The Morning Brief: Och-Ziff Close to Settling Bribery Charges
Och-Ziff Capital Management Group is close to finally settling bribery charges with the Federal government. According to Bloomberg, the New York-based multistrategy firm headed by Daniel Och will pay about $400 million under a deferred-prosecution agreement. Under the settlement with the Justice Department and the Securities and Exchange Commission, an Och-Ziff subsidiary will plead guilty to paying bribes to African officials, according to the report.
Och-Ziff has been in negotiations with the federal government for five years over the charges, which stem from the placement of funds by a foreign sovereign wealth fund in Och-Ziff in 2007 and investments by some of its funds in a number of African companies. Bloomberg explains that Michael Cohen, who headed Och-Ziff’s London operation, worked on mining deals that involved paying the bribes. Cohen and others are still said to be under investigation.
Investors apparently are happy with the deal, even though it has not been officially announced. Shares of the largest publicly traded hedge fund firm surged 5.7 percent, to close at $4.25.
The firm recently added $214.3 million to the $200 million reserve it established in anticipation of a settlement. In addition, Och-Ziff said at the time that some of its partners were discussing the possibility of committing as much as $500 million to the firm to help fund possible settlements.
More bad news for the hedge fund industry. Rhode Island’s State Investment Commission agreed to cut its hedge fund allocation by nearly half, to $500 million, according to the Wall Street Journal. This works out to 6.5 percent of the Commission’s total $7.6 billion in pension assets, down from 15 percent. The decision to scale back its hedge fund investments was due to performance and fees, according to the report. The pension will instead invest this money in stocks and bonds. Over the past three years Rhode Island’s equity hedge fund portfolio posted annualized returns of 3.26 percent, while other hedge funds gained 4.02 percent--less than the 5.89 percent annualized return generated by all of its holdings during the same period. “Going forward we will only remain in funds that deliver consistent performance and strong returns,” said Rhode Island General Treasurer Seth Magaziner, according to the Journal’s report.
John Thaler is mulling a comeback. The Tiger Management descendant who shut down his JAT Capital Management in 2015 is thinking about launching a new fund, according to Reuters, citing two people familiar with the matter. But launching a fund is one of several career options that Thaler is considering, including running a family office or turning to philanthropy, according to the report.
Thaler is a so-called Tiger Grandcub because he previously worked for Tiger Cub Chris Shumway’s Shumway Capital. He launched Greenwich, Connecticut-based JAT in 2007 specializing on the kinds of stocks popular with the Tiger set: technology, Internet, telecommunications and media. Thaler produced a sort of feast-or-famine record at JAT. His fund was up by double digits in every one of his profitable years. However, it also lost 11.3 percent in 2014 and 19.6 percent in 2012. Thaler’s fund had gained 6.3 percent in the first half of 2015 when he returned capital to investors. At the time he was managing about $1.7 billion, down from $3 billion at one time.
Shares of Tempur Sealy International plunged more than 22 percent on Wednesday, after the mattress maker warned that sales for the quarter would be below earlier guidance. One big loser was Discovery Capital Management, the eighth-largest shareholder. The stock is the sixth-largest U.S. equity position of the South Norwalk, Connecticut macro hedge fund firm headed by Tiger Cub Robert Citrone.
The car rental stocks that sold off on Monday continued their slide on Tuesday. Shares of Hertz Global Holdings fell another 3.1 percent, while Avis Budget Group dropped 2.7 percent — one day after they fell more than 10 percent and 8 percent, respectively. As we noted yesterday, New York-based Glenview Capital Management is a major holder of both stocks, while several other hedge fund firms also have positions in the two stocks.