NEW YORK (Reuters) – Fortress Investment Group LLC (FIG.N), a private equity and hedge-fund firm, reported a first-quarter loss on Wednesday as redemptions by clients continued to erode assets under management and reduce fees.
New York-based Fortress also disclosed that on Tuesday it agreed to take over management of $2 billion of credit investment funds from D.B. Zwirn & Co LP. The transaction is expected to be completed during the second quarter, pending approval of certain Zwirn investors.
Fortress reported a quarterly net loss attributable to Class A shareholders of $67 million, or 71 cents a share, compared with a loss of $68.9 million, or 74 cents, in the year-earlier period.
Fortress emphasizes an adjusted number it calls “distributable earnings,” which in the most recent quarter came to $8 million, or 2 cents a share. On that basis, Fortress beat analysts’ average estimate of a loss of 3 cents, according to Reuters Estimates.
Revenue fell 39 percent to $122.3 million. The most recent results included $32 million of impairments in principal investments.
Excluding compensation costs related to the firm’s top executives, Fortress had a loss of $52 million.
Total managed assets fell 10 percent to $26.5 billion, largely reflecting $2.65 billion in client redemptions. Fortress said fund management earnings declined by more than a third.
Private equity funds under management fell to $10.2 billion, while assets in its Drawbridge hedge funds fell by nearly half to $4.8 billion.
But after a year of poor performance, several of the firm’s investment funds posted better results.
The Drawbridge global macro fund generated net returns of 5.2 percent. The special opportunities fund, where assets declined 23 percent to $4.9 billion, generated net returns of 3.1 percent.
Fortress for the first time detailed results from its “hybrid” private equity business — comprised of distressed credit, illiquid credit and real assets such as property or natural resources. Managed assets there more than doubled to $2 billion.
Shares of Fortress, which in early 2007 became the first U.S. private equity firm to issue stock to public investors, were up 14 percent to $7.60 in premarket trading.
The shares sank 92 percent last year as tumbling markets and falling assets eroded earnings. But they have surged more than fivefold this year as investors have become more optimistic that financial markets will start to recover.
(Reporting by Joseph A. Giannone; editing by Maureen Bavdek and John Wallace)