Be EPIC Podcast
Looking Beyond Traditional Assets with Josh Pack
Wed Jul 12 2023Description
Fortress is a global asset management firm that provides loans to companies, buys debt on a secondary basis, and manages over $50 billion in assets. They focus on various industries and are becoming more active in lending against real estate and intellectual property assets. The firm also offers equity participation, specializes in niche strategies like intellectual property and litigation assets, and manages multiple investment funds. Fortress invests in shipping and real estate, has a flat organizational structure, and has developed internal business platforms. They value upward mobility within the organization and have a long-standing senior management team.
Insights
Fortress provides loans to businesses in various industries
Fortress offers loans to regional restaurant chains, software companies, healthcare companies, energy firms, and startups with valuable patents or new technologies.
Investment firm offers equity participation at a lower cost than VC firms
The investment firm provides equity participation in operating businesses and can take over patents if the business fails. They focus on firms confident in their value and analyze code value and potential enforcement routes against infringing parties.
Fortress invests in shipping and real estate
Fortress manages LP commitments and invests in shipping and real estate assets, particularly large distribution centers for e-commerce companies. They have been successful in buying and selling shipping assets, including converting wide-body aircraft into cargo planes during the COVID crisis.
Fortress has a flat organizational structure and internal business platforms
Fortress has a flat organizational structure that encourages open dialogue and criticism during investment decision-making. They have developed multiple business platforms internally, such as a litigation finance business created by Jack Newmark.
Chapters
- Fortress: Global Asset Management Firm
- Investment Firm: Equity Participation and Niche Strategies
- Fortress: Investments in Shipping and Real Estate
- Fortress: Internal Business Platforms and Organizational Structure
Fortress: Global Asset Management Firm
00:00 - 08:38
- Fortress is a global asset management firm focused on debt and assets.
- They make loans to companies that may not have access to traditional capital providers.
- They also buy other pieces of debt on a secondary basis, including performing and non-performing loans.
- The firm was founded in 1997 as a private equity firm and later expanded into credit.
- Fortress manages almost $50 billion in total assets under management (AUM), with the majority being credit assets.
- They have about 900 employees and operate in 12 offices worldwide, primarily focusing on North America, Western and Southern Europe, Japan, and Asia.
- Fortress provides loans to businesses in various industries such as regional restaurant chains, software companies, healthcare companies, and energy firms.
- They are becoming more active in lending against real estate assets due to market conditions.
- Fortress is interested in intellectual property assets such as patents, copyrights, trademarks, and brands.
- They lend against these assets or acquire the entire company if necessary.
- Lending against trademarks and brands is attractive due to robust cash flow streams from licensing agreements with operators across the country.
- For startups with valuable patents or new technologies, Fortress can create special purpose entities to lend money against those patents for business growth at a lower cost than VC funding.
Investment Firm: Equity Participation and Niche Strategies
08:13 - 17:09
- Investment firm offers equity participation in operating businesses at a lower cost than VC firms
- Firms that are confident in their value are less likely to give up equity
- Investment firm can take over patents if the operating business fails
- Analysis is done to determine the value of code and potential enforcement routes against infringing parties
- 50% of the firm's business is standard lending, while the other half focuses on niche strategies like intellectual property and litigation assets
- The firm provides liquidity against multi-billion dollar litigation claims, allowing companies to accelerate cash flows and earn investment returns
- Capital is provided to law firms involved in large tort cases, secured by potential fee income from those cases
- The firm manages three dozen different funds across various investment categories, including private credit and distressed investments
- Private credit offers senior secured loans with attractive current yields and protection in case of company default
- Majority of funds are closed-end with a set lifespan, while some are open-ended or evergreen hedge funds
Fortress: Investments in Shipping and Real Estate
16:45 - 25:13
- Fortress manages LP commitments and invests in various funds, including an evergreen hedge fund called drawbridge.
- Their investments are primarily focused on shipping and real estate, particularly large distribution centers for e-commerce companies.
- Fortress is not the cheapest cost to capital, but companies prefer to invest in technology and logistics rather than fixed assets.
- They have been successful in buying and selling shipping assets, including converting wide-body aircraft into cargo planes during the COVID crisis.
- The speaker's career path involved leaving the Air Force Academy, working in financial phone sales, and joining a company that made loans to branded businesses before eventually joining Fortress.
- Fortress has a flat organizational structure that encourages open dialogue and criticism during investment decision-making.
- The firm has developed multiple business platforms internally, such as a litigation finance business created by Jack Newmark.
Fortress: Internal Business Platforms and Organizational Structure
24:49 - 26:45
- A lot of them are developed internally.
- Jack Newmark created our litigation finance business and our litigation assets business over the past 12-15 years, now a three to four billion dollar platform within our company.
- We like having upward mobility within the organization.
- We tend to bring people in when they're younger and instill in them the fortress DNA.
- We haven't had much success bringing in senior folks from the outside, unless there's a specific business need or lack of expertise.
- The senior management team has been together for more than 15 years, some for 25 years.
- You want to be in a place where you're still finding it interesting and able to get that buzz from making successful investments.
- Thank you for visiting with us and congratulations on your remarkable career.