Institutional Investor's Alpha Magazine - May 2008 - (Page 28)

ﬁ rms aim to collaborate in the year ahead on sourcing new deals, and al-Ansari is watching the market’s reaction to the IPO closely. “Right now the market is actually having a hard time knowing what to do with the alternative-asset management and hedge fund ﬁ rms that have gone public,” alAnsari says. “But we have every conﬁdence that Och-Ziff will differentiate itself through its monthly earnings and quarterly reporting in the year ahead. The ﬁrm has a very strong, sustainable earnings model.” Still, Och knows that transforming his ﬁ rm into a global powerhouse could alienate long-term investors worried that he will lose focus. Landis Zimmerman, CIO of the Howard Hughes Medical Institute in Chevy Chase, Maryland, is willing to take a wait-and-see approach. “We are always concerned when any ﬁrm starts to migrate out of what it has been good at and starts to do something else — particularly when that something else is illiquid or has a longer time horizon,” says Zimmerman, who has known Och since he ﬁrst invested with him while working as CIO of the University of Pennsylvania’s endowment. “But on the plus side, Dan has always been very thoughtful about how he has built out his business, and we’re pretty conﬁdent that he has given the same sort of rigorous thought to entering the private markets.” SINCE FOUNDING HIS FIRM Och has adhered to certain bedrock investing principles: preserving client capital, mitigating risk and aiming for consistent, moderate returns with minimal volatility. His OZ Master Fund has had annualized volatility of just 4.97 percent since inception, compared with 13.98 percent for the S&P 500. Unlike many of his hedge fund peers, who typically leverage their assets three to ﬁve times, Och uses almost no leverage: just 1.12 times assets as of early May (OchZiff ’s funds typically employ no more than 1.25 times leverage). And despite running a massive business that encompasses various types of arbitrage and long-short strategies, he is still very much hands-on, talking to senior portfolio managers many times a day to help them interpret global market activities. “Ninety percent of what we do at this firm is still boring, grind-it-out, multistrategy investing,” Och says. “That hasn’t changed. We’re still very conservative, very liquid and very patient. But as we see opportunities in the area of special investments, we are going to take advantage of our global reach.” That reach has grown phenomenally in the past decade. After awakening to the popularity of substrategies in the OZ Master Fund, the ﬁ rm carved out dedicated European and Asian investment vehicles — the OZ Europe Master Fund and the OZ Asia Master Fund. Some 300 employees currently work at the ﬁ rm’s headquarters in midtown Manhattan; an additional 125 are scattered among Och-Ziff ’s ofﬁces in Beijing, Hong Kong, London, Tokyo and Bangalore, India. Sameer al-Ansari is CEO of Dubai International Capital, Och-Ziff’s second-biggest investor and a key strategic partner. last month had dropped by one third since the IPO. Backers blame the fall in Och-Ziff ’s stock price on the current economic malaise more than on any inherent weakness in the ﬁ rm’s business model, and Blackstone Group and Fortress Investment Group’s share prices have been similarly afﬂicted. “The fact that his stock is down says less about Dan than it does about the market,” says Richard Fuld Jr., chairman and CEO of Lehman Brothers, whose own company’s shares were battered in March on fears that its subprime exposure would send it tumbling into a deep pit of insolvency in the wake of the near collapse of Bear Stearns Cos. “Unfortunately, anybody who is associated with anything that smells like a ﬁnancial services company is getting pummeled, whether it’s a commercial bank, an investment bank, a hedge fund, a specialty ﬁrm or anything else.” One shareholder in particular has a vested interest in Och-Ziff’s stock performance: Dubai International Capital. In October 2007, nearly three weeks before OchZiff ’s IPO, Sameer al-Ansari, executive chairman and CEO of the Dubai-based international investment company, agreed to acquire 9.9 percent of Och-Ziff’s class-A shares upon completion of the public offering. The two 28 • INSTITUTIONAL INVESTOR’S ALPHA • MAY 2008

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - May 2008

Institutional Investor's Alpha Magazine - May 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Send in the Clones The Good Guys: Outside the Box Cover Story: Welcome to Oz Interview: The Tipping Point Regulation: When Sentinels Go Astray Strategies: Taking Credit Research Center: The Hedge Fund 100 Book Excerpt: Shoot the Messenger Alpha Bytes: VaR Enough? Unhedged: Commentary: Not Your Father's Activist

Institutional Investor's Alpha Magazine - May 2008

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