History was made today at the New York Stock Exchange, when Fortress Investment Group made its Wall Street Debut, becoming the first major hedge fund to stage an initial public offering in the U.S. In the first minutes of trading, share price nearly doubled, with investors eager to grab a piece of the pie. But any way you slice it, hedge funds and risk go hand in hand.
“Let’s keep in mind what we’re talking about,” said David Friedland, President of the Hedge Fund Association. “Investors are buying into the management company of the hedge fund… as opposed to buying shares of the actual hedge fund."
In other words, this IPO allows investors to benefit from the fees collected from the management of a hedge fund. It’s a big deal, because investors often cite these high fees as the main reason they avoid hedge funds. “Here’s an opportunity to actually profit from that,” Friedland added.