- Hedge fund legend vows fight to preserve ‘my legacy’
- Value investor built fortune starting as scrappy stock picker
For a quarter century, Leon Cooperman gained a reputation as a brash, old-school stock picker, building Omega Advisors Inc. into one of the biggest names in the hedge-fund game.
From his 33rd-floor aerie near Times Square, the blustery billionaire has prospered while lesser lights, and some brighter ones, have been snuffed out by newfangled markets or old-fashioned greed.
But now, at 73, Cooperman finds himself in the fight of his life following allegations of insider trading at Omega.
“It took me 50 years of hard work and playing by the rules to get where I got and I’m not going to let these people destroy my legacy,” Cooperman said Wednesday on a call with investors.
News that the U.S. Securities and Exchange Commission has accused the $5.4 billion firm and Cooperman of illicit trades stunned Wall Street, and with reason. Cooperman -- a plumber’s son who bootstrapped his way from the South Bronx to mighty Goldman Sachs Group Inc. -- is a fixture in financial and philanthropic circles. Through his many appearances on television and industry conferences, his gravel-voiced harrumph can be heard on trading floors across Manhattan and beyond.
While many hedge funders avoid the limelight, Cooperman has gained notice beyond Wall Street for his outspoken criticism of President Barack Obama and, more recently, Hillary Clinton.
“This isn’t a case where an employee is being charged with wrongdoing, this is the guy whose name is on the door,” said Brad Alford, who had invested in Omega when he worked at Duke University’s endowment.
It’s a remarkable turn of events for Cooperman, one of the deans of the hedge fund industry and, in many ways, a throwback to the age before computer algorithms and high-frequency traders. Cooperman has long celebrated value investing and said repeatedly that he’s too set in his ways to change as a younger breed of math and computer whizzes grab the spotlight.
"I’m too old to learn new tricks," Cooperman told Bloomberg News in a telephone interview in May.
Cooperman on Wednesday vigorously denied the SEC’s allegations, which center on 2010 trades in Atlas Pipeline Partners, a natural gas producer. In a spirited nine-minute call with investors, he began with an off-color joke to explain why he’s talking openly about the case. He boasted that he could have settled it “for an amount which is far less than what I donate to charity every year.”
The question is not only whether he can prevail against the SEC but also whether he can calm anxious investors. No sooner had the SEC announced the case Wednesday morning than traders throughout the market turned on Cooperman, dumping investments held by Omega on the bet the fund might be forced to sell. However the case plays out, many outsiders said the fund is almost certain to face redemptions. Cooperman promised on the call that if the SEC case became a distraction he would give investors in his funds their money back.
Omega’s assets have plunged by more than 40 percent from $9.4 billion in early 2015 as investors pulled their money. The New Jersey Investment Council, which had $150 million with Cooperman’s firm, started redeeming last year and will get back all its money in January 2017, Joseph Perone, director of communications, said in an e-mail Wednesday.
Internal money, including Cooperman’s fortune, makes up roughly 35 percent of the firm’s assets under management, he said on the Wednesday call. He has said he would consider returning money to outside investors if Omega’s assets fall below a certain unspecified threshold.
"I have a number in mind," Cooperman told Bloomberg in May, declining to elaborate. Whatever that number was, it could become even more important now in the event the SEC case prompts investors to withdraw money.
“Leon Cooperman is one of the most well-known long-short equity managers,” said Don Steinbrugge, managing partner of hedge-fund consulting firm Agecroft Partners. “The unfortunate thing about the hedge fund industry is that if you are charged by the SEC it has a material impact on your business even if you are not ultimately found guilty."
South Bronx Kid
Cooperman has come a long way from the South Bronx, where he bagged fruit and worked changing tires to make money as a teenager. He graduated from Hunter College before getting an MBA from Columbia University. At Goldman, he served as its longtime research chief and lobbied for years to expand its money management efforts. When Goldman Sachs Asset Management was created in 1988, he was its first chief executive. He rose to a partner at the firm before leaving in 1991 to start Omega.
Even his offices hark back to another era. A sepia-toned photo of old Times Square covers an entire wall in the reception area. From Cooperman’s office, next to that of his deputy, Steven Einhorn, the view stretches toward Central Park. Bric-a-brac includes a caricature of Cooperman.
Outside financial circles, Cooperman has gained attention for his full-throated criticism of what he regards as class warfare being waged by the Obama administration. He has defended -- loudly -- billionaires and mere millionaires, saying Clinton and other Democrats indiscriminately criticize the wealthy.
Capitalists “are not the scourge that they are too often made out to be,” Cooperman wrote in an open letter to Obama in 2011.
Cooperman later recounted in an interview with Bloomberg that after the letter was published, he was regaled by his fellow members of the St. Andrews Country Club in Boca Raton, Florida. So many thanked him that he couldn’t eat his egg-white omelet in peace, he said.
Even before Wednesday’s news, Cooperman was saying his best days as a money manager might be behind him.
"The golden period for hedge funds is 2000 to 2007,” Cooperman said at a New York event in June. “Money was coming in over the transom, and it became very fashionable at cocktail parties for hedge-fund men and hedge-fund women because they were outperforming conventional money managers and they were up.”
Golden age or not, Omega’s been able to stand by its numbers even in an environment that’s been difficult for stock pickers. Omega has posted an average annual return of 11 percent since its founding in 1991.
Cooperman has had ups and down. Omega lost 10 percent in the first quarter of 2016, but has since wiped out losses. Its main fund was up more than 3 percent through Sept. 20, he said on the investor call.
Cooperman is known for his philanthropy in New Jersey and to Jewish causes. He cited the Talmud as motivation for donations. In a 2010 letter describing his pledge to donate at least half of his fortune to charity, he said: “A man’s net worth is measured not by what he earns but rather what he gives away.”
“Pablo Picasso once observed that the meaning of life is to find your gift, and the purpose of life is to give it away," Cooperman said on the call Wednesday, his voice wavering. “Well this kid from the South Bronx found my gift 50 years ago and I am intent on giving it back to society, not the government and not the legal profession."