Fortress to Cede Control of Convex Asia to City Financial

Apr 29 2016 | 9:23pm ET

Hedge fund management company Fortress Investment Group has inked a deal to exit its Convex Asia strategy as the alternative investment industry braces for what could one of the largest shakeouts since the financial crisis. 

London-based City Financial Investment Company will assume the Fortress Convex Asia Fund as well its management team based in Singapore, according to a Bloomberg article citing a Fortress investor letter. The handover will reportedly occur in the second quarter, although further terms were not disclosed.

The divestment is part of a larger reorganization underway at Fortress, noted the letter, to increase focus on event-driven strategies. Fortress was among the first large hedge fund managers to shutter a large macro strategy in the face of intense volatility last year, closing Michael Novogratz’s $2.3 billion fund in October after steep losses and redemptions. Exiting Convex Asia was part of this reorganization, the letter reportedly said, and “is part of a larger strategic repositioning of the Fortress Liquid Markets business, including…a more dedicated focus on the event-driven Fortress Centaurus Global Fund.”

Centaurus managed approximately $220 million as of the end of 2015. It focuses on global, equity-biased event driven opportunities driven by catalysts in liquid securities across the capital structure, according to Fortress. 

Convex Asia was launched in May 2012 to focus on volatility-based strategies in Asian markets. The group managed about $184 million as of February, according to Bloomberg, and has recently been posting positive performance after several years in the red.

City Financial, which was founded in 2006 and manages approximately $2.3 billion across equity, bond and currency strategies, will assume the Fortress offices and staff subject to regulatory approval in Singapore.  

Founded in 1998, Fortress manages more than $70 billion across a number of alternative investment strategies as of December 31, 2015. It was the first private equity and hedge fund manager to sell shares to the public when it IPO’d in February 2007 at $18.50. The company’s stock has fallen more nearly 40% in the past year. 

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