I am a big believer in the leverage of certain financial organizations — more specifically, private pools of leveraged money in the right places. That led me to Och-Ziff Capital Management Group (NYSE: OZM), a leading institutional alternative hedge fund manager with more than $28 billion under management.
Founded in 1994, Och-Ziff is one of the few publicly traded hedge funds in the United States. The firm went public in November 2007, making it one of the only pure plays in the hedge fund business.
The firm, which is set up as a partnership to pay out the lion’s share of its retained earnings to shareholders, enjoyed a 21% increase in assets from 2009 to 2010.
These guys are all about taking on very low risk-adjusted return type strategies, like pre-announced cash mega-merger deals where there is 2% to 3% arbitrage return involving a three- or four-month holding period (buying shares now, at a discount to the tender value, and then cashing them in when due).
Talk about undiscovered assets. If last quarter is any indication, you could make some serious money with these guys while the iron is hot as far as deal flow is concerned.
In its latest quarterly report, the company saw distributable income rise 8% to 74 cents per share, which resulted in the payment of a dividend of 71 cents per share in February. On an annualized basis, that’s $2.84 per share — an 18% annual yield at its recent price of $15.76.
Logic would have it that there is clearly a disconnect between the rebound in demand for alternative assets — especially for the largest players — and the value of those underlying assets. I’m a buyer, but only for aggressive accounts.
Why the disclaimer? It’s a hedge fund, for crying out loud.