Fortress Deepens Private Credit Push as Money Pours In

(Bloomberg) -- Fortress Investment Group LLC is boosting its offerings to investors betting on one of the debt market’s hottest corners.

The investment manager is expanding its private credit effort with a direct-lending fund; another that buys debt linked to real estate, aircraft leases and other assets; and one that invests in intellectual property, according to people with knowledge of the matter.

The firm owned by Japan’s SoftBank Group Corp. expects to close the $2 billion direct lending fund in October and already raised $400 million for the one dedicated to patents, said the people, who asked not to be identified because the information is private. Fortress is also seeing increased demand for its open-ended asset-based fund, currently at about $500 million.

Fortress is seizing the opportunity to benefit from a robust private-credit market, where juicier yields typically gained by lending to small and mid-size companies are luring money from pension plans, sovereign wealth funds and insurers.

Risk Concern

Money managers including Blackstone Group LP’s GSO Capital Partners and BlackRock Inc. are also broadening their offerings amid the influx. The rush into these less-regulated corners of the debt market has raised some concern that lenders are taking too much risk, especially as interest rates are set to rise.

A representative for New York-based Fortress declined to comment.

With demand increasing, Fortress is also opening up its flagship credit opportunities fund to new buyers after typically limiting it to existing investors, and expecting a first close of the $5.5 billion vehicle before the end of 2018, said the people. A global real estate credit fund is expected to raise more than $1.5 billion before year-end after a similar fund focused solely on Japan raised $1.5 billion earlier this year, the people said, adding that all of the firm’s credit funds could have raised more money.

Fortress, with about $40 billion of assets under management, became the first U.S. private equity firm to delist following its $3.3 billion sale last year to SoftBank.

©2018 Bloomberg L.P.