Why Och-Ziff Capital Management Group LLC Shares Sank

Is this meaningful or just another movement?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Apr 28, 2014 at 5:00PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Och-Ziff Capital Management Group (NYSE:OZM) plunged 11% today after a report said the hedge fund helped finance controversial oil and mining deals in Africa.

So what: According to The Wall Street Journal, Och-Ziff made two loans of $234 million to companies controlled by Israeli billionaire Dan Gertler -- whose deals have been criticized for lacking transparency -- putting the hedge fund under serious scrutiny from U.S. authorities. While WSJ isn't exactly sure about the specific kind of information that U.S. investigators are seeking from Och-Ziff, the report alone raises plenty of uncertainty over the stock's appreciation prospects.

Now what: Gertler remains confident that the controversy surrounding his deals in Africa is completely overblown. "[Gertler] vigorously contests any and all accusations of wrongdoing in any of his Congo dealings," said a spokesman for the mining magnate. "Though we are a private business, we recognize we do have certain disclosure obligations and as our business develops, we are acting to improve our transparency efforts." So while the uncertainty surrounding Och-Ziff could be too much for average investors, less risk-averse contrarians might want to use today's plunge to bet on that confidence.