The leaders of Fortress Investment Group are to stay on for a further five years, the New York-based alternative investments firm revealed in its second quarter results today, during which it acknowledged its financial performance had been below expectations.
In a presentation of the results, Fortress said co-founders Wesley Edens and Robert Kauffman alongside fellow principals Peter Briger, Randal Nardone and Michael Novogratz, had agreed to remain employees of the business for the half-decade, effective 1 January, 2012.
The terms of their incoming employment agreements, Fortress said, were ‘on substantially similar terms and conditions as their current employment agreements’. Their respective compensation will be awarded in both cash and equity, with the latter component increasing as the firm’s performance increases.
Fortress said the new compensation plan would provide the firm with “ongoing, uninterrupted management of each of its businesses by the principals who sponsor them and, in many cases, act as their chief investment officers”. The firm also said it would incentivise the principals to raise more capital for Fortress’ funds and would further align them with the firm’s funds and public company investors.
Hitching the principals to longer employment terms was a factor that was ‘an overhang’ to its share price, according to The Wall Street Journal. Fortress’ share price fell 4.9 percent to $3.88 a share, although that decrease could in part be due to wide economic factors in the US and Europe.
Fortress delivered a set of second quarter results which, by its own admission, were ‘just off expectations’. The firm reported a net loss of $246 million compared to a net loss of $251 million in the second quarter of 2010. It said its total revenues for the period were $151 million down 13 percent from the $173 million recorded last year also.
“Our earnings today were just off expectations,” Daniel Mudd, chief executive officer at Fortress said, “but further off what we expect from ourselves.”
Mudd apportioned the blame for the disappointing results to a ‘challenging quarter’ for the groups Macro funds, which sit in its liquid markets division. But he countered by stating that Fortress’ credit division ‘continues to generate strong returns’ and that the firm’s private equity business, the firm’s original business upon formation in 1998, saw ‘continued valuation gains’. Our outlook is optimistic for the second half of the year,” he added.