Fortress Investment Group LLC Class AFIG

Even with the ongoing market volatility the last several years, Fortress' AUM has grown rapidly from $11.3 billion at the end of 2005 to $32.8 billion (excluding the Logan Circle Partners acquisition) at the end of last year, reflective of a 16% compound annual growth rate during that time frame.

After raising $4.2 billion of new third-party capital during 2011, Fortress saw commitments reach $6.7 billion during 2012, with the company seeing more than $1.6 billion committed in the first two months of 2013.

Benefiting from an influx of capital from institutional investors, Fortress recorded $5.7 billion in fixed-income inflows during 2012, close to six times the inflows that Logan Circle Partners was able to generate during 2011.

Fortress held more than $6 billion of committed but uninvested capital at the end of 2012--including $5 billion in newer vintage funds available for general investment purposes--providing it with plenty of dry powder to put to work.

Many of the investments managed by Fortress are subject to lock-in periods or other restrictions that stabilize the level of management fee income the firm receives. In its private equity funds, management fees are determined by initial investment rather than net asset value, limiting the revenue loss caused by market downturns. Read more 

Ongoing net inflows at Logan Circle Partners is having a negative impact on Fortress' realization rate, with the management fees that the firm earns on its fixed-income AUM significantly lower than those it generates with the rest of its managed assets.

While redemptions and distributions from Fortress' private equity and hedge funds declined from $6.9 billion during 2009 to $5.6 billion in 2010, they did not move much lower last year, and ticked up to $6.5 billion during 2012.

Given the increased volatility in the equity and credit markets over the last several years, opportunities to cash out of private equity investments have remained limited, with investors far less receptive to highly leveraged offerings.

Alternative investments tend to be illiquid, making them more difficult to value directly, which leaves Fortress and the other alternative asset managers in the driver's seat when it comes to assessing the value of and returns provided by these investments (which, in turn, has an impact on performance fees and carried interest).

Hedge funds continue to struggle with the stigma created by several prominent hedge fund managers who have defrauded their clients of late, as well as the impact that the raising of "redemption gates," which kept investors from pulling money out of funds during the height of the bear market, had on clients. Read more