“The risk of a systemic financial crisis has now diminished. We’re now in a credit crisis rather than a liquidity crisis,” he said on a phone call in May.
Fortress reported a loss of $69 million in the first quarter. Earnings for the period were $58 million compared with $220 million for the first quarter in 2007. “Our business is not a business that can be measured quarterly,” insists Edens, but adds that one month into the second quarter, “we’re off to a good start”,
Since the beginning of the year, Fortress has launched several new funds. Its commodities fund had $800 million in assets under management at the end of March. At the beginning of April, it also launched two mortgage opportunities funds, targeting the residential mortgage sector. Both now have more than $300 million in assets.
The firm has one private equity fund looking at other credit assets, which Edens says has $1 billion still to invest. Fortress is organizing a second private equity fund to take advantage of further opportunities. “We are on track with our capital-raising initiatives, having raised $11 billion this year already,” says Edens. The target is to raise between $15 billion and $20 billion over 2008. The forecast for assets under management by end of the year is $40 billion.
Of its $34.2 billion in assets, $17.7 billion is in the hedge fund business. Edens says returns were flat to modestly down for the quarter, but compares it with a 3% decline for the HFR aggregate index for the same period. Fortress has $2 billion in private equity financing. Edens says the firm is looking at investing more in insurance, and that in the second half of the year banks could offer an interesting investment opportunity. “There are going to be some interesting assets for sale [in financial services],” he says.
