- Downturn hit holdings including Freescale, Wesco, CommScope
- Firm had higher cash gains on Axalta, TeleCable dispositions
Carlyle Group LP reported its first quarterly loss since going public in 2012, after a global market rout cut the value of its private equity holdings, hedge funds and energy assets.
The alternative-asset manager reported a third-quarter loss in economic net income, which includes unrealized gains and declines, of $140 million, or 43 cents a share, according to a statement Wednesday. That compared with a profit of $177 million, or 55 cents, a year earlier and fell short of the 36-cent average per-share loss expected by 12 analysts in a Bloomberg survey.
A market rout in the third quarter hurt Washington-based Carlyle’s holdings, including its stakes in Axalta Coating Systems Ltd., Freescale Semiconductor Ltd., Wesco Aircraft Holdings Inc. and CommScope Holding Co. The Standard & Poor’s 500 Index had its biggest quarterly decline in four years, fueled by investor concern that China’s economy is slowing.
The loss “was largely driven by portfolio valuations on the final day of September,” David Rubenstein, Carlyle’s co-chief executive officer, said in the statement. “Since then global markets and valuations have moved higher. Our core business trends remain unaffected.”
Private equity firms hold unlisted businesses, whose values are in part marked to the market, and shares of companies they have taken public. Both are affected by stock-market swings.
Carlyle fell 2.2 percent to $18.83 at the close of trading in New York. The stock has lost 24 percent this year, including reinvested dividends.
Carlyle’s distributable earnings, which reflect cash earned on asset sales and available to pay out to shareholders, increased 55 percent from a year earlier to $244 million. The company sold shares of Philadelphia-based paintmaker Axalta, as well as stakes in Spanish telecommunications company TeleCable de Asturias and Australian hospital operator Healthscope Ltd. Carlyle said it will pay stockholders a dividend of 56 cents a share on Nov. 24.
While some of the firm’s declines were in legacy energy funds it managed with investment manager Riverstone Holdings, Carlyle reported profits from its power fund, from which it sold the Cedar Bay Generating Plant in Jacksonville, Florida. Carlyle also posted gains in its U.S. real estate business.
Performance was sluggish in Carlyle’s global market strategies unit, which houses its hedge funds and credit investments. The firm, which owns majority stakes in Claren Road Asset Management, Emerging Sovereign Group and Carlyle Commodity Management, said the hedge funds had a weighted loss of 4 percent in the quarter. Its hedge fund assets were $9.3 billion as of Sept. 30, down from $15.2 billion a year earlier, and Carlyle said clients asked for $1.9 billion back in the quarter, which it will pay out over the “next several quarters.”
Carlyle marked down the value of its stake in Claren Road by $162 million in the quarter, Curt Buser, Carlyle’s chief financial officer, said on a conference call with investors and analysts. The holding was worth $216 million as of June 30, according to an August regulatory filing.
“Over the last year the performance of the hedge funds hasn’t been what we’d hoped it would be,”’ Bill Conway, Carlyle’s co-CEO and chief investment officer, said on the call. “We’re not planning on exiting the business or anything like that. We’re going to do everything we can to help our hedge funds to continue in business and be successful. But it’s not a business right now I feel like we’re anxious to expand.”
Carlyle’s total assets under management declined to $187.7 billion as of Sept. 30 from $192.8 billion three months earlier, as it received $3.9 billion in new money commitments and returned $6.4 billion to clients.
Blackstone Group LP, Carlyle’s larger peer, and KKR & Co. reported their first quarterly losses in four years, also missing analysts’ expectations.