Fortress Investment Group is using a direct-lending fund to boost its offerings for investors through a private credit effort. It is also expanding with another fund that invests in intellectual property as well as one that buys aircraft leases, real estate debts and other types of asset debts. SoftBank Group owns Fortress and expects to close the direct-lending fund for $2 billion in October 2018.
For a fund that relates to patents, the company has already raised $400 million. The demand for the Fortress open-end asset fund has increased to about $500 million, and the company is realizing the benefits of a healthy private credit market. In a private credit market, the yields from lending are better for small and midsize companies. These funds are starting to draw such companies away from insurance, sovereign wealth funds and pension plans.
What Is An Open-End Asset Fund?
An open-end asset fund is a mutual fund that is free of restrictions on the number of shares that it issues for bonds or stocks. Most mutual funds are structured this way to give investors a more convenient and useful way to invest. If the managers of the fund decide that the total assets are too large, the fund may be closed off to new investors.
In some instances, existing investors may not be able to make additional investments if this happens. When investors purchase shares, this creates new ones. However, the shares are taken out of circulation when they are sold.
Buying and selling happens on demand using the net asset value, and this value is based on the underlying securities of the fund. At the end of each trading day, the NAV is calculated. If a considerable number of shares are redeemed, some of the fund’s investments may be sold to pay investors.
In addition to having an easy way to pool their money, investors can enjoy a diverse portfolio when they have open-end funds. This helps them meet specific objectives such as income thresholds and growth goals. To enter an open-end fund, an investor does not need a large amount of money.
There are risks associated with these funds as well. Open-end investments are not traded on an exchange. They are not as liquid and are priced at the end-of-day value. On the other hand, closed-end funds are more liquid, are traded on an exchange and come with pricing discounts.
Open-end asset funds represent a part of the debt market that is not as regulated, and the recent announcement from Fortress Investment Group is making some experts wonder about the decision. Some people are concerned about interest since rates are about to rise. However, this concern also extends to other lenders. Money managers such as GSO Capital Partners and BlackRock recently expanded their offerings as well.
To mitigate risks, Fortress will extend its flagship credit opportunities to new purchasers. In the past, the entity limited its opportunities to its current investors. Inside sources predict that the company will close the $5.5 billion vehicle by the end of the year.
Also, a real estate fund with a global reach is expected to raise at least $1.5 billion by that time. In Japan, a similar fund raised that amount earlier in the year. This incident showed that the fund could have raised more money.
Why Fortress Investment Group Was A Good Acquisition For SoftBank
In the past, it has partnered with many reputable companies to meet strategic financial goals. The company is known in the investing world for its high-tech platform, its strong commitment to success and its innovative team of leaders. The leaders are proud to help other businesses reach new markets and attain their growth goals. When the Fortress leaders can help the leaders of other entities realize their potential, they feel satisfied.
Although SoftBank acquired Fortress, it will still maintain its highly diversified business model, which has been a cornerstone of its success. Managers and outside experts can see that its business model has provided great profits and many benefits for partners. Fortress specializes in investment strategies such as real estate, private equity and several others.
Another benefit about the company’s business model is its predictability and stability in relation to management fees. Most of its incentive income comes from alternative investment businesses, and a considerable portion of its alternative AUM is in long-term investments. These powerful attributes give Fortress more defined financial results.
Fortress also places a great deal of importance on balance sheet investment monitoring. Its balance sheet investments make up a large percentage of its overall value. With the help of sound partners, Fortress makes strategic choices. Its perpetually strong financial health and its focus on diversification make it a smart choice for many companies that seek financial strategic partnerships. The company is committed to innovation and technological advancement, and investors reap the benefits with risk-adjusted returns.
At the time of its acquisition, Fortress Investment Group had more than 900 asset management employees. Of that amount, more than 200 individuals were highly skilled investment professionals. One of the aspects about Fortress that sets it apart from similar companies is its innovative way of analyzing investment opportunities. In the past, investors only looked at a company’s profitability and its history.
Today, many savvy investors know that innovative abilities and growth potential are also important to consider in relation to advancing technologies and needs in various markets. Fortress Investment Group considers these aspects of companies before it invests. With more insight into potential growth and innovation, SoftBank has access to valuable resources as well.
The Purchase Of Fortress Investment Group By SoftBank
With over $40 billion in managed assets, Fortress Investment Group was the first private equity firm in the United States to de-list itself after it was sold to SoftBank for $3.3 billion in 2017. The Japanese telecommunications company’s acquisition of Fortress differed from its usual investments, which focused on technology and telecommunications firms in the past.
For example, it acquired ARM, which is a company that designs microchips. Some analysts saw the acquisition of Fortress as a good strategy for SoftBank. The acquisition allowed SoftBank to gain access to top-tier financial management advice. In a way, the company jumped into the field of asset management and private equity.
With the financial services of Fortress Investment Group readily available, SoftBank could increase its $100 billion technology investment fund to an even larger amount. The fund’s manager is a former executive of Fortress who was hired by SoftBank. In 2017, SoftBank announced its plans to invest $50 billion in the American economy with a goal of creating 50,000 jobs.
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