Fortress Investment Group announced the closure of its flagship family of global macro fund strategies and the departure of Michael Novogratz, principal and macro chief investment officer, on Tuesday. Trading in Fortress shares was halted for about an hour prior to the announcement of Mr. Novogratz’s retirement from the firm and its board at the end of the year, a company announcement said. Mr. Novogratz founded Fortress’ liquid markets hedge fund unit in 2002.
Fortress will purchase Mr. Novogratz’s ownership stake in the firm, which totaled about 56.8 million Class A shares as of Sept. 30, at $4.50 per share, representing a 23% discount to Fortress’ share price at the closing of markets on Tuesday, the news release said. The company will fund the repurchase of its stock with cash and a note issued to Mr. Novogratz.
“After careful consideration and analysis, we have decided to close the Fortress macro funds and return cash to our investors,” Mr. Novogratz said in the release. “We have had an extremely challenging two years and I do not believe the current environment is conducive to achieving our best results.”
Gordon E. Runte, managing director and Fortress’ head of public investor relations, did not respond to a request for more information by press time.
The liquidation of the Fortress macro funds, which totaled $2.3 billion as of June 30, will be completed by Dec. 31. The macro fund complex accounted for 3.2% of Fortress’ total $72 billion in assets under management, the release said.
Fortress’ macro funds AUM dropped 34.3% between March 31, 2014, and June 30, 2015, according to Fortress’ June 30 earnings statement.
Fortress filed an 8-K filing with the SEC on Tuesday, noting that as of Sept. 30, the global macro fund’s estimated year-to-date return was -17.5%. By contrast, the HFRI Macro (Total) index was down 0.6% for the same time period.
Fortress’ liquid hedge fund unit will continue to manage about $1.2 billion in global and Asia-focused strategies. The company’s affiliated managers investment platform also had $3.9 billion under management by outside managers as of June 30, earnings statement data showed.
Separately, as of June 30, Fortress managed $6.2 billion in credit hedge funds through another business unit, as well as $9.6 billion in private equity funds; $8.2 billion in credit private equity funds; and $6.9 billion in permanent capital vehicles.