Fortress Investment Group LLC, the first publicly traded private-equity and hedge-fund manager in the U.S., said fourth-quarter profit more than doubled on higher-fee income from managing funds.
Pretax distributable earnings, which exclude some compensation costs and other items, increased to $107 million, or 20 cents a share, from $50 million, or 9 cents, a year earlier, New York-based Fortress said today in a statement. The average estimate of seven analysts in a Bloomberg survey was for profit of 14 cents a share.
A 13% gain in global stocks last year lifted the value of fund holdings and boosted fees for overseeing them. Fortress’s macro hedge fund, which invests across products and geographies, returned 18% in 2012. Fortress is being led by co-founder Randal Nardone after former CEO Daniel Mudd resigned last year amid a government lawsuit stemming from his tenure as chief of mortgage financing company Fannie Mae.
Fortress shares have gained 42% this year, closing at $6.23 yesterday. The stock is down 66% since the company’s 2007 initial public offering, when it sold shares at $18.50 apiece to become the first U.S.-listed buyout and hedge-fund manager. Blackstone, which followed four months later, has lost 41% of its value.
Fortress’s distributable earnings differ from U.S. generally accepted accounting principles. Under those rules, known as GAAP, the company’s net income attributable to Class A shareholders was $102 million, or 24 cents a share, compared with a net loss of $91 million, or 49 cents, a year earlier.
Blackstone Group LP, the world’s biggest private-equity firm by assets, last month reported net income of $106 million after a loss of $23 million a year ago. KKR & Co. reported a fourth-quarter profit of $97 million, compared with $46 million a year earlier, helped by the rising value of its buyout holdings. Both firms are based in New York.
Private-equity firms pool money from investors including pension plans and endowments with a mandate to buy companies within about five to six years, then sell them and return the funds with a profit after about 10 years. The firms, which use debt to finance the deals and amplify returns, typically charge an annual management fee equal to 1.5% to 2% of committed funds and keep 20% of profit from investments.
Robert Kauffman, one of three Fortress co-founders, retired from the company during the quarter after 15 years at the firm. Kauffman said in an interview at the time that his decision was partly due to higher tax rates on top earners that took effect at the beginning of the year. He most recently oversaw the company’s long-only fixed-income business, called Logan Circle Partners.