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Fortress raises $2bn for alternative investments in Q3

Thursday, October 31, 2013
Opalesque Industry Update - Fortress Group declares a cash dividend of $0.06 per dividend paying share for the third quarter of 2013

Management Fee Paying Assets Under Management (“AUM”) of $58.0 billion as of September 30, 2013, a 6% increase from the second quarter of 2013 and a 13% increase from the third quarter of 2012

GAAP net income of $101 million for the third quarter of 2013, or $0.12 per diluted Class A share; GAAP book value per share of $2.70 as of September 30, 2013

Pre-tax distributable earnings (“DE”) of $65 million, or $0.13 per dividend paying share, for the third quarter of 2013, compared to pre-tax DE of $64 million, or $0.12 per dividend paying share, for the third quarter of 2012

Net cash and investments of $3.18 per dividend paying share as of September 30, 2013, up from $2.40 per dividend paying share as of December 31, 2012

$807 million of gross embedded incentive income across funds as of September 30, 2013, that has not been recognized in DE

Total uncalled capital, or “dry powder,” of $7.2 billion as of September 30, 2013, including approximately $5.0 billion available for general investment purposes

BUSINESS HIGHLIGHTS

Raised $2.0 billion of capital across alternative investment businesses during the quarter, bringing total third-party alternative capital raised year-to-date through September 30, 2013 to $5.0 billion

Recorded $1.9 billion of net client inflows for Logan Circle during the quarter, bringing total net client inflows year-to-date through September 30, 2013 to $3.2 billion Investment performance summary as of quarter end:

Third quarter 2013 net returns of 3.8% in the Drawbridge Special Opportunities Fund (“DBSO”) LP, (3.0)% in the Fortress Macro Funds and (1.1)% in the Fortress Asia Macro Funds; year-to-date 2013 net returns of 13.5% in the DBSO LP, 9.8% in the Fortress Macro Funds and 11.7% in the Fortress Asia Macro Funds

Private Equity fund valuations increased 10.0% during the quarter and 17.2% year-to-date through September 30, 2013

Annualized inception-to-date net IRRs through September 30, 2013 for the Credit Opportunities Fund and Credit Opportunities Fund II of 25.9% and 18.4%, respectively 14 of 16 Logan Circle fixed income strategies outperformed respective benchmarks in the quarter and all 16 strategies have outperformed respective benchmarks since inception “We continue to track towards a terrific full year, driven by strong year-to-date investment performance and broad-based success in attracting new capital,” said Fortress Chief Executive Officer Randy Nardone. “We began the fourth quarter with assets under management at an all-time high of $58 billion, our highest first three quarters of distributable earnings since 2007, and a substantial and growing store of embedded value in our funds and on our balance sheet. We feel very good about our prospects for the full year and for 2014.”

SUMMARY FINANCIAL RESULTS

Fortress’s business model is highly diversified, and management believes that this positions the Company to capitalize on opportunities for investing, capital formation and harvesting profits that can occur at different points in any cycle for our individual businesses. Fortress’s business model generates stable and predictable management fees, which is a function of the majority of Fortress’s alternative AUM residing in long-term investment structures. Fortress’s alternative investment businesses also generate variable incentive income based on performance, and this incentive income can contribute meaningfully to financial results. Balance sheet investments represent a third component of Fortress’s business model, and the Company has built substantial value in these investments, which are made in Fortress funds alongside the funds’ limited partners.

Press release

bc

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