Updated, 8:48 p.m. | Private equity may be a booming business, but that was not enough to lift the Carlyle Group’s earnings in the first quarter.
Carlyle, a private equity giant based in Washington, reported on Wednesday that its first-quarter profit — measured as economic net income, which includes unrealized investment gains — fell 18 percent, to $322 million, from the period a year earlier.
The profit after taxes amounted to 85 cents a share, well short of the expectation of $1.01 a share by analysts surveyed by Standard & Poor’s Capital IQ.
The results were weighed down by declines in Carlyle’s global market strategies business, with investments in equities and credit, and in its real assets segment, which includes real estate. In its private equity business, however, economic net income rose 8 percent from the first quarter of 2013.
Carlyle, like its big rivals, has been reaping rewards from selling its investments into a buoyant stock market. It sold shares in companies it had already taken public, including CommScope, a telecommunications equipment maker; Allison Transmission, which makes vehicle transmission systems; and Nielsen, the television ratings company. It also sold the remainder of its position in BankUnited.
Such “exits” are expected to continue. Carlyle recently announced a sale of shares in HD Supply, an industrial distribution company.
And it has been busy making new investments, including a deal this year to buy the clinical testing division of Johnson & Johnson for more than $4 billion.
The realized net performance fees in Carlyle’s private equity business, reflecting the firm’s share of investment profits, were 21 percent higher than in the period a year earlier. Its portfolio of private equity investments from which it is able to collect profit recorded an 8 percent return in the quarter, handily outpacing the Standard & Poor’s 500-stock index during the period.
But overall results were more mixed.
The firm’s realized net performance fees were flat from the year-earlier period. The one crucial metric that recorded a gain was distributable earnings, a measure of the cash generated by Carlyle that can be given to shareholders, which rose 7 percent.
“Carlyle had a solid start to 2014,” David M. Rubenstein, the co-founder and co-chief executive, said in a statement. “Fund-raising, fund performance and investing activity are all running at strong levels. As new top talent joins our seasoned leadership team and we launch new fund strategies and make targeted acquisitions, Carlyle continues to meet the increasingly complex demands of our global investor base.”
A continuing point of weakness was the real assets business, which recorded an economic net loss of $17 million, in contrast to a profit of $42 million in the period a year earlier. Carlyle said the chief cause was unrealized investment losses in certain Latin American and European real estate investments, an issue that has affected the firm in previous quarters.
Its realized net performance fees in real assets fell to zero, from $16 million in the period a year earlier.
In global market strategies, Carlyle said its economic net income fell 46 percent, to $56 million, probably reflecting choppy markets in credit and equities around the world.
Carlyle’s total assets under management rose to $198.9 billion by the end of the quarter, 13 percent higher than in the period a year earlier. The increase reflected new capital raised from investors, market appreciation and the effect of acquisitions.
Carlyle reports its results using nonstandard metrics. According to generally accepted accounting principles, Carlyle earned $25 million in the quarter, 27 percent lower than in the first quarter of 2013.
The firm is getting ready for a significant change in leadership, as Michael J. Cavanagh, a longtime executive at JPMorgan Chase, prepares to join as co-president in June.
In the newly created role, Mr. Cavanagh, along with his partner, Glenn A. Youngkin, will be in line to possibly take over one day from the firm’s three founders, who are in their 60s.