(Adds details on charges, pre-market share trading, industry
NEW YORK Feb 8 Private equity firm Carlyle
Group L.P. posted sharply lower-than-expected
fourth-quarter earnings on Wednesday following losses in its
hedge fund businesses that it has since exited.
Hedge funds have been beleaguered by poor performance in the
past year after some were wrong-footed by the pace of U.S.
interest rate hikes and the post-election rally in the United
"Obviously we are disappointed with the losses in our hedge
fund business," Carlyle Chief Executive Officer David Rubenstein
said in a statement.
Shares were down 6.1 percent at $16.10 in light pre-market
Washington, D.C.-based Carlyle said it took a charge of $175
million in its former hedge fund Vermillion Asset Management due
to "misappropriation of petroleum commodities by third parties
outside the U.S." from various investment vehicles belonging to
The buyout group also said it incurred around $25 million in
charges after selling its ownership stake in former hedge fund
Claren Road Asset Management back to its founders, adding it has
zero hedge fund asset under management as of the end of
For the fourth quarter, Carlyle said it earned economic net
income - a key metric for U.S. private equity firms that
accounts for unrealized gains or losses in investments - of $6.4
million after taxes.
That translated to earnings of 2 cents per share, down from
24 cents a year earlier. Analysts on average had expected 41
cents, according to Thomson Reuters I/B/E/S.
Dragged in part by the hedge fund losses, Carlyle's
distributable earnings, which show cash available to pay
dividends, slumped to $7 million in the fourth quarter, from
$145 million a year ago.
That translated to distributable earnings of 16 cents a
share, compared to 29 cents a year earlier.
A breakdown of Carlyle's investment performance showed
returns either matched or slightly lagged the broader market.
Private equity returns, for example, rose 4 percent in the
fourth quarter, compared with a 3.3 percent gain in the S&P 500.
Energy investment returns climbed 9 percent, below a 11.4
percent rebound in oil prices.
(Reporting by Koh Gui Qing; Editing by Lisa Von Ahn and Nick