Fortress Investment Fee Income Rises

BOSTON (Reuters) – Fortress Investment Group (FIG.N) said pretax distributable income rose tenfold in the first quarter, topping expectations, due to good performance across its funds.

The New York-based hedge fund and private equity firm said pretax distributable income, a figure that excludes non-cash compensation charges and other costs, was $96 million, or 19 cents per share, up from $9 million, or 2 cents per share, a year earlier.

Analysts had expected 8 cents per share, according to Thomson Reuters I/B/E/S.

Chief executive Daniel Mudd said the firm’s underlying results benefited from improved fund performance and the increasing value of investments held on its balance sheet. “Having survived the past two years, we’ve come out stronger,” Mudd said on a call with analysts.

The firm expects to benefit by taking public more of the companies its owns in its private equity portfolio later this year, co-founder Wesley Edens said on the call. “There is absolutely the possibility, even the likelihood, out of the transportation business,” he said.

One of Fortress’ shipping companies, SeaCube Container Leasing, last month filed for a $165 million initial public offering. Another IPO candidate is retail lender Nationstar Mortgage, which Fortress bought in 2006, Edens said.

The firm posted a first-quarter net loss attributable to common shareholders of $84 million, compared with a loss of $67 million a year earlier. The per-share loss fell to 58 cents from 71 cents because of an increase in shares outstanding.

Revenue was $160 million, up 31 percent. Compensation and benefits to staff rose 64 percent to $179 million. The non-cash compensation charge covering the firm’s principals was unchanged at $235 million.

Investors withdrew a net $895 million in the quarter, including capital raised, redemptions and return of capital distributions. Another $861 million was distributed back to investors from special purpose vehicles.

Pro forma assets under management were $41.6 billion on March 31, including the acquisition of Logan Circle Partners, which closed on April 16.

Excluding the acquisition, assets under management totaled $30.2 billion, up 15 percent from a year earlier but down 4 percent from the end of 2009.

Fortress shares were down 10 cents, or 2 percent, to $4.86 in midday trading on the New York Stock Exchange. The stock remains far below the price of $18.50 when the company went public in February 2007. (Reporting by Aaron Pressman; Editing by Maureen Bavdek and John Wallace)