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Fortress’ debut Asia fund holds closes, does debut deal

The New York-based alternative investment firm revealed it has closed on a deal to buy 1,200 home loans from Lehman Brothers’ Asia subsidiaries for its first ever Asia-focused fund.

Fortress Investment Group has launched its first fund aimed at investing in Asian real estate and has already held “several closings” since its launch in June, according to chairman and chief executive Wesley Edens.

The fund has also made its first acquisition in the region, Edens said during the firm’s second quarter 2009 earnings call.

Fortress, which had $31 billion of assets under management at the end of the quarter, said it did not know what the final size of the fund would be but that it had raised approximately $275 million “in newly created funds focusing on Asian real estate and credit, of which $135 million was raised during the second quarter”.

The firm’s efforts in Asia, which Edens characterised as “an important focus of the firm in the coming months and years”, will be headed by Tom Pulley, a principal in its Tokyo office. Pulley reports directly to Peter Briger, president and head of Fortress’ hybrid hedge fund business.

The Asia fund “has leveraged our strategic relationships with (Imera) our largest investor at Fortress,” Edens said. “They were very helpful in the capital formation for the fund.”

The fund has already closed on its first investment, a portfolio of 1,200 home loans in Japan bought from Lehman Brother’s subsidiaries as part of the failed Wall Street Bank’s Asia arm bankruptcy process.

Fortress’ strategy to invest in distressed assets in Asia was boosted last month as it hired former Fannie Mae chief executive Daniel Mudd as part of a board reshuffle aimed at enabling senior executives to focus on the group’s portfolio. “We are very engaged in the distressed businesses right now,” Edens said.

Fortress reported a second-quarter net loss of $171 million, an improved delivery on the previous quarter’s $287 million loss. This was due in part to an increase in fees of 17 percent from a larger portfolio. The group however, again declined to pay out a dividend to shareholders.