(Reuters) – Daniel Mudd, the embattled former chief executive of mortgage financing company Fannie Mae, is taking a leave of absence from him current job as head of hedge fund Fortress Investment Group (NYSE:FIG – News), the company said on Wednesday.
Last week the Securities and Exchange Commission charged Mudd and other top executives at Fannie Mae and Freddie Mac with understating the lenders’ exposure to risky subprime mortgages.
Now he has announced plans to step down for the moment and the company tapped a co-founder, Randal Nardone, to take over.
“I have requested a leave of absence from my position as chief executive officer to ensure that any time or attention I need to focus on matters outside of Fortress will not affect the business or operations of the company, Mudd said in a statement.
Mudd, who had been forced out at Fannie Mae, said last week that he would fight the SEC charges, and Fortress said the matter was not having an impact on Fortress’s operations.
But its share price, under pressure all year, sank even lower this week as investors worried about his future and outside analysts speculated that Mudd’s presence might become a further liability for the company.
In mid-morning trading on Wednesday the shares were 1.2 percent lower at $3.30, leaving them down 41 percent for the year. Rival Och Ziff, another one of the small number of publicly traded hedge funds, has lost more than 47 percent this year.
“The bigger issue facing the firm right now, more so than a departure of Dan Mudd, is the performance issues in the private equity business and the liquid hedge funds,” said Campbell Anthony, an analyst at Macquarie. “This isn’t a big event in our view because Mudd is not a key man. We would be much more concerned if something were to happen to portfolio managers like Wes Edens or Michael Novogratz or Peter Briger.”
“We doubt Mudd leaving will cause any kind of redemptions at an LP level,” Anthony added.