Fortress Gets a New Principal

Hedge funds can be extremely good at making their founders extremely wealthy. But that can be a problem, too: a star trader at a hedge fund knows that if he wants the real dynastic wealth, he'll have to start up his own fund at some point. As a result, hedge funds rarely survive their founders -- which is a problem for any hedge funds with public listings like Fortress.

It's not surprising, then, that Fortress has lavished a $300 million share grant on its star trader, Adam Levinson. Such grants are only to be expected at publicly-listed hedge funds which need to exist in perpetuity, not only so long as their founders stick around.

On the other hand, such share grants are necessarily dilutive for existing shareholders: they're essentially being asked to give up ownership now in return for the hope of owning part of a star fund long into the future. Still, they shouldn't be shocked or upset in principle at this share grant: it's exactly what publicly-listed hedge funds should be doing.

That said, this share grant could have been the best trade of Levinson's career. The stock is being issued to him while the shares are trading at their all-time lows; what's more, Levinson's own magic touch seems to have deserted him this year, at least as it's reflected in the performance of the global macro hedge fund he runs. From here on in, he gets to piggy-back in large part on his colleagues' performance, rather than his own, and he gets to do so from an extremely attractive entry point.