Carlyle Group L.P.'s (CG) third-quarter profit shrank 88% as the
private-equity firm posted higher expenses, though revenue
benefited from stronger fund management fees.
Firms like Carlyle make money by buying up companies, often with
borrowed funds, then selling them at a profit. The buoyant stock
market that has lifted company values this year has both helped and
hurt buyout firms, which are reaping profits from past deals in
huge volume this year but are finding it difficult to identify new
deals where they can expect the 20% or better annualized returns
such firms target.
For the quarter, Carlyle collected $3 billion selling out of
investments while investing $1.9 billion in new deals. The company
raised $6.5 billion in funds, continuing its strong fundraising
activity.
Distributable earnings, the portion of profits from which
shareholder payouts come, were $105 million, down from $207 million
a year earlier.
Overall, Carlyle reported a profit of $2.3 million, or four
cents a unit, down from $18.6 million, or 40 cents a unit, a year
ago.
The company's economic net income was $195 million, down from
$219 million a year earlier. On an adjusted basis, Carlyle logged
51 cents in economic income. Analysts polled by Thomson Reuters
projected 60 cents.
Private-equity firms view economic net income as a better gauge
of performance because it includes unrealized gains and employee
compensation.
Total revenue was up 3.4% at $888.1 million. Analysts were
expecting $616 million.
Fund management fees rose 7.5% to $257.9 million. Total
performance fees were $320.5 million, down 10% from a year ago.
Total expenses rose 16%, with compensation and benefits costs
jumping 12%.
Units closed at $30.13 on Tuesday and were inactive premarket.
The stock is up 16% so far this year.
Write to Ben Fox Rubin at ben.rubin@wsj.com
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