Fortress Sheds Over $2 Billion In First Quarter

Date: Friday, May 8, 2009
Author: FINalternatives

The Fortress Investment Group suffered $2.6 billion in hedge fund redemptions in the first quarter bringing its year-to-date assets under management to $26.5 billion. The alternative investment behemoth also reported a net loss of $287 million for the quarter.

Assets under management for Fortress’ hybrid hedge funds stood at $6.5 billion as of the end of March, compared to $8.1 billion during the same period last year. The firm’s Drawbridge Global Macro Funds was down to $2.3 billion in the first quarter from $6.1 billion as of the end of December. The fund has gained 5.2% year-to-date. Fortress’ $1 billion Commodities Fund experienced little change in its AUM and is down 0.5% YTD.

Assets under management for private equity funds were $10.2 billion as of the end  March, compared to $12.4 billion during the same period last year. Both of the firm’s hedge fund and p.e. units generated management and incentive fees totaling $177 million.

“Overall, results for the quarter were very much as we expected,” said CEO Wes Edens, in a conference call. “Our earnings were basically just management fees with no incentives paid. Encouragingly, all the segments have had good performance in the first quarter and thus far through April and seem to be on the mend after a very difficult 2008.”

Edens also said that the Drawbridge Fund, which underwent a restructuring at the end of last year, has been split into two pieces: a less liquid SPV and a liquid fund. “It is currently our plan to move all the liquid assts in the macro fund to a new platform. This fund was actually launched officially on May 1 and it is not focused on core liquid macro trading strategies under the direction of Mike Novogratz and Adam Levinson. Last week, we took in modest new money, the first since the fall of 2008.”

Fortress’ credit hedge fund, managed by Pete Briger and Dean Dakolias, had a good quarter and was up 3.15%, according to Edens, who sees greater opportunity for Fortress in the sector. Edens said the firm is looking to launch new funds during the course of the year to focus on Asian real estate, U.S. distressed real estate debt as well as government programs directly.