According to Credit Suisse Group AG (NYSE:CS) the hedge fund managers to report solid trends in 2Q 13 despite the broad-based June declines in equity and bond market prices.
Credit Suisse: Reduce EPS at FIG/OZM; Still Expect Beat from FIG
Specifically, Credit Suisse Group AG (NYSE:CS) still expect a beat from Fortress Investment Group LLC (NYSE:FIG) driven by incentive income, and while they estimate in-line EPS for Och-Ziff Capital Management Group LLC (NYSE:OZM), they believe OZM will post 13 percent annual organic growth driven by a $0.6 billion CLO raise. CS “core” alternative flow estimate (x-CLO) for Och-Ziff Capital Management Group LLC (NYSE:OZM) is also positive in 2Q and compares favorably to the net redemptions experienced in 2H 12.
They have reduced 2Q 13 EPS estimates for FIG (down 2 cents) and OZM (down 1 cent) – see above table for specific details. Fortress Investment Group LLC (NYSE:FIG) was driven by lower performance in June which impacted Credit Suisse Group AG (NYSE:CS) performance fee estimate. Their LT EPS estimate for FIG fell by 3 percent, and they reduced their TP to $8.5 from $8.8.
Hedge Fund Key Development
Fortress Investment Group LLC (NYSE:FIG) continues its strategic shift away from traditional buyout vehicles and is marketing two separate sector-specific PE funds: MSR2 and Fortress Infrastructure Partners (FIP). CS believe both funds will target capital raises of 1 billion and close in 2H 13. Credit business co-CIO Pete Briger has been negative on the credit market’s investment environment for some time, and has been slow to deploy the 5.9 billion in dry powder in the credit PE segment.
Credit Suisse Group AG (NYSE:CS) expect some commentary on the call regarding market opportunities and possible future capital deployment. FIG’s flagship Macro Fund and recently launched Asia Macro Fund (March 2011) are now up ~13 percent YTD. CS believe recent performance has translated into improved flows, with Asia Macro reportedly already hitting its 2013 cap of 1.7 billion.
OZM raised its fourth CLO in as many quarters with a $600 million offering in June. These four CLOs total 2.3 billion and represent an estimated 79 percent of OZM’s total organic growth over the past four quarters. OZM’s non-HF business (RE & Credit) has now grown by an estimated 63 percent since 2Q 12. Based on Och-Ziff Capital Management Group LLC (NYSE:OZM)’s performance/AuM disclosures, CS model estimates 2Q 13 core multi-strategy HF net flows of +500 million, bringing the YTD total to just under 1 billion. However, they estimate July 1 outflows of approximately 500 million and forecast total net flows of under 200 million in 3Q 13 . At a recent conference, MGMT noted that they think they will grow their long/short strategy as clients have requested dedicated platforms.