Why The Big Deal About Fortress IPO?

Fortress Investment Group has not publicly responded to all the hoopla surrounding reports that it may go public, but should it come to pass, it would mark a major shift in the way hedge funds build businesses, for better or for worse.

Fortress Investment Group has not publicly responded to all the hoopla surrounding reports that it may go public, but should it come to pass, it would mark a major shift in the way hedge funds build businesses, for better or for worse. On the plus side, according to The New York Times, a reported $5-7 billion initial public offering would pump in a lot of extra cash to acquire other companies and give the firm a means of holding on to their best people, namely through awards of stock. In addition, by becoming a public company, Fortress will ensure succession to guarantee a future when the time comes for its current executives to retire; such departures at times have meant the end of the firm. Unlike IPOs launched by other alternative investment firms, such as Man Group and Kohlberg Kravis & Roberts, Fortress would be offering investors pieces of itself, not just funds it manages, and with that comes the oodles of fees that have helped build Fortress into a $24.3 billion money machine. On the down side, going public means Fortress will no longer be able to avoid what hedge funds have been beating back recently: heavy regulation and disclosure requirements. In addition, the firm would have to learn to value itself, which could be complicated given the various sources of revenue. Someone will have to decided, is it an asset-management company, with higher price to earning ratio, or like broker, with a lower one? Hedge funds will be watching to see what Fortress does, if anything, as timing has been a factor in IPOs recently. Earlier this year, some firms scratched fund IPOs because of underwhelming interest. The question is whether the hulking Fortress would be too hard to resist.