Fortress profit up but faces dividend questions

Fortress profit up but faces dividend questions

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BOSTON (Global Markets) - Fortress Investment Group LLC (FIG.N) on Thursday said pretax distributable earnings rose 7 percent in the first quarter as assets under management increased.

But its shares fell 5.3 percent in morning trading as the company faced questions over its lack of a dividend.

Fortress, one of the first big hedge fund and private equity firms to go public, said its net loss attributable to Class A shareholders widened to $103 million from $84 million a year earlier as compensation costs and income tax expenses rose.

Pretax distributable earnings were $103 million, or 20 cents per share, up from $96 million, or 19 cents per share, a year earlier.

Fortress says pretax distributable earnings are the best way to measure its performance because the figures exclude compensation costs tied to the equity interest of principals who took the company public in 2007.

"I'd say overall our initiatives are tracking well," Chief Executive Daniel Mudd said on a conference call with investors.

Several analysts on the call mentioned the company's lack of a dividend, which it suspended during the financial crisis of 2008. Other asset managers took similar actions at the time but have since restored or increased dividends as funds have rebounded.

Mudd said he could not offer any sense of timing on when the company's board may make a decision to resume payments or not. Management has not made a recommendation to the board on the question to date, he added.

Assets under management were $43.1 billion at March 31, up from $30.2 billion a year earlier but lower than the $44.6 billion it reported on December 31, 2010.

The increase from a year ago was due mainly to the acquisition in April 2010 of Logan Capital Partners, which had $12.5 billion in assets under management at the time.

Fortress said first-quarter redemptions totaled $614 million. During the period, assets under management fell in the company's private equity funds and credit hedge funds.

Total segment revenue -- including incentive income and fees -- was $244 million in the quarter, up from $207 million a year earlier. Analysts surveyed by Thomson Global Markets I/B/E/S on average had $211 million.

(Reporting by Ross Kerber; Editing by John Wallace and Maureen Bavdek)