* Stock rises more than 2 pct
* Fortress sees opportunities in U.S. transport, mortgages
By Katya Wachtel
Nov 2 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
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
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
Sept. 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.