Fortress earnings beat estimates, shares rise

By Emily Chasan

NEW YORK (BestGrowthStock) – Fortress Investment Group (FIG.N: ) reported third-quarter earnings above analysts’ expectations on Friday as a strong performance in its credit products and hedge funds boosted management fees.

The New York-based hedge fund and private equity firm said pretax distributable income rose to $78 million, or 15 cents per share, from $51 million, or 11 cents a share, a year earlier.

On an after-tax basis, the company earned distributable income of 13 cents per share, ahead of analysts’ average estimate of 11 cents, according to Thomson Reuters I/B/E/S.

Fortress, one of the first alternative investment management firms to go public, says pretax distributable income is 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.

“Performance was strong across the vast majority of the funds and that performance carried through into October,” Chief Executive Officer Daniel Mudd said on a conference call.

“The third quarter really represents a more typical quarter for what we’ll see going forward,” he added.

Shares of the company were rose about 3.8 percent on the New York Stock Exchange after the results.

The company said on the conference call that its hedge funds benefited from more liquid markets and positioning to benefit from an expectation of low interest rates and low growth in the United States. Fortress’s special situation funds have been benefiting from global deleveraging of assets which creates more investment opportunities, the firm said.

Through October 31, the firm said its macro offshore hedge fund was up a net 7.6 percent for the year, while its Drawbridge Special Opportunities fund saw net returns of about 20 percent through September 30.

The firm, which recently priced initial public offerings for private equity portfolio companies SeaCube Container Leasing Ltd (BOX.N: ) and Whistler Blackcomb, said it was seeing “attractive” private equity opportunities emerging.

Fortress said assets under management rose to $44 billion as of September 30, seeing its largest organic gain in assets under management in a single quarter since 2007. The firm raised $1.2 billion in new third-party capital during the quarter and added $551 million of that to assets under management.

Fortress also said it was opening a new hub for business development in Singapore, and is eyeing the potential for specific Asia-focused funds in the future.

Revenue for the third quarter was $162.2 million, above analysts’ average estimate of $144.7 million.

Fortress expects the quarterly expense related to the equity interests of its top executives at the time of its IPO to end in February 2012, which coincides with the fifth anniversary of its IPO and the end of the vesting period for the managers.

Under generally accepted accounting principles, the firm said its full quarterly net loss attributable to Class A shareholders widened to $95 million, or 62 cents per share, from $59 million, or 43 cents a share, a year earlier.

Fortress earnings beat estimates, shares rise