ALTERNATIVES

Carlyle Group sees Q2 loss as private equity values decline

Updated

Carlyle Group posted a loss in the second quarter as the value of its private equity holdings declined.

The shortfall, excluding some costs related to its May IPO, was $58.9 million compared with a profit of $236.8 million a year earlier, Carlyle said Wednesday in an earnings statement.

Carlyle had distributable earnings of $116.7 million, or 32 cents a share, in the second quarter, compared with $89.3 million a year earlier. The firm said it would pay a quarterly distribution of 11 cents a share to public investors. Fee-related earnings of $36 million was up 4% from three months earlier and 16% higher than a year earlier as fund management fee revenue increased while direct compensation increased at a slower pace, according to the statement.

However, overall revenue for the second quarter was $61 million, down 93% from the first quarter and 90% less than a year ago.

Carlyle raised $3.9 billion in new funds during the period, and its total assets under management were $156.2 billion, down 2% from the end of March but up 45% from the second quarter 2011. The quarterly decline was chiefly the result of $4.8 billion in net distributions, the statement said.

Carlyle, like other private equity firms, reports profit that doesn't comply with generally accepted accounting principles. On a GAAP basis, the firm had a second-quarter net loss of $10.3 million, or 26 cents per share.

The value of Carlyle's corporate private equity funds dropped 2% during the second quarter, according to the statement. The value of all of Carlyle's so-called carry funds also fell 2%.

On an earnings call to discuss the second-quarter results, Carlyle executives declined to comment on talk that the private equity giant is looking to invest in Los Angeles-based money management firm TCW Group. In response to a follow-up question, however, executives conceded that Carlyle is unlikely to acquire a traditional money management capability as a new business line for the group, as opposed to making a private equity investment in a money manager, over the next few years.

The firm invested $1.4 billion during the second quarter and agreed to invest at least $1.6 billion in new deals since the beginning of July, William Conway, Carlyle's co-CEO, said in the statement.

“We have made some of our best investments during uncertain times,” Mr. Conway said.

Douglas Appell, Tim Pollard and Rick Baert contributed to this story.