U.S. Markets

Och-Ziff executive to start new unit under fund giant Millennium: sources

NEW YORK (Reuters) - An Och-Ziff Capital Management executive is leaving the company to run a new firm backed by global investment firm Millennium Management, according to two sources familiar with the matter, the latest move in the commodities fund industry after a turbulent 2017.

Chaitanya Mehra, managing director and head of global commodities at Och-Ziff OZM.N, plans to launch the entity backed by Millennium as soon as September with offices in New York and London, two sources told Reuters. The firm will initially trade exclusively with Millennium's capital, one source said.

A Millennium spokesman declined comment. A spokesman for Och-Ziff declined to comment.

Last year, hedge funds and banks posted heavy losses due to muted client activity and volatility in energy markets, leading prominent managers like Astenbeck Capital’s Andy Hall and T. Boone Pickens to shut investment units.

Millennium, led by billionaire Israel Englander, is one of the industry’s best-known firms, a multi-manager platform that oversees some $35 billion in assets. The firm’s flagship fund ended 2017 with a 7.1 percent gain, according to a report by HSBC. This is up from a 3.3 percent rise in 2016 but well below the double-digit gains in previous years.

Mehra’s firm will invest in commodities including oil, one source said. He specialized in global energy and volatility-based strategies at Och-Ziff, which he joined in August 2012 after working as a vice president at Goldman Sachs.

Och-Ziff has been through recent top-level management changes. Plans to name an heir apparent James Levin as CEO to replace founder Daniel Och were abruptly put on hold in December. Instead, later in January the company appointed an outsider, Robert Shafir, as chief executive.

As of March 1, Och-Ziff had an estimated $33.3 billion in assets under management, according to an SEC filing.

The firm’s master fund returned a net 0.6 percent in the fourth quarter while net returns were about 10.4 percent for 2017, according to an investor letter seen by Reuters. Och-Ziff’s commodity business saw choppy returns during the fourth quarter, the letter said.

Funds were hurt in the first half of 2017 on sliding natural gas prices, while others lost ground in the second half on swings in oil prices during Hurricane Harvey.

Hall shuttered his main Astenbeck fund in 2017. Pickens closed his energy fund due to poor performance and his declining health.

Separately, Jamison Capital Partners LP, a $1.5 billion commodity hedge fund, told investors it was closing by the end of January.

Reporting by Devika Krishna Kumar in New York; Additional reporting by Lawrence Delevingne; editing by Diane Craft