Fortress CEO sees new demand for funds

BOSTON (Reuters) - Fortress Investment Group (FIG.N) is raising money for new funds and benefiting from investors' renewed demand for alternative assets like hedge and real estate funds, Fortress' CEO said on Wednesday.

"Capital is flowing back into hedge funds," Daniel Mudd said at the Goldman Sachs U.S. Financial Services Conference. Demand is especially strong for funds specializing in distressed investments and global macro strategies, he said, adding that Fortress is raising money for distressed portfolios now.

Hedge fund assets surpassed $2 trillion in November for the first time in a year as investors slowly began adding new money and performance improved, data from HedgeFund.net showed.

Mudd, who succeeded Fortress co-founder Wesley Edens as CEO in July, also said the company recently raised $500 million for portfolio of Japanese real estate.

Fortress, one of only a handful of publicly traded private equity and hedge fund firms, manages $32 billion. It took a beating during the financial crisis. While the company's stock has surged 295 percent this year, it is still down 79 percent from where it began trading when Fortress went public in February 2007.

The shares were down 1.5 percent to $3.89 in morning trade on the New York Stock Exchange.

Mudd, a former CEO at Fannie Mae, said most of Fortress' funds are close to reaching their high-water marks, meaning their values are expected to reach new highs, which would allow the company to begin charging incentive fees again.

"We have improved performance across the board in 2009," Mudd told analysts at the conference.

(Reporting by Svea Herbst-Bayliss; editing by John Wallace)