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Opalesque Industry update – Fortress Investment Group has completed the acquisition of U.S.-based bond investment shop Logan Circle Partners, L.P. from Guggenheim Partners, LLC., as part of a move to get more involved in traditional investment management and to offer fixed income products to investors across the globe. Daniel Mudd, Fortress’s CEO said the firm would pay approximately $21m in cash with the potential for an additional payment at the end of 2011, consistent with the growth and performance of Logan Circle's business. The transaction is expected to close by the end of the second quarter of 2010, following regulatory approvals. Fortress Group, with headquarters in New York and $32bn in AuM (as of end Sept. 09), will absorb roughly $12bn of assets from its acquisition of Logan Circle, which manages portfolios for institutional investors in strategies that include core/core plus, short, intermediate and long duration, corporate and high yield. Mudd said in a statement: "We believe this is a unique opportunity to diversify and expand Fortress’s investment management business. Logan Circle has a high quality management team and a fundamental credit focus which is complementary to our existing approach.” Logan Circle’s founder Jude Driscoll and his portfolio management and research team will join Fortress. He said that while his firm’s investment approach and the day-to-day operations would remain the same, Fortress's size and global infrastructure, along with its intellectual capital and transaction flow would meaningfully enhance Logan Circle’s ability to build its platform. Driscoll and the senior leadership team at Logan Circle will continue to manage the business, which will report directly to Mudd. According to a report by WSJ.com today, there is a growing trend amongst large private-equity firms to expand their assets under management by making acquisitions, although it is more difficult for them to raise new capital. Last month Blackstone Group acquired $3.2bn in debt funds from Allied Capital Corp., and Apollo Global Management is bidding on the real-estate private equity assets being offered for sale by Citigroup Inc. The report added that Fortress’s acquisition of Logan Cicle would broaden its capital base beyond the lucrative but riskier private equity and hedge fund assets. Alternative investment managers such as Fortress and Citadel started looking for good credit portfolio managers and firms late last year in the “mess” within the investment management business that followed the credit crisis, according to PIonline.com. Last December, Fortress launched a $500m Japan real estate fund as it saw demand for distressed and global macro strategies could benefit investors. Fortress’s CEO Mudd said at the time that capital was flowing back into hedge funds. The group also sued law firm Dechert LLP in connection with the $700m Ponzi scheme perpetrated by lawyer Marc Dreier that month. And it elected not to pay a dividend in the fourth quarter of 2009. Indeed, the group posted a third quarter loss and a decline in total assets in early November; its shares were down 5% or 23 cents at $4.34. Fortress’s stock closed up 5 cents at $4.10 yesterday (16-Feb). – PD & BG –
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Industry Updates
Fortress expands capabilities with acquisition of fixed income manager Logan Circle Partners
Wednesday, February 17, 2010
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