Hedge fund CEO says ongoing redemption pressure, industry consolidation likely

By Jennifer Lanning Drey

Portland, Ore., Nov. 4 - Och-Ziff Capital Management Group LLC chief executive officer Daniel Och said the hedge fund industry is likely to remain under higher-than-usual redemption pressure until the markets settle, and industry consolidation will likely be significant following the current market dislocation.

"Our belief is that the industry is going through a difficult period for many reasons, some related to performance in other asset classes, some related to investors' needs for liquidity due to other commitments that they have, as well as certain industry issues including performance by some funds that may have disappointed investors," Och said Tuesday.

Speaking generally about the industry during Och-Ziff's third-quarter conference call, Och said in some cases, investor disappointment has stemmed from investors viewing funds to be switching strategies, often from highly levered positions to less levered positions, or from more directional to less directional.

"There is no question we are currently operating under the most challenging operating conditions we have ever encountered," Och said.

"The anticipated consolidation in our industry will likely be significant; however, we firmly believe that institutional investors will continue to allocate capital to alternative asset managers to diversify their investments and enhance their returns."

Later in the call, Och noted that prior to the market dislocation there was significant expectation of new international and domestic investors moving toward alternative investment products.

Och said the expected consolidation is likely to result in market share gains for larger, more established firms.

Och-Ziff is an institutional alternative asset manager based in New York.

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