In February 2007 Fortress Investment Group (NYSE:FIG) debuted on the public markets in an IPO. That event made it official: Peter Briger Jr. was a billionaire. At the time, his 66 million shares were worth just more than $2 billion.
Unfortunately for Mr. Briger, that high water mark soon receded. Today, Fortress' stock is down 74% since the IPO. Briger now owns just north of 44 million shares worth about $350 million.
Despite that huge hit to his net worth on paper, Briger remains an elite player in the shadowy world of special asset investing. Here's how he rose to the top of this secretive corner of the investing world.
Making a name at Goldman Sachs
Briger joined Fortress in 2002 after a 15-year stint with Goldman Sachs. He joined the Fortress team to lead the real estate and debt securities businesses as the company sought to diversify away from its core private equity business. Today, he is a principal of Fortress, and Co-Chairman of the board of directors.
Briger's wealth has been built on his acumen for trading assets that no one else wants. His specialty, though, has always been distressed debt.
That expertise was put on full display after Briger co-founded Goldman's Special Situations Group in 1997. That group -- famous for its secretive, yet highly profitable, trades -- is sometimes credited with being a primary driver of Goldman revenue during the past decade. For context on just how successful this group has become both during and after Briger's tenure, another Special Situations Group co-founder, Mark McGoldrick, left Goldman in 2007 citing his $70 million paycheck as being insufficient relative to the returns he was producing.
During their heyday at Goldman, Briger, McGoldrick and their colleagues bought and sold car loans in Thailand, troubled mortgages in Japan, an alcoholic beverage company in South Korea, commercial aircraft, a British power plant, and more. In every case, the strategy was to buy assets that had fallen out of favor with mainstream sources of capital. That could be due to economic problems, political pressures, or any other reason that opportunity presented.
The group would hold those assets until markets stabilized, and then sell for a handsome profit. Buy low, sell high. It seems so simple, yet the execution and expertise needed to succeed in these esoteric asset classes required world-class investment prowess. Time and again, Briger and his teams delivered.
Putting the pedal to the metal at Fortress Capital
Since leaving Goldman, Briger's success hasn't skipped a beat. In the first quarter of this year, Briger's team successfully raised $4.7 billion for a new fund called "Fortress Credit Opportunities Fund IV." That represented 87% of the total new funds raised by Fortress in the quarter. The company also has private equity and liquid markets divisions.
In recent years, Briger has found gold in the aftermath of the financial crisis, calling his business today "financial services garbage collection" in an interview with Institutional Investor. As banks -- and even governments -- have been forced to sell off non-performing and risky illiquid assets due to shareholder and regulatory demands, Briger and Fortress Capital have been happy to scoop them up at deep discounts.
The preceding three credit opportunity funds have yielded internal rates of return of 25.2%, 17.8%, and 12.7%, respectively, evidence that Briger is still getting results today. Investors are betting their cash that he'll continue to get it done for years to come.
The future remains bright for Peter Briger Jr
With the financial crisis now seven years in the rearview mirror, Briger still sees ample opportunity to profit from distressed assets, particularly in the financial sector. Banks today have, for the most part, recovered from the woes of 2008-2010, but regulatory and political changes continue to force the banks to change how they do business.
The Dodd-Frank regulatory reform legislation forces banks to hold high-quality assets on the books by requiring huge capital reserves against assets deemed risky. That puts a lot of pressure on the banks to sell those risky assets to boost returns on equity. That's exactly the kind of opportunity Peter Briger has capitalized on for decades.
If history is any indication, when this current opportunity dries up, another will present itself. And when it does, Peter Briger will be right there, ready to capitalize, once again.
Jay Jenkins has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.