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UPDATE 1-Och-Ziff Q1 profit lifted by strong incentive income

Thu May 2, 2013 8:12am EDT

May 2 (Reuters) - Och-Ziff Capital Management Group LLC said its quarterly profit more than doubled and easily beat estimates as it earned much higher fees from more investors putting new money into its hedge fund portfolios.

First-quarter distributable earnings, excluding costs related to its November 2007 initial public offering, reached $136.9 million, or 29 cents a share, Och-Ziff said on Thursday. Wall Street analysts expected 16 cents a share, according to Thomson Reuters I/B/E/S. A year ago the company reported $57.3 million, or 13 cents a share, in distributable earnings.

Assets under management stood at $35 billion at the end of the quarter, 16 percent more than a year before. Assets have climbed further in the last weeks to reach $35.6 billion at the end of April.

Management fees rose 7 percent to $126.4 million. But the real jump in earnings was fueled by a dramatic surge in incentive income - fees that hedge funds earn on top of management fees if their portfolios perform well - to $101.3 million from $1.2 million a year earlier.

The bulk of the incentive fees came from one unidentified client that shifted around investments among Och-Ziff's products and also gave the New York-based firm more money to manage.

Long favored by pension funds, including state plans in Florida and Massachusetts, Och-Ziff likes to pride itself on steady returns. This year its OZ Asia Master Fund has gained 10.7 percent while its flagship OZ Master Fund is up 5.45 percent.

The average hedge fund earned 3.78 percent through the end of April, according to Hedge Fund Research data.

"We continued to allocate capital opportunistically across our strategies and geographies, which was central to the excess returns we have been able to generate this year," Daniel Och, the chairman and chief executive said in a statement.

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