Fortress Investment Group decided to close a portion of its hedge fund business, which has become an increasing burden on the entire firm, according to report from Wall Street Journal based on information from people familiar with the situation.
The stock price of Fortress Investment declined more than 3% to $5.41 per share at the time of this writing around 12:09 in the afternoon in New York.
Over the past 52 weeks, the shares of the investment management firm traded from $8.65 per share to as low as $4.16 per share. Fortress Investment lost more than 32% of its stock value year-to-date.
Fortress Investment is selling Partners Funds investments
Fortress Investment is selling all of its investments in other hedge funds, which were made through its Partners funds, according to people familiar with the matter.
The Partners funds managed $1.7 billion at its peak in 2010. The business unit was designed to imitate the bets of university endowments and other deep-pocketed investors. However, the Partners Funds delivered weak performances in recent years. Its assets under management (AUM) were around $500 million as of the second quarter of 2015.
The person also said Fortress Investment will likely wind down the remaining cash of the Partners Funds over the new few years. The remaining cash is split between other private equity firms and direct stakes in private companies in projects.
The move showed that Fortress Investment is struggling in its “liquid markets” business, which resulted in the departure of some executives and a change in trading strategies.
Earlier this month, Stuart Bohart, co-chief investment officer of the Partners Funds left. Prior to his departure, Jeff Feig, co-manager of macro fund resigned. David Markus, an executive who helped manage the Partners Funds under Bohart, will leave as part of the liquidation of the business unit.
Fortress Investment main macro hedge fund down 15%
Fortress Investment’s main macro hedge fund declined 15% through early September this year. The firm’s co-founder Michael Novogratz manages the macro hedge fund, which is considered one of the biggest losers in the industry this year.
During the recent earnings call of Fortress Investment, Mr. Novograts said he was taking more direct control of the business.