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The Morning Brief: Och-Ziff Reportedly Considered Sale
Och-Ziff Capital Management Group, whose stock has been in free fall as the hedge fund giant tries to settle federal bribery charges, mulled selling the firm earlier in the year, according to the Wall Street Journal, citing people familiar with the matter. The New York hedge fund firm spoke with Pacific Investment Management Co. about some sort of deal, including a buyout or a joint venture, according to the story. “We are not contemplating selling any part of the firm or any other strategic transactions,” Och-Ziff spokesman Joe Snodgrass told the paper, which said deal talks are not currently taking place. Shares of Och-Ziff, the largest publicly-traded hedge fund firm, were down 39 percent this year through Wednesday and 70 percent since May 2015. The firm said it had $39.1 billion in assets under management as of August 1—off $5.5 billion since year-end. As we have previously reported, the multistrategy firm is in negotiations with the federal government over 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. The firm recently added $214.3 million to the $200 million reserve it established in anticipation of settling the bribery probe. In addition, Och-Ziff said some of its partners are discussing the possibility of committing as much as $500 million to the firm to help fund possible settlements. The stock surged 6.6 percent on the news, to close at $44.20 on Thursday.
Total assets invested in emerging market hedge funds increased in the second quarter by $4.7 billion, to $189.8 billion, according to HFR. This is down slightly from $191.3 billion at year-end. Altogether, total capital invested in hedge funds globally rose last quarter to $2.898 trillion. Through July, the HFRI Fund Weighted Composite Index was up 3 percent while the HFRI Emerging Markets Composite Index grew 5.2 percent. The best performers are hedge funds investing in Latin America. The HFRI EM: Latin America Index jumped 8.9 percent in the second quarter and another 4.3 percent in July, boosting its total gains for the first seven months to 24.4 percent. Keep in mind the index posted losses in four of the last five years, including the past three.
More trouble for Valeant Pharmaceuticals International. T. Rowe Price Group has filed a lawsuit against the embattled drug maker, accusing it of engaging in “a fraudulent scheme,” which caused the mutual fund complex and other investors to lose billions of dollars, according to the Wall Street Journal, citing a lawsuit filed earlier this week in federal court in New Jersey that was made public on Thursday. T. Rowe rice alleges that Valeant’s related mail-order firm, Philidor Rx Services, engaged in deceptive pricing and reimbursement practices and “fictitious accounting,” enabling it to artificially boost results and reduce competition, according to the lawsuit. The Journal points out that at one time Price owned 21.5 million shares of Valeant, or 6.4 percent of the total outstanding. The position at the time was worth more than $4.5 billion. In a statement, Valeant said it is aware of the filing and has not yet been serve. “This T. Rowe Price complaint repeats allegations and claims as in the pending securities putative class action brought against Valeant by TIAA-CREF,” the drug maker adds. “As with the original complaint, which was filed in October 2015, Valeant intends to defend itself and cannot comment further on ongoing litigation.” The stock fell nearly 3 percent on the news, to close at $29.19.
Highbridge Capital Management roughly doubled its stake in rehab hospital company HealthSouth, to five million shares or 5.3 percent of the total outstanding. The stake, as of August 10, is passive, according to the New York hedge fund firm’s regulatory filing.