Fortress Investment Group’s macro hedge fund, run by Wall Street star Michael Novogratz, racked up big gains during the boom years starting in 2002, but the fund was ill-equipped for the 2007 crisis and subsequent shocks to the financial system. From a peak of $8 billion in assets under management (“AUM”) in 2007, the Fortress Macro Fund’s assets had dwindled to just $2.3 billion, as of June 30, 2015. On October 12, Bloomberg broke the story that the fund was being shut down. The next day, Fortress confirmed the story by issuing a press release announcing the fund’s impending closure.
“After careful consideration and analysis, we have decided to close the Fortress Macro Funds and return cash to our investors,” said Mr. Novogratz. “This was a difficult decision given my confidence in both the research positions we hold and the talent of our team. But we have had an extremely challenging two years, and I do not believe the current environment is conducive to achieving our best results.”
The Fortress Macro Fund lost 17.5% in the first nine months of 2015, according to the Wall Street Journal. The fund got off to a bad start by being on the wrong end of the Swiss franc/euro trade when Switzerland unexpectedly de-pegged its national money from the common currency of the European Union. Mr. Novogratz’s former co-manager Jeff Feig was allegedly behind the trade, which may have led to his departure in July. Since then, Mr. Novogratz – described by WSJ as “a 50-year-old former college wrestler known for his high-profile public predictions about global economic trends and a colorful sartorial style” – has been in sole control of the fund.
“The recent past does not negate years of hard work and achievement,” commented Mr. Novogratz, in acknowledgment of the fund’s poor performance. “It has been a rare privilege to lead the Macro team and to serve as a Principal at Fortress.”
Fortress will redeem Mr. Novogratz’s shares in Fortress at a 17% discount to the fund’s closing price on October 12. This will reduce the fund’s dividend-paying share count by 13%. The fund’s liquidation is expected to be completed before the end of 2015.
For more information, visit fortress.com.