* 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.
