With the benefit of hindsight, it is sometimes possible to pinpoint specific events that marked a turning point in the direction of a particular market. When Netscape Communications listed on Nasdaq in 1995 it opened the eyes of the investing public at large to the potential for technology stocks and triggered the start of the dotcom craze that ended spectacularly in 2000.
The market might just have witnessed a similar event in the form of the Fortress Investment Group IPO in the US. As with Netscape’s listing, the $7 billion IPO of the global investment fund, with $26 billion in hedge and private equity funds under management, is likely to spawn a number of copy-cat offerings as money managers seek to cash in on the growing craze for alternative funds.
Although listings of investment funds make sense depending on portfolio structure and liquidity, floating a fund manager is a less convincing proposition. Outside investors are always likely to be at a disadvantage to partners and staff at the firm.
According to the Fortress prospectus, the listing was undertaken because of the need to provide financial incentives for employees, as if the traditional hedge fund fee structure was not enough to make anyone stay. The document also claims that the firm is seeking to gain “permanence” to encourage institutions to invest more money with it as well as to secure long-term capital. But Fortress’s superb track record has already garnered $26 billion of assets, much of it locked up on a long-term basis. With that kind of firepower, how more permanent does the firm need to be? And is it really worth paying the price of opening the books to US regulatory scrutiny?
The most likely explanation for the listing is that Fortress’s founders recognize the top of a market when they see one and understandably want to take some of their cash off the table.
