"The hedge fund business is Darwinian," Mr Novogratz said on a July conference call to discuss Fortress's earnings, when he had expressed hopes of stemming redemptions. "Do well and you raise assets, do poorly and you lose assets."
The end of the Fortress macro hedge fund, which makes bets on economic trends, marks one of the highest-profile hedge fund casualties during a year that has seen some of the industry's biggest managers suffer significant losses.
Mr Novogratz's macro hedge fund has been one of the worst performing large hedge funds in the world this year. Its assets under management have fallen from as much as $8 billion at its peak to under $2 billion as a wave of investors redeemed their money.
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Mr Novogratz's co-manager on the fund, Jeff Feig, left the company in a downsizing of the business in the summer.
The macro fund represents about 3 per cent of Fortress's total $72 billion of assets under management, and contributed 2 per cent of its net earnings since 2013.
Last year, Mr Novogratz's macro fund lost 1.6 per cent, underperforming his peers, but then suffered earlier this year when a bet against the Swiss franc went awry after the Swiss central bank lifted its currency peg against the euro and the currency's value soared.
Mr Novogratz, a former US army pilot and honorary chairman of USA Wrestling Foundation, founded the macro hedge fund unit of Fortress in 2002 after spending 11 years working at Goldman Sachs.
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Other high-profile hedge fund managers that have suffered this year amid a prolonged bout of market volatility include David Einhorn's Greenlight Capital, and Bill Ackman's Pershing Square Capital.
Hedge funds as a whole are on track to post one of their most disappointing years since 2011, with the industry on average down 1.3 per cent, according to the HFRI Fund Weighted Composite index. The HFR macro index is down 0.64 per cent year to date.