NEW YORK, March 6 (Reuters) – Fortress Investment Group’s commodities fund battled through February, losing 5 percent in a month when global financial markets rallied, according to figures published in an regulatory filing on Tuesday.

The portfolio is now down 5.43 percent for the year.

But the firm’s macro strategies fared much better last month, eking out gains as Greece moved closer to securing a 130 billion euro bailout and the Standard and Poor’s 500 stock index rose 4.1 percent.

The firm’s flagship macro fund, run by Michael Novogratz and Adam Levinson, gained 0.8 percent in February, sending yearly returns to 4.71 percent.

The Fortress Asia Macro fund rose about 1.5 percent, pushing returns for the year to 3.76 percent.

The firm’s liquid hedge funds were a sore point in 2011, with nearly all capital ending the year below respective high watermarks, Chief Financial Officer Daniel Bass told an earnings conference call last month.

While the commodities fund sank in February, strong results across Fortress’s macro funds will be a relief for investors, especially as some macro competitors saw their returns dive over the same period.

NEW YORK, Feb 28 (Reuters) – Fortress Investment Group’s quarterly profit slumped as its hedge funds struggled to make gains in last year’s volatile global markets, though in some good news for shareholders, the firm will pay its first dividend since 2008, it said Tuesday.

Fortress, one of a handful of publicly traded alternative investment managers, announced last year it would reinstate its dividend in the fourth quarter. The firm has not made a dividend payout since the second quarter of 2008, and then it was 22.5 cents per share. Next month, shareholders will earn a 5 cent dividend on each share they own.

The New York company said its pretax distributable earnings fell 60 percent to $50 million in the fourth quarter, or 9 cents per share, from $125 million, or 24 cents per share in the same quarter a year ago. For the full year, pretax distributable earnings fell to $242 million, down 35 percent from $372 million in 2010.

Fortress says pretax distributable income is the best way to measure its performance because it excludes large quarterly compensation costs stemming from the equity interest of principals who took the company public in 2007.

Wall Street analysts had expected quarterly earnings of 12 cents per share, according to Thomson Reuters I/B/E/S.

Performance in Fortress’s credit and liquid hedge fund were unable to make up losses sustained during the volatile third quarter, when the European debt crisis sent markets into a tailspin.

The Fortress Macro Fund ended 2011 down 9.3 percent, losing 2.2 percent in the fourth quarter. Its flagship commodities fund lost almost 9 percent in the final quarter alone. Hedge funds lost about 5 percent in 2011, according to Hedge Fund Research.

By Nick Brown and Katya Wachtel

(Reuters) – The MF Global saga could soon become a legal battle between hedge funds and the futures brokerage’s shortchanged customers, with more than a billion dollars at stake.

As the investigation into the collapse of the Jon Corzine-led brokerage moves into more of a regulatory whodunnit than a criminal case, the guessing game centers on who the two court-appointed trustees overseeing MF Global’s liquidation will sue to recoup money owed to customers of MF’s broker-dealer unit and creditors of its parent.

Those decisions are not easy ones, legal experts say, and they could end up pitting hedge funds like David Tepper’s Appaloosa Management and Paul Singer’s Elliott Management – who own MF Global bonds – against brokerage customers trying to recover an estimated $1.6 billion shortfall in their accounts.

It’s likely that James Giddens, the trustee in charge of recovering customer funds, and Louis Freeh, the trustee in charge of recovering money for parent creditors, will dispute the ownership of certain assets, said attorney Chris Ward, vice chair of Polsinelli Shughart’s bankruptcy practice, who is not involved in the case.

A more complex battle could arise from the fact that both customers and bondholders claim priority for payouts from MF Global’s general estate.

Customer groups have said that if efforts to recoup customer cash do not make them whole, they have a right under Commodity Futures Trading Commission regulations to demand payment from the parent company.

By Jonathan Stempel and Katya Wachtel

(Reuters) – A firm run by John Paulson was sued on Tuesday by a prominent Miami investor who claimed the billionaire’s hedge funds failed to conduct proper due diligence on Chinese forestry company Sino-Forest Corp before buying shares, costing investors more than $460 million.

The lawsuit by Hugh Culverhouse, whose namesake father once owned the Tampa Bay Buccaneers team in the National Football League, is among the first targeting Paulson since his funds suffered large double-digit percentage losses in a disastrous 2011, even as U.S. stocks overall were little changed.

Those losses marked a reversal for Paulson, whose successful bet against subprime mortgage debt prior to the global financial crisis drove huge inflows into his firm Paulson & Co. That bet also helped make him the 17th-richest American, worth $15.5 billion according to Forbes magazine.

Paulson & Co in a statement said Culverhouse’s lawsuit lacks merit. Lawyers for Culverhouse did not immediately respond to requests for comment.

According to the complaint filed in the U.S. district court in Miami, Paulson’s Advantage and Advantage Plus funds by 2011 owned about 14 percent of Sino-Forest shares, a stake valued at about $800 million.

That bet blew up after the short-seller Muddy Waters LLC last June questioned Sino-Forest’s accounting and whether it inflated the value of its forestry assets. Sino-Forest shares fell 72 percent in the next two days in Toronto.

NEW YORK (Reuters) – An outspoken research analyst who made waves by refusing to cooperate in the U.S. government’s broad insider-trading probe was charged with illegally supplying hedge funds with tips as part of his consulting service.

The charges against the analyst, John Kinnucan of Portland, Oregon, were announced shortly before a former executive at flash memory chipmaker SanDisk Corp (SNDK.O: Quote, Profile, Research) pleaded guilty to conspiring to divulge company secrets to an unnamed consultant. A source close to the probe, who declined to be identified, said that consultant was Kinnucan.

Between 2008 and 2010, investigators said, Kinnucan paid insiders with cash, trips and other benefits to get secret information, including sales trends for Apple Inc’s (AAPL.O: Quote, Profile, Research) iPhone.

Kinnucan then funneled the information to hedge fund traders in California, New York and Texas in exchange for hundreds of thousands of dollars, investigators said.

Kinnucan was arrested late Thursday, more than a year after he was first linked to Operation Perfect Hedge, the federal probe into the trafficking of corporate information among analysts, corporate executives and hedge fund traders.

The 54-year-old Kinnucan briefly became a media sensation when he went public in 2010 with his refusal to wear an FBI wire to cooperate with the investigation. He then sent a widely circulated email to current and former clients of his firm, Broadband Research, to alert them to the probe.

FOUR COUNTS

NEW YORK (Reuters) – An outspoken research analyst who made waves by refusing to cooperate in the U.S. government’s broad insider-trading probe was charged with illegally supplying hedge funds with tips as part of his consulting service.

The charges against the analyst, John Kinnucan of Portland, Oregon, were announced shortly before a former executive at flash memory chipmaker SanDisk Corp pleaded guilty to conspiring to divulge company secrets to an unnamed consultant. A source close to the probe, who declined to be identified, said that consultant was Kinnucan.

Between 2008 and 2010, investigators said, Kinnucan paid insiders with cash, trips and other benefits to get secret information, including sales trends for Apple Inc’s iPhone.

Kinnucan then funneled the information to hedge fund traders in California, New York and Texas in exchange for hundreds of thousands of dollars, investigators said.

Kinnucan was arrested late Thursday, more than a year after he was first linked to Operation Perfect Hedge, the federal probe into the trafficking of corporate information among analysts, corporate executives and hedge fund traders.

The 54-year-old Kinnucan briefly became a media sensation when he went public in 2010 with his refusal to wear an FBI wire to cooperate with the investigation. He then sent a widely circulated email to current and former clients of his firm, Broadband Research, to alert them to the probe.

FOUR COUNTS

NEW YORK (Reuters) – Hedge fund managers bought shares of several of last year’s hot IPOs in the fourth quarter, including upscale retailer Michael Kors (KORS.N: Quote, Profile, Research, Stock Buzz) and online networking site LinkedIn (LNKD.N: Quote, Profile, Research, Stock Buzz).

Another company with an initial public offering that was a hedge fund favorite was online coupon company Groupon.(GRPN.O: Quote, Profile, Research, Stock Buzz). But the company’s stock has performed poorly since its November debut.

The hedge fund holdings were disclosed Tuesday in quarterly 13F filings with the U.S. Securities and Exchange Commission.

Philippe Laffont’s Coatue Management LLC bought up 680,000 shares of LinkedIn Corp, worth $42.6 million, and 50,000 shares of online coupon purveyor Groupon Inc GPRN.O that are roughly valued at $1 million, according to the firm’s regulatory filing.

Laffont’s bet on LinkedIn looks to be paying off. The company went public in May at $45 per share and soared to $94.25 by the end of its first day. Linkedin was trading at $85.10 at the close of trade on Tuesday.

But Groupon, which went public in November at $20 a share and peaked around $26, has struggled since. It shares closed at $19.35 on the Nasdaq.

New York-based hedge fund Contour Asset Management upped its stake in LinkedIn in the fourth quarter to 565,000 shares from 275,000. Diamondback Capital Management also bought over 45,000 LinkedIn shares in the same period.

NEW YORK (Reuters) – Lucas van Praag, a Goldman Sachs partner and the global head of corporate communications for the firm will leave at the end of March, according to a memo obtained by Reuters.

Van Praag, 62, joined the investment bank in 2000 as the director of corporate communications for Europe, and over the next 12 years oversaw corporate communications in Asia before being tapped to manage communications for the firm globally.

“Lucas has played a critical role in helping the firm navigate through one of the most difficult and testing environments the firm has faced, particularly during the recent financial crisis and its aftermath,” Chief Executive Lloyd Blankfein and Chief Operating Officer Gary Cohn wrote in the memo.

“His strategic counsel and deep understanding of complex issues defined his career at the firm as did his warmth, natural inclusiveness and determination in the face of relentless demands.”

Van Praag will continue to provide strategic advice as a consultant to the securities firm, according to the memo.

A spokesman for Goldman Sachs confirmed the contents of the memo but declined to comment further.

Speculation that van Praag was likely to leave the firm had grown in recent weeks, as media reported that Richard Siewert Jr., a former top adviser to Treasury Secretary Timothy Geithner and a White House press secretary under President Bill Clinton, was in talks to take on a similar role at the investment bank.

LONDON/NEW YORK (Reuters) – David Einhorn’s reputation as one of the hedge fund industry’s most respected investors took a bit a of a hit Wednesday when Britain’s financial regulator imposed a 7.2 million pounds fine on him and his Greenlight Capital fund for alleged trading abuses.

Britain’s Financial Services Authority (FSA) said it fined Einhorn 3.64 million pounds ($5.67 million) and Greenlight Capital 3.65 million pounds for using inside information he obtained from a broker before selling shares in a UK public company in 2009.

The regulator said Einhorn learned from a telephone conversation with the broker that British pub company Punch Taverns was on the verge of a significant equity fundraising, prompting Einhorn to sell down his holdings before an expected fall in the shares.

This decision allowed Einhorn to avoid losses of around 5.8 million pounds, the FSA said.

“The FSA accepted that Einhorn’s trading was not deliberate because he did not believe that it was inside information. However, this was not a reasonable belief,” the FSA said.

“This was a serious case of market abuse by Einhorn and fell below the standards the FSA expects, particularly due to Einhorn’s prominent position as President of Greenlight and given his experience in the market.”

Einhorn, one of the hedge fund industry’s best known managers after big, successful bets against financial firms including Lehman Brothers, said the FSA’s action was unjust and inconsistent with its prior enforcement precedent, but had decided to settle to focus on managing his business.