Fortress Investment Group's 2Q loss narrows

Alternative asset manager Fortress Investment Group LLC said today that its second-quarter loss narrowed as it cut expenses and recorded a special non-cash gain on affiliate investments.
AUG 05, 2009
Alternative asset manager Fortress Investment Group LLC said today that its second-quarter loss narrowed as it cut expenses and recorded a special non-cash gain on affiliate investments. The New York-based firm lost $171.3 million, or 41 cents per share, during the second quarter, compared with a loss of $250 million, or 67 cents per share, during the same quarter last year. Pretax distributable earnings, which exclude charges such as a special compensation agreement for principals of the firm, totaled $59 million, or 12 cents per share, during the quarter ended June 30. Fortress paid out $237.4 million in the second quarter as part of the compensation agreement. Analysts polled by Thomson Reuters, on average, forecast earnings of 7 cents per share for the quarter on revenue of $107.8 million. Analysts do not always include special charges in their estimates. Despite a 26 percent decline, Fortress' revenue still topped analysts' expectations. The company's revenue fell to $139.1 million during the quarter, from $188.1 million during the year-ago period. The drop was primarily the result of declining management fees from affiliates and lower incentive income from affiliates. Management fee revenue fell 28 percent to $108.4 million, while incentive income dropped 62 percent to $7 million. Fortress was able to cut expenses, which partially offset the declining revenue. Expenses were trimmed 6 percent, mostly due to a reduction in compensation and benefits. Expenses totaled $382.2 million during the second quarter, including the $237.4 million paid out in the principals' compensation agreement. Fortress' loss also narrowed because of $19.6 million non-cash gain from affiliate investments. During the same quarter last year, Fortress recorded a $6.6 million non-cash loss from affiliate investments. Assets under management increased to $31.04 billion as of June 30, compared with $26.54 billion at the beginning of the quarter. Fortress Investment raised $3.37 billion in new money for its funds during the quarter, which was the primary reason for the increase in assets under management. The firm also recorded income and foreign exchanges gains of $1.71 billion during the quarter. Customers redeemed $736 million in cash during the quarter, primarily from hedge funds managed by Fortress. Fortress shares rose 20 cents, or 4.6 percent, to $4.50 in premarket trading.

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