tag:blogger.com,1999:blog-5389144729834496735.post7882209669093134728..comments2024-03-17T05:15:55.634-04:00Comments on The Brooklyn Investor: Perpetual Option: Och-Ziff Capital Management Group (OZM)Unknownnoreply@blogger.comBlogger21125tag:blogger.com,1999:blog-5389144729834496735.post-23564381700403582032017-05-16T10:41:08.332-04:002017-05-16T10:41:08.332-04:00Hi, I think I added unvested RSU's and unveste...Hi, I think I added unvested RSU's and unvested class A shares. Not entirely sure if it is correct, but to bias on the conservative side, I added them to shares outstd. Look at the very bottom of the 10-K. kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-60914142057118160382017-05-16T09:45:29.425-04:002017-05-16T09:45:29.425-04:00Hi, I was wondering how you calculated how many di...Hi, I was wondering how you calculated how many diluted shares outstanding they have? They claim to have had 480 million at the time of when you wrote the article but you used 520. They have a very complex equity structure and I was hoping you could shed light on how to look at it. Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-3911316046915171012017-03-10T01:24:59.262-05:002017-03-10T01:24:59.262-05:00KK
Would appreciate any updated comments, especia...KK<br /><br />Would appreciate any updated comments, especially in light of Q4 results and the stock trading down to $2.50. A cheaper priced option that you still hold, or something to be avoided based on the latest news? I suspect the former but would appreciate your insight.<br /><br />Thanks<br /><br />Bronx CheerAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-58643044225202778792017-02-18T18:52:01.171-05:002017-02-18T18:52:01.171-05:00Hey kk,
Thoughts on Q4 and 2016? Seems like AUM ...Hey kk, <br /><br />Thoughts on Q4 and 2016? Seems like AUM is down about as expected, while performance in the master fund, credit opportunities fund and real estate were all decent. Combining that with the still wide value gap in the overall market, Vanguard passing $4T in total assets, and the final FCPA settlement feels like we're close to trough for active managers and OZM specifically while the market is still pricing in all downside and no upside. Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-29223436104028027682016-11-20T11:17:58.689-05:002016-11-20T11:17:58.689-05:00It's difficult to compare KKR to BX or the oth...It's difficult to compare KKR to BX or the other alternative asset managers on a % of AUM basis, given its decision to retain a substantial part of its earning for balance sheet investments - it has >10bn in cash + investments on its books. <br /><br />If you net that out, it's trading at 4.5% of AUM, similar to the credit guys or CG, and arguably KKR has much stickier money / better reputation. <br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-86684866196614023842016-11-18T16:24:37.351-05:002016-11-18T16:24:37.351-05:00Hi, that is already baked into the balance sheet. ...Hi, that is already baked into the balance sheet. Preferreds were offered after September-end. <br /><br />This thing has been hanging over OZM for a while now, and a settlement is usually the end of the uncertainty, not the beginning. So yes, there will be redemptions towards year-end as they said and maybe some into the new year. <br />kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-49347246219120114322016-11-18T16:17:45.157-05:002016-11-18T16:17:45.157-05:00Curious why there is little mention of "Och-Z...Curious why there is little mention of "Och-Ziff to Pay Over $400 Million in Bribery Settlement"<br />Institutions will now begin to request redemptions, over the next quarters/years.<br />Anyway, good starting point on a worthy discussion. Thanks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-62180247790607843322016-11-16T15:17:23.186-05:002016-11-16T15:17:23.186-05:00Oh well I just saw you mention them in the post on...Oh well I just saw you mention them in the post on Pzena. Anyways, thanks again for the post!KYLERhttps://www.blogger.com/profile/13869668135385918564noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-31800831155966919512016-11-16T14:59:39.769-05:002016-11-16T14:59:39.769-05:00Thanks for the post. An excellent analysis as usu...Thanks for the post. An excellent analysis as usual, but especially because I think you acknowledged the risks in the right way. I think it's tempting, especially if you've followed something like the Buffett mold, to try to only invest in sure shots where there's a large moat and you're pretty sure it'll last for a very long time. OZM definitely isn't that, and as you mention, there are lots of scenarios where it goes to 0, but it does seem like it could be over-discounting that. If you make enough small bets like this then it should probably work out for you over time.<br /><br />Also, this whole thought of perhaps hedge fund performance being cyclical reminded me of Affiliated Managers Group (AMG), which has a pretty solid track record of buying chunks of hedge funds. It definitely isn't as cheap as OZM, but it is very diversified, so the real business risk is certainly much less. Looking at it now, it has fallen 30% or so and trades at ~8x pretax earnings. I don't know a whole lot about it (I think I read their shareholder letter but that's about it) but they're exposed to how well hedge funds do and they do have an undisputedly good track record in buying stakes in them, so if you're right about investors hating hedge funds too much then it's another interesting place to look. KYLERhttps://www.blogger.com/profile/13869668135385918564noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-13629469384924840042016-11-15T22:16:57.181-05:002016-11-15T22:16:57.181-05:00Long time reader, first time commenter... Love yo...Long time reader, first time commenter... Love your thoughtful posts, thanks.<br /><br />For what it's worth, I noticed that Seth Klarman unloaded his OZM last quarter. Looks like a miniscule position to begin with so maybe meaningless, but one more data point at least.<br /><br />http://www.dataroma.com/m/m_activity.php?m=BAUPOST&typ=a Chris Millsnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-72838014275431594242016-11-15T14:51:24.605-05:002016-11-15T14:51:24.605-05:00Hi, sorry, I missed this post. I still do like ba...Hi, sorry, I missed this post. I still do like banks and other financials. Maybe overdone in the short term, but should be good over the long haul... kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-35407074905740574172016-11-15T11:51:13.984-05:002016-11-15T11:51:13.984-05:00I think it comes down to the business itself, not ...I think it comes down to the business itself, not the performance. If you look at the alt managers, BX and KKR are at premiums. Then if you look at ARES and APO - who I think are awesome - they are at 4% or so. OAK is around 6%, the most overvalued. Part of the reason is that ARES and APO have a lot more credit vs PE and OAK is almost all credit and has a lot of traditional credit as well. Credit funds are shorter duration (6 years), lower performance fees (1/10 or 1/15), and are more expensive to run in terms of the trading operations and research. The overall return profile on a gross basis is not that exciting either meaning the cyclical performance fees don't juice or leverage your operating structure. You just won't make the PE returns in credit and if you do cause you're in Greek distressed, it's a very small part of the 100B plus a firm like this manages. So lower upside incentive fees, more people needed to run the strategy, shorter duration AUM relative to PE and RE. In PE, you can run billions with 5-6 people.<br /><br />Go further down the scale from OAK, ARES, and APO to FIG and OZM, yeah FIG sux, but FIG and OZM have quarterly liquidity (i know FIG has 56% of AUM in traditional asset mgmt), fee compression, and in both cases need a significant infrastructure to run their operations. So you have on a blended basis less upside, less sticky capital, and more challenges in leveraging your cost basis.<br /><br />I haven't researched the sector in a while but conventional and alts are all the same, it's valuation based on AUM. The real outlier right now is CG, Carlyle as we acknowledge is a top tier PE firm, it's valuation against its AUM is the lowest in the entire peer group.NotATeabaggerhttps://www.blogger.com/profile/01750039064202384253noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-72938653056045225352016-11-15T10:06:07.723-05:002016-11-15T10:06:07.723-05:00Thanks for the thoughtful response. I do like the...Thanks for the thoughtful response. I do like the other alt managers and think they will do well as a basket over time because they are all cheap. My only reservation is the same as I've been saying; their recent huge AUM make me wonder what returns will be going forward. BX is the gold standard in this area for sure. <br /><br />I've been following FIG since the IPO and haven't really been a big fan. Their hedge funds are awful, and other funds seem mediocre. I guess they have some decent funds too, but overall doesn't seem as consistent as some of the others. <br /><br />So that's probably why it's cheap. I should take another close look, though. <br /><br />CG too is top notch firm. Dimon'ss #2 went there for a while before jumping ship to Comcast. <br /><br />Anyway, these are all great ideas, but for OZM, I was looking at them specifically because they are trading down 90% from their IPO, they had their bribery problem and some performance problems that may be attributed to the cyclical factor that I have been talking about here as a theme (value spread widening for years on end). <br /><br />So in that sense, it's a play on buying distressed OZM while it's down due to bribery distraction, redemptions following that, poor performance due to what I guess may be hugely cyclical factors that might snap back at any moment etc. <br /><br />This idea, in that sense, was a bit more specific. <br /><br />I don't see private equity now really in a distressed environment. The exit market is excellent etc... <br /><br />Anyway, thanks for the interesting discussion. Maybe it's time for some alt manager posts here. But before that, I have one conventional manager in the queue... <br />kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-23805812689536872062016-11-15T03:48:47.435-05:002016-11-15T03:48:47.435-05:00OZ has a highly concentrated investor base, unlike...OZ has a highly concentrated investor base, unlike Fidelity or Vanguard.<br /><br />The right price for this stock is 1% of net AUM. Still 50% overvalued assuming 39bn AUM.<br /><br />One can use the same approach to Fortress and Oaktree. Blackstone is worth slightly more.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-45772419697136301322016-11-14T16:16:04.732-05:002016-11-14T16:16:04.732-05:00Why not go long FIG too? The best relative value ...Why not go long FIG too? The best relative value of the alt asset mgrs is CG. OZM and FIG will trade at a discount because their capital is not sticky. Look at the alt AMs, the guys like BX and KKR are at 8% - 10% of AUM for equity valuation. That reflects, at least for KKR almost exclusive sticky 2/20 pe money and BX has that + the massive RE. As you get into less sticky capital that requires more overhead (a L/S equity person won't necessarily scale to convertible arb, but a team of 8 can run multiple LBO funds), the valuation on a price per AUM basis goes down.<br /><br />I'd argue OZM and FIG can do well as trends reverse but you won't get much more than that in terms of multiple expansion. Bot OZM and FIG are at 3% - 4% of AUM which is fair to rich for hedge fund-y, quarterly liquidity w/fee pressure managers. <br /><br />CG is what you should take a look at. Due to its traditional asset mgmt expansion, it's suffered a bit operationaly and valuation wise. It's valued at about 3% AUM, same as FIG and OZM. CG is a top tier PE brand and peers like KKR and BX are 10% and 8% of AUM respectively for valuation. CG could re-rate to a 6% of AUM valuation - comparable to Oaktree which is mostly a premier name in distressed - but IMO a much better business given the better fee structures in PE vs credit/distressed. Even w/no operational improvement, CG could re-rate to 6% of AUM which would be a double, when you tack on improving operating performance and the re-rate you get over a 100% return.<br /><br />I think your OZM thesis relies more on operational improvement but has low likelihood of multiple expansion.NotATeabaggerhttps://www.blogger.com/profile/01750039064202384253noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-72393478123458812572016-11-14T14:41:11.512-05:002016-11-14T14:41:11.512-05:00Well, earnings are clearly depressed as they are n...Well, earnings are clearly depressed as they are not earning what they used to. Remember, they paid out an average of $1/share not too long ago. <br /><br />The pressures you mention are true, but that is just a question of whether the earnings are at bottom or not. Anyway, yes, it's true AUM can keep going down etc.<br /><br />Markets at all time highs, to me, are not as relevant as OZM is long/short. Raging bull markets can be bad for these guys as institutions may actually prefer going long instead of long/short. <br /><br />In any case, I don't know what will happen, but at these levels, it's an interesting situation. <br /><br />I do like OAK, actually. kkhttps://www.blogger.com/profile/06299974418283948333noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-28699636965200073602016-11-14T12:53:03.458-05:002016-11-14T12:53:03.458-05:00AUM could easily fall more dramatically than from ...AUM could easily fall more dramatically than from $37 bn to $30 bn... of course, if performance improves and AUM grows, there is considerable option valueAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-32239607778051915232016-11-14T05:51:04.058-05:002016-11-14T05:51:04.058-05:00*other alternative asset managers (not other AuM)*other alternative asset managers (not other AuM)InvestingIdeasOnlyhttps://www.blogger.com/profile/17759317903624486815noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-42219559629014811842016-11-14T05:50:24.965-05:002016-11-14T05:50:24.965-05:00"Trading at 10x depressed earnings"
Wh..."Trading at 10x depressed earnings" <br /><br />Why are the earnings depressed if 1) AUM is declining 2) there will likely be pressure on fees 3) markets are at all time highs<br /><br />Given the above, I would argue that 10x is pretty high on a current earnings base. Other AuM appear to be cheaper e.g. OAKInvestingIdeasOnlyhttps://www.blogger.com/profile/17759317903624486815noreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-68624558913963112532016-11-11T22:44:05.340-05:002016-11-11T22:44:05.340-05:00Interesting and well done. If you have the time, p...Interesting and well done. If you have the time, perhaps you can compare it to Fortress Group (FIG) another interesting stock in the same industry.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5389144729834496735.post-88818878308571065242016-11-11T21:26:23.335-05:002016-11-11T21:26:23.335-05:00Hi there, OZM is a bit esoteric for me, but your t...Hi there, OZM is a bit esoteric for me, but your thinking on banks has been excellent. Any thoughts on the banks after the surge? My guess is higher rates will still take time to materialize, but a better regulatory environment should probably justify a re-rating... Thanks. <br />jbhttps://www.blogger.com/profile/11742236573084621576noreply@blogger.com