Fortress Investment Group's quarterly profit rose roughly 49 percent, beating Wall Street expectations, helped by strong performances in its hedge, credit and private equity funds.
New York-based Fortress, one of a handful of publicly traded alternative asset managers, reported pretax distributable earnings on Friday of $64 million, or 12 cents a dividend-paying share, for the third quarter. That was up from $43 million, or 8 cents a share, a year earlier.
Analysts, on average, had expected distributable earnings of 11 cents a dividend-paying share, according to Thomson Reuters I/B/E/S.
Fortress said pretax distributable income is the best way to measure its performance because it excludes large quarterly compensation costs stemming from the equity interest of principals who took the company public in 2007.
The company announced a third-quarter dividend of 5 cents per share.
Fortress posted gains across its various portfolios, with the Drawbridge Special Opportunities Fund rising more than 5 percent and the Fortress Macro Funds gaining about 3 percent. Fortress also said its private equity fund valuations rose 9.4 percent in the quarter.
Those gains boosted the firm's incentive income to $65 million from $14 million in the year-before quarter.
"Performance, at first glance, appears to have been strong across a number of products and flows," said Roger Freeman, an equity analyst at Barclays Capital, in an initial research note. "We would expect the shares to benefit from these results as they look to be an all-around beat."
Fortress shares were about 2.2 percent higher at $4.55 at midday. The stock closed Thursday at $4.45.
Fortress reported net income of $1 million attributable to Class A shareholders, compared with a year-earlier loss of $142 million. It said the improvement was due mainly to a reduction in costs associated with a "principals' agreement" that expired at the end of 2011.
Total assets under management rose to $51.5 billion as of September 30 from roughly $48 billion on June 30.
Looking forward, Fortress executives said during a conference call on Friday that they see opportunities to make money in U.S. transport and real estate.
Wes Edens, who runs the private equity group, said Fortress's private equity funds had been boosted by the changing landscape of the financial services sector in the United States, noting that with "banks becoming more utility-like" and moving out "of businesses on the margin", Fortress has opportunities in areas such as mortgage servicing.
"The mortgage markets in the U.S. have got a tremendous amount of dislocation still in them," Edens said.
Co-founder Randal Nardone has headed the firm since the previous chief executive, Daniel Mudd, resigned in January after the Securities and Exchange Commission charged him and other top executives at Fannie Mae and Freddie Mac with understating the lenders' exposure to risky subprime mortgages.
Asked by an analyst during the conference call if Fortress had made progress in a search for a permanent CEO, Nardone said "the structure we have in place right now is working well and I don't see any need to introduce a distraction".
"That said, I don't have any intent to take the interim off my business cards," he added. (Reporting by Katya Wachtel in New York; Editing by Lisa Von Ahn; and Peter Galloway)