Fortress Investment Group protects its investors' money. The global investment firm manages private equity and hedge funds for institutional investors, wealthy individuals, and on its own behalf. Its private equity arm buys long-term, controlling stakes in undervalued or distressed companies and credit assets; it also manages real estate investors Newcastle Investment and Eurocastle Investment. The hedge fund arm invests in liquid markets. Fortress offers traditional asset management through Logan Circle Partners. Fortress earns fees, performance-based incentive revenues, and investment income on its own investments. The firm has more than $67 billion in assets under management.
Fortress operates its management and investment business through six main segments differentiated by strategy, including: Private Equity Funds, Permanent Capital Vehicles, Liquid Hedge Funds, Credit Hedge Funds, Credit Private Equity Funds, and Logan Circle.
The company generated nearly 35% of its total revenue from management fees (tied to assets under management) in 2014, while incentive income (based on alternative investment performance) and expense reimbursements made up another roughly 20% and 10%, respectively. Fortress made 35% of its total revenue from its non-managed investments, including nearly 20% from Advertising company investments, 10% from Circulation companies, and the small remainder of revenues from a mix of commercial printing and rental revenue.
The investment firm has headquarters in New York City, and roughly 15 offices in the US, Europe, and Asia. Specifically, its offices are in San Francisco, Philadelphia, London, Tokyo, Dallas, Frankfurt, Portland, Los Angeles, Plano, Tampa, Summit, Sydney, New Canaan, Atlanta, Luxembourg City, Singapore, Rome, Lake Oswego, Shanghai, Dubai, Hong Kong and Tel Aviv.
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Fortress serves more than 1,700 institutional clients and private investors worldwide.
Fortress Investment Group's revenues and profits have been on the uptrend in recent years, mostly as its assets under management have risen with the appreciating financial markets.
The firm's revenue jumped by more than 40% to $1.81 billion in 2014 thanks to a $626.2 million revenue increase from the consolidation of its New Media and New Senior investments held in its NewCastle Investment real estate investor division. Beyond this non-recurring transaction, overall revenue declined, with the company's incentive income revenue falling by nearly $100 million for the year due to lower returns and performance from its hedge funds, credit hedge funds, and liquid hedge fund managed accounts. The firm's management fee income, however, rose by nearly $14 million (around 2%) as assets under management grew during the year.
Fortress' net income plummeted by 50% to $99.96 million, mostly because of a $621.3 million expense related to its consolidation of its New Media and New Senior holdings, though investment manager expenses also swelled by $95 million due to higher compensation and benefits, and increased general, administrative and other expenses. Fortress' operating cash also dove by 45% to $239.87 million mostly due to a decline in cash earnings.
Fortress reiterated in 2015 that its main strategy is to grow its fee-paying assets under management, with an eye toward generating strong risk-adjusted returns from its funds over the long haul. To boost its assets under management, the firm plans to entice new investors to invest in its funds by regularly introducing new investment products. To this end, during 2014, Fortress raised $6.4 billion in new third-party capital and launched four new funds. That year the company also attracted some $5.4 billion in net client inflows in its traditional asset management business.
On the real estate management side, Fortress eyes new investments in a variety of sectors, including in the hospitality, transportation, senior living, and financial services sectors. In 2015, for example, the firm's Japan Opportunity Fund, which specializes in real estate investments in the region, agreed to purchase Rihga Royal Hotel Kyoto, one of Japan's most prestigious hotels, with plans to enhance the facilities and update its rooms with more modern features while keeping its classic look intact. In late 2013, Fortress acquired more than 50 senior-housing properties from Holiday Acquisition Holdings for more than $1 billion.