Victory Capital(US:VCTR)2021-03-15 12:28Assets Under Management (AUM) - As of December 31, 2020, the company has $147.2 billion in assets under management (AUM), a significant increase from $17.9 billion in August 2013[24]. - The company has diversified its AUM, with no single Franchise accounting for more than 22% of total AUM as of December 31, 2020[45]. - As of December 31, 2020, the company had total AUM of $147.2 billion, with 88% of this amount in fixed income, U.S. small- and mid-cap equities, and global/non-U.S. equities[70]. - As of December 31, 2020, about 73% of AUM was invested in U.S. and international equity, with 30% concentrated in small- and mid-cap equities[160][162]. - Approximately 2% of the company's AUM as of December 31, 2020, consisted of assets in money market funds, which seek to preserve a stable net asset value[138]. Investment Strategies and Performance - The company operates nine autonomous Investment Franchises and a Solutions Platform, collectively managing 117 investment strategies[17]. - Approximately 76% of the company's strategies by AUM outperformed their respective benchmarks over a ten-year period, while 67% outperformed over both five-year and three-year periods[74]. - The performance of the company's investment strategies is critical, as poor performance could lead to client redemptions and a decline in AUM[131]. Client Base and Revenue Sources - The client base is diversified, with 46% from direct investors, 28% from institutional clients, and 26% from retail clients as of December 31, 2020[33]. - For the year ended December 31, 2020, 80% of total revenues were derived from services to investment companies registered under the 1940 Act, including mutual funds and ETFs[104]. - Approximately 91% of total revenues for the year ended December 31, 2020, were generated from mutual funds and other pooled investment vehicles advised by the company[151]. Employee Ownership and Structure - Approximately 79% of employees beneficially own about 21% of the company's shares, aligning their interests with those of clients[23]. - Employee ownership stood at approximately 21% as of December 31, 2020, with employees collectively investing around $190 million in managed products[52][53]. - The company has established an equity awards program that a majority of employees participate in, with 429 employees as of December 31, 2020[94]. Growth and Acquisition Strategy - The company has completed four acquisitions since 2013, enhancing its growth and financial profile[24]. - The company plans to continue organic growth through strategic acquisitions, focusing on investment management firms that enhance growth and diversification[55]. - The company believes there are significant opportunities for profitable growth through additional acquisitions in the investment management industry[25]. Regulatory Environment and Compliance - The company is subject to extensive regulation, with agencies having broad administrative powers to enforce compliance with investment adviser laws[100]. - The company is subject to extensive regulation by the SEC, FINRA, and various states, with potential material adverse effects on business if compliance is not maintained[105]. - The company maintains a legal and compliance team of 16 professionals responsible for regulatory compliance and monitoring adherence to client investment guidelines[114]. Operational Efficiency and Expenses - Approximately two-thirds of the company's operating expenses are variable, which is expected to drive industry-leading margins and facilitate free cash flow conversion[90]. - The company outsources certain middle- and back-office activities to recognized service providers on a variable-cost basis, enhancing scalability[87]. - The company’s expenses are subject to fluctuations, which could negatively impact its results of operations if revenues decrease without a corresponding decrease in expenses[159]. Market Risks and Challenges - The ongoing COVID-19 pandemic has negatively impacted the global economy and may continue to interrupt normal business activity[121]. - A significant proportion of existing AUM is managed in long-only investments, which may expose the company to market risks[123]. - The company faces risks of AUM decline due to investor redemptions, which can be triggered by poor investment performance or adverse market conditions[151][163]. Stock and Shareholder Structure - Crestview GP beneficially owns 52.2% of the company's common stock and 66.2% of the total voting power as of December 31, 2019, allowing it to control board elections and company policies[199]. - The dual class structure of the company's common stock concentrates voting control with Class B shareholders, who hold 96.8% of the total voting power as of December 31, 2020[197]. - The company may issue additional shares or securities, which could result in substantial dilution to existing shareholders[208]. Technology and Innovation - The company has made recent investments in data, technology, and marketing to enhance organic growth and improve operational efficiencies[54]. - The company launched a new digital platform for direct investors in 2020, featuring client-centric design and investment tools[82].