Fortress Investment Group LLC (NYSE:FIG) reported a mixed bag in its third quarter results Thursday. Its pre-tax distributable earnings rose 1.5% to $65 million or 13 cents a share compared to last year’s $64 million or 12 cents. However, earnings missed RBC Capital Markets’ estimate of 18 cents. The company CEO Randy Nardone said in a statement that it’s the “highest first three quarters of distributable earnings since 2007.”
Fortress Investment’s hedge funds perform miserably
Management fees rose 17% to $136 million. But incentive income was down 35% from $65 million to $42 million. RBC Capital Markets analyst Bulent Ozcan blamed the poor performance of some of Fortress Investment Group LLC (NYSE:FIG) ‘s hedge funds for lower-than-expected income. Its Asia Macro Funds was down 1.1% in the third quarter, and the Fortress Macro Funds slipped 3%, reports Reuters.
Corsair Capital was down by about 3.5% net for the third quarter, bringing its year-to-date return to 13.3% net. Corsair Select lost 9.1% net, bringing its year-to-date performance to 15.3% net. The HFRI – EHI was down 0.5% for the third quarter but is up 11.5% year to date, while the S&P 500 returned 0.6% Read More
Despite lower than expected earnings, RBC Capital analysts see positive developments in the company. Fortress Investment Group LLC (NYSE:FIG) ‘s assets under management jumped 6% during the third quarter to $58 billion. The investment firm raised over $2 billion across its businesses, better than $1.2 billion in the previous quarter. Higher management fees were driven by the increase in assets under management.
Bulent Ozcan said in a research note to investors that Logan Circle is making progress. Net inflows surged from $129 million in the June quarter to $1.9 billion for the quarter ending September 30. However, a large part of the jump can’t be attributed to Logan Circle’s new growth equity franchise because they have just begun the marketing. However, Bulent Ozcan is optimistic that inflows could rise rapidly going forward as the Logan Circle team starts gathering assets.
Fortress Investment’s private equity valuations soar
Fortress Investment Group LLC (NYSE:FIG)’s private equity valuations gained 10% during the third quarter as Nationstar Mortgage Holdings Inc (NYSE:NSM) soared over 50% between July and September. The investment firm’s gross embedded incentive income inched up from $754 million to $807 million QoQ. Fortress Investment Group LLC (NYSE:FIG) doesn’t realize that in distributable earnings.
The firm also announced a Q3 dividend of 6 cents a share. RBC Capital Markets has an Outperform rating on the stock with a $8.59 price target.
Fortress Investment Group LLC (NYSE:FIG) shares plunged 3.96% to $8.25.