Fortress Plans Hedge Fund for Mideast, North Africa Investments

Date: Tuesday, August 26, 2008
Author: Saijel Kishan, Bloomberg

Fortress Investment Group LLC, the manager of $18 billion in hedge funds, plans a new fund to invest in the Middle East and North Africa as countries in the region seek to expand their economies beyond the oil industry.

The Fortress MENA Fund LP will be managed by Philippe Peress and is set to begin trading by the end of September, according to marketing documents, which didn't say how much money the company is seeking to raise. Peress, based in Geneva, has been a managing director and partner of the company's Drawbridge Global Macro funds since 2003.

``Historically MENA was characterized by low investment rates relative to Asian peers,'' New York-based Fortress said in the documents, a copy of which was obtained by Bloomberg News. ``This is beginning to change as governments use petro-dollars to diversify the economies away from oil.''

Middle East economies, benefiting from oil prices that tripled in the past five years, will expand 9.2 percent in 2008 as revenue spurs spending on infrastructure such as airports and power plants, New York-based Morgan Stanley has forecast. That's more than double the International Monetary Fund's 4.8 percent global growth projection.

The Bloomberg GCC 200 Index of 200 companies based in the Gulf Cooperation Council region gained 23 percent in the past 12 months, while the Standard & Poor's Index of 500 companies fell 14 percent. The GCC is an economic and political grouping of Saudi Arabia, the U.A.E., Kuwait, Qatar, Oman and Bahrain.

Peress and Lilly Donohue, a Fortress spokeswoman, both declined to comment.

Mixed Returns

The MENA fund will add to the four hedge funds that Fortress manages and will seek to return 20 percent annually, according to the documents. Fortress and its employees will invest a ``significant'' amount of capital in the fund, the documents said.

The Drawbridge Global Macro fund, with $8.8 billion in assets, lost 2.76 percent in the first six months of the year, Fortress said in its Aug. 7 earning release. Two versions of the Drawbridge Special Opportunities fund, with a combined $6.6 billion, lost 0.65 percent and 2.18 percent. The HRFX Global Hedge Fund Index fell 1.03 percent this year through June 30.

The MENA fund will trade equities, currencies and fixed- income securities in countries such as Lebanon and Qatar, according to the documents. Investments will also be made in Pakistan and Turkey. The investment team will include Sam Hassan, Alex Stojanovski and Diya Al-Sarraj.

Peress was previously head of European strategy at Big Sky Capital LLC and a director of Bankers Trust Co., now part of Deutsche Bank AG. He had also worked at Republic National Bank of New York, which was acquired by HSBC Holdings Plc.

Fortress said Aug. 7 that second-quarter profit declined to $58 million, or 13 cents a share, compared with $143 million, or 33 cents, a year earlier. The stock lost 36 percent this year through yesterday.

To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net