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Fortress escapes subprime write-downs

Fortress reported a loss of $38 million for the third quarter, though it managed to avoid subprime-related losses, raised revenue by 80 percent and grew private equity assets under management by 60 percent.

Fortress Investment Group does not face any losses related to mortgage-backed securities, chief executive Wes Edens said in its third quarter earnings statement. Edens said during the conference call the firm expects to see ample investment opportunities in the credit markets in the next few months.

Fortress had previously invested in subprime loans through a wholly owned subsidiary, Nationstar Mortgage, that the firm acquired last year. But this September Fortress said that the unit would stop all wholesale origination activity.

The publicly-traded asset manager’s revenues grew to $219 million (€150 million), an 80 percent increase compared to the third quarter of 2006. But the firm nonetheless reported a net loss of $38 million for the quarter, due to a $54 million special charge. The firm made a $55 million loss in the second quarter of this year.

Its private equity assets under management continued to grow in the third quarter, increasing 60 percent year on year from $8.1 billion to $12.9 billion.

The increase included capital committed to two new funds closed in July, the $4 billion Fortress Investment Fund V and the $1 billion Fortress Coinvestment Fund V. The firm also reported that it has deployed $3 billion of capital in the third quarter.

Fortress also said it had realised one investment in the third quarter, the sale of tower company Crown Castle. Fortress originally invested $120 million in Crown Castle in 2002, and realised a total return of $1.7 billion. But Edens said that due to market volatility the firm would see few private equity realisations for the rest of the year.

Fortress’ stock price rose 6 percent after the earnings call, to $18.25 per share. The firm took a portion of its management company public last year, at an issue price of $18.50 per share.