Hedge fund CEO seeing compelling investment opportunities but says redemption cycle not yet over

By Jennifer Lanning Drey

Portland, Ore., Feb. 12 - Och-Ziff Capital Management Group LLC is finding compelling investment opportunities in areas including credit instruments such as structured products and distressed debt, equity financing prospects in industry sectors requiring recapitalization and convertible arbitrage, Daniel Och, the hedge fund's chief executive officer, said Thursday.

"We see a greater number of compelling new investment ideas than have existed in many years," Och said during the firm's quarterly earnings conference call for the fourth quarter.

Och also noted there are now fewer firms competing for such investment opportunities, and proprietary trading desks at commercial and investment banks are much less active than they were two years ago.

However, the hedge fund industry as a whole is still likely to face challenges, as the industry-wide redemption cycle does not appear to be over, he said.

"In light of market conditions that remain unstable globally, we believe institutional investors will have continued liquidity needs and will consequently reduce their exposures further," Och said.

Speaking broadly about the hedge fund industry, Och said there has been more stability during the first quarter as credit spreads have tightened and new issuance of investment-grade credit has been reasonably strong.

However, there's anecdotal evidence that the continued overall instability and need for liquidity will lead to continued redemptions, he said.

During the fourth quarter, outflows were higher from Och-Ziff's non-U.S. clients than from U.S. clients, he said.

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

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