Carlyle’s second-quarter profit missed expectations

By Echo Wang

NEW YORK (Reuters) – Private equity firm Carlyle Group on Monday reported a bigger-than-expected 11.7% year-on-year drop in second-quarter net profit, as record revenue from management and transaction fees failed to offset a big drop in performance fees.

The decline was because Carlyle generated less cash from asset sales. That resulted in lower profits because Carlyle receives a portion of the cash generated as performance fees. The fees it receives for managing investor money rose, but they weren’t enough to make up the difference.

Distributable earnings, which measure cash that can be returned to shareholders, fell to $343 million from $389 million a year earlier. That translated to after-tax distributable earnings of 78 cents per share, which was below the average Wall Street analyst estimate of 83 cents, according to LSEG data.

The Washington, D.C.-based company reported fee income of $273 million, its highest ever and up 32% from a year earlier. Its fee income margin was 46%, up from 34% in the same quarter a year earlier.

Carlyle’s assets under management rose 13% from the previous quarter to $435 billion.

Carlyle’s private equity funds rose 2% during the quarter, while real estate funds gained 1%, infrastructure and natural resources funds gained 3% and global credit funds rose 3%. Last month, larger rival Blackstone reported that its core private equity funds rose 2% and its opportunistic real estate funds rose 0.3%.

Carlyle raised $12.4 billion from investors during the quarter, driven primarily by real estate commitments and the closing of four new secured loan commitments.

The alternative asset manager raised $2.8 billion for its fifth Japan buyout fund this quarter, making it the largest Japan-focused buyout fund ever.

Carlyle spent $4 billion on new acquisitions and held on to $83 billion in unspent capital. It and private equity firm KKR won an auction for a $10 billion student loan from Discover Financial Services in June.

(Reporting by Echo Wang in New York; Editing by Sonali Paul)