May 1, 2018 / 10:33 AM / in 3 months

Carlyle's first-quarter earnings dented by choppy markets

(Reuters) - Carlyle Group LP’s (CG.O) first-quarter earnings per share more than halved year-on-year, as its private equity and real estate funds succumbed to market swings, albeit to a lesser extent than most analysts had predicted.

Passersby walk in front of video monitors announcing the Carlyle Group's listing on the NASDAQ market site in New York's Times Square after the opening bell for trading, May 3, 2012. REUTERS/Keith Bedford

Profits have soared at buyout firms such as Carlyle in recent years, as a U.S. stock market rally allowed them to sell assets for top dollar. That rally ended in the first quarter of 2018 amid a trade dispute between the world’s two largest economies, the United States and China.

“Despite these challenging conditions, we are pleased with our investment performance, specifically our deployment of capital, appreciation of our existing portfolio and realizations from exits,” co-Chief Executive Kewsong Lee said in an investor call on Tuesday.

Carlyle’s economic net income per share came in at 47 cents in the first quarter of 2018. This was ahead of analysts’ expectations for 26 cents, according to Thomson Reuters I/B/E/S, but down from $1.09 per share a year ago, when a buoyant stock market boosted investment returns.

Economic net income reflects the mark-to-market valuation gains or losses on Carlyle’s portfolio and is a closely-watched earnings metric for U.S. private equity firms.

Carlyle said most of its funds generating performance fees appreciated by 3 percent on average, even as the S&P 500 index .SXP slid 1.2 percent in the first three months of 2018, the index’s first quarterly fall in 2-1/2 years.

Peer Blackstone Group LP (BX.N) disclosed last week its private equity funds appreciated by 6.4 percent in the quarter.

Carlyle shares were up marginally by 0.5 percent at $20.60 in afternoon trading in New York, giving it a marker capitalization of $7 billion.

Washington, D.C.-based Carlyle was also aided by investor appetite for alternative asset managers, with assets rising to $201.5 billion at the end of March, up from $195 billion at end-2017.

Carlyle, which decided to exit its hedge fund business two years ago, is trying to reach $100 billion in assets under management by next year. This will help it boost earnings from management fees, which are a more stable source of revenue than performance fees.

“We should be at about $80 billion by the end of this year, which leaves us $20 billion for 2019 to raise,” co-CEO Glenn Youngkin said.

Carlyle said it expected the fundraising to bring management fee revenues to at least $75 million by the end of 2018.

Carlyle’s distributable earnings - the actual cash available for paying dividends - more than doubled from a year earlier to $139 million.

Reporting by Joshua Franklin in New York; Editing by Tom Hogue and Grant McCool

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