It’s shaping up to be a tough year for Och-Ziff Capital Management Group, the $33 billion hedge fund that took its stock public last year.
At $17 a share, the company’s stock has been nearly halved from the $32 mark it hit on its November IPO.
And Wall Street watchers are predicting the stock will remain underwater until at least next year as the performance fees – the bread and butter of any hedge fund – continue to get squeezed by lower returns and a slowdown in inflows.
“They’re basically treading water for the time being,” said Jackson Turner, an analyst who covers the stock for research firm Argus, and who expects performance fees to drop by about 30 percent this year.
Others think the revenue squeeze could be even worse. Citigroup analyst Prashant Bhatia is predicting performance fees of $380 million this year, down from $637 million for 2007.
Annual earnings estimates are also coming down, with a consensus of analysts predicting $1.38 a share, versus estimates earlier this year of closer to $1.65.
Och-Ziff, which is reporting earnings today, is expected to post 13 cents a share, based on a formula that excludes things like distributions paid to partners and charges related to the company’s IPO.
Dan Och, the former Goldman Sachs trader, took his hedge fund public just as markets hit choppy waters and investors started to get jittery about investing in hedge funds.
So while Och-Ziff hasn’t been wowing investors with double-digit returns, like John Paulson and Phil Falcone, the firm has been keeping to its mandate, which is to do better than benchmarks like the Standard & Poor’s 500 index.