Private equity may be a booming business, but that wasn’t enough to lift the Carlyle Group’s earnings in the first quarter.
Carlyle, a private equity giant based in Washington, reported on Wednesday that its first-quarter profit â€" measured as economic net income, which includes unrealized investment gains â€" fell 18 percent from the period a year earlier to $322 million. The profit after taxes amounted to 85 cents a share, falling short of the expectation of $1.01 a share by analysts surveyed by Standard & Poor’s Capital IQ.
The results were weighed down by declines in Carlyle’s global market strategies business, whose investments include equities and credit, and in its real assets segment, which includes real estate. In its private equity segment, however, economic net income rose 8 percent from last year’s period.
Carlyle, like its big rivals, has been reaping profits from selling its investments into a buoyant stock market. It sold shares in companies it had already taken public, including CommScope, a telecommunications equipment maker; Allison Transmission, which makes vehicle transmission systems; and Nielsen, the television ratings company. It also sold the remainder of its position in BankUnited.
Such “exits†are expected to continue. Carlyle recently announced a sale of shares in HD Supply, an industrial distribution company. And it has been busy making new investments, including a deal to buy the clinical testing division of Johnson & Johnson for more than $4 billion.
The realized net performance fees in Carlyle’s private equity business, reflecting the firm’s share of investment profits, were 21 percent higher than a year earlier. Its portfolio of private equity investments from which it is able to collect profit recorded an 8 percent return in the quarter, handily outpacing the Standard & Poor’s 500-stock index during the period.
But over all, the results were more mixed. The firm’s realized net performance fees were flat from a year earlier. The one major metric that recorded a gain was distributable earnings â€" a measure of the cash generated by Carlyle that can be given to shareholders â€" which rose 7 percent.
“Carlyle had a solid start to 2014,†David M. Rubenstein, the co-founder and co-chief executive, said in a statement. “Fund-raising, fund performance and investing activity are all running at strong levels. As new top talent joins our seasoned leadership team and we launch new fund strategies and make targeted acquisitions, Carlyle continues to meet the increasingly complex demands of our global investor base.â€
A continuing point of weakness was the real assets business, which recorded an economic net loss of $17 million, compared with a profit of $42 million a year earlier. Carlyle said the chief cause was unrealized investment losses in certain Latin American and European real estate investments â€" an issue that has affected the firm in previous quarters.
Its realized net performance fees in real assets fell to zero, from $16 million a year earlier.
In global market strategies, Carlyle said its economic net income fell by 46 percent to $56 million â€" probably reflecting choppy markets in credit and equities around the world.
Carlyle’s total assets under management rose to $198.9 billion by the end of the quarter, 13 percent higher than a year earlier. The increase reflected new capital raised from investors, market appreciation and the effect of acquisitions.
Carlyle reports its results using nonstandard metrics. According to generally accepted accounting principles, Carlyle earned $25 million in the quarter, 27 percent lower than a year earlier.
