Och-Ziff posts first ever quarterly loss, shares slump

February 11, 2016 12:58 PM EST

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By Svea Herbst-Bayliss

BOSTON (Reuters) - Hedge fund company Och-Ziff Capital Management Group reported its first ever quarterly loss on Thursday after earning half as much in fees during the tail end of 2015.

The company's stock price fell 15 percent to $4.02, nursing far steeper losses than rivals whose stocks also slid along with the broader market.

The New York-based company lost $36.1 million, or 7 cents a share, in distributable earnings in the fourth-quarter, compared with a $255.4 million, or 50 cents a share, profit in the year-earlier period. Analysts had called for a 0 cents per share in distributable earnings, according to Thomson Reuters I/B/E/S.

Total revenue fell by 50 percent to $342.8 million as incentive income, the amount the hedge funds earn for their returns, tumbled 84 percent to $69.2 million and management fees dropped 11 percent to $148.6 million.

As one of the few publicly traded hedge fund firms, Och-Ziff and analysts focus mainly on distributable earnings which exclude costs from the company's 2007 initial public offering.

Och-Ziff said that it is not paying a dividend this quarter.

"As you all know, 2015 was a difficult year for equity and credit markets globally and 2016 has gotten off to an extremely challenging start," chief executive Dan Och said on a conference call with analysts.

Assets under management, while still very large compared with most hedge fund firms, shrunk to $45.5 billion at the end of the fourth quarter, down 4 percent from the fourth quarter 2014 as investors pulled $1.2 billion out.

Tumbling markets in early 2016 took another bite out of assets leaving them at $43.7 billion on Feb. 1 after investors pulled out another $1.2 billion and declines in performance cost $628 million.

Och-Ziff's flagship OZ Master Fund dipped 0.4 percent in 2015 while its OZ Asia Master Fund climbed 9.6 percent and its OZ Europe Master Fund rose 5.8 percent. The average global hedge fund lost about 1 percent last year. Outflows at the multi-strategy funds totaled $4.7 billion in the quarter.

"We have yet to get a sense of urgency from the management team regarding obtaining new inflows to its core multi-strategy funds, as the team has consistently stated it will focus on its performance while waiting for inflows to recover," Morningstar analyst Stephen Ellis said in a note.

Expenses climbed largely because of higher legal fees related to a U.S. government investigation into Och-Ziff's business in Africa under the Foreign Corrupt Practices Act.

(Reporting by Svea Herbst-Bayliss Editing by W Simon)

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