Fortress Investments

  • Overview

A-team origins

Fortress Investment Group has about $26.5 billion in assets under management (as of March 2009) and a network of 840 employees, making it one of the world's largest alternative asset managers.  Headquartered in New York, the firm's affiliate offices in North America are located in Chicago, Los Angeles, Dallas, Charlotte, N.C., Toronto, San Francisco and New Canaan, Conn.  Overseas outposts include London, Frankfurt, Munich, Rome, Shanghai, Sydney and Tokyo.

The firm was founded in 1998 by a trio of partners led by CEO Wesley Edens, known for making savvy distressed asset grabs during the savings and loan crisis of the early 1990s.  Edens' career has been the definition of fast-track: he made partner at Lehman Brothers when he was in his early 30s, then left in 1993, citing "philosophical differences" with the firm.  Post-Lehman, Edens moved to BlackRock and then UBS. He launched Fortress with the help of partners Randal Nardone and Robert Kauffman, who now runs the firm's European business.

In 2002 the three partners were joined by former high-flying Goldman Sachs partners Peter Briger and Michael Novogratz, who came on board to run the firm's hedge funds.  These five men still own about 75 percent of Fortress, which went public in February 2007 with a closely-watched $10.7 billion initial offering.  On the day of the issue, FIG share prices jumped from $18.50 to $35, making its founders millionaires.

Investments around the world

Fortress has just two businesses: private equity and hedge funds.  The private equity business includes two divisions.  The funds division makes controlling investments in North America and Western Europe, and also manages a group of "long-dated value" funds that invest in undervalued assets â€" in other words, assets that show potential for long-term dividends despite current cash limitations.  The Castles division includes Eurocastle Investment Limited and Newcastle Investment Corporation, two publicly-traded investment companies that focus on real estate and real estate debt.

The hedge fund business also includes two segments: hybrid hedge funds and liquid hedge funds.  The latter invests in fixed income, currency, equity and commodity markets (as well as their derivatives) around the world.  The former includes a set of funds that makes investments in undervalued and distressed assets, and another set of funds that operate more broadly (Fortress compares these funds to a university's endowment portfolio).
 
Hedge fund hell?

Like other hedge funds, Fortress ran into its share of trouble in 2008 as financial institutions collapsed, investors fled, margin calls went unmet and exposure to bad banks and bad assets became revealed.  By December, the firm's stock had fallen 95 percent, even though Fortress had managed to raise $6.2 billion in new capital for its funds during the year.  Speaking to a Vanity Fair reporter for an April 2009 story, an anonymous hedge fund manager described the tension at Fortress as "hell."

The troubles didn't just affect Fortress, either.  Japanese bank Nomura had purchased a 15 percent stake in Fortress immediately before the IPO, paying $888 million for its holding.  In January 2009, as Fortress shares dipped to $1.27 apiece, Nomura, which still holds about 55 million shares, announced that the loss would amount to $535 million for its third quarter earnings report.

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Fortress Investments


1345 Avenue of the Americas, 46th Floor
New York, NY 10105
Phone: (212) 798-6100
www.fortressinv.com

STATS


  • Employer Type: Public
  • Stock Symbol: FIG
  • Stock Exchange: NYSE
  • Chairman & CEO: Wesley R. Edens
  • 2009 Employees: 840

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