- Finance Weblog - https://finance.blogs.ie.edu -

Can Hedge Funds go public?

This seems odd but it is as it sounds. On Friday, we had the first hedge fund going public in the NYSE: Fortress. The main differences relative to others is how its assets under management are distributed. They have approximately 30 bn dollars distributed as: a) 60 % is in private equity; b) 30 % on hedge funds; c) 10 % is in real state.

Demand for shares surpassed expectations and investors demanded more than 27 times the amount made available. Prices skyrocketed and closed up 70 per cent. Amazing and bizarre is the valuation priced in. Fortress had a valuation of about 37 times earnings. Others within the business are likely to follow given the reception from the market. Among then probably Citadel or D.E. Shaw. This sounds like the dot com frenzy. A large portion of profits in Fortress comes from the hedge funds side business in the form of management fees and these are highly volatile. The twist is probably in the investment mix, but still that is no reason for that high valuation. Lex from the FT put it bluntly: