Know When To Fold ‘Em: Billionaire Leon Cooperman To Close Hedge Fund After Big Comeback
Billionaire hedge fund manager Leon Cooperman, one of this generation’s most successful and highly watched investors, is closing his hedge fund Omega Advisors after 26 years and will convert it to a family office. Cooperman, 75, characterized the move as returning client money at a high after a run of strong performance, citing a famous line in Kenny Rogers’ classic ballad The Gambler, “You’ve got to know when to hold ’em, know when to fold ’em.”
“I am pleased that at present, given the firm’s positive performance over the past two-and-a-half years, all of you are at a record high on your investments, which is important to me as I plan this next move,” he said in the client letter obtained by Forbes. Cooperman, who signed Warren Buffett and Bill Gates’ Giving Pledge in 2010 and is worth $3.2 billion according to Forbes estimates, is likely to now dedicate an even greater portion of his time to philanthropy.
“[M]y financial wealth is earmarked to be returned to society in the hope of benefiting those in need, prominent among them youngsters who can use a helping hand in their quest to achieve the American Dream as I have,” said Cooperman in the introspective letter. “I don’t want to spend the rest of my life chasing the S&P 500 and focused on generating returns on investor capital.”
The decision to close Omega to outside investors has been a long time coming. After peaking at over $10 billion in assets after the crisis, Omega’s assets dwindled to just $3.6 billion after the Securities and Exchange Commission leveled insider trading charges against Cooperman for trades he directed in a small pipeline stock. In 2017, after spending millions to contest the charges, Cooperman settled by paying $4.9 million, but neither admitted nor denied the accusations.
As the investigation swirled, and amid a bull market in stocks that caused many hedge funds to flounder or close, Cooperman performed strongly.
In 2017, Omega’s main Overseas Fund returned 16.6% after fees, while strategies in corporate debt and structured credit outperformed. At year-end 2017, Cooperman told limited partners he believed the challenges to active management and hedge funds amid the rise of passive index investments were fading. He also expressed a generally bullish outlook on the state of the U.S. economy. Omega’s best-performing investments in recent years included tech stocks such as Google, Facebook, Dell Technologies and Microsoft. Corporate credit and structured credit were the biggest drivers of Omega’s alpha in 2017.
While Cooperman will now invest out of a family office, some Omega employees will soon spin out and continue running hedge fund strategies. Sam Martini and Eric Schneider, two portfolio managers at the head of Omega’s Credit Opportunities Fund, will continue the strategy under a new name. Rebecca Pacholder, an Omega PM of six years, will be launching a new high-yield debt and distressed fund. Cooperman will be a big investor in both strategies.
About his retirement as a hedge fund investor, Coopeman took an upbeat tone. “I’ve been happily married to the same woman for 52 years, don’t need the money, and know when to fold ’em.”
The son of a South Bronx-based plumber and a first generation college graduate, Cooperman credits his success to a string of opportunity afforded to him. Educated at local public schools in the Bronx, Cooperman matriculated to Hunter College where he met his wife of 54-years, Toby. As Cooperman tells it, after earning an MBA at the Columbia University Graduate School of Business, he joined Goldman Sachs the day after graduation. He then embarked on a storied quarter century career at Goldman, where he built up its vaunted $1.5 trillion asset management unit, Goldman Sachs Asset Management.
In 1991, Cooperman left Goldman to start his own fund, called Omega. Since inception, Cooperman’s main fund has returned over 12.5% net of fees, outperforming the S&P 500 by about three percentage points annually.
In philanthropy, Cooperman has dedicated his resources to expanding educational opportunities and improving healthcare, particularly in New Jersey and Florida, where he now resides.
He’s helped thousands of high-achieving young adults pay for their college educations through the Cooperman College Scholars Fund. A proud alumnus of Hunter College and Columbia University, Cooperman has been a major donor to both schools. Last year, the Saint Barnabas Medical Center opened a 241,000-square-foot addition to its Livingston medical center using a $25 million gift from Leon and Toby Cooperman. Increasingly dedicated to giving away his billions, Cooperman will sometimes break out into song for phone callers when describing his newest charitable venture, the Songs of Love Foundation, a 501(c)(3) organization that records personalized music for those facing chronic illness.