Fortress Investment Group is shuttering its flagship hedge fund.
The investment firm announced Tuesday it would close the $2.3 billion Fortress Macro Fund and managed separate accounts. Fortress aims to return all investor capital by the end of the year.
Fund CIO and Fortress principal Michael Novogratz is set to retire from the firm and its board of directors at the end of the year. Novogratz founded Fortress’ liquid markets business in 2002.
The announcement came one week after reports that Bain Capital was liquidating its $2.2 billion Absolute Return Capital hedge fund.
“This was a difficult decision given my confidence in both the research positions we hold and the talent of our team,” said Novogratz. “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 macro fund had lost more than 17% so far this year as of the end of September, according to the New York Times. Requests for hedge fund redemptions totaled more than $1 billion in the past year, the Times reported.
Co-chairmen Peter Briger and Wesley Edens said in a joint statement with CEO Randal Nardone that they were “obviously disappointed” in the outcome.
“While we regret closing a fund that has been productive in the past, we also recognize the market’s reluctance to ascribe value to this strategy even in its best years,” they said.
In a 2014 regulatory filing, Fortress acknowledged liquidation of the macro fund could have a “material adverse effect” on its broader business.
“The occurrence of such an event with respect to any of our funds would, in addition to the significant negative impact on our revenue and earnings, likely result in significant reputational damage as well,” the filing said.
Investors in Fortress’s flagship fund included the Fire & Police Pension Association of Colorado, which approved an investment in the fund in 2014, according to minutes from a meeting with its board of directors.
As the investment chief of one large foundation told CIO, “This is a big deal.”
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