Fortress Investment Tops Street (Update)

Updated from 10:59 a.m.

Shares of Fortress Investment(FIG Quote), the private-equity and hedge fund, rose as much as 15% Wednesday after the firm beat expectations despite posting a decline in assets under management.

By the close of trading, however, Fortress shares had retreated from those gains and then some, ending the session down nearly 3% at $6.45 on massive volume of 24 million shares. Average daily volume is 1.7 million.

Before the opening bell, Fortress said its loss attributable to Class A Shareholders was $67 million, or 71 cents a share, narrower than the year-ago period's loss of $68.9 million, or 74 cents a share.

On an adjusted basis, Fortress said it was in the black on the quarter. Its "pre-tax distributable earnings" -- the best measure of its financial performance, according to the company -- came in at $9 million, or 2 cents a share, down from $58 million a year ago. Analysts polled by Thomson Financial were expecting a loss of 5 cents a share.

On the top line, the company had revenue of $122.3 million, down 39% from a year ago.

Hurt by a slew of customer redemptions amid the bear market, the New York firm's assets under management fell 22% to $26.5 billion from $34 billion as of the end of March 2008.

Fortress also announced that it planned to take control of $2 billion worth of credit investment funds previously owned by D.B. Zwirn & Co. The deal still needs the approval of some Zwirn investors.

Meanwhile, Fortress's private-equity rival Blackstone(BX Quote) also topped Wall Street estimates Wednesday, saying its first-quarter loss was narrowed year-over-year and that it would pay a full dividend.

Blackstone saw its stock rocket on the news, trading up as high as 14%, before returning to earth by the closing bell. The shares closed at $13.16, up $1.00, on five-times the average daily volume.

Shares of Och-Ziff(OZM Quote), another publicly traded alternative asset manager, closed higher Wednesday as well, ending trading up nearly 10% at $10.06 on heavier-than-average volume.