Och-Ziff growth highlights hedge fund recovery

Date: Thursday, January 7, 2010
Author: Helia Ebrahimi, Telegraph

Och-Ziff Capital Management, the owner of a stake in retailer Debenhams, has underlined the recovery in the hedge fund industry by recouping most of 2008's losses with a return to form last year.

The turnaround was powered by its flagship OZ Master Fund which recorded growth of 1.1pc for December, lifting its return for the whole of 2009 to 23pc.

The return to positive territory also meant that Och-Ziff's OZ fund has become one of the first hedge funds to pass its high water mark level – the fund's highest value and the threshold that managers have to surpass to earn performance fees from investors again.

Regulatory filings in New York show that all four of Och-Ziff's hedge funds grew last month, with the firm's assets under management up by $700m (£438m) in December to end the year at $23.5bn – some 6.3pc higher. That's in stark contrast to the outset of 2009 where Och-Ziff disclosed assets had fallen by 25pc.

The figures highlight the renewed interest in the sector by investors who have begun ploughing money back after massive redemptions left the industry fighting for survival.

More than 2,100 funds have been liquidated since the end of 2007. But after four consecutive quarters of net withdrawals, hedge funds showed a net asset inflow in the third quarter of 2009, increasing the industry's assets to $1.5 trillion. The average fund returned 19pc in 2009.

Och-Ziff's European fund, which made a £47m loss on its investment in brewer Cobra when it fell into administration last year, rose 0.3pc in December and 16.3pc for the year.

The firm, which was founded in 1994 by former Goldman's star Daniel Och in partnership with the Ziff family, hit the headlines last year when it bought an 11.5pc stake in Debenhams from private equity house TPG.

It is also a shareholder in budget retailer Peacocks and backed the Glazer family in its acquisition of Manchester United.

Och-Ziff helped fund the Peacocks and Man Utd deals with the controversial high yield payment-in-kind notes which can accrue massive interest payments when companies are sold.