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UPDATE 2-Och-Ziff profit tops view; Oz fund net returns 9.4 pct

Nov 2 (Reuters) - Och-Ziff Capital Management, one of only a handful of publicly traded hedge fund firms, on Friday reported quarterly earnings that beat Wall Street's forecasts, fueled by higher performance fees and lower taxes.

All four of Och-Ziff's funds are in the black for the year with most beating the average hedge funds' returns. Steady and strong returns boosted assets, as did fresh demand, the company said.

As of Nov. 1, the New York-based company said it had assets of $31.8 billion, and for the year-to-date through Oct. 31 its OZ Master fund had net returns of 9.4 percent.

A strong performance at Och-Ziff's main funds is leading analysts to expect the company to earn more in incentive fees, the money paid to hedge fund managers when their funds do well.

Additional flows and the year-to-date returns of ``9.45 percent for the Master Fund (is) putting (Och-Ziff) in solid position for strong performance fee generation into year-end,'' Jefferies analyst Dan Fannon wrote in a report.

The company, which has long been a favorite with pension funds, is in discussions to manage money for other big name clients, Daniel Och, the company's chairman and chief executive officer, said on a conference call.

For the third quarter, Och-Ziff reported distributable earnings of $61.7 million, or 14 cents per adjusted Class A share, beating Wall Street's 13 cent per share forecast. The result excludes costs associated with a reorganization in connection with its November 2007 initial public offering. A year before the company earned $49.9 million, or 12 cents a share.

Och-Ziff reported a net loss of $127.5 million, or 89 cents per share, largely due to expenses associated with the IPO-related reorganization.

The company will pay a third-quarter dividend of 12 cents a share, down from 13 cents a share for the second quarter, when incentive income was higher.

Och-Ziff's stock price was nearly flat at $10.03 in midday trading.