NEW YORK (Reuters) – Och-Ziff Capital Management Group LLC rode bets on Asian stocks and U.S. corporate mergers to strong returns in 2017 – its best showing in years – but remained challenged by succession planning, declining assets and a stagnant stock price.
Its flagship hedge fund, the OZ Master Fund Ltd, gained an estimated 10.4 percent net of fees in 2017, according to a letter sent to investors this week seen by Reuters. That was better than its historical average of 8.86 percent, its highest return since 2013, and above the benchmark HFRI asset-weighted composite gain of 6.52 percent.
The performance, according to the letter, was driven by Asian shares such as Alibaba Group Holding Inc, JD.com Inc and Nintendo Co, and mergers and acquisitions like pharmaceuticals business Actelion Ltd, which was bought by Johnson & Johnson in June, and Aetna Inc’s proposed merger with CVS Health Corp.
The New York hedge fund firm, which goes by “Oz Management,” also made money on U.S. corporate and structured credit and lost on U.S. stocks and convertible and derivative arbitrage, the letter said.
A spokesman for Oz declined to comment.
The strong performance comes amid a stalled succession plan for Daniel Och, the firm’s billionaire founder and chief executive officer.
Oz sent a letter to investors on Dec. 23 saying that it was “not the right time” to promote co-Chief Investment Officer James “Jimmy” Levin to CEO. It added that Och and the firm’s board of directors hoped that the 34-year-old Levin, Och’s longtime protégé and heir apparent, would remain as co-CIO. David Windreich is the other co-CIO.
The December letter was previously reported by the Wall Street Journal and Bloomberg. The Oz communication to clients this week added that “we hope to come back to you in the near future to present the (succession) plan.”
Och, through a spokesman, and Levin did not immediately respond to requests for comment.
One of the few publicly traded hedge fund managers, Oz’s stock price and assets have also not rebounded alongside its performance.
Shares have languished around $4 or below since early 2016 and fell to $2.37 on Friday from around $3.20 a year ago. The issue is not new: Oz went public in November 2007 at $32 a share.
The firm managed $31.9 billion as of Jan. 1, according to the new letter, down from $47.5 billion at the end of 2014 and $37.9 billion at the end of 2016, according to public filings.
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