Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Affiliated Managers Group Inc reported a strong first quarter with $260 million in EBITDA and a 28% year-over-year growth in economic earnings per share of $5.37.
- The company saw continued momentum in both private markets and liquid alternative strategies, contributing significantly to the quarter's success.
- Affiliated Managers Group Inc has successfully launched new products and engaged in strategic partnerships, such as with Pantheon and Systematica, enhancing long-term growth prospects.
- The firm's diversified business model, which now derives half of its earnings from alternative strategies, provides a competitive advantage and enhances earnings stability.
- Affiliated Managers Group Inc maintains a robust balance sheet, allowing for strategic investments in new and existing affiliates and returning excess capital to shareholders through share repurchases.
Negative Points
- Despite strong overall performance, the company reported net client cash outflows of $(4) billion, reflecting challenges in fundamental equities.
- The competitive environment for acquiring new affiliates remains intense, with high pricing for growth-oriented firms potentially limiting acquisition opportunities.
- Some segments, particularly fundamental active equities, continue to experience volatility and unpredictability in flows.
- The reliance on performance fees, which can be variable, introduces earnings volatility and may affect financial stability in downturns.
- While alternatives are growing, the need to continuously innovate and compete in this space adds pressure and could impact long-term success if not managed effectively.
Q & A Highlights
Q: Can you provide your thoughts on the ability to maintain positive flows in the institutional channel going forward?
A: Tom Wojcik, Chief Operating Officer, highlighted the strength in private markets as a key driver of positive institutional flows, noting stability in liquid alternatives and improvements in long-only strategies. He emphasized the strategic shift towards alternatives, particularly private markets, which is expected to enhance long-term organic and earnings growth.
Q: How do we think about deal activity against other uses of capital as we look ahead to '24 and '25?
A: Jay C. Horgen, President and CEO, explained that AMG's strategy focuses on investing in high-growth areas by acquiring new affiliates and investing alongside existing ones. He emphasized maintaining a balance between making new investments and returning capital to shareholders through repurchases, depending on the availability of suitable investment opportunities.
Q: Could you discuss the sales trends and performance fees expectations for liquid alternatives?
A: Tom Wojcik discussed the improving trends in liquid alternatives, noting that while flows were roughly flat, there was a significant rebound from previous outflows. He highlighted the strong performance across various liquid alternative strategies, which positions them well for performance fee earnings and attracting new client investments.
Q: Can you talk about your confidence in the sales growth in alternatives, particularly from private markets and quant strategies?
A: Tom Wojcik expressed confidence in the growth of private markets, citing AMG's strategy of adding high-quality affiliates and enhancing their growth through strategic initiatives. He also noted the strong performance of quant strategies, which contributes to the positive outlook for alternatives.
Q: Could you expand on the pricing dynamics in transaction activity and whether pricing has topped out?
A: Jay C. Horgen addressed the competitive and pricing dynamics in acquiring new affiliates, noting that while pricing for growth-oriented firms remains high, AMG is selective in pursuing deals that meet their return criteria. He emphasized AMG's unique position in offering strategic partnership while preserving the independence of affiliate firms.
Q: What progress is being made in the wealth channel with semi-liquid and new alternative products?
A: Tom Wojcik detailed AMG's strategy in the U.S. wealth channel, focusing on leveraging existing relationships and a vertically integrated sales approach to distribute products from independent partner-owned firms. He highlighted the success of the AMG Pantheon Fund and the potential for significant growth through new and existing alternative products.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
