Fortress Investment Posts Wider 3rd-Qtr Loss

Alternative asset manager Fortress Investment Group LLC said Friday its third-quarter loss deepened as it cut expenses and recorded a big gain on affiliate investments.

For the three months ended Sept. 30, the company posted a loss of $58.6 million, or 43 cents per share, compared with a loss of $57.4 million, or 66 cents per share in the year-ago period. The latest quarter's results reflect 12 percent more shares outstanding.

Pretax distributable earnings, which exclude charges such as a special compensation agreement for principals of the firm, totaled $57 million, or 11 cents per share.

Fortress allotted $240 million in the second quarter as part of the compensation agreement.

Analysts polled by Thomson Reuters, on average, expected profit of 9 cents per share. Analysts do not always include special charges in their estimates.

Revenue slid 22 percent to $143.7 million from $185.1 million last year. Wall Street had forecast revenue of $123.2 million.

The revenue drop reflected a 31 percent decline in management fees to $106.9 million. Incentive income from affiliates, however, jumped more than tenfold, to $7.6 million, from $718,000 in the year-ago quarter. Expense reimbursements from affiliates doubled, to $25 million, from $12.5 million last year.

Fortress cut expenses by 3 percent to $397.6 million, including the principal's compensation payout.

Net realized losses narrowed to $408,000, from $2.5 million last year, and the company recorded a net realized gain from affiliate investments of $315,000, versus a $671,000 loss last year.

Fortress' loss also narrowed because of $20.3 million gain from affiliate investments. During the same quarter last year, Fortress recorded a $7 million loss from affiliate investments.

Assets under management fell 7 percent to $32 billion from $34.3 billion last year.

Customers redeemed $766 million in cash during the quarter, primarily from hedge funds managed by Fortress.