The government is investigating an investment by a foreign sovereign wealth fund in some of Och-Ziff’s funds back in 2007 and investments by some of the funds in a number of companies in Africa.
Och-Ziff reported a second-quarter loss of $184.3 million in distributed earnings, or $0.35 per share, which includes the investigation-related reserve. Excluding the costs for the reserve, earnings would have been 6 cents a share, just missing analyst estimates of 7 cents per share. Estimated assets under management were $39.1 billion as of August 1. Still, shares rallied more than 12 percent on the news, to close at $3.76, as the new reserve fund and partner commitments appear to put a floor on how much the firm will have to shell out for the settlement. But the shares are down more than 90 percent from its 2007 IPO price and nearly 68 percent just over the past year.
The firm said its flagship OZ Master Fund lost 2.1 percent for the first half of 2016. Assets in the firm’s multistrategy fund stood at about $26 billion at the end of the first half, down a hefty $7 billion year-on-year. Much of the decline came of redemptions of about $5 billion from the OZ Master Fund, as well as $2 billion of performance losses. The firm’s OZ Asia Master Fund declined by 3.8 percent in the first half, while its OZ Europe Master Fund fell by 1.7 percent. Its OZ Credit Opportunities Master Fund netted a 4.4 percent gain over the period.
Och-Ziff also said it has appointed former U.S. attorney general William Barr to its board of directors, expanding the board to eight directors. Barr served under President George H.W. Bush and also under President Ronald Reagan as White House Domestic Policy Staff at the Central Intelligence Agency. The appointment of a high-powered attorney to its board comes at a time when Och-Ziff is trying to put the long-running investigation behind it. In its first-quarter conference call with investors, the publicly traded hedge fund firm’s chief financial officer, Joel Frank, said he is “hopeful” the matter will be resolved soon.
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Daniel Loeb’s Third Point Offshore fund, managed by his New York-based hedge fund firm Third Point, gained 3 percent in July, bringing its year-to-date return to 5.2 percent. That compares with a 3.7 percent July gain for the Standard & Poor’s 500 stock index, which is now up 7.7 percent for the year. The fund also dialed up its net exposure to 54.4 percent, up from 42.9 percent last month.
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Shares of Etsy rose 7 percent in after-hours trading on Tuesday after the Brooklyn-based online marketplace for handmade goods beat analyst expectations for second-quarter revenues and raised its annual forecast. The company reported second-quarter sales of $85.3 million and a loss of $7.3 million, or 6 cents a share. Still, the stock is nowhere near the $30 closing price it hit on its first day of trading on April 1, 2015. Shares of the company closed at $12.71 on Tuesday.
Several hedge fund firms are investors in Etsy, most significantly Charles (Chase) Coleman’s Tiger Global Management, which owned a 9.9 percent stake in the company as of the end of the first quarter. Other hedge fund investors at the end of the first quarter included Millennium Management, Point72 Asset Management (Steve Cohen’s family office) and Two Sigma. Etsy surged nearly 18 percent on Monday after investment bank Citi initiated coverage on the stock and rated it a buy.
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Richard (Mick) McGuire III’s Marcato International, managed by his San Francisco-based activist firm Marcato Capital Management, posted a hefty 10.4 percent gain in July, narrowing its year-to-date losses to 2.7 percent, according to a Reuters report. Marcato revealed two big new stakes last week: a 5.1 percent stake in crane manufacturer Terex and a 5.1 percent stake in casual dining chain Buffalo Wild Wings.
