Affiliated Managers (US:AMG)2023-07-26 15:42Financial Data and Key Metrics Changes - Adjusted EBITDA for Q2 2023 was $214 million, which included $20 million of net performance fee earnings, reflecting ongoing execution of the growth strategy and strong performance in liquid alternative strategies [16] - Economic earnings per share increased by 10% year-over-year to $4.45, benefiting from share repurchases and discrete foreign tax benefits [16] - Net client cash outflows, excluding certain quantitative strategies, were $7 billion, primarily driven by global equities, which offset strength in alternatives [16] Business Line Data and Key Metrics Changes - Alternatives reported nearly $2 billion in net inflows during Q2 2023, with significant contributions from private market flows at Pantheon, EIG, and Comvest [17] - Liquid alternatives saw flat net flows, but absolute return-oriented strategies experienced strong demand with $1 billion in inflows, offset by lockup expirations on beta-sensitive strategies [18] - U.S. equities faced net outflows of approximately $2 billion, while multi-asset and fixed income flows remained flat [18] Market Data and Key Metrics Changes - Approximately half of the company's earnings in the last 12 months were generated by alternative strategies, including private markets and liquid alternatives [11] - The company expects the composition of earnings to reflect an even greater contribution from alternatives moving forward [11] Company Strategy and Development Direction - The company announced a new partnership with Forbion, marking its seventh investment in alternatives over the last four years, which aims to evolve the business towards in-demand strategies [4][5] - The focus remains on deploying additional capital toward private markets and liquid alternatives, leveraging financial flexibility and a disciplined capital allocation strategy [5][14] - The company aims to build a multi-generational firm by enhancing strategic capabilities and offering a broad array of partnership solutions to independent firms [7][8] Management's Comments on Operating Environment and Future Outlook - Management noted that while active equity outflows are impacting the current macro environment, the underlying momentum in alternatives remains strong [12] - The company is well-positioned to continue evolving its business through growth investments, supported by a robust financial position and a strong pipeline of opportunities [13][14] - Management expressed confidence in generating incremental value over time through disciplined capital allocation and strategic partnerships [25] Other Important Information - The company completed an accelerated share repurchase program, repurchasing additional shares worth $44 million in Q2 2023, totaling $269 million in share repurchases for the first half of 2023 [23] - The veritable transaction is expected to generate approximately $294 million in pre-tax proceeds, contributing to future earnings per share growth [23] Q&A Session Summary Question: Is wealth management an immediate term priority for the company? - Management confirmed that wealth management is a focus area, with strategies to invest in independent wealth management firms and expand access to private markets and liquid alternatives [28][30] Question: Will the company consider pruning traditional businesses? - Management indicated that the business shape is changing, with nearly half of EBITDA coming from alternatives, but there is no intention to move away from high-quality active equity affiliates [34][37] Question: How has the M&A pipeline evolved over the last six months? - Management noted a steady flow of opportunities in the M&A pipeline, with expectations that valuations have moderated, making it a constructive environment for potential transactions [42][44] Question: Is there a pipeline of larger, impactful deals? - Management stated that there is a diverse pipeline of small, medium, and large transactions, with a focus on maintaining discipline in capital deployment [50][52]