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The Morning Brief: Och-Ziff Multistrat Funds Shed $4.8 Billion

Daniel Och’s Och-Ziff Capital Management Group disclosed that it had $4.8 billion in net capital outflows from its multi-strategy funds over the past 12 months. The New York firm, whose stock is publicly traded, had $29.5 billion invested in the strategy as of September 30, or a little less than 70 percent of the firm’s total $44.1 billion in assets, which include the company’s multi-strategy, opportunistic credit, real estate and equity funds, institutional-credit strategies products and other alternative investment vehicles.

“It’s hard to know exactly what affects flow,” Och said on a conference call Tuesday morning with investors. “Each investor makes his own decision based on many factors, so it’s kind of hard to say. But if we continue to perform we think that product along with our current products are going to do very well. Over our 20-year history…we’ve consistently performed and the fund has consistently grown.”

Separately, Och-Ziff reported that its flagship OZ Master Fund gained 1.83 percent in October, cutting its loss for the year to just 0.32 percent. OZ Asia Master Fund surged 3.78 percent last month and is now up 6.71 percent for the year while OZ Europe Master Fund climbed 0.89 percent in October and is up 4.65 percent for the year.

In the conference call, Och said that in the third quarter the multi-strat fund’s equity portfolio “underperformed its fundamentals,” adding that the period was challenging for financial markets globally. “With few exceptions, we haven’t changed our assessment of the embedded value for most of our strategies,” Och added. “We like what we own and have taken advantage of the recent market dislocation to increase many of the ideas we feel more strongly about.”


Daniel Loeb’s Third Point Offshore fund rose 4.7 percent last month and is now at break-even for the year. Its longs were up 5.7 percent but its shorts lost 1.6 percent. The New York eclectic fund also lost 0.5 percent from its credit and other portfolios. Entering November, it kept its net long exposure at around 50.5 percent, roughly consistent with the previous month.


October was another ugly month for William Ackman’s Pershing Square Capital Management. The concentrated New York hedge fund firm, which has a big bet in the plummeting shares of Montreal, Canada-based drug company Valeant Pharmaceuticals International, lost another 7.3 percent last month and is now down 19 percent for the year.


Barry Rosenstein’s Jana Partners, based in New York, rose 2.7 percent in October, trimming its loss for the year to 4.1 percent.


Good news for David Einhorn’s Greenlight Capital. Shares of Consol Energy, one of the New York hedge fund firm’s largest disclosed longs, surged nearly 5 percent to close at $8.20. This is surprising given that earlier Tuesday morning Deutsche Bank cut its rating on the coal and natural-gas company from Hold to Sell and reduced its price target from $13 to $6. In a note to clients, the bank cited reduced natural-gas prices and “lower coal realizations.” Of course, the analyst made these downgrades after the stock plunged 32 percent last month and 35 percent in September.


Ricky Sandler’s Eminence Capital raised its stake in Oakland, California-based Pandora Media by about 20 percent, to more than 12 million shares, or 5.6 percent of the streaming-music company. The New York-based hedge fund firm was the third-largest shareholder as of the end of the second quarter. We earlier reported that nearly two weeks ago shares of Pandora plummeted 35 percent after the company reduced guidance. The stock is still down 37 percent since that day.

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