Fortress Earnings Hit By Redemptions

May 3 2012 | 9:51am ET

Fortress Investment Group saw its first-quarter distributable earnings fall by 45%, even as its assets jumped and its costs fell sharply.

The New York-based alternative investments giant said its pretax distributable earnings fell to $57 million from $103 million in the year-earlier period. Using generally accepted accounting principles, the firm’s net loss was $24 million, less than one-tenth the $255 million loss it suffered in the first quarter of 2010.

Fortress said the big drop in its loss was due to the expiration of a principals’ agreement—and its compensation provisions—at the end of last year.

The firm said its assets under management rose from $43.7 billion at the end of the fourth quarter to $46.4 billion at the end of the first, thanks to its “largest single-quarter capital raise since 2008.” Interim CEO Randal Nardone, who took over when former CEO Daniel Mudd resigned in January to battle a Securities and Exchange Commission lawsuit stemming from his tenure at Fannie Mae, noted that Fortress’ assets “grew to an all-time high of over $46 billiom,” despite paying out $1 billion in redemptions in the first quarter.

Those redemptions cut Fortress’ performance fee income by more than half, to $52 million. All told, pretax earnings from its hedge fund, credit and private equity portfolios dropped from $103 million to $57 million.

Most of Fortress’ funds did well in the first quarter, with the exception of its commodities fund, which lost 8.7%. Its Macro Fund added 6%, its Asia Macro Fund 5.8% and its Drawbridge Special Opportunities Fund 4.2%.

Fortress, which despite the troubles still managed to top analysts’ expectations, said it would pay a five cent dividend for the first quarter.


In Depth

Humble in Hofstra...One Debate an Election Can Make

Sep 26 2016 | 10:20am ET

Tonight's U.S. Presidential debate, infamously coined the “Humbling in Hofstra...

Lifestyle

Vortic: Reimagining the Custom Wristwatch

Sep 27 2016 | 7:24pm ET

American watch manufacturer Vortic, which started out restoring antique pocket watch...

Guest Contributor

Hedge Fund Marketing – Tips for Your Initial Sales Meeting

Sep 29 2016 | 5:46pm ET

There are two main goals a hedge fund should have for an initial in-person sales...