BOSTON, July 30 (Reuters) - Fortress Investment Group on Thursday said its liquid hedge funds posted a $6 million pre-tax loss for the second quarter as a result of turmoil at its flagship hedge fund portfolio that bets on global economic trends, sending its shares down.
Michael Novogratz, who runs the closely watched macro fund, said he is more optimistic for the second half, adding that fresh investment opportunities around the world plus a simpler management structure at the fund should help boost returns.
The New York-based company reported distributable earnings, which exclude some compensation costs and other items, of $137 million, or 30 cents per share, for the second quarter, down 20 percent from $172 million, or 39 cents a share, a year ago. Earnings beat Wall Street analysts’ expectations of 21 cents a share, according to ThomsonReuters.
The share price, which has dropped nearly 14 percent since January, fell as much as 3 percent in early trade but later wiped away some losses to trade down 1.7 percent at $6.88.
Fortress, one of only a handful of publicly traded hedge funds and private equity firms, oversees $72 billion in assets, 13 percent more than a year ago. But assets in its liquid hedge funds segment shrunk 6 percent to $7.4 billion and posted a pre-tax loss of $6 million during the quarter.
Novogratz’ macro fund lost 6.2 percent in the second quarter and is off 9.9 percent through July 24. Assets shrunk by one third from last year to $2.3 billion.
“We started the year with big losses and have moved sideways since then,” Novogratz, a former college wrestler known for his blunt assessment of market conditions, told analysts on a conference call. But he added “the macro set is as rich as I’ve seen” and that a simpler management structure should go a long way to boosting returns again.
Earlier this month Reuters reported that Novogratz was becoming the sole chief investment officer after Jeff Feig, his co-CIO of less than one year, leaves the firm.
He said the U.S. Federal Reserve is “hell-bent” on raising interest rates this year “even though they shouldn‘t” and noted that China’s slowdown in growth and a recent stock market tumble opens room for new investments.
Novogratz acknowledged that investors unhappy with returns had pulled money out of the fund but said, “with these changes we feel comfortable that we’ve bottomed out on redemptions.” (Reporting by Svea Herbst-Bayliss; Editing by Bernard Orr)