Thursday, October 6, 2016

Goldman Sachs Employees To Pull $300 Million From Omega Advisors

Follows insider trading charges against Omega’s Leon Cooperman; Bank retirement plan also liquidated fund managed by Och-Ziff

By Dakin CampbellKatherine Burton and Saijel Kishan
October 6, 2016

Goldman Sachs Group Inc.’s retirement plan is pulling about $300 million from Leon Cooperman’s Omega Advisors Inc., marking the second time this year it’s cutting ties with a famous alum who ran afoul of U.S. authorities.

The bank informed employees of the decision in a memo Wednesday, according to a person with knowledge of the situation. Most of the funds, which are held in a separately managed account, will be liquidated by Oct. 31, said the person, who asked not be identified because the information is private.

Goldman Sachs employees are exiting the investments managed by Cooperman, who spent more than two decades at the bank, after the U.S. Securities and Exchange Commission accused the hedge fund manager of insider trading.

“Bottom line is that we have done nothing wrong and this will be proven in a court of law,” Cooperman, 73, said by phone Wednesday. “We are disappointed that they couldn’t make an independent decision. They are rewarding the government for bad behavior.”

Omega’s Performance

Cooperman said that since Goldman Sachs invested with him in May 1993, he’s outperformed the S&P 500 Index by about 2 percentage points a year for the bank. He’s also beaten the Russell 2000 by about 3 percentage points annually and the MSCI World Index by about 6. He’s matched the performance of the HFRI Fund Weighted Composite Index during that time.

The Omega Credit Opportunities Fund is up more than 13 percent, the Omega Equities fund has gained more than 5 percent and the firm’s main fund is up over 3 percent this year through Sept. 20, Cooperman said on a call last month.

In August, the Goldman Sachs retirement plan said it would pull about $350 million from Daniel Och’s Och-Ziff Capital Management Group LLC as the U.S. investigated whether a unit paid bribes in Africa. After exiting Omega and Och-Ziff, 401(k) participants who want to invest with an external hedge fund manager will be left with only one option: investments managed by Lee Ainslie’s Maverick Capital, said the person.

Andrew Williams, a spokesman for Goldman Sachs, declined to comment.

On Sept. 21, the SEC accused Cooperman of using his status as one of Atlas Pipeline Partners’ largest shareholders to gain access to confidential information. Cooperman defended his trading in Atlas and told clients he’s fighting the charges and refused an opportunity to settle the case. He promised investors on a call last month that the firm would voluntarily return client money if the SEC case became a distraction.

Goldman Ties

Cooperman founded Omega in 1991 after 25 years at Goldman Sachs, where he headed the asset-management unit and rose to general partner, according to the hedge fund firm’s website. Omega, with $5.4 billion in assets under management as of Aug. 31, is among the oldest in the industry and one that Cooperman has built with a reputation as a stock picker who scrutinizes undervalued companies and asks management tough questions.

A plumber’s son who worked his way up from the South Bronx to Wall Street, Cooperman has gained attention beyond financial circles for his political views and criticism of President Barack Obama, and more recently, Hillary Clinton.

Like Cooperman, Och has kept ties with the bank after starting his own company. Och rose to become co-head of U.S. equities trading over a decade at Goldman Sachs and his multistrategy fund at Och-Ziff was among the firm’s retirement offerings. Goldman Sachs planned to liquidate most of the assets in the fund by Sept. 1, according to an investor letter obtained by Bloomberg.

On Sept. 29, Och-Ziff reached a settlement with U.S. authorities, paying more than $400 million and admitting that a unit conspired to bribe officials in the Congo to win business. Och-Ziff’s assets have slid by almost a fifth since the end of 2015 to $36.9 billion as of Oct. 1, the firm said this week.

Goldman Sachs’s 401(k) plan held more than $6.6 billion in assets at the end of 2014 for more than 30,000 employees, former employees or survivors, according to the latest government filing available.

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