Affiliated Managers (AMG) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $228 million, a decline of 12% year over year, primarily due to lower performance fees and a comparison to a one-time private market catch-up fee from the previous year [20][21] - Economic earnings per share were $5.2, reflecting a 3% year-over-year decline, influenced by a $77 million write-down on certain mutual fund assets [21][22] - The company expects adjusted EBITDA for the second quarter to be between $210 million and $225 million, based on current AUM levels [22] Business Line Data and Key Metrics Changes - The private markets affiliates raised $3 billion in the quarter, primarily in credit, infrastructure, and private market solutions [13] - Liquid alternatives saw record net inflows of $10 billion, driven mainly by tax-aware solutions, marking the strongest quarterly flow number in liquid alternatives in the company's history [14][15] - The company experienced net outflows of approximately $14 billion in equities, reflecting industry headwinds [15] Market Data and Key Metrics Changes - The company generated a record $14 billion in net client cash inflows into alternative strategies, which offset outflows from the long-only business [5][6] - The ongoing market volatility has created opportunities for high-quality investment teams to differentiate themselves, particularly in equities [44] Company Strategy and Development Direction - The company is focusing on strategic capital allocation towards areas of secular growth, particularly in private markets and liquid alternatives [5][6] - Three new partnerships were announced in 2025, with a total commitment of approximately $700 million, expected to be accretive to earnings and improve organic growth [6][10] - The company aims to evolve its business mix towards alternatives, anticipating that alternatives will represent over 50% of earnings in the future [57] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to generate incremental shareholder value over time, supported by a strong capital position and a diverse business model [11][25] - The company remains committed to disciplined capital allocation, with plans to repurchase approximately $400 million in shares for the full year, subject to market conditions [25] - Management highlighted the importance of the U.S. Wealth channel and the ongoing demand for alternative products, which is expected to drive future growth [66] Other Important Information - The company has a strong liquidity position and a long-dated capital structure, enabling it to execute its growth strategy effectively [23] - The expected proceeds from the Peppertree transaction are approximately $240 million, which will enhance the company's ability to continue capital allocation towards strategic growth areas [24] Q&A Session Summary Question: What drives the decision to part with one of the affiliates, especially in private markets? - Management stated that the partnership model is centered around supporting affiliates' independence, and any strategic decisions are mutually agreed upon. The recent liquidity events highlight the underlying business value of affiliates [30][34] Question: Can you discuss the diversity of flows in liquid alternatives and the outlook? - Management noted that liquid alternatives had a standout quarter with $10 billion in net inflows, driven by tax-aware solutions, and emphasized the strong positioning of high-quality liquid alternative firms to deliver excellent risk-adjusted returns [39][41] Question: What are the dynamics in the equity market regarding investor allocations? - Management acknowledged headwinds in equities but noted opportunities for high-quality investment teams to differentiate themselves, particularly with a focus on quality-oriented and defensive approaches [44][46] Question: Can you clarify the 8% accretion from new investments? - Management confirmed that the 8% accretion is based on economic earnings per share and is expected to begin in 2026, following the completion of the Peppertree and Qualitas transactions [50][51] Question: How is the distribution expansion for existing products going? - Management highlighted the growth of alternatives AUM on the U.S. Wealth platform and the successful launch of new products, indicating a strong pipeline for future product development [63][67]