Fortress Loss Yawns In Q3

Nov 3 2011 | 9:18am ET

The third quarter proved a forgettable one for Fortress Investment Group.

The New York-based alternative investments giant said its quarterly loss soared more than 40% for the year-earlier period to $381.9 million. Distributable earnings fell from $78 million to $43 million, while segment revenue dropped 24% to $145 million—despite a $15 million jump in management fee income, performance fee income fell $61 million. Assets under management also dipped, to $43.6 billion, down from $43.8 billion in the second quarter and $44 billion in the third quarter of last year.

Investors fled Fortress' hedge funds in growing numbers: Its liquid hedge funds saw redemption notices double, while investors sought to pull $100 million more from its credit hedge funds than in the year-earlier period.

And no wonder: Fortress' main hedge funds, Macro and Drawbridge Global Macro, lost 3.9% and 4% on the quarter, respectively. Its private equity business suffered a 6.4% drop in carrying value over the quarter. Only its Commodity Fund did well, rising 4.7%.

"Fortress delivered steady, profitable results in a quarter that saw double-digit declines in broad market indices and in which volatility spiked to its highest levels since early 2009," CEO Daniel Mudd said. "I believe our ability to maintain assets under management, raise new capital, expand our client base globally and deliver positive financial performance speak to the benefits of our diversified business model."

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