The US hedge fund Och-Ziff has emerged as one of the biggest winners in Johnson & Johnson’s planned takeover of Swiss biotechnology company Actelion, thanks to a 3.2 per cent stake it built up in the target shortly before the end of 2016.
That stake is now valued close to $1bn after Actelion shares spiked about 20 per cent today following the merger’s announcement.
The gain is a much-needed bright spot for Daniel Och’s publicly traded hedge fund after it was fined $413m by the US authorities and saw one subsidiary pleaded guilty as part of a sprawling investigation into overseas bribery in Libya, Chad, Niger, Guinea and the Democratic Republic of Congo.
In November, Fitch Ratings downgraded Och-Ziff to junk status with a negative watch after the fund cut the management fees for its main funds by 25 basis points.
Och-Ziff’s master fund finished 2016 up 3.8 per cent. Assets under management were $33.5bn at the start of the year, down from a peak of $47.5bn in 2014. Investors pulled $3.6bn in December alone. On the bright side, Och-Ziff’s credit fund was up 18 per cent last year.
Under its debt covenants, Och-Ziff is under pressure to retain the money investors have put into its funds. According to its financial statements, the hedge fund’s total fee-paying assets under management must not fall below $22bn for two successive quarters, or it will be judged to be in default against its five-year unsecured revolving credit facility.