Fortress Investment Group, in partnership with Mubadala Capital, last week completed a buyout of the equity stake owned by SoftBank since 2017. The firm, which has seen substantial fundraising in recent years, is reportedly gearing up for the launch of multiple funds over the next 12 months. It will also launch a major expansion of its offerings in the wealth management space.
The New York-based investment management company has been majority owned by Tokyo-based SoftBank Group, which acquired the New York manager for about $3.3 billion. The bank last week reached an agreement to sell 90.01 percent of its equity to Fortress Management and Abu Dhabi-based Mubadala Capital for around $3 billion, according to published reports. SoftBank made the decision to sell Fortress several months ago after hitting turbulence.
Mubadala Capital, which currently holds a 9.99 percent stake in Fortress, will own 70 percent of Fortress equity when the transaction closes in the first quarter of 2024. The transaction also means the management team at Fortress will own 30 percent of the equity in the company and Fortress will have majority control of the company’s board.
Drew McKnight and Joshua Pack have been appointed co-chief executives of Fortress and Pete Briger will be appointed chairman. Dean Dakolias will continue in his role as managing partner and Tom Pulley will continue in his role as the chief executive of the firm’s global real estate business, Fortress Real Estate. Fortress co-founders Wes Edens and Randy Nardone will continue to oversee the firm’s permanent capital vehicles business and its remaining private equity investments.
“The transaction with Mubadala is positive from every perspective,” said Joshua Pack, co-chief executive of Fortress. “We’re partnering with one of the world’s most highly regarded sovereign investors and defining our own path forward. We are maintaining autonomy and control over our business and operations.”
Additionally, the buy-in increases the skin in the game for the company over the long-term. “We’ve never been more deeply aligned with our LPs,” Pack added.
Drew McKnight, co-chief executive, noted the firm sees a clear path forward.
“There was not a need for any change at Fortress, either from an ownership or business context,” McKnight said. “We’ve probably never seen a market better aligned with what our business was designed to do. But we took this opportunity to provide certainty about the future of our company – the continuity of the DNA of our credit business and the formalization of our next leadership team. We’ll also establish real ownership interests across a broad base of employees.”
Wealth management expansion
The transaction comes as Fortress is gearing up to expand its wealth management business, focusing on providing real estate and credit-related solutions to private investors of all sizes. The firm has been shifting toward a predominantly credit-driven mandate, with its credit and real estate business now accounting for over 90 percent of total Fortress assets under management.
Adam Bobker, managing director and co-head of wealth management at Fortress, noted while roughly 15 percent of the firm’s assets are concentrated in this space, the firm did not have a dedicated team for the sector until recently.
“We have been assembling and hiring a team of high-quality talent with experience within wealth management who are also able to provide our clients with market insight and educational support,” Bobker said. “Our priority is to enhance our partnership with wealth management firms working with individual investors who have historically had limited access to alternative investments.”
While private investors have recommended allocations to alternatives of 10-15 percent, the average weighting is closer to 2-3 percent. “There is a tremendous opportunity to grow these firms’ weightings to a more appropriate level,” Bobker added.