Investing in publicly traded hedge funds is a great way for an investor to see returns through capital appreciation and dividend payments in the financial sector.
When it comes to investing, many think of the process as a choice between growth and value stocks; you’re either taking on risk in search of capital appreciation, or you’re seeking out stable sources of current income through dividend payments. Luckily, Wall Street has many investment options and investors don’t have to make a clear-cut choice between capital gains and dividends.
With the recent financial crisis still very fresh in investors’ minds, it’s no surprise that many have been hesitant to return to this corner of market. However, one particular corner of the financials sector bears a appealing risk/return profile that warrants a closer look in the current environment. They are publicly traded hedge funds and they offer a lucrative opportunity to tap into upside potential while still enjoying a stream of dividends.
For those willing to dip their feet into the world of hedge funds, several firms present themselves as attractive investment vehicles for income-hungry investors in search of potentially substantial returns. It must be noted that while these hedge fund companies do have the potential to bring high returns on investment, they can be very volatile with a lot of risk involved. Below we highlight 10 of the biggest publicly traded hedge funds, in terms of market capitalization, that pay out a dividend. Investors should note that each of the funds profiled below also maintains operations in other corners of the finance industry; however, their asset management divisions could rake in big profits that are not necessarily dependent on the performance of the stock market.1. BlackRock, Inc. (BLK)
BlackRock (BLK) is one of the biggest and most well known independent investment management firms. Based out of New York, New York, BlackRock provides a range of investment and risk management services. The firm invests all over the world and its clients are everyone from pension funds to corporations & insurance companies to endowments & sovereign wealth funds. In addition to operating a host of mutual funds and exchange-traded products, BlackRock is perhaps best known for their keen portfolio management skills. The company runs multi-asset portfolios covering stocks and bonds among other asset classes. BlackRock currently has $3.67 trillion in assets under management with a market capitalization of $32.75 billion.
BlackRock has consistently paid a dividend since mid-2003 and has raised its quarterly dividend payment every year, except for 2009. Its current dividend yield of 3.21% warrants a closer look from value investors looking to diversify into the financials space.
BlackRock shares have appreciated +6.00%, or $10.69, year-to-date.2. The Blackstone Group LP (BX)
Blackstone (BX) is a manager of private capital and provides financial advisory services to its clients. Based out of New York, York, it was founded in 1985. It has a market capitalization of $18.89 billion with $166.2 billion assets under management. BLK’s alternative asset management businesses include the management of private equity funds, real estate funds, funds of hedge funds, credit-oriented funds, collateralized loan obligation (CLO) vehicles and separately managed accounts.
The firm started paying a quarterly dividend in 2007 and currently has a dividend yield of 3.39%.
Blackstone shares have appreciated +9.71%, or $1.36, year-to-date.3. Invesco Ltd (IVZ)
Invesco (IVZ) is an investment management firm based out of Atlanta, Georgia. It has $632.1 billion assets under management and a market capitalization of $10.73 billion. IVZ provides a range of investment strategies and vehicles to its retail, institutional and high-net-worth clients around the world.
The company has paid a dividend since 1996 and has a current dividend yield of 2.02%. Starting in 2008 it switched to a quarterly dividend schedule after several years of paying a semi-annual dividend. It has gradually increased its dividend since a steep drop in 2008.
Invesco shares have appreciated +20.21%, or $4.06, year-to-date.4. Oak Tree Capital Group LLC (OAK)
Oaktree (OAK) is a global investment management firm focused on alternative markets. It has a market capitalization of $7.76 billion and manages $77.9 billion in assets. The firm manages funds in investment strategies that fall into six asset classes: distressed debt, corporate debt, control investing, convertible securities, real estate and listed equities.
Based in Los Angeles, California and founded in 1995, OAK became publicly listed on the NYSE on April 12, 2012. It has a short history of dividend payments as it only has paid its quarterly dividend twice so far. However, its dividend yield is an eye-popping 7.95%.
Oaktree shares have appreciated +0.57%, or 24 cents, year-to-date.5. Och-Ziff Capital Management Group LLC (OZM)
Och-Ziff (OZM) operates multiple investment strategies, including merger arbitrage, convertible arbitrage, equity restructuring, credit and distressed investments, private investments, and real estate. The firm is based in New York, New York and was founded in 1994. It manages $31 billion in assets and has a market capitalization of $4.15 billion. The company serves the investment needs of a diversified institutional base. It provides asset management services through its funds, which pursue a range of global investment opportunities seeking returns in low volatile market cycles.
The company became public in 2007, right before the financial crisis occurred. It started paying a quarterly dividend in 2008. OZM has a dividend yield of 5.65%.
Och-Ziff shares have appreciated +18.91%, or $1.59, year-to-date.6. Lazard Ltd. (LAZ)
Lazard (LAZ) is a financial advisory and asset management company that is incorporated in Bermuda but operates out of New York, New York. It was founded in 1848. LAZ’s asset management segment includes strategies for the management of equity and fixed income securities and alternative investment and private equity funds, as well as wealth management. Lazard has $160.4 billion in assets under management and a market capitalization of $3.60 billion.
Lazard has paid a quarterly dividend since 2005 and it has a good history of consistent dividend increases. It currently offers a dividend yield of 2.22%.
Lazard shares have appreciated +12.72%, or $3.32, year-to-date.7. KKR & Co. L.P. (KKR)
KKR (KKR) is a private equity firm that specializes in leveraged buyouts and investments. Based in New York, New York, it was founded 1976 and became publicly traded in 2010. The firm has $40.37 billion in assets under management and a market capitalization of $3.58 billion.
It pays a quarterly dividend, with irregular payment amounts. Its dividend yield is 6.51% but due to inconsistent payouts, that yield is not reliable.
KKR shares have appreciated +17.93%, or $2.30, year-to-date.8. Fortress Investment Group LLC (FIG)
Fortress (FIG) is a global investment firm based in New York, New York. It was founded in 1998 and went public in 2007. It offers alternative investment products including private equity funds, liquid hedge funds and credit funds. In addition, it offers traditional investment products. Its assets under management are approximately $47.8 billion. It has a market capitalization of $2.22 billion.
When it first became publicly traded it paid a quarterly dividend, but stopped paying the dividend after the financial crisis in 2008. However, it started paying a quarterly dividend again in 2012 and currently offers a 4.69% dividend yield.
Fortress shares have appreciated +27.51%, or 93 cents, year-to-date.9. Apollo Global Management LLC (APO)
Apollo (APO) is a private equity and investment firm based in New York, New York. It was founded in 1990 and became publicly traded in 2011. It primarily manages assets and investments on behalf of pension and endowment funds, as well as other institutional and high net worth individual investors. It currently has $75.2 billion assets under management and a market capitalization of $1.96 billion.
APO pays a semi annual dividend with some history of special dividends. It has a current dividend yield of 1.98%.
Apollo shares have appreciated +22.4%, or $2.78, year to date.10. Janus Capital Group Inc (JNS)
Janus (JNS) is an investment firm based out of Denver, Colorado. It manages $158.2 billion in assets for institutions and individual investors. It manages investments in mutual funds and other pooled investment vehicles and products for domestic and international clients. The firm was founded in 1969 and Its market capitalization is $1.57 billion with $158.2 billion assets under management.
It used to pay an annual dividend, until 2011 when it started paying a quarterly dividend. Its dividend yield currently sits at 2.86%.
Janus shares have appreciated +34.55%, or $2.18, year-to-date.The Bottom Line
The hedge funds above have the potential to show investors lucrative returns through their extensive asset management portfolios and the stock growth potential that can come from them. But an intriguing aspect of these hedge funds is the potential returns in dividend income. However, investors need to be aware of the instability of regular dividend payments from some of the hedge funds. So while investing in these hedge funds can bring about substantial returns, there is volatility and risk that might not be appealing to all investors.