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.