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The Morning Brief: Fortress to Shutter Part of Hedge Fund Unit

More woes at Fortress Investment Group. The New York-based alternative investment firm’s Partners funds are selling their investments made in other hedge-fund managers, according to a Wall Street Journal report, citing sources familiar with the situation. The unit at one time managed $1.7 billion but recently was overseeing just $400 million, according to the report. It still holds investments in other private-equity firms and direct stakes in private companies and projects. These investments are also likely to be liquidated over the next few years, according to the report.

This is the latest setback for Fortress. Its Fortress Macro Fund fell about 4.44 percent last month, extending its loss for the year to 13.45 percent. The fund was down 1.6 percent in 2014. In a shake-up last month, Stuart Bohart resigned as president of Fortress Investment Group’s hedge fund business after spending five years with the firm. Fortress spokesman Gordon Runté told the Wall Street Journal in a statement at the time: “It has been a very challenging 18 months for our macro fund and the liquid markets business. Our overriding focus remains on turning performance around as we see a rich macro opportunity set today.”

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The Brevan Howard Master Fund provided details on Monday about its 0.79 percent loss in August, which cut its gain for the year to 1 percent. In its August monthly report, the macro fund’s London-based manager, Brevan Howard Asset Management, said interest rate trading overall was unprofitable. Long euro rates and long asset swap spreads also lost money. The fund was hurt by the rise in interest rates toward the end of the month, the manager explains. It also suffered small losses in a short position in the U.S. dollar rates curve.

In addition, the fund lost a small amount of money from foreign exchange trading, as gains from the Australian dollar, Taiwan dollar and Canadian dollar were more than offset by losses in the euro and Japanese yen. The fund also lost money from equity trading “as European and Japanese indices declined sharply,” it adds. On the other hand, it made some money from tactical short positions in U.S. and Korean indices.

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Shares of Volkswagen fell between roughly 17 percent and 19 percent on various exchanges after the car maker was accused of using software to intentionally circumvent emissions rules. It is not clear who owns shares of the German-based company. But we reported earlier this year that the stock was one of the biggest winners in the first quarter for the multistrategy funds managed by Eric Mindich’s Eton Park Capital Management. The New York firm enjoyed a 34 percent gain from Volkswagen and a 36 percent pop from Porsche, which gets most of its value from its stake in Volkswagen. Eton Park explained in its first quarter letter that the stocks benefited from general interest in German-export companies and overall fundamentals.

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New York-based Visium Asset Management raised its stake in Aquinox Pharmaceuticals nearly six-fold, to 1.4 million shares, or 8.6 percent of the total outstanding, making it the company’s largest shareholder. The clinical-stage drug company, which has a $292 million market capitalization, specializes in discovering and developing therapeutics for inflammation and immuno-oncology. The stock dropped 4 percent on Monday but surged 3 percent in after-hours trading.

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