UPDATE 2-Carlyle Group sees Q1 earnings drop

Tue May 15, 2012 10:23am EDT

* Q1 ENI $392 mln, down 26 pct

* Q1 distributable earnings $179 mln, down 37 pct

* Assets under management reach $159.2 bln

By Greg Roumeliotis

May 15 (Reuters) - Carlyle Group LP, the private equity firm that went public earlier this month, on Tuesday reported that first-quarter earnings dropped 26 percent as it failed to match a strong 2011 first quarter.

Carlyle's decline was mostly due to its corporate private equity segment that contributes two-thirds of its distributable earnings. Carlyle could not raise as much cash from its investments as it did this time last year, when its Asian buyout funds sold assets.

In the first quarter of 2012, Carlyle sold down stakes in Dunkin' Brands Group Inc, Nielsen Holdings NV and Triumph Group Inc; sold a portion of its stake in India's HDFC Ltd and completed a $600 million initial public offering of Allison Transmission Holdings Inc.

"We frequently hold investments for four, five or six years. Thus we would encourage those who hold or follow our units not to focus disproportionally on quarter-to-quarter results," Carlyle co-founder and co-chief executive David Rubenstein said on a conference call.

Carlyle went public May 3 in a $671 million IPO that met with lukewarm investor interest. Carlyle had to discount its IPO to $22 per share on May 2, below the expected price range of $23 to $25 per unit.

Its shares rose 0.3 percent to $21.10 early Tuesday.

Carlyle said economic net income (ENI), a measure of profitability that takes into account the mark-to-market valuation of its assets, declined to $392 million from $533 million in the first quarter of 2011.

Distributable earnings, which includes realized rather than unrealized investment gains and accounts for cash available to pay dividends, was down 37 percent at $179 million, reflecting fewer assets sales.

Assets under management increased 48 percent to $159.2 billion, with fee-paying assets under management at $117 billion. Carlyle said it generated realized proceeds of $3.8 billion for its fund investors in the first quarter.

Carlyle said over the past 12 months, its carry funds, which pay Carlyle and its shareholders a cut of the investment profits, appreciated 15 percent. Its dry powder -- capital available to invest in deals -- was $39.9 billion as of the end of March.

"This is a fantastic time to make investments. It is precisely at times like this when economic data and markets are sending confusing signals that the best investments can be made," Carlyle co-founder and co-chief executive Bill Conway said on the call.

Rubenstein expects to have 11 carry funds in the fundraising market in 2012, and sees the market improving as more institutions and high net-worth individuals allocate capital to alternative assets in search of yield.

Carlyle's latest flagship $10 billion buyout fund is expected to achieve its first fundraising close, securing commitments from investors, in the second quarter of 2012, Rubenstein said.

Carlyle has also started fundraising for its latest Asia buyout fund and expects a first close in the second half of this year, he added.

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