We remain bullish on Och-Ziff Capital Management (OZM) as the stock remains undervalued and offers attractive performance. We’ve said it time and time again: management is competent and knows how to preserve capital while managing risk and generating returns in an environment where the big hedge funds are getting killed. The company returned +0.46% on its Master Fund in November, which is where roughly 70% of the company's assets under management reside. This latest print brings the year-to-date total on the Master Fund to +10.01%, which far surpasses the 2.57% YTD return on the HFRX Global Hedge Fund Index, and is only modestly below the 12.08% year-to-date return on the S&P 500.
With the stock itself up +11.7% over the last three months, we expect OZM will continue to thrive but remain cautious about tax consequences related to the fiscal cliff. With no edge on the outcome of the negotiations, we prefer to sidestep the event risk and re-engage on the long side post the outcome.