Och-Ziff public debut may be tough sell

By Jonathan Keehner

NEW YORK (Reuters) - U.S. hedge fund operator Och-Ziff, which plans to raise about $1.1 billion in an initial public offering next week, could face a tough reception when it floats shares on Tuesday.

Last month the alternative asset manager, founded in 1994 by former Goldman Sachs trader Daniel Och and the Ziff family, cut the amount it planned to raise by half amid concerns that market turbulence might dampen demand.

But analysts still question the level of shareholder interest in Och-Ziff, which has $30 billion under management.

"I think they're going to have to cut the price," said Scott Sweet, managing director of research firm IPOboutique.com. "I would not be a player in that deal."

The last major asset manager to go public has hardly inspired investors. The Blackstone Group (BX.N: Quote, Profile, Research, Stock Buzz), which had its highly anticipated debut in June, was one of this summer's worst performing offerings and closed on Friday over 20 percent below its initial offering price.

"There's still a serious lingering hangover from Blackstone," said Sweet. "We're in a much, much worse environment."

Since June shaky credit markets have squeezed demand for securities related to subprime mortgages and leveraged loans, slowing deal activity and burdening equity values.

"The environment is getting tougher by the day," said Tabb Group consultant Adam Sussman. "When Och-Ziff cut their offering, I don't think they were pricing in that the credit problem would widen this much.