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MARKETS | FINANCIAL SERVICES | HEDGE FUNDS Leon Cooperman Is Turning Omega Into Family Office Veteran fund manager writes ‘I don’t want to spend the rest of my life chasing the S&P 500’

Longtime hedge-fund manager Leon Cooperman said Monday his fund would convert into a family office. PHOTO: CHRISTOPHER GOODNEY/BLOOMBERG NEWS

By Rachael Levy Updated July 23, 2018 3:14 p.m. ET

Renowned hedge-fund manager Leon Cooperman on Monday told clients that he would be returning capital and turning his firm into a family office, a dramatic shift for one of the country’s best-known stock pickers.

Mr. Cooperman said his New York hedge fund, Omega Advisors Inc., which was founded in 1991, will now manage only his personal wealth. Mr. Cooperman, who regularly appears on financial television, said the decision was driven “solely by how I want to spend my remaining years.”

In an interview, Mr. Cooperman, 75 years old, said his decision wasn’t based on performance. “I’m closing because of my age and because I want to reduce my stress level,” he said.

One of Omega’s funds, Omega Overseas Partners Ltd., has posted 12.6% annualized net returns for certain clients since January 1992, according to a fund document reviewed by The Wall Street Journal. That was better than the 9.6% rise in the S&P 500 during the same period. This year, that same fund has gained 4.5% after fees through Friday, lower than a 5.9% gain for the S&P 500, including dividends.

Omega, like all hedge READ MORE funds, is under pressure. Stock pickers have faced New Force on Wall Street: The ‘’ headwinds, and clients have Look Inside the DeVos Family Office clamored for lower fees as Zuckerberg’s Wealth Manager Wants to Be a Buyout Shop hedge funds have struggled to make money. Well-established funds, such as Eton Park Capital Management LP, have shut.

A widely followed hedge-fund index maintained by data research company HFR dropped 0.45% in June, according to a report released last week. That pulled down the industry’s gains for the first half of 2018. The index rose 0.79% in the first two quarters, which was lower than the 2.65% return on the S&P 500, including dividends, over the same period.

Investors also redeemed an estimated $3 billion from hedge funds during the second quarter, according to HFR, which was the highest outflow since the first quarter of 2017. The industry manages a total of $3.23 trillion.

Hedge funds typically bet on or against stocks, bonds or other securities, often using borrowed money and charging hefty fees. Many dropped less than the overall market during the last financial crisis and some even posted outsize gains by anticipating the collapse. But since 2008, the funds have struggled to do better than low-cost, passive investment products that track indexes such as the S&P 500.

Mr. Cooperman said he expected tough financial markets in coming years. He acknowledged that he didn’t want to be caught in the fray.

In the letter to clients, Mr. Cooperman wrote: “I turned 75 last April. It is my understanding that if you make it past 65 and cancer doesn’t get you, you can expect to live on average to 85. Hopefully, I can improve on that average, but in any event I don’t want to spend the rest of my life chasing the S&P 500 and focused on generating returns on investor capital.”

Omega managed $3.6 billion as of June 30, according to the firm’s website.

Omega’s vice chairman, Steve Einhorn, and Mr. Cooperman will advise each other on their respective family offices, Mr. Cooperman said in the letter. Omega employees Sam Martini and Eric Schneider, who run the firm’s credit fund, will continue the fund under a new name, and portfolio manager Rebecca Pacholder will be launching a new fund. Mr. Cooperman said his family office will invest in both.

Mr. Cooperman’s decision to shut Omega to outside investors comes just over a year after he and U.S. securities regulators ended a lengthy showdown over allegations of .

That settlement didn’t bar the well-known investor from the industry.

The agreement with the Securities and Exchange Commission called for Omega to accept a compliance monitor for five years who can question any trade that Mr. Cooperman or his traders make. It also called for monthly certifications that insider information didn’t figure into any trades.

Neither Mr. Cooperman nor the firm Omega Advisors admitted to wrongdoing as part of the pact.

Mr. Cooperman, the son of an immigrant plumber, grew up in a one-bedroom apartment in the Bronx. He joined Group Inc. the day after he graduated from , and spent more than two decades there. He rose to general partner and chairman of its asset- management business before leaving to establish Omega.

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