Fortress is launching an affiliated manager platform as part of the firm's growth strategy in the liquid alternative investment space.
The platform will allow Fortress to take an economic interest in high potential start-up and established funds, and to provide a fee-for-services model for funds seeking to leverage Fortress’s technology, infrastructure and client relationships.
The first fund to join the new platform will be the firm’s own Singapore-based Fortress Asia Macro Fund (FAMF), managed by chief investment officer Adam Levinson. Levinson, a long-standing member of Fortress’s senior leadership team, is expected to join Fortress’s board of directors and will continue to invest for Fortress-managed funds as well as serving as CIO for FAMF.
Over the course of 2014, Levinson will transition FAMF, staffed with the current FAMF team, into an autonomous asset management business – to be called Graticule Asset Management Asia – with Fortress as a non-control partner and provider of FAMF’s infrastructure services. It is also anticipated that FAMF will change its name to Graticule Asia Macro Fund.
Fortress will retain a perpetual minority interest in Graticule Asset Management Asia, including economics generated by FAMF and other funds introduced in the future. This economic interest will amount to 42.5 per cent of earnings during the business’s first year as an affiliated manager and will decline to approximately 27 per cent over time. Fortress expects to generate additional fees for technology, back-office and other services provided to the fund.
"We believe an affiliated manager platform will allow us to bring our investors a broader range of best-in-class strategies and to grow our footprint substantially in a highly diverse market,” says Stu Bohart, president of Fortress’s liquid markets business. “The Fortress Asia Macro Fund will be an ideal anchor fund for the platform, demonstrating the benefits of Fortress affiliation and support to a large group of high potential start-ups and established funds. We expect most platform participants will be existing hedge funds that want to be freed from the challenges and distraction of building and managing infrastructure. At the same time, we will continue to grow our internal capabilities, further expanding our range of Fortress-managed funds.”
Fortress intends to add one or two teams per year to the affiliated manager platform. Although the model will be flexible on structure, the typical platform participant will pay fees to Fortress for support services in addition to Fortress having a significant minority ownership stake in the general partner. Bohart is expected to have dual roles at Fortress and platform companies as part of the partnership design.
“We are excited to take this next step in optimising the structure and potential of our Asia Macro business,” says Levinson. “In a highly specialised Asia market, it has become clear that our having the flexibility to evolve and grow in an entrepreneurial environment is extremely important to many limited partners, who also value the depth of resources and strength of infrastructure that Fortress provides. Transitioning the Asia Macro business seamlessly into an independent manager with deep economic ties and ongoing collaboration with Fortress is an approach that we believe benefits all stakeholders.”