Fortress Co-CEO’s Unexpected Death Rattles $53 Billion Debt Firm

(Bloomberg) -- Well before they became co-chief executive officers, Drew McKnight and Josh Pack were known for their close partnership within Fortress Investment Group.

The pair had worked together for two decades, and Pack had followed McKnight in moving his family to Dallas from California during the pandemic. They established Texas as a new power center for the Manhattan firm, and then in 2023, were instrumental in a Mubadala Investment Co.-backed buyout of the company that led to their ascent to the top job.

But last week, McKnight was suddenly on his own. He faced the firm’s staff on a conference call and cried as he delivered stunning news: Pack had just died.

The 51-year-old left behind a wife, four children and a perch at the top of a $53 billion debt investing giant. His death — just after he moved to London from Dallas to spearhead a Europe expansion — has rattled a roughly 900-person, tight-knit company.

McKnight and Pack had embarked on an ambitious plan to double assets in a half-decade and become the face of Fortress’ aspirations to move beyond its distressed roots. Now Fortress must navigate a leadership shock, rally the firm’s grieving employees, and stick to the growth plan Pack helped craft.

“While we have a giant hole in our hearts for Josh that will never be filled, we also have a team and a culture that Josh helped shape and cultivate,” McKnight said in a statement.

Fortress elevated managing partner Jack Neumark as co-CEO after Pack’s death. Neumark was among Fortress’ four largest individual investors in the Mubadala buyout, along with Pack. 

Key backers got the news about Pack from Fortress employees on Monday, Sept. 29. Hours after those calls, an email went out to the firm’s wider investor community letting them know Pack had died, without providing further details, said a person familiar with the matter. It has sought to reassure them about the overall state of the business, according to another person.

The New Mexico State Investment Council had been finalizing a commitment of up to $250 million with the asset manager. While it isn’t walking away from the deal, the state sovereign wealth fund is now taking more time to review the situation, according to people familiar with the matter.  

A New Mexico State representative declined to comment, as did a spokesperson for Mubadala. The Pack family declined to comment through Fortress.

Distressed Bets 

Founded in 1998 by a group of executives including former BlackRock Inc. partner Wes Edens, Fortress was known for taking on messy bets — including indebted private railway Brightline, the Trump Organization and now-incarcerated Elizabeth Holmes’ biotech startup, Theranos.

Fortress went public in 2007 before being taken private under Softbank Group a decade later. 

Viewed by colleagues as even-keeled, Pack, a self-described “day one employee” of the credit business, built his reputation on deals like supermarket chain Albertsons and Alamo Drafthouse, a struggling movie-theater chain that Fortress bet on during the depths of the pandemic and later sold to Sony Pictures. 

Pack shaped key parts of the firm along the way, including its real estate arm. Under him, the net-lease business — which acquires properties from firms that then lease them back  — deployed $19 billion since 2002 and had been expanding into Europe.

The late co-CEO was “always a man full of great ideas, very collaborative, very humble,” said Ike Suri, chairman and CEO of fintech FundingShield, who has known Pack since his days at Wells Fargo & Co. “People looked up to him, and that’s a very sad thing to see him go this soon.”

As Pack and McKnight pursued their goal of hitting $100 billion under management, they had the tricky task of managing some of the firm’s legacy bets on unloved assets. Some of these exposed the firm to volatility and negative headlines — including private railway Brightline, whose struggles in Florida have rippled through the municipal bond market.

Fee-related revenue declined about 20% in 2023 because of a decision to terminate a management contract on a legacy permanent capital vehicle, according to people with knowledge of the matter. (Not including that contract, gross management fees increased about 6% in 2023 from the prior year.) 

Through it all, the pair aimed to establish Fortress’ presence around the globe.

This year, Pack was posted to London to spearhead the firm’s expansion in the region and its business with wealthy individuals. It opened a new office in Abu Dhabi in May and secured $1 billion from Mubadala to pursue opportunities in credit and other strategies.  

Even as the firm expanded around the globe, Pack kept a lower profile than many of his peers atop large asset managers. 

Employees remain stunned by the loss of their leader. He always appeared to be in good health in client and internal meetings, according to people who were present. 

For now, they continue the work that Pack started. Fortress is setting its sights on closing $3 billion across various funds in October. 

“The ability of our team to adapt over the past 10 days is exactly what we would expect after working together for decades,” Neumark, the newly appointed co-CEO, said in a statement. “And that’s part of what we learned from Josh.”

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