Fortress Investment Group
, a hedge fund and private equity firm with more than $26 billion in assets, is giving ordinary investors a chance to invest in it.
The firm, which will sell shares under a new entity to be called Fortress Operating Group, will be the first hedge fund complex listed on the
New York Stock Exchange
. The filing is seen a test of the receptivity of the U.S. public to investing in hedge fund holding companies.
The filing offers a glimpse into the often-secretive hedge fund world and shows just how profitable these private investment funds for the wealthy can be.
The IPO could raise up to $750 million from the sale of Class A shares to the public. Fortress has not yet set a price for the initial public offering. The five principals who run Fortress will own all of its Class B shares and will effectively continue to control all management decisions at the firm.
Fortress, which intends to trade under the ticker symbol FIG, says $250 million of the net proceeds from the offering will be used to prepay a portion of a $600 million loan facility it has taken out. The remaining proceeds will be used for general business purposes.
Founded in 1998, Fortress has been a fast grower. Just five years ago, the firm had $1.2 billion in assets under management. The rapid growth at Fortress is indicative of all the money that has been pouring into hedge funds and private equity firms the past few years.
The firm reports that its private equity funds, which buy out underperforming companies and then try to turn them around, has $13.6 billion in assets under management. Fortress' hedge funds, meanwhile, manage about $9.4 billion.
In the first six months of this year, Fortress says it earned $88 million on $877 million in revenue. Management incentive fees totaled a little over $150 million.
But the bulk of Fortress' revenue comes from interest payments and dividend income generated from its big stock and private equity portfolio holdings. In the first six months of this year, those revenues totaled $692 million.
Expenses totaled $681 million.
The offering is being underwritten by
Bank of America