Fortress Raises Redemptions Drawbridge

[CORRECTED Dec. 3] Translated from the original filingspeak, it seems that Fortress Investment Group (FIG) has determined that it needs the money more than investors now seeking to pull $3.5 billion — or, pretty much half the whole pile — from its Drawbridge hedge funds:

On December 3, 2008, the advisor to the Drawbridge Global Macro Master Fund Ltd (the “Fund”), Drawbridge Global Macro Fund Ltd, Drawbridge Global Macro Fund LP and Drawbridge Global Alpha Fund V Ltd (each, a “Feeder Fund,” and, together with the Fund, the “Funds”) informed the Funds’ investors that the Funds have received notices of redemptions in relation to both the November 30, 2008 and December 31, 2008 redemption dates for approximately $3.51 billion (“Requested Redemptions”). The amount of Requested Redemptions includes $1.5 billion of redemption notices received through November 1, which amount was previously disclosed during Fortress Investment Group LLC’s (the “Company”) third quarter earnings call on November 13, 2008.

The Boards of Directors and General Partner of the applicable Feeder Funds have...acted unanimously to temporarily suspend pending redemptions from the Fund. This action will result in amounts requested for redemption with respect to the November 30, 2008 and December 31, 2008 redemption dates remaining part of the Company’s AUM for so long as the suspension remains in effect. Taking into account the redemption notices received, the suspension of those redemptions and the anticipated restructuring of the Funds, the Company estimates that the Funds’ AUM as of January 1, 2009 will be approximately $3.65 billion. [Emphasis added]

Or, if it actually gave the money back to the people it belongs to, $150 million.

Fortress Investment Group LLC
SEC Form 8K Dec. 3 2008

Comments

[adan:]

not exactly (or approximately) a confidence builder

maybe there'll be some re-writes about the redemption clauses in future funds (if things don't get better and people in general forget all about this, again)

2008 Dec 04 08:52 AM

[Daniel Moser:]

I would love for someone to explain to me how anyone who can invest in the common stock of these hedge funds can ever expect to earn any money?

It seems to me, these securities are a terrible way to get access to the hedge fund scene. Unless I am mistaken, investors who buy FIG and other publicly traded hedge funds are shareholders in the management company of these funds. Thus, the only earnings theoretically applicable to shareholders are management fees and performance bonus. The big catch though is that the performance fee isn't applicable to the management company since it is accounted for as "carried interest" within the hedge fund entity itself. To someone more intelligent on the subject, please feel free to correct me, but it seems to me the best the shareholders of FIG could ever dream about earning in EPS is 2% of the AUM. This problem is just compounded when you figure that the 2% is really just revenue. Once you subtract out expenses of the employees there is not likely to be anything left for shareholders. Why then would you ever purchase these securities?

2008 Dec 04 11:24 AM