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Fortress holds $500m first close on sixth buyout fund

The publicly listed investment firm also disclosed in its second quarter earnings call that it is nearing its $2.5bn target on a private equity-style credit fund – yet its fundraising pace has dropped more than 70 percent compared to the same period last year.

Publicly listed investment firm Fortress Investment Group has held a roughly $500 million (€326 million) first close on its sixth core private equity fund. Fortress did not disclose the target of the latest buyout fund; its fifth fund closed on $5 billion last year.  

The New York-based firm has also raised $1.9 billion for a new private equity style-fund targeting $2.5 billion for investments in “credit sensitive assets”, Fortress founder and chief executive Wesley Edens said during the firm’s second quarter earnings call.

Fortress’ fundraising pace has dipped significantly compared to last year, however.

Although the firm grew its total assets under management by 23 percent from July 2007, new capital devoted to Fortress’ private equity franchise dropped 71 percent, or roughly $4 billion for the second quarter of last year to $1.2 billion this year.

Across all of Fortress’ investment vehicles, which include hedge funds, private equity funds and real estate “castles”, the firm raised approximately $2.2 billion in the three months ending 30 June, down from $5.9 billion in 2007.

“The LP universe, as well as every other human being, has been shocked and been on their heels in terms of what has happened to the market over the last year,” Edens said, responding to an analyst’s question concerning limited partner appetite. “It has been, at least by my measure, one of the most destructively bad markets we have been a part of.”

Edens indicated that despite a less than favorable mergers and acquisition market, the firm was eagerly targeting potential investments in distressed financial institutions, an increasingly popular destination for private equity capital.

“In general we have been, and continue to be, very active pursuing some of the many significant opportunities in the mortgage and financial services space,” he said, adding that the firm will consider private investments in public companies. Edens isolated insurance companies and banks as possible targets.

Fortress, which listed on Wall Street in February 2007, reported a net loss of $55 million for the second quarter. Yesterday, buyout giant The Blackstone Group reported a net loss of $156.5 million.