Fortress Reports Third Quarter 2012 Results and Announces Dividend of $0.05 per Share
Fortress Reports Third Quarter 2012 Results and Announces Dividend of $0.05
per Share
Business Wire
NEW YORK -- November 02, 2012
Fortress Investment Group LLC (NYSE: FIG) today reported its third quarter
2012 financial results.
FINANCIAL SUMMARY
* Fortress declares a distribution of $0.05 per dividend paying share for
the third quarter of 2012
* Assets under management (“AUM”) increased to $51.5 billion as of September
30, 2012, an increase of 8% from the second quarter of 2012 and 18% from
the third quarter of 2011; AUM does not include uncalled capital, or “dry
powder,” of $7.2 billion
* GAAP net income of $7 million in the third quarter of 2012; GAAP book
value per share of $2.22 as of September 30, 2012
* Pre-tax distributable earnings of $64 million, or $0.12 per dividend
paying share, in the third quarter of 2012; pre-tax distributable earnings
of $171 million, or $0.32 per dividend paying share, for the nine months
ended September 30, 2012
* Net cash and investments of $2.37 per dividend paying share as of
September 30, 2012, up from $2.12 per dividend paying share as of June 30,
2012
* $651 million of embedded incentive income across the funds as of September
30, 2012, of which $543 million has not been recognized in DE
* Subsequent to quarter end, paid in full $181 million of outstanding
corporate debt
BUSINESS HIGHLIGHTS
* Raised $1.2 billion of capital across alternatives businesses in the third
quarter, bringing total capital raised year-to-date through September 30,
2012 to $5.2 billion
* Recorded $2.0 billion of net client flows for Logan Circle during the
quarter, bringing total net client flows year-to-date through September
30, 2012 to $5.9 billion
* Delivered strong investment performance across all businesses:
* Net third quarter 2012 returns of 5.1% in the Drawbridge Special
Opportunities Fund, 2.9% in the Fortress Macro Funds and 3.6% in the
Fortress Asia Macro Funds; net year-to-date 2012 returns of 13.1% in
the Drawbridge Special Opportunities Fund, 11.1% in the Fortress
Macro Funds and 10.7% in the Fortress Asia Macro Funds
* Private Equity fund valuations increased 9.4% during the quarter, and
20.8% year-to-date through September 30, 2012
* Net annualized inception-to-date IRRs through quarter end for the
Credit Opportunities Fund and Credit Opportunities Fund II of 26.9%
and 17.8%, respectively
* All 15 Logan Circle strategies outperformed respective benchmarks in
the three months ended September 30, 2012 and 14 of 15 strategies
outperformed respective benchmarks in the nine months ended September
30, 2012
* Subsequent to quarter end, completed the sale of our private equity
portfolio company, RailAmerica, for $1.4 billion
“We had a strong third quarter, with very solid momentum carrying forward in
every one of our businesses,” said Randal Nardone, interim Chief Executive
Officer. “We are solidly optimistic in our outlook. With no corporate debt,
and substantial balance sheet value, we have never operated from a position of
greater financial strength. New commitments of over $5 billion through the
third quarter helped drive our assets under management to a record $51.5
billion. Most important, we continued to deliver strong performance for our
investors in all Fortress businesses, and large-scale opportunities remain
aligned with our greatest investment strengths.”
SUMMARY FINANCIAL RESULTS
Fortress’s business model is highly diversified, and management believes that
this positions the company to capitalize on opportunities for investing,
capital formation and harvesting profits that can occur at different points in
any cycle for our individual businesses. Fortress’s business model generates
stable and predictable management fees, which is a function of the majority of
alternative assets under management residing in long-term investment
structures. Fortress’s alternatives businesses also generate variable
incentive income based on performance, and this incentive income can
contribute meaningfully to financial results. Balance sheet investments
represent a third component of Fortress’s business model, and the company has
built substantial value in these investments, which are made in Fortress funds
alongside the funds’ limited partners.
The table below summarizes Fortress’s operating results for the three and nine
months ended September 30, 2012. The consolidated GAAP statement of operations
and balance sheet are presented at the end of this press release.
3Q 2Q 3Q % Change YTD September %
Change
2012 2012 2011 QoQ YoY 2012 2011 YoY
(in millions,
except per
share amount)
GAAP
Net income $ 7 $ 14 $ (382 ) -53 % N/M $ (3 ) $ (883 ) N/M
(loss)
Net income
(loss)
attributable $ 1 $ 5 $ (142 ) -86 % N/M $ (24 ) $ (340 ) N/M
to Class A
Shareholders
Per diluted $ (0.04 ) $ (0.12 ) $ (0.83 ) N/M N/M $ (0.13 ) $ (1.88 ) N/M
share
Weighted
average Class
A shares 520 516 496 517 492
outstanding,
diluted
Distributable
Earnings
(non-GAAP)
Fund $ 63 $ 53 $ 51 19 % 24 % $ 172 $ 200 -14 %
management DE
Pre-tax DE $ 64 $ 50 $ 43 28 % 49 % $ 171 $ 192 -11 %
Per dividend
paying $ 0.12 $ 0.09 $ 0.08 27 % 47 % $ 0.32 $ 0.36 -12 %
share/unit
Weighted
average
dividend 537 533 530 534 527
paying shares
and units
outstanding
Assets Under
Management
Private $ 14,718 $ 13,826 $ 12,708 6 % 16 % $ 14,718 $ 12,708 16 %
Equity
Credit 11,753 11,452 11,833 3 % -1 % 11,753 11,833 -1 %
Liquid 4,378 4,398 6,165 0 % -29 % 4,378 6,165 -29 %
Markets
Logan Circle 20,626 18,112 12,913 14 % 60 % 20,626 12,913 60 %
Total Assets
Under $ 51,475 $ 47,788 $ 43,619 8 % 18 % $ 51,475 $ 43,619 18 %
Management
CONSOLIDATED GAAP RESULTS
Fortress recorded GAAP net income of $7 million, or a $0.04 loss per diluted
share in the third quarter of 2012, compared with a GAAP net loss of $382
million, or $0.83 loss per diluted share, in the third quarter of 2011. Our
diluted loss per share for all periods presented includes the income tax
effects to net income (loss) attributable to Class A Shareholders from the
assumed conversion of Fortress Operating Group Units and fully vested
Restricted Partnership Units to Class A shares.
The primary driver of the year-over-year improvement in Fortress’s GAAP
results was the expiration of the Principals Agreement and related
compensation expense, a non-economic amortization expense that had accounted
for approximately $4.8 billion in compensation expenses between the first
quarter of 2007 and the fourth quarter of 2011. No amounts were ever paid, or
equity issued, in connection with this agreement. This agreement expired at
the end of 2011 and will no longer impact Fortress’s financial results.
CONSOLIDATED SEGMENT RESULTS (NON-GAAP)
This section provides information about each of Fortress’s businesses: (i)
Credit, (ii) Private Equity, (iii) Liquid Hedge Funds, and (iv) Logan Circle.
Fortress uses “distributable earnings,” or DE, as a primary metric to manage
its businesses and gauge the company’s performance, and it uses DE exclusively
to report segment results. Consolidated segment results are non-GAAP
information and are not presented as a substitute for Fortress’s GAAP results.
Fortress urges you to read “Non-GAAP Information” below.
As of September 30, 2012
Private Equity Liquid Credit Funds Logan
Hedge Circle
(in millions) Total Funds Castles Funds Hedge PE Funds Partners
Funds
Assets Under $ 51,475 $ 11,113 $ 3,605 $ 4,378 $ 5,663 $ 6,090 $ 20,626
Management^1
Dry Powder $ 7,242 $ 740 N/A N/A N/A $ 6,502 N/A
Average
Management 1.2 % 1.5 % 1.7 % 1.9 % 1.4 % 0.1 %
Fee Rate^2
Incentive
Eligible NAV
Above $ 14,367 $ 220 $ - $ 2,418 $ 4,603 $ 7,126 N/A
Incentive
Income
Threshold^3
Undistributed
Incentive $ 543 $ 16 $ - $ 5 $ 92 $ 430 N/A
Income:
Unrecognized
Undistributed
Incentive 108 - - 20 88 - N/A
Income:
Recognized
Undistributed
Incentive $ 651 $ 16 $ - $ 25 $ 180 $ 430 N/A
Income^4
Three Months Ended September 30, 2012
Private Equity Liquid Credit Funds Logan
Hedge Circle
(in millions) Total Funds Castles Funds Hedge PE Funds Partners
Funds
Third-Party
Capital $ 1,183 $ 591 $ 177 $ 167 $ 100 $ 148 N/A
Raised
Segment
Revenues
Management $ 116 $ 30 $ 15 $ 19 $ 24 $ 21 $ 7
fees
Incentive 65 1 - 11 36 17 -
income
Total 181 31 15 30 60 38 7
Segment
Expenses
Operating (82 ) (9 ) (8 ) (17 ) (15 ) (24 ) (9 )
expenses
Profit
sharing (31 ) - - (4 ) (19 ) (8 ) -
compensation
expenses
Total (113 ) (9 ) (8 ) (21 ) (34 ) (32 ) (9 )
Principal
Performance
Payments
(5 ) - (1 ) (1 ) (3 ) - -
Fund $ 63 $ 22 $ 6 $ 8 $ 23 $ 6 $ (2 )
Management DE
Pre-tax
Distributable $ 64 $ 22 $ 6 $ 8 $ 23 $ 6 $ (2 )
Earnings
______________________________
^1 The Assets Under Management presented for the Credit Hedge Funds includes
$511 million related to the third-party originated Value Recovery Funds.
Fortress earns fees from the Value Recovery Funds based only on collections.
^2 The Average Management Fee Rate presented for the Credit Hedge Funds
excludes the third-party originated Value Recovery Funds. See footnote (1)
above.
^3 The Incentive Eligible NAV Above Threshold presented for hedge funds
excludes sidepocket investments. The Incentive Eligible NAV Above Threshold
presented for Private Equity Funds and Credit Private Equity Funds represents
total fund NAV.
^4 The Undistributed Incentive Income presented includes the impact of
sidepocket investments on hedge funds. Undistributed Incentive Income for
Private Equity Funds, Credit Private Equity Funds and hedge fund sidepocket
and redeeming capital account (RCA) investments has not been recognized in
Distributable Earnings and will be recognized when realized; Undistributed
Incentive Income for other hedge fund investments was recognized in
Distributable Earnings when earned.
Pre-tax DE was $64 million in the third quarter of 2012, up from $43 million
in the third quarter of 2011. The year-over-year increase was primarily due to
higher incentive income earned from our funds, partially offset by lower
management fees.
Management fees were $116 million in the third quarter of 2012, down from $131
million for the third quarter of 2011, primarily due to lower management fees
from the Liquid Hedge Funds and Credit Hedge Funds, partially offset by higher
management fees from the Credit Private Equity Funds and Logan Circle.
Notably, 86% of the alternative assets under management at quarter end were in
funds with long-term, locked-up structures, which provides for a stable,
predictable base of management fees.
Incentive income recorded in the third quarter of 2012 totaled $65 million,
compared to $14 million recorded in the third quarter of 2011. This
year-over-year increase was driven by higher incentive income generated by the
Liquid Hedge Funds, Credit Hedge Funds and Private Equity Funds, partially
offset by lower incentive income recognized from the Credit Private Equity
Funds. Additionally, Fortress had $651 million in undistributed, unrealized
incentive income embedded across the funds based on investment valuations at
September 30, 2012. Of that $651 million, $543 million has not been recognized
in DE during the first nine months of 2012.
The Company’s segment revenues and distributable earnings will fluctuate
materially depending upon the performance of its funds and the realization
events within its private equity businesses, as well as other factors.
Accordingly, the revenues and profits in any particular period should not be
expected to be indicative of future results.
ASSETS UNDER MANAGEMENT
As of September 30, 2012, assets under management (“AUM”) totaled $51.5
billion, up 8% from $47.8 billion as of June 30, 2012 and up 18% from $43.6
billion as of September 30, 2011. During the third quarter of 2012, Fortress
recorded $2.0 billion of net client inflows for Logan Circle, had a $1.8
billion increase in its fund valuations, invested $0.8 billion of capital and
raised $0.6 billion of capital and equity that was directly added to AUM.
These increases to AUM were partially offset by (i) $0.7 billion of capital
distributions to investors, (ii) $0.4 billion of Hedge Fund redemptions and
(iii) $0.4 billion of RCA payments to Credit Hedge Fund investors. As of
September 30, 2012 Fortress had $7.2 billion of dry powder, primarily in
Credit Private Equity funds.
BUSINESS SEGMENT RESULTS
Below is a discussion of third quarter 2012 segment results and business
highlights.
Credit:
* Drawbridge Special Opportunities Fund had a net return of 5.1% for the
third quarter of 2012 and 13.1% year-to-date through September 30, 2012
* Raised nearly $250 million of third party capital in the third quarter,
bringing total capital raised year-to-date to $3.7 billion through
September 30, 2012
* Deployed over $720 million of capital during the quarter and distributed
over $950 million of capital back to limited partners
* Completed the sale of CWCapital LLC for $234 million. CWCapital is an
operating subsidiary of CW Financial Services LLC, which Fortress’s Credit
and Private Equity funds acquired in September 2010
(See supplemental data on pages 18-19 for more detail on Credit results)
The Credit business, which includes our Credit Hedge Funds and Credit Private
Equity Funds, generated pre-tax DE of $29 million in the third quarter of
2012, which is up $4 million from the second quarter. During the third
quarter, the business recorded $53 million of incentive income, including $36
million from hedge funds and $17 million from private-equity style funds.
On a year-to-date basis, pre-tax DE of $80 million is down from $109 million
for the comparable period in 2011. This is largely attributable to fewer
realizations in our private-equity style funds, partially offset by additional
incentive income from the hedge funds.
In our Credit Hedge funds, the Drawbridge Special Opportunities Fund continued
its track record of positive investment performance in the third quarter. The
fund had a net return of 5.1% in the quarter, bringing net returns
year-to-date through September 30, 2012 to 13.1%. Net annualized
inception-to-date returns in this fund increased to 10.9%. The Credit Hedge
Fund segment had a total of $4.6 billion of incentive eligible NAV above
performance thresholds as of September 30, 2012.
Fortress’s Credit Private Equity Funds continued to generate strong investment
performance during the third quarter as well, which contributed to a further
increase in unrealized, undistributed incentive income. The Credit
Opportunities Fund and Credit Opportunities Fund II had net annualized
inception-to-date IRRs through September 30, 2012 of 26.9% and 17.8%,
respectively. Unrealized, undistributed incentive income increased $84
million, or 24%, to $430 million in the third quarter and has increased $186
million, or 76%, during the first nine months of 2012.
Also during the quarter, we completed the sale of CWCapital, CW Financial’s
commercial real estate lending and primary servicing businesses, to Walker &
Dunlop, Inc. (NYSE: WD) for $80 million in cash and $154 million of Walker &
Dunlop common stock. Following the transaction’s close, Fortress’s Credit and
Private Equity funds became Walker & Dunlop’s largest shareholder.
Additionally, the Credit team called over $720 million of dry powder for
investments and returned over $950 million of capital to our investors in the
quarter. Total Credit Private Equity dry powder – capital committed to the
funds but not yet generating management fees – was $6.5 billion at the end of
the quarter.
Total capital raised during the third quarter was nearly $250 million. This
included $100 million raised in the Credit Hedge Funds and nearly $130 million
raised in our second Japan real estate credit fund, which we anticipate will
close with total commitments in excess of $1 billion prior to year-end. We
also held a final close for a set of dedicated real estate opportunities funds
with over $280 million in total third-party commitments.
“Our belief remains that the long-term investment opportunities in the Credit
and broader distressed space are still substantial, primarily from the
financial deleveraging that must occur in the next few years,” said Peter
Briger, Fortress co-chairman and Credit co-CIO. “We are pleased to have
substantial capital to invest as this broad opportunity set takes shape, but
we do not believe that pricing dynamics today represent the most compelling
opportunities that we will see in the current cycle. Our overriding objective
is always to deliver outstanding returns for our investors, and we will remain
patient and opportunistic in making investments on behalf of our limited
partners.”
Private Equity:
* Fund portfolio investment valuations increased 9.4% in the third quarter
of 2012, bringing year-to-date appreciation to 20.8%
* Raised $591 million of capital for a new Private Equity fund focused on
investments in mortgage servicing rights
* Raised $168 million of permanent equity capital for Newcastle Investment
Corp. in the third quarter, bringing total equity capital raised
year-to-date to $435 million
* Sold remaining interest in Aircastle Limited (NYSE: AYR) for $134 million
* Subsequent to quarter end, completed the sale of RailAmerica, Inc. for
$27.50 per share, representing a total equity value of $1.4 billion
(See supplemental data on page 17 for more detail on Private Equity results)
The Private Equity business, which includes Private Equity Funds and Castles,
had pre-tax DE of $28 million for the third quarter, up slightly from $27
million in the second quarter. Year-to-date pre-tax DE for the segment is $84
million, down $5 million from the same time period in 2011, largely due to
lower Private Equity Fund management fees that resulted from changes in the
basis on which these fees are calculated in three funds, partially offset by
increased Private Equity Fund incentive income. The majority of this incentive
income was attributable to a $6 million reversal of previously recognized
claw-back reserves recorded for Fund II.
Private Equity Fund investment performance in the third quarter was strong,
with valuations in underlying investments increasing by 9.4%. This brings
appreciation of these fund investments to 20.8% through September 30, 2012.
Our public company investments, which represent 36% of Private Equity fund
NAV, increased 24% in the third quarter.
In addition to the CWCapital transaction described above, we sold our
remaining interest of 11.8 million common shares in Aircastle, for total
proceeds of $134 million. Fortress formed Aircastle in 2004 and completed an
IPO in 2006 at a price of $23 per share. In aggregate, the initial investment
of $351 million generated a return of 2.1 times invested capital and a gross
IRR of approximately 23%.
Subsequent to quarter end, we completed the sale of RailAmerica to Genesee &
Wyoming Inc. for $27.50 per share, representing a total equity value of $1.4
billion. Fortress acquired RailAmerica in a take-private transaction in 2007
and completed an IPO in 2009 at $15 per share. This investment had a return on
investment of 2.2 times invested capital and a gross IRR of 17%.
During the quarter, fundraising activity was highlighted by nearly $770
million in additional capital raised for investments in mortgage servicing
rights opportunities. This includes the nearly $600 million successful launch
of a dedicated mortgage servicing rights fund, as well as the continuation of
equity raises at Newcastle Investment Corp. (NYSE: NCT). Total capital and
equity raised in the Private Equity segment was nearly $1.1 billion in the
first nine months of 2012.
“The first three quarters of 2012 have been very strong for our Private Equity
business,” said Wes Edens, Fortress co-Chairman and Private Equity CIO.
“Valuation gains in our fund investments accelerated in the third quarter, and
now stand at over 20 percent for the year, with strong operating performance
at most of our large portfolio companies pointing to potential for further
gains. We are very optimistic about prospects for both our existing
investments, and with substantial new capital commitments, for new investments
in our key areas of focus today—mortgage servicing rights, senior living, and
transportation and infrastructure.”
Liquid Hedge Funds:
* Fortress Macro Fund had a net return of 11.1% for the first nine months of
2012 and an estimated year-to-date net return of 13.2% through October 26,
2012
* Fortress Asia Macro Fund had a net return of 10.7% for the first nine
months of 2012 and an estimated year-to-date net return of 12.2% through
October 26, 2012
* Raised approximately $167 million in new third-party capital during the
quarter
(See supplemental data on page 20 for more detail on Liquid Hedge Funds
results)
The Liquid Hedge Funds generated pre-tax DE of $8 million in the third quarter
of 2012, bringing year-to-date pre-tax DE to $15 million. Pre-tax DE was up $5
million for the quarter, largely a result of increased incentive income from
both our Macro Funds and Asia Macro Funds as more capital eclipsed respective
high water marks during the quarter.
Net returns for the nine months ended September 30, 2012 for the Fortress
Macro Funds, Fortress Asia Macro Funds and Fortress Partners Funds were 11.1%,
10.7% and 6.9%, respectively. Positive year-to-date performance has brought
nearly all main Fortress Macro Fund and Fortress Asia Macro Fund capital above
respective high water marks and thus eligible to generate incentive income. As
of September 30, 2012, approximately 96% of capital in the main Fortress Macro
Funds exceeded respective high water marks and 100% of Fortress Asia Macro
Fund capital exceeded its respective high water marks. In aggregate,
approximately $2.4 billion of capital is now above respective high water
marks, a $1.3 billion increase from the end of the second quarter.
Liquid Hedge Fund AUM finished the third quarter flat at $4.4 billion. In the
third quarter, we raised a total of $167 million of capital, directly adding
to AUM, and paid out $379 million of redemptions. NAV appreciation of $193
million also added to AUM during the period.
Subsequent to quarter end, the Liquid Hedge Funds have raised over $400
million of additional capital, which will be added to AUM in the fourth
quarter of 2012. As of September 30, 2012, there were $0.3 billion of Liquid
Hedge Fund redemption notices outstanding, of which $0.1 billion will be paid
primarily within one quarter and $0.2 billion will be paid primarily in the
first quarter of 2013.
“Double digit year-to-date returns in our Fortress Macro Funds and Fortress
Asia Macro Funds have brought nearly all of our capital above respective
incentive thresholds,” said Mike Novogratz, Fortress Principal and co-CIO of
Macro Funds. “With over $2 billion of capital now eligible for incentive
income, we are positioned very well for a strong financial close to 2012 and
for next year. Our trading philosophy continues to align well with market
opportunities and we remain optimistic that we can continue to deliver
positive returns for our investors.”
Logan Circle:
* All 15 Logan Circle investment strategies outperformed their respective
benchmarks in the third quarter of 2012, and 14 of 15 strategies
outperformed respective benchmarks in the first nine months of 2012
* Total traditional fixed income AUM rose to $20.6 billion as of quarter
end, an increase of 60% from the third quarter of 2011
* Net client flows were $2.0 billion in the third quarter of 2012, bringing
year-to-date net client flows to $5.9 billion through September 30, 2012
(See supplemental data on page 21 for more detail on Logan Circle results)
Our traditional asset management business, Logan Circle, generated a pre-tax
DE loss of $2 million in the third quarter of 2012, flat compared to the
second quarter of 2012. Compared to the third quarter of 2011, pre-tax DE loss
improved by $2 million primarily due to an increase in management fees driven
by a $7.7 billion increase in assets under management.
Logan Circle’s strategies continued to deliver strong investment performance,
with all of Logan Circle’s 15 strategies outperforming their respective
benchmarks in the third quarter of 2012 and 14 of 15 strategies outperforming
respective benchmarks in the nine months ended September 30, 2012. Notably, 14
of 15 Logan Circle strategies have also outperformed their respective
benchmarks since inception and seven are ranked in the top quartile of
performance for their competitor universe.
Logan Circle had $20.6 billion in AUM at the end of the quarter, an increase
of 14% compared to the previous quarter and a 60% increase compared to the
third quarter of 2011. The $2.5 billion quarterly increase in AUM was
primarily driven by net client inflows of $2.0 billion. Logan Circle’s AUM has
grown over 75% since Fortress completed the acquisition and launched the
traditional asset management business in April 2010.
“We continue to deliver positive investment performance across all of our
strategies which has enabled us to capture significant market share in recent
quarters,” said Jude Driscoll, CEO and CIO of Logan Circle. “Strong
institutional investor demand for our long-only fixed income strategies has
led to record AUM of nearly $21 billion and a significant pipeline of new
mandates. We are optimistic about the prospects for Logan Circle going forward
as our performance track record and recent asset flow momentum has positioned
the business well for long-term organic asset growth.”
Principal Investments:
The Principal Investments segment, which is comprised of Fortress’s
investments in its own funds, generated pre-tax DE of $1 million for the third
quarter of 2012 as compared to a pre-tax DE loss of $8 million in the third
quarter of 2011. This year-over-year improvement is largely a result of the
positive performance of our investments in our funds.
As of September 30 2012, Principal Investments had segment assets (excluding
cash and cash equivalents) totaling $1.2 billion, up 6% from June 30, 2012. As
of September 30, 2012, Fortress had a total of $154 million of outstanding
commitments to its funds.
In addition, as of September 30, 2012, the net asset value of Fortress’s
Principal Investments exceeded its segment cost basis by $416 million,
representing net unrealized gains that have not yet been recognized for
segment reporting purposes. This is up 13%, or $49 million, from June 30,
2012.
LIQUIDITY & CAPITAL
As of September 30, 2012, Fortress had cash and cash equivalents of $254
million, up from $184 million as of June 30, 2012.
In October 2012, the completed sale of private equity portfolio company
RailAmerica resulted in Fortress receiving aggregate proceeds of $182 million,
comprised of the payment of deferred management fees and expenses of $150
million, the repayment of advances of $16 million, and $17 million of
distributions related to our principal investments in related funds. Fortress
used these proceeds to pay down the remaining balance of the company’s only
outstanding debt obligation – a corporate term loan that had a balance of $181
million as of September 30, 2012. Fortress currently has no outstanding term
loans or revolving debt balances.
DIVIDEND
Fortress’s Board of Directors declared a third quarter 2012 dividend of $0.05
per share. The dividend is payable on November 19, 2012 to Class A
shareholders of record as of the close of business on November 14, 2012.
The declaration and payment of any distributions are at the sole discretion of
the Board of Directors, which may decide to change its distribution policy at
any time. Please see below for information on the U.S. federal income tax
implications of the dividend.
NON-GAAP INFORMATION
Distributable earnings, or DE, is a primary metric used by management to
measure Fortress’s operating performance. Consistent with GAAP, DE is the sole
measure that management uses to manage, and thus report on, Fortress’s
segments, namely: Private Equity, Castles, Credit Hedge Funds, Credit Private
Equity Funds, Liquid Hedge Funds, Logan Circle and Principal Investments. DE
differs from GAAP net income in a number of material ways. For a detailed
description of the calculation of DE, see note 11 in the financial statements
included in the Company’s most recent annual report, or note 10 to the
financial statements included in the Company’s most recent quarterly report on
Form 10-Q.
Fortress aggregates its segment results to report consolidated segment
results, as shown in the table under “Summary Financial Results” and in the
“total” column of the table under “Consolidated Segment Results (Non-GAAP).”
The consolidated segment results are non-GAAP financial information.
Management believes that consolidated segment results provide a meaningful
basis for comparison among present and future periods. However, consolidated
segment results should not be considered a substitute for Fortress’s
consolidated GAAP results. The exhibits to this release contain
reconciliations of the components of Fortress’s consolidated segment results
to the comparable GAAP measures, and Fortress urges you to review these
exhibits.
CONFERENCE CALL
Management will host a conference call today, Friday, November 2, 2012 at
10:00 A.M. Eastern Time. A copy of the earnings release is posted to the
Investor Relations section of Fortress’s website, www.fortress.com.
All interested parties are welcome to participate on the live call. The
conference call may be accessed by dialing 1-877-717-3044 (from within the
U.S.) or 1-706-679-1521 (from outside of the U.S.) ten minutes prior to the
scheduled start of the call; please reference “Fortress Third Quarter Earnings
Call.”
A simultaneous webcast of the conference call will be available to the public
on a listen-only basis at www.fortress.com. Please allow extra time prior to
the call to visit the site and download the necessary software required to
listen to the internet broadcast.
A telephonic replay of the conference call will also be available until 11:59
P.M. Eastern Time on November 9, 2012 by dialing 1-855-859-2056 (from within
the U.S.) or 1-404-537-3406 (from outside of the U.S.); please reference
access code “27979789.”
ABOUT FORTRESS
Fortress Investment Group LLC (NYSE: FIG) is a leading, highly diversified
global investment management firm with $51.5 billion in assets under
management as of September 30, 2012. Fortress applies its deep experience and
specialized expertise across a range of investment strategies - private
equity, credit, liquid hedge funds and traditional fixed income - on behalf of
over 1,400 institutional clients and private investors worldwide. For more
information regarding Fortress Investment Group LLC or to be added to its
e-mail distribution list, please visit www.fortress.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this press release may constitute “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding Fortress’s sources of management fees,
incentive income and investment income (loss), estimated fund performance and
the amount and source of expected capital commitments. These statements are
not historical facts, but instead represent only the Company’s beliefs
regarding future events, many of which, by their nature, are inherently
uncertain and outside of the Company’s control. It is possible that the
sources and amounts of management fees, incentive income and investment
income, the amount and source of expected capital commitments for any new fund
or redemption amounts may differ, possibly materially, from these
forward-looking statements, and any such differences could cause the Company’s
actual results to differ materially from the results expressed or implied by
these forward-looking statements. For a discussion of some of the risks and
important factors that could affect such forward-looking statements, see the
sections entitled “Risk Factors” and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in the Company’s Quarterly
Report on Form 10-Q, which is, or will be, available on the Company’s website
(www.fortress.com). In addition, new risks and uncertainties emerge from time
to time, and it is not possible for the Company to predict or assess the
impact of every factor that may cause its actual results to differ from those
contained in any forward-looking statements. Accordingly, you should not place
undue reliance on any forward-looking statements contained in this press
release. The Company can give no assurance that the expectations of any
forward-looking statement will be obtained. Such forward-looking statements
speak only as of the date of this press release. The Company expressly
disclaims any obligation to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in the
Company’s expectations with regard thereto or any change in events, conditions
or circumstances on which any statement is based.
U.S. FEDERAL INCOME TAX IMPLICATIONS OF DIVIDEND
For U.S. federal income tax purposes, the dividend declared in November 2012
will be treated as a partnership distribution. Based on the best information
currently available, when calculating withholding taxes, 2.60 cents of the per
share distribution will be treated as U.S. source interest income.
Accordingly, for non-U.S. holders of Class A shares, unless an exception to
withholding tax applies, the distribution will be subject to a U.S. federal
withholding tax of 0.78 cents per share. Non-U.S. holders of Class A shares
are generally subject to U.S. federal withholding tax at a rate of 30%
(subject to reduction by applicable treaty or other exception) on certain
types of U.S. source income realized by the Company. With respect to interest,
however, no withholding is generally required if proper certification (on an
IRS Form W-8) of a beneficial owner's foreign status has been filed with the
withholding agent. In addition, non-U.S. holders must generally provide the
withholding agent with a properly completed IRS Form W-8 to obtain any
reduction in withholding.
Fortress Investment Group LLC
Consolidated Statements of Operations (Unaudited)
(dollars in thousands, except share data)
Three Months Ended September 30, Nine Months Ended September 30,
2012 2011 2012 2011
Revenues
Management
fees: $ 112,806 $ 118,353 $ 336,935 $ 353,269
affiliates
Management
fees: 10,762 18,865 32,534 47,641
non-affiliates
Incentive
income: 5,976 14,754 38,994 44,361
affiliates
Incentive
income: 788 266 1,564 1,251
non-affiliates
Expense
reimbursements 49,636 42,350 138,317 130,337
from
affiliates
Other revenues 1,555 1,071 3,885 5,433
181,523 195,659 552,229 582,292
Expenses
Interest 3,375 4,583 11,877 13,883
expense
Compensation 181,421 158,426 537,267 535,259
and benefits
Principals
agreement
compensation - 279,623 - 751,749
(expired in
2011)
General,
administrative 31,004 34,165 93,365 109,545
and other
Depreciation
and
amortization 4,982 23,767 11,718 30,114
(including
impairment)
220,782 500,564 654,227 1,440,550
Other Income
(Loss)
Gains (losses) (2,228 ) (15,229 ) 29,542 (26,751 )
Tax receivable
agreement - - (6,935 ) (116 )
liability
adjustment
Earnings
(losses) from 52,034 (64,483 ) 110,417 26,417
equity method
investees
49,806 (79,712 ) 133,024 (450 )
Income (Loss)
Before Income 10,547 (384,617 ) 31,026 (858,708 )
Taxes
Income tax
benefit (3,881 ) 2,712 (34,251 ) (24,493 )
(expense)
Net Income $ 6,666 $ (381,905 ) $ (3,225 ) $ (883,201 )
(Loss)
Principals'
and Others'
Interests in
Income (Loss) $ 5,958 $ (239,847 ) $ 20,698 $ (543,175 )
of
Consolidated
Subsidiaries
Net Income
(Loss)
Attributable $ 708 $ (142,058 ) $ (23,923 ) $ (340,026 )
to Class A
Shareholders
Dividends
Declared Per $ 0.05 $ - $ 0.15 $ -
Class A Share
Earnings
(Loss) Per
Class A Share
Net income
(loss) per $ 0.00 $ (0.76 ) $ (0.12 ) $ (1.85 )
Class A share,
basic
Net income
(loss) per $ (0.04 ) $ (0.83 ) $ (0.13 ) $ (1.88 )
Class A share,
diluted
Weighted
average number
of Class A 220,641,776 190,006,987 212,297,285 185,373,605
shares
outstanding,
basic
Weighted
average number
of Class A 520,039,541 495,864,738 517,431,334 492,396,969
shares
outstanding,
diluted
Fortress Investment Group LLC
Consolidated Balance Sheets
(dollars in thousands)
September 30, 2012
(Unaudited) December 31, 2011
Assets
Cash and cash equivalents $ 253,731 $ 333,166
Due from affiliates 289,889 298,689
Investments 1,199,622 1,079,777
Deferred tax asset 379,372 400,196
Other assets 102,787 108,858
$ 2,225,401 $ 2,220,686
Liabilities and Equity
Liabilities
Accrued compensation and benefits $ 222,719 $ 247,024
Due to affiliates 345,009 354,158
Deferred incentive income 245,957 238,658
Debt obligations payable 180,528 261,250
Other liabilities 81,193 57,204
1,075,406 1,158,294
Commitments and Contingencies
Equity
Class A shares, no par value,
1,000,000,000 shares authorized,
220,188,973
and 189,824,053 shares issued and
outstanding at September 30, 2012 and
December 31, 2011, respectively - -
Class B shares, no par value,
750,000,000 shares authorized,
298,723,852
and 305,857,751 shares issued and
outstanding at September 30, 2012 and
December 31, 2011, respectively - -
Paid-in capital 2,048,874 1,972,711
Retained earnings (accumulated (1,508,043 ) (1,484,120 )
deficit)
Accumulated other comprehensive (2,175 ) (1,160 )
income (loss)
Total Fortress shareholders' equity 538,656 487,431
Principals' and others' interests in 611,339 574,961
equity of consolidated subsidiaries
Total Equity 1,149,995 1,062,392
$ 2,225,401 $ 2,220,686
Fortress Investment Group LLC
Exhibit 1-a
Supplemental Data for the Three Months Ended September 30, 2012 and 2011
Three Months Ended September 30, 2012
Private Equity Liquid Credit Funds Principal
Hedge
(in millions) Total Funds Castles Funds Hedge PE Funds Logan Investments
Funds Circle
Assets Under
Management
AUM - July 1, $ 47,788 $ 10,436 $ 3,390 $ 4,398 $ 5,859 $ 5,593 $ 18,112 $ -
2012
Capital 395 - - 167 100 128 - -
raised
Equity raised
(Permanent 177 - 177 - - - - -
capital
vehicles)
Increase in
invested 754 31 - - - 723 - -
capital
Redemptions (379 ) - - (379 ) - - - -
SPV - - - - - - - -
distribution
RCA
distributions (387 ) - - - (387 ) - - -
^5
Return of
capital (689 ) (122 ) - - (155 ) (412 ) - -
distributions
Adjustment
for reset (8 ) - - - - (8 ) - -
date
Crystallized
Incentive (1 ) - - (1 ) - - - -
Income
Equity - - - - - - - -
buyback
Net Client 1,980 - - - - - 1,980 -
Flows
Income (loss)
and foreign 1,845 768 38 193 246 66 534 -
exchange
AUM - Ending 51,475 11,113 3,605 4,378 5,663 6,090 20,626 -
Balance
Third-Party
Capital $ 1,183 $ 591 $ 177 $ 167 $ 100 $ 148 $ - $ -
Raised
Segment
Revenues
Management $ 116 $ 30 $ 15 $ 19 $ 24 $ 21 $ 7 $ -
fees
Incentive 65 1 - 11 36 17 - -
income
Total 181 31 15 30 60 38 7 -
Segment
Expenses
Operating $ (82 ) $ (9 ) $ (8 ) $ (17 ) $ (15 ) $ (24 ) $ (9 ) $ -
expenses
Profit
sharing (31 ) - - (4 ) (19 ) (8 ) - -
compensation
expenses
Total (113 ) (9 ) (8 ) (21 ) (34 ) (32 ) (9 ) -
Fund
Management DE
(before 68 22 7 9 26 6 (2 ) -
Principal
Performance
Payments)
Principal
Performance (5 ) - (1 ) (1 ) (3 ) - - -
Payments
Fund 63 22 6 8 23 6 (2 ) -
Management DE
Investment 4 4
Income
Interest (3 ) (3 )
Expense
Pre-tax
Distributable $ 64 $ 22 $ 6 $ 8 $ 23 $ 6 $ (2 ) $ 1
Earnings
Pre-tax
Distributable
Earnings per $ 0.12
Dividend
Paying Share
Three Months Ended September 30, 2011
Private Equity Liquid Credit Funds
Hedge
(in millions) Total Funds Castles Funds Hedge PE Funds Logan
Funds Circle
Assets Under
Management
AUM - July 1, $ 43,823 $ 9,979 $ 3,277 $ 6,321 $ 6,374 $ 4,941 $ 12,931
2011
Capital 461 - - 292 60 109 -
raised
Equity raised 122 - 122 - - - -
Increase in
invested 1,034 9 - 5 57 963 -
capital
Redemptions (335 ) - - (335 ) - - -
SPV - - - - - - -
distribution
RCA
distributions (158 ) - - - (158 ) - -
^ 5
Return of
capital (484 ) - - - (59 ) (425 ) -
distributions
Adjustment
for reset - - - - - - -
date
Crystallized
Incentive - - - - - - -
Income
Net Client (231 ) - - - - - (231 )
Flows
Income (loss)
and foreign (613 ) (517 ) (162 ) (118 ) (60 ) 31 213
exchange
AUM - Ending $ 43,619 $ 9,471 $ 3,237 $ 6,165 $ 6,214 $ 5,619 $ 12,913
Balance
Third-Party
Capital $ 899 $ - $ 122 $ 292 $ 60 $ 425 $ -
Raised
Segment
Revenues
Management $ 131 $ 31 $ 13 $ 28 $ 35 $ 19 $ 5
fees
Incentive 14 (3 ) - 1 (4 ) 20 -
income
Total 145 28 13 29 31 39 5
Segment
Expenses
Operating $ (83 ) $ (9 ) $ (6 ) $ (19 ) $ (33 ) $ (7 ) $ (9 )
expenses
Profit
sharing (11 ) 1 - (5 ) 1 (8 ) -
compensation
expenses
Total (94 ) (8 ) (6 ) (24 ) (32 ) (15 ) (9 )
Fund 51 20 7 5 (1 ) 24 (4 )
Management DE
Investment (3 ) - - - - - -
Income
Interest (5 ) - - - - - -
Expense
Pre-tax
Distributable $ 43 $ 20 $ 7 $ 5 $ (1 ) $ 24 $ (4 )
Earnings
Pre-tax
Distributable
Earnings per $ 0.08
Dividend
Paying Share
___________________________
^5 Represents distributions from (i) assets held by redeeming capital accounts
in the Drawbridge Special Opportunities Funds, and (ii) the Value Recovery
Funds.
Fortress Investment Group LLC
Exhibit 1-b
Supplemental Data for the Nine Months Ended September 30, 2012 and 2011
Nine Months Ended September 30, 2012
Private Equity Liquid Credit Funds Principal
Hedge
(in millions) Total Funds Castles Funds Hedge PE Funds Logan Investments
Funds Circle
Assets Under
Management
AUM - January $ 43,713 $ 9,285 $ 3,181 $ 5,515 $ 5,976 $ 6,232 $ 13,524 $ -
1, 2012
Capital 890 - - 447 216 227 - -
raised
Equity raised 444 - 444 - - - - -
Increase in
invested 1,582 98 - - 20 1,464 - -
capital
Redemptions (2,012 ) - - (2,001 ) (11 ) - - -
SPV - - - - - - - -
distributions
RCA
distributions (903 ) - - - (903 ) - - -
^6
Return of
capital (1,939 ) (142 ) - - (233 ) (1,564 ) - -
distributions
Adjustment
for reset (331 ) - - - - (331 ) - -
date
Crystallized
incentive (72 ) - - (2 ) (70 ) - - -
income
Equity - - - - - - - -
buyback
Net Client 5,935 - - - - - 5,935 -
Flows
Income (loss)
and foreign 4,168 1,872 (20 ) 419 668 62 1,167 -
exchange
AUM - Ending 51,475 11,113 3,605 4,378 5,663 6,090 20,626 -
Balance
Third-Party
Capital $ 5,198 $ 620 $ 444 $ 447 $ 216 $ 3,471 $ - $ -
Raised
Segment
Revenues
Management $ 348 $ 89 $ 42 $ 58 $ 76 $ 64 $ 19 $ -
fee
Incentive 164 9 - 21 92 42 - -
income
Total 512 98 42 79 168 106 19 -
Segment
Expenses
Operating $ (245 ) $ (30 ) $ (22 ) $ (51 ) $ (47 ) $ (69 ) $ (26 ) $ -
expenses
Profit
sharing (83 ) (3 ) - (11 ) (45 ) (24 ) - -
compensation
expenses
Total (328 ) (33 ) (22 ) (62 ) (92 ) (93 ) (26 ) -
Fund
Management DE
(before 184 65 20 17 76 13 (7 ) -
Principal
Performance
Payments)
Principal
Performance (12 ) - (1 ) (2 ) (9 ) - - -
Payments
Fund 172 65 19 15 67 13 (7 ) -
Management DE
Investment 10 10
Income
Interest (11 ) (11 )
Expense
Pre-tax
Distributable $ 171 $ 65 $ 19 $ 15 $ 67 $ 13 $ (7 ) $ (1 )
Earnings
Pre-tax
Distributable
Earnings per $ 0.32
Dividend
Paying Share
Nine Months Ended September 30, 2011
Private Equity Liquid Credit Funds Principal
Hedge
(in millions) Total Funds Castles Funds Hedge PE Funds Logan Investments
Funds Circle
Assets Under
Management
AUM - January $ 44,613 $ 11,923 $ 3,037 $ 6,355 $ 6,773 $ 4,817 $ 11,708 $ -
1, 2011
Capital 1,619 - - 1,141 288 190 - -
raised
Equity raised 220 - 220 - - - - -
Increase in
invested 2,432 224 - 11 107 2,090 - -
capital
Redemptions (1,131 ) - - (986 ) (145 ) - - -
SPV - - - - - - - -
distribution
RCA
distributions (968 ) - - - (968 ) - - -
^6
Return of
capital (1,927 ) (313 ) - - (119 ) (1,495 ) - -
distributions
Adjustment
for reset (1,997 ) (1,997 ) - - - - - -
date
Crystallized
Incentive (160 ) - - (69 ) (91 ) - - -
Income
Equity (19 ) - (19 ) - - - - -
buyback
Net Client 476 - - - - - 476 -
Flows
Income (loss)
and foreign 461 (366 ) (1 ) (287 ) 369 17 729 -
exchange
transfers
AUM - Ending $ 43,619 $ 9,471 $ 3,237 $ 6,165 $ 6,214 $ 5,619 $ 12,913 $ -
Balance
Third-Party
Capital $ 2,359 $ 51 $ 220 $ 1,141 $ 413 $ 534 $ - $ -
Raised
Segment
Revenues
Management $ 388 $ 102 $ 39 $ 84 $ 96 $ 52 $ 15 $ -
fees
Incentive 152 (2 ) - 4 50 100 - -
income
Total 540 100 39 88 146 152 15 -
Segment
Expenses
Operating $ (254 ) $ (31 ) $ (20 ) $ (58 ) $ (95 ) $ (23 ) $ (27 ) $ -
expenses
Profit
sharing (86 ) 1 - (16 ) (23 ) (48 ) - -
compensation
expenses
Total (340 ) (30 ) (20 ) (74 ) (118 ) (71 ) (27 ) -
Fund 200 70 19 14 28 81 (12 ) -
Management DE
Investment 6 - - - - - - 6
Income
Interest (14 ) - - - - - - (14 )
Expense
Pre-tax
Distributable $ 192 $ 70 $ 19 $ 14 $ 28 $ 81 $ (12 ) $ (8 )
Earnings
Pre-tax
Distributable
Earnings per $ 0.36
Dividend
Paying Share
_________________________
^6 Represents distributions from (i) assets held by redeeming capital accounts
in the Drawbridge Special Opportunities Funds, and (ii) the Value Recovery
Funds.
Fortress Investment Group LLC
Exhibit 2-a
Assets Under Management and Fund Management DE
(dollars in millions)
Nine
Months
Three Months Ended Three Months Ended Ended
March 31, June 30, September December Full Year March 31, June 30, September September
30, 31, 30, 30,
Fortress 2011 2011 2011 2011 2011 2012 2012 2012 2012
Assets Under
Management
Private
Equity & $ 13,244 $ 13,256 $ 12,708 $ 12,466 $ 12,466 $ 13,239 $ 13,826 $ 14,718 $ 14,718
Castles
Liquid Hedge 6,303 6,321 6,165 5,515 5,515 4,840 4,398 4,378 4,378
Funds
Credit Hedge 6,545 6,374 6,214 5,976 5,976 6,011 5,859 5,663 5,663
Funds
Credit
Private 4,531 4,941 5,619 6,232 6,232 6,258 5,593 6,090 6,090
Equity Funds
Logan Circle 12,484 12,931 12,913 13,524 13,524 16,084 18,112 20,626 20,626
AUM - Ending $ 43,107 $ 43,823 $ 43,619 $ 43,713 $ 43,713 $ 46,432 $ 47,788 $ 51,475 $ 51,475
Balance
Third-Party
Capital $ 649 $ 811 $ 899 $ 1,818 $ 4,177 $ 2,912 $ 1,103 $ 1,183 $ 5,198
Raised
Segment
Revenues
Management $ 126 $ 131 $ 131 $ 121 $ 509 $ 118 $ 114 $ 116 $ 348
fees
Incentive 118 20 14 46 198 52 47 65 164
income
Total 244 151 145 167 707 170 161 181 512
Segment
Expenses
Operating (93 ) (79 ) (83 ) (89 ) (344 ) (82 ) (81 ) (82 ) (245 )
expenses
Profit
sharing (58 ) (17 ) (11 ) (25 ) (111 ) (28 ) (24 ) (31 ) (83 )
compensation
expenses
Unallocated 2 (1 ) - - 1 - - 0 0
expenses
Total (149 ) (97 ) (94 ) (114 ) (454 ) (110 ) (105 ) (113 ) (328 )
Fund
Management
DE (before 95 54 51 53 253 60 56 68 184
Principal
Performance
Payments)
Principal
Performance - - - - - (4 ) (3 ) (5 ) (12 )
Payments
Fund
Management $ 95 $ 54 $ 51 $ 53 $ 253 $ 56 $ 53 $ 63 $ 172
DE
Fortress Investment Group LLC
Exhibit 2-b
Assets Under Management and Fund Management DE
(dollars in millions)
Nine
Months
Three Months Ended Three Months Ended Ended
March 31, June 30, September December Full Year March 31, June 30, September September
30, 31, 30, 30,
Private
Equity Funds 2011 2011 2011 2011 2011 2012 2012 2012 2012
& Castles
Assets Under
Management
Private $ 10,016 $ 9,979 $ 9,471 $ 9,285 $ 9,285 $ 10,029 $ 10,436 $ 11,113 $ 11,113
Equity Funds
Castles 3,228 3,277 3,237 3,181 3,181 3,210 3,390 3,605 3,605
AUM - Ending $ 13,244 $ 13,256 $ 12,708 $ 12,466 $ 12,466 $ 13,239 $ 13,826 $ 14,718 $ 14,718
Balance
Third-Party
Capital $ 98 $ 51 $ 122 $ - $ 271 $ 29 $ 267 $ 768 $ 1,064
Raised
Segment
Revenues
Management $ 47 $ 50 $ 44 $ 44 $ 185 $ 44 $ 42 $ 45 $ 131
fees
Incentive 1 - (3 ) - (2 ) 5 3 1 9
income
Total 48 50 41 44 183 49 45 46 140
Segment
Expenses
Operating (21 ) (15 ) (15 ) (15 ) (66 ) (18 ) (17 ) (17 ) (52 )
expenses
Profit
sharing - - 1 - 1 (2 ) (1 ) - (3 )
compensation
expenses
Total (21 ) (15 ) (14 ) (15 ) (65 ) (20 ) (18 ) (17 ) (55 )
Fund
Management
DE (before 27 35 27 29 118 29 27 29 85
Principal
Performance
Payments)
Principal
Performance - - - - - - - (1 ) (1 )
Payments
Fund
Management $ 27 $ 35 $ 27 $ 29 $ 118 $ 29 $ 27 $ 28 $ 84
DE
Fortress Investment Group LLC
Exhibit 2-c
Assets Under Management and Fund Management DE
(dollars in millions)
Nine
Months
Three Months Ended Three Months Ended Ended
March 31, June 30, September December Full Year March 31, June 30, September September
30, 31, 30, 30,
Credit Hedge 2011 2011 2011 2011 2011 2012 2012 2012 2012
Funds
Assets Under
Management
Drawbridge
Special $ 5,341 $ 5,272 $ 5,227 $ 5,165 $ 5,165 $ 5,209 $ 5,168 $ 5,152 $ 5,152
Opportunities
Funds ^7
Value
Recovery 1,204 1,102 987 811 811 802 691 511 511
Funds ^8
AUM - Ending $ 6,545 $ 6,374 $ 6,214 $ 5,976 $ 5,976 $ 6,011 $ 5,859 $ 5,663 $ 5,663
Balance
Third-Party </t*Story
Capital $ 149 too
Raised large*
[TRUNCATED]
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