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Last Wednesday, the mega hedge fund Och-Ziff went public. But investors were jittery and the stock has already dropped 12.5% since its debut.
Well, it may drop even more -- that is, according to a piece in Barron's [a paid service]. In fact, the author, Andrew Bary, calls the company's investment performance an example of "mediocrity."
The current market value of Och-Ziff is about $10.8 billion, which means it is trading at about 18 times earnings. So, on its face, this seems reasonable, right?
Well, you need to make some adjustments. First of all, there is the favorable tax treatment (which may undergo some changes in Congress).
Next, Och-Ziff relies primarily on hefty fees for its investment performance. But, what if the firm has a down year? It could be a big hit to the bottom line.
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