Brazil woes forced Fortress to shut fund: Report

Hedge Fund

The shakeout in emerging markets may have claimed the scalp of one of Wall Street's most successful investors, a report said on Saturday.

The Wall Street Journal reported on Saturday that Michael Novogratz recently decamped from Fortress Investment Group and shuttered his macro hedge fund amid turmoil in Brazil. According to the publication, Novogratz lost about $100 million in the last two months alone, and came on the heels of a $150 million bath the fund took on a wrong bet placed on the Swiss franc.

At Fortress, Novogratz oversaw approximately $2 billion in assets that included $1 billion in the macro fund. Novogratz, The Journal wrote, attempted to right the ship after the fund was hammered by the franc. Instead, he compounded those losses by stacking up on positions that assumed Brazilian interest rates would fall.

When the bet went the other way, and faced with the prospect of client redemptions, Novogratz cut his losses and vacated his position, the publication added. Other Fortress executives agreed with the decision, according to the report.

Citing a regulatory filing, The Journal added that the latest losses left the fund down 17.5 percent for the year through last month. A Fortress representative contacted by CNBC did not immediately return a request for comment.

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Recently, investors have fled Brazil — one of the emerging market's seemingly surest bets and a draw for global capital. A multi-pronged political scandal has touched off wrangling that may result in the impeachment of Brazilian president Dilma Rouseff,

Fortress, however, is far from being the only large investor wrongfooted by a tumultuous global market.

Earlier this year, Everest Capital —a 25-year-old hedge fund firm that counted George Soros and Nelson Peltz as early backers and has ties to Condoleezza Rice and Robert Gates—shut down six of its seven remaining hedge funds. The firm was hammered by Switzerland's surprise decision to remove its currency's cap against the euro, a legacy of Europe's debt crisis that sent investors scurrying for safe-haven assets.

In August, a flagship fund of private equity powerhouse Carlyle Group was reportedly hammered by the global rout in commodities. Vermillion Asset Management saw its holdings plunge from an estimated $2 billion to about $50 million, the WSJ reported at the time.

The full Wall Street Journal report can be found at its website (note subscription may be required).

 

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