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Fortress Investment Group, among the largest private equity and hedge fund firms, on Sunday named former Fannie Mae boss Daniel Mudd as its chief executive.
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Mudd, a Fortress director, replaces Fortress co-founder and top stockholder Wesley Edens. Edens will become co-chairman of the firm with Peter Briger.
Fortress[FIG
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] said that both of the Fortress principals will continue to lead their respective investment businesses. It said the new management structure would free them up to better manage and expand their investments.
The company said the principals of the firm will continue to own about 70 percent of Fortress. The move is effective Aug. 11.
The son of television newsman Roger Mudd, Daniel Mudd first did business with Fortress in the late 1990s as a top executive at GE Capital, where he worked on deals with Peter Briger, a Goldman Sachs partner who is now Fortress co-president.
The board of Fannie Mae [FNM
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]plucked Mudd, 50, from his role as chief operating officer to lead the mortgage finance company as it tried to rebuild after an accounting scandal in late 2004.
As the housing crisis deepened, Mudd was responsible for growing the company and preserving market share assailed by the country's largest commercial and investment banks.
Mudd was forced to leave Fannie Mae last September when the government took it over, along with its sibling Freddie Mac[FRE
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], but he retains a reputation in many quarters as an able manager who was caught up in events out of his control.
Fortress, which manages about $27 billion in assets, listed its shares near the peak of the private equity boom in February 2007. Its stock has plunged 90 percent since, though the firm's five top principals, including Edens and Briger, own 77 percent of Fortress and raked in nearly $900 million selling a minority stake to Nomura Holdings Inc <8604.T> before
the IPO.
The recession and credit crunch have weakened the firm's portfolio. For example, Fortress is in talks with lenders to refinance a $1.6 billion loan to Florida East Coast Industries, its largest investment. The loan comes due on July 27.
The firm's two flagship hedge funds suffered massive losses and investor withdrawals last year, prompting Fortress to impose gates to stem redemptions.
The firm has been in the news recently as management looks to take advantage of what Edens calls "The Great Deleveraging."
In May, Fortress was part of a trio of investors that agreed to inject $450 million in First Southern Bancorp, a Florida bank they intend to use for buying other distressed banks. Last month, the firm took control of about $2 billion in assets from troubled hedge-fund firm D.B. Zwirn & Co at a steep discount.
With Fannie Mae often in the crosshairs of regulators and lawmakers, Mudd, a former U.S. Marine, gave conciliatory testimony before Congress that differed from that of his predecessor, Franklin Raines.
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