We are one of the largest, independent alternative asset managers in the world, with a diversified institutional investor base. We provide investment management and advisory services through our multi-strategy hedge funds, which pursue diverse investment opportunities globally. As of March 1, 2010, we had approximately $24.6 billion in assets under management.
We were founded in 1994 by Daniel Och, together with the Ziffs, with the goal of building an enduring investment management business. We were one of the pioneers of investing on a global scale and today our funds invest in many regions around the world with a breadth not offered by many other alternative asset management firms. We have built an experienced investment management team worldwide, and as of December 31, 2009, we had 378 employees worldwide, including 135 investment professionals and 18 partners, working from our headquarters in New York and offices in London, Hong Kong, Bangalore, and Beijing. Our London office houses our European investment team and our Hong Kong office houses the majority of our Asian investment team.
Since our inception, we have built long-term relationships with our fund investors, which represent many of the largest and most sophisticated institutional investors from around the world. We currently have approximately 600 fund investors from many regions around the world, including fund-of-funds, public and corporate pension funds, foundations, university endowments, family offices and private banks among others.
We conduct substantially all of our business through the Och-Ziff Funds segment, which is currently our only reportable segment. Our other operations are currently comprised of our real estate business and the new businesses established to expand our private investment platforms.
Our primary sources of revenues are management fees, which are based on the value of our assets under management, and incentive income, which is based on the investment performance we generate for our fund investors. Accordingly, for any given period our revenues will be influenced by the combination of assets under management and the investment performance of our funds.
Funds Overview
We currently manage four main investment funds, with most of our total assets under management invested on a multi-strategy basis, across multiple geographies. The following are our most significant funds (by asset size):
Ÿ OZ Master Fund, which is our flagship, global, multi-strategy fund. The OZ Master Fund opportunistically allocates capital between the underlying investment strategies described below in North America, Europe and Asia. The OZ Master Fund’s European and Asian investments mirror those made in the OZ Europe Master Fund and the OZ Asia Master Fund. As of December 31, 2009, the OZ Master Fund’s geographic allocation was 54% in North America, 32% in Europe and 14% in Asia.
Ÿ OZ Europe Master Fund, which is a multi-strategy fund that opportunistically allocates capital between the underlying investment strategies described below in Europe.
Ÿ OZ Asia Master Fund, which is a multi-strategy fund that opportunistically allocates capital between the underlying investment strategies described below in Asia.
Ÿ OZ Global Special Investments Master Fund, which is a fund that allocates capital to private investments and to the private investment platforms we are developing. These investments are diversified by industry and geography, and tend to be longer term than the investments made by our other funds. In addition, this fund invests a portion of its capital in certain strategies of the OZ Master Fund. The majority of the capital in this fund belongs to the partners of our firm and is their reinvested proceeds from our initial public offering, or “IPO.”
Overview
Our financial performance in 2009 was driven by strong risk-adjusted returns in each of our funds as we were able to capitalize on investment opportunities globally across all of our strategies. We surpassed the high-water marks on our assets under management during the year and as a result we generated a meaningful amount of incentive income in 2009 compared to 2008. We maintained a disciplined focus on our long-standing investment and risk management processes, which were central to the strength of our returns and allowed us to generate consistent, positive, risk-adjusted returns within our risk tolerances despite challenging market conditions.
Our investment performance also benefited from our ability to capitalize on a diverse set of opportunities globally. We invest capital based on the quality of the idea, regardless of asset class, industry sector or country, rather than being dependent on large directional moves in the markets broadly or in any one asset class or sector. The market dislocation in 2008 and early 2009 affected a broad range of asset classes worldwide, creating a diverse range of investment opportunities that were well suited to our multi-strategy approach and our international capabilities. The magnitude of this market dislocation was historic and we believe the investment environment that resulted was, and remains, compelling. Over our sixteen years in business, we have seen that many of the most important opportunities come about because of periods of market dislocation. Our performance in 2009 was driven by positive returns across all of our strategies, in particular long/short equity special situations globally, convertible and capital structure arbitrage, structured credit, particularly in residential mortgage-backed securities, and other credit in the United States and Europe. While we cannot predict future performance, and the opportunities which helped us generate returns last year may change as markets continue to normalize, we believe that our model and investment approach position us well to generate strong performance for our fund investors over the long term.
Our assets under management, and therefore our management fees, were adversely impacted by unusually high redemptions during the first half of 2009, as institutional investors reduced their market exposures in reaction to the instability in the equity and credit markets globally in the fourth quarter of 2008 and the first quarter of 2009. Our redemptions during this period were also affected by the ongoing effect of other fund managers that imposed gates which precluded investors from withdrawing their capital. While providing liquidity to our investors in accordance with the pre-defined terms of our funds adversely affected our assets under management in the short term, we believe it increased our competitive differentiation and thus will be an important consideration in our ability to gain market share of new capital flows to the hedge fund industry over the long term.
The redemption cycle for the hedge fund industry tapered off during the second half of the year as markets normalized globally, and capital inflows began to return to the hedge fund industry towards the end of the year, which contributed to the increase in our overall assets under management in the fourth quarter. Our dialog with fund investors was active throughout 2009. We believe interest in Och-Ziff remains high because of our consistent track record and business model, the transparency we provide our fund investors, and the strength of our platform and infrastructure. We believe that institutional investors view us as a manager of choice and we are well-positioned to gain market share of capital inflows to the hedge fund industry, which will lead to asset growth over the long term.
Employees
As of December 31, 2009, we had 378 employees (including 60 in the United Kingdom and 45 in Asia), with 135 investment professionals (including 38 in the United Kingdom and 27 in Asia).
Available Information
The principal executive offices of Och-Ziff Capital Management Group LLC are located at 9 West 57th Street, New York, New York, 10019. The telephone number of our principal executive office is (212) 790-0041. Our website address is www.ozcap.com. We make available free of charge on our public website our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission, which we refer to as the “SEC,” pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act.” We also make available through our website other reports filed with or furnished to the SEC under the Exchange Act, as well as our Code of Business Conduct and Ethics and other information related to our corporate governance. Printed copies of each of these documents may also be obtained upon written request to the Company at 9 West 57th Street, New York, New York 10019, Attention: Office of the Secretary.
Any materials we file with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC, 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The reports and other materials that we file or furnish electronically with the SEC are available to the public through the SEC’s website.
On June 12, 2009, we submitted to the New York Stock Exchange the Annual CEO Certification required by Section 303A.12(a) of the New York Stock Exchange Listed Company Manual. We have also filed with this annual report as Exhibits 31.1 and 31.2 the certifications required under Section 302 of the Sarbanes-Oxley Act of 2002.