Big Hedge Funds' Results Waning, Worrying InvestorsVW Staff
The world’s largest private equity firm, The Blackstone Group L.P. (NYSE:BX) said that profits for the first quarter fell by around 24%, as its performance fees fell due to slower gains.
Performance fees for the giant hedge fund fell by almost 37%, while holdings for the fund increased a little when compared to the previous year. The CEO for the firm, Stephen Schwartzman has been pushing for the firm to reduce trust on buyouts by increasing its fund of hedge businesses, and its advisory group which usually offers advice in cases of mergers with new firms, and restructuring.
The head of The Blackstone Group L.P. (NYSE:BX) was also disappointed because he had anticipated great growth in real estate and credit. Private equities in the firm increased by 4.9%, while real estate gained a mere 4%, compared to last year when the increase for the same period was over 8.7%. However, the assets under management in the firm rose by 27% to close the quarter at $190 billion. It was this boost the led to the dividend of 10 cents a share for the company.
But generally, as with most hedge funds of late, stock for The Blackstone Group L.P. (NYSE:BX) has gained less than 1% for the year so far.
On the other hand, Och-Ziff Capital Management Group LLC (NYSE:OZM) firm had a similar showing with income for the first quarter declining, but performing well in other results. Earnings for the firm that trades publicly were $57.5 million, a decline from $65.2 million in the same period last year. However, the lowered earnings were on increased revenue of $140.9 million up from $138.4. Och-Ziff’s management said that profits fell due to increased income tax, as well as a lack of recurrence of a tax distribution that was taken last year in the same quarter. The dividends for the firm will be 10 cents a share, down from last year when it was 13 cents a share.
However, Och-Ziff Capital Management firm’s assets under management rose to over $300 million, beating predictions by analysts.
Another showing that most hedge funds investors do not want to see happen in their investments is the drop in performance in Man Group Plc (LON:EMG).
The CEO, Peter Clarke has been under pressure from investors, and even the management board to resign, after the firm’s share price fell by almost 60% since September. Clients are making withdrawals of their investments, and this has played havoc on the firm’s earnings, as well as profits.
Assets under management at the firm fell from $59.5 billion to $59 billion, and it is this showing that has investors at the private equity fund worried. Nevertheless, the firm’s newest acquisitions, like GLG unit are the ones which seem to be helping the firm stay afloat, by performing consistently well.
Therefore, hedge fund firms today seem to be having under the par performance, despite their history of being some of the best investments vehicles today. Analysts and investors are of the opinion that the firm’s declining profit margins are due to harsh tax cuts, and even lowered interest rates. So, investors who are worried about this new trend- of funds under performing- only have to wait and see, it if it will pass, or not.