Reuters: Private Equity: UPDATE 1-Fortress profit down but beats analysts' estimates

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UPDATE 1-Fortress profit down but beats analysts' estimates May 3rd 2012, 12:29 Thu May 3, 2012 8:29am EDT * Earnings down almost 45 percent * Firm will pay Q1 dividend of 5 cents per share in May * Assets under management hit $46.4 billion * Earnings beat analysts' estimates By Katya Wachtel May 3 (Reuters) - Fortress Investment Group's profit sank in the first quarter of 2012 as incentive fees in some of the firm's hedge and credit private equity funds declined, though the results still beat Wall Street expectations and the firm tightened losses sharply due to reduced compensation expenses. New York-based Fortress, one of a small group of publicly traded investment managers, said on Thursday that pretax distributable earnings fell about 45 percent to $57 million, or 11 cents per share, from $103 million, or 20 cents per share, a year earlier. Fortress said pretax distributable income was the best way to measure its performance because it excludes large quarterly compensation costs stemming from the equity interest of principals who took the company public in 2007. Wall Street analysts had expected quarterly earnings of 10 cents per share, according to Thomson Reuters I/B/E/S. The firm reported a net loss of $24 million, or 16 cents per dividend paying share, down substantially from a loss of $255 million, or 58 cents per share, this time one year ago. Fortress said the main reason for that significant tapering of losses was the expiration of a principals agreement and related compensation expenses at the end of 2011. Several Fortress portfolios posted strong gains in the first quarter, including the Fortress Macro Fund, which climbed more than 6 percent, the Fortress Asia Macro Fund, which rose 5.8 percent, and the Drawbridge Special Opportunities Fund, which posted returns of 4.2 percent. But compared with the first quarter of 2011, incentive income fell from $118 million to $52 million in the first three months of this year. Across its hedge, credit and private equity portfolios, pretax earnings fell to $57 million from $103 million a year ago. The performance of the firm's main commodities hedge fund was one sore point in the first quarter, losing 8.7 percent. Fortress paid out about $1 billion in redemptions from its hedge fund business in the first quarter, which pushed management fees down about 20 percent. Despite the drop in incentive and management fees, Fortress' assets rose in the first quarter, hitting $46.4 billion as of March 30, up from $43.7 billion at the end of the fourth quarter of 2011. "With our largest single-quarter capital raise since 2008, our assets under management grew to an all-time high of over $46 billion, not including over $6 billion of dry powder," interim Chief Executive Officer Randal Nardone said in a statement. "Investing that capital to generate strong returns for our investors remains our foremost priority." The firm announced a first-quarter dividend of 5 cents per share. Fortress' shares closed at $3.64 on Wednesday. Link this Share this Digg this Email Reprints

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