May 1, 2018 / 10:30 AM / a month ago

Choppy markets dent Carlyle's first-quarter earnings

* Assets under management $201.5 bln vs $195 bln at end-2017

* Economic net income per share 47 cents vs expected 26 cents

By Joshua Franklin

NEW YORK, May 1 (Reuters) - Carlyle Group LP said on Tuesday its first-quarter earnings per share more than halved year-on-year, as its private equity and real estate funds succumbed to market swings, although to a lesser extent than most analysts had predicted.

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.

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.

“We are benefiting from robust fundraising activity that is driving increased scale in our fund platforms and we remain on track to generate significantly higher fee related earnings by the fourth quarter of 2018,” Co-Chief Executives Kewsong Lee and Glenn Youngkin said in a statement.

Carlyle said most of its funds generating performance fees appreciated by 3 percent on average, even as the S&P 500 index 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 disclosed last week its private equity funds fared even better, appreciating by 6.4 percent in the quarter.

Blackstone reported a 20 percent drop in economic net income per share last week, also beating Wall Street’s expectations.

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

The Washington, D.C.-based firm was 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 and from which Carlyle will expect to earn stable management fees.

Carlyle declared a distribution of 27 cents per common unit for the first quarter. This was the first time Carlyle reported quarterly earnings with Lee and Youngkin at the helm.

Carlyle’s co-founders David Rubenstein and William Conway gave up their co-CEO roles last year to become co-executive chairmen. Carlyle’s other co-founder, Daniel D’Aniello, gave up his title as chairman but continues to sit on Carlyle’s board as chairman emeritus. (Reporting by Joshua Franklin in New York; Editing by Tom Hogue)

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