Nov. 8 (Bloomberg) -- Fortress Investment Group LLC, a New York-based hedge-fund and private-equity firm, plans to raise as much as $750 million in the first initial public offering by a U.S. manager of alternative assets.

Investors will own 10 percent of Fortress after the IPO, the company said today in a regulatory filing. The sale values Fortress, which oversees $26 billion, at as much as $7.5 billion, and will expose it to the kind of public scrutiny that private investment firms usually avoid.

Fortress was founded as a private-equity firm in 1998 by Wesley Edens, Robert Kauffman and Randal Nardone, who came from Swiss bank UBS AG and New York-based BlackRock Financial Management Inc. It expanded into hedge funds, real estate and debt, and assets more than doubled since March 2005. No comparable U.S. firms have gone public, though others may now follow Fortress's lead.

``There are few firms who have taken this alternative area, broadly defined, and expressed it in so many ways,'' said John Casey, chairman of Casey, Quirk and Associates LLC, a Darien, Connecticut-based investment-consulting firm. ``Running these businesses is complex.''

Fortress said having publicly traded shares would help it compensate employees, raise capital and provide currency for future acquisitions. Proceeds will help it start funds to invest in infrastructure, real estate and structured debt, and to ``selectively diversify our business,'' Fortress said in its filing with the U.S. Securities and Exchange Commission.

More to Follow?

The firm manages $13.6 billion in private equity, $9.4 billion in hedge funds and $3 billion in publicly traded real estate investment and real-estate debt companies. It has more than 250 investment professionals.

Fortress has grown in part by appealing to institutional investors like Oregon's public pension fund, and now is turning to the stock market to attract investors who will share in the profits from managing its funds. The move will be watched closely by other alternative-investment companies.

``Other firms will be more than happy to create a valuation for their businesses, without giving up control or inviting a strong partner into the mix,'' said Geoff Bobroff, an independent money-management consultant in East Greenwich, Rhode Island.

Lilly Donohue, managing director at Fortress, declined to comment.

Public in Europe

It's not uncommon in Europe for alternative-asset managers to go public. And this year, two New York-based buyout firms, Apollo Management LP and Kohlberg Kravis Roberts & Co., raised money for publicly traded funds in Amsterdam. Apollo and KKR didn't sell any shares in their management companies as Fortress is doing.

KKR gathered $5 billion for KKR Private Equity Investors LP, with shares priced at $25 apiece in May. Three months later Apollo raised $2 billion for AP Alternative Assets LP.

Last month, Doughty Hanson & Co., a London-based buyout firm, shelved a planned 1 billion euro ($1.27 billion) initial public offering of a fund as shares of the KKR and Apollo funds traded below their IPO prices.

Fortress's IPO is being managed by Goldman Sachs Group Inc. along with Bank of America Corp., Citigroup Inc., Deutsche Bank AG and Lehman Brothers Holdings Inc. No price range for the shares, which will trade under the symbol ``FIG'' on the New York Stock Exchange, was given in the preliminary filing.

The Man Group PLC, based in London, is the world's largest publicly listed hedge-fund manager. Its shares have climbed 55 percent this year. RAB Capital PLC, also based in London, focused on resource companies, has seen its shares climb 76 percent this year.

Rising Profits

Fortress's net income for the first six months of 2006 was $88 million, nearly double the $45.3 million it earned in the same period a year earlier, according to today's filing. Revenue for the period almost tripled to $877.5 million.

Edens, 45, chairman of Fortress's management committee, was head of BlackRock Asset Investors. Nardone, 51, was managing director of the same division. New York-based BlackRock Inc. is a publicly traded mutual-fund manager that also runs hedge funds and invests in real estate.

Kauffman, 43, came to Fortress from the principal finance group of UBS and previously was executive director of Lehman Brothers International in London.

In 2002, Fortress hired former Goldman Sachs partners Peter Briger, 42, and Michael Novogratz, 41, whose backgrounds include management of fixed income, distressed debt, international commodities, currencies and real estate.

Michael Jackson

Briger oversees Fortress's Drawbridge Special Opportunities and Long Dated Value businesses, and Novogratz is in charge of the Drawbridge Global Macro business, all part of the firm's hedge-fund division started in 2002 and expanded last year, according to the firm's Web site. Fortress once held $270 million in loans to singer Michael Jackson, secured partially by his 50 percent stake in the Beatles song catalog. Jackson restructured the debt in April.

In October, Amaranth Advisors LLC, the Greenwich, Connecticut-based hedge-fund manager that lost $6.6 billion on bad natural-gas bets, hired Fortress to help sell assets in an effort to return money to investors.

The company's portfolio includes Vancouver-based resort owner Intrawest Corp., which operates 2010 Winter Olympic venue Whistler Blackcomb. Fortress agreed to buy Intrawest in August for $1.8 billion amid a rash of lodging buyouts.

Other Holdings

Fortress owned 59 percent of outstanding shares of Chicago- based Brookdale Senior Living Inc., which runs skilled-nursing centers and assisted-living homes, as of July, according to regulatory filings. The company also has invested in Stamford, Connecticut-based jet-leasing company Aircastle Ltd. and Italian mortgage lender Italfondiario SPA, a unit of Fortress.

Edens sits on the boards of all of those companies as well as that of London-based commercial property manager Mapeley Ltd. He also is chairman and chief executive officer of Global Signal Inc., a Sarasota, Florida-based real estate investment trust. Kauffman is chairman of Italfondiario.

Fortress has offices in cities including New York, Geneva, Hong Kong, Los Angeles, London and Toronto. There are an estimated 9,000 hedge funds worldwide with more than $1.3 trillion in assets, more than double the amount under management five years ago, according to Hedge Fund Research Inc. in Chicago. Hedge funds are largely unregistered pools of private capital that allow managers to profit from gains on clients' money.

Returns Lag

Hedge-fund returns are stumbling this year even as record amounts of money flow into managers' hands. The funds attracted $110.6 billion of net new investments in the first nine months of the year compared with $46.9 billion during all of 2005.

In the past decade, buyout funds have returned at least 2 percentage points more than the Standard & Poor's 500 Index, according to industry data. Buyout funds gained 8.9 percent annually in the 10 years ended June 30, compared with the 6.6 percent annual return of the Standard & Poor's 500 Index, according to the National Venture Capital Association and Thomson Venture Economics.

Private-equity funds may raise as much as $400 billion this year, up from $283 billion in 2005, according to London-based industry research firm Private Equity Intelligence Ltd.

There have been $37 billion of U.S. IPOs so far this year, about the same as last year, according to data compiled by Bloomberg.

To contact the reporters on this story: Jenny Strasburg in New York at jstrasburg@bloomberg.net; Katherine Burton in New York at kburton@bloomberg.net

Last Updated: November 8, 2006 20:12 EST