Fortress Said to Seek $2 Billion for Debut Direct Lending Pool

(Bloomberg) -- Fortress Investment Group LLC is preparing to make a big push into corporate lending as it sets out to raise funds under the ownership of SoftBank Group Corp., according people familiar with the matter.

Fortress aims to raise about $2 billion for its first fund dedicated to direct lending, said the people, who declined to be identified because the matter is not public. The New York-based firm is also targeting $5 billion for its fifth, flagship credit opportunities fund, the people said. It closed the most recent iteration of that fund in 2015 with $5 billion.

A representative for Fortress declined to comment.

The capital raises mark the next chapter for Fortress since it became the first U.S. private equity firm to delist following its $3.3 billion sale last year to SoftBank. The Japanese conglomerate had to relinquish certain controls to get regulatory approval for that deal, people familiar with the matter have said.

Fortress is putting fresh faces forward. It recently promoted Josh Pack and Drew McKnight to managing partners in its credit group, working closely with Pete Briger, the firm’s credit head and co-chief executive officer.

In March, Joel Holsinger became the first senior executive to leave the firm following its sale to SoftBank. Holsinger was also a considered to be a rising leader at the firm alongside Pack and McKnight, people familiar with the matter said. He was a member of Fortress’ management committee and of the credit group’s investment committee and is currently on sabbatical, according to his LinkedIn profile.

With the direct lending fund, Fortress follows other money managers that have been expanding into that market. Ares Management LP, Tennenbaum Capital Partners LLC, HPS Investment Partners LLC and others have recently closed direct lending pools. Asset managers see an opening as banks grapple with stiffer regulation and yield-hungry investors look to deploy cash in alternatives.

Fortress’s new pool will supplement the direct lending strategy it applies within its Drawbridge Special Opportunities funds, the people familiar with the matter said. The firm has considered taking the direct lending fund public at some point, though no decisions have been made, one of the people said.

©2018 Bloomberg L.P.