Thursday, 11 February 2010

Industry Flows – Inference From Och Ziff Results Announced Today

Och-Ziff Capital Management Group LLC is a quoted company (Ticker:OZM), and as such we may get some insight into industry flows from their disclosures.

For sure, Och-Ziff is only truly representative of hedge fund management companies of its size, tenure, quality, and track record. In each of these regards OZM stands out. It is emblematic of the track record of Och-Ziff that, since the inception of the flagship fund, the Och-Ziff Master Fund has returned 14.5% compound (net of fees) to investors, which equates to a Sharpe ratio of 1.83.

Source: Och-Ziff Capital Management Group LLC

Och Ziff funds, like 60% of all hedge funds, hit new high-water marks in 2009. That, and by inference the returns achieved in 2009, and the size and quality of operations of Och-Ziff Capital Management drew in a disproportionate amount of industry flows last year. The big got bigger as a proportion of hedge fund industry assets in 2009 – this was not just a flight-to-safety argument, but every hedge fund in the world had capacity for new capital in the first half of last year as redemptions given in late 2008 came into full effect. So the biggest and best benefitted particularly because many of the hedge funds in that subset of funds had been hard closed to all investors for some time. Why not invest with Tudor, Moore and Och-Ziff if you can?

• Och-Ziff’s assets under management were $23.1 billion as of December 31, 2009, 4% higher than the $22.3 billion in assets under management as of September 30, 2009 but 14% lower than the $27.0 billion in assets under management as of December 31, 2008. The $3.9 billion year-over-year decrease was driven by net outflows of $8.1 billion, partially offset by performance-related appreciation of $4.2 billion during the year.

• During the 2009 fourth quarter, the $802 million increase in assets under management was driven by performance-related appreciation of approximately $497 million and net inflows of approximately $305 million.

• Assets under management as of January 1, 2010 were $23.5 billion, which reflected January 1, 2010 capital inflows (net of redemption requests received for December 31, 2009) of approximately $400 million.

• Estimated assets under management of $24.0 billion as of February 1, 2010, reflecting capital inflows of approximately $250 million and performance-related appreciation of approximately $250 million

The point to emphasise is that sequence of net investor flows for Och-Ziff went from $305m for the 4th quarter, to $400m for January 1st, to $250m for February 1st 2010.

Dan Och, Chairman and Chief Executive Officer of Och-Ziff, said “We believe that the capital inflow cycle for the hedge fund industry has begun, and that our assets under management will grow over time. Institutional investors remain extremely focused on manager selection, and we remain confident that our track record, infrastructure and demonstrated alignment of interests with our fund investors will continue to differentiate us in the marketplace.”

Dan Och’s statement about their own prospects of drawing investor flow might be true, but if Och-Ziff had smaller flows for February1st than those of January 1st, then the industry experience is likely to be significantly less positive for January and February flows.

HFN reported that there was a very small net outflow from the industry in December 2009, at a time when Och-Ziff was experiencing inflows. Och-Ziff inflows have moderated since. Does that mean that the industry has had further outflows in January?

No comments:

Post a Comment