Fortress Investment Group, the first major US hedge fund and private equity group to go public, on Thursday night priced its initial public offering shares at $18.50, the high end of its projected range of $16.50 to $18.50, valuing the company at about $7.4bn.

There was intense demand for Fortress IPO shares among investors anxious to grab a slice of the flotation. Fortress is selling 34m class A shares in the offering, which raised about $635m.

The investment banks managing the deal, including Lehman Brothers, Goldman Sachs, Bank of America, Citigroup and Deutsche Bank, faced a challenge in allocating shares in the IPO after they received requests for more than 925m shares.

The broader market will now have a chance to weigh in as Fotress shares begin trading on the New York Stock Exchange on Friday morning under the FIG symbol. Wesley Edens, Robert Kauffman and Randal Nardone, the company’s three co-founders, all of whom previously worked at BlackRock Financial Management, were expected to ring the opening at the NYSE this morning.

Investors buying into the shares will be betting that Fortress can continue to raise large funds and earn market-beating returns. Fortress has about $29.9bn in assets under management as of September 30 last year, $17.5bn of which is in private equity, $9.4bn in hedge funds and $3bn in real estate and related debt. Since its founding in 1998, Fortress’s private equity funds have returned about 39 per cent per year while its hedge funds have returned about 14 per cent.

However, the $7.5bn valuation represents about about 20 times Fortress’ expected 2007 earnings, according to bankers. That is about twice the multiple of investment bank Goldman Sachs.

While Fortress will be the first major US hedge fund manager to list, bankers expect other alternative asset managers to follow.

Several US private equity managers are watching the Fortress float, such as Citadel Investments, the Chicago-based hedge fund group with $12bn under management, which last year raised $500m from a bond issue.

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