• Economic Earnings Per Share: Increased by 18% year over year.
• Adjusted EBITDA: $214 million, up 3% year over year.
• Net Client Cash Outflows: $3 billion, a significant improvement compared to the previous year.
• Private Markets Net Inflows: $7 billion in the quarter, with year-to-date fundraising at $18 billion.
• Assets Under Management (AUM): Approximately $730 billion, the highest level in over two years.
• Share Repurchases: $103 million in the third quarter, with a year-to-date total of approximately $580 million.
• Fourth Quarter Adjusted EBITDA Guidance: Expected to be between $260 million and $270 million.
• Fourth Quarter Economic Earnings Per Share Guidance: Expected to be between $5.94 and $6.17.
• Debt Issuance: Issued a 10-year $400 million institutional bond.

• Warning! GuruFocus has detected 7 Warning Sign with AMG.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Affiliated Managers Group Inc (NYSE:AMG) reported an 18% growth in economic earnings per share, showcasing strong business momentum and effective capital allocation strategies.
• The company raised $7 billion in new capital for its affiliates, indicating strong demand for its specialized private market strategies.
• AMG's business mix is evolving towards secular growth areas, with alternative strategies now contributing significantly to earnings.
• The company has a robust pipeline of new investment opportunities, particularly in private markets and liquid alternatives.
• AMG's US wealth platform is well-positioned to capitalize on the increasing client demand for alternative strategies, with over $5 billion in assets from alternative products.

Negative Points

• AMG experienced net client cash outflows of $3 billion in the third quarter, although this was an improvement from the previous year.
• The company faces industry headwinds in active equities, which offset some of the growth in alternatives.
• Performance fees for the year are expected to be below the historical average due to underperformance in certain absolute return strategies.
• Despite strong fundraising, AMG's differentiated long-only strategies saw net outflows of approximately $10 billion in equities.
• The company's performance fee earnings are subject to significant macroeconomic events, which could impact future results.

Q & A Highlights

Q: How should we think about capital deployment and the pipeline for new investments as we look out to 2025? A: Jay Horgen, President and CEO, explained that AMG's investment pipeline is robust, with several opportunities in the later stages, particularly in private markets and liquid alternatives. The company is focused on gaining exposure to secular growth trends. Dava Ritchea, CFO, added that AMG has been opportunistic with share repurchases, expecting to repurchase about $700 million in 2024, while maintaining flexibility for growth investments.

Q: Can you provide more details on the performance fee guidance and the impact of absolute return strategies? A: Dava Ritchea, CFO, noted that performance fees are expected to be below the historical average due to challenges in trend-following strategies. However, AMG remains confident in long-term performance fee contributions, especially from private market strategies. The company has a diversified set of performance fee-generating assets totaling about $200 billion.

Q: What is the outlook for carried interest and liquid strategy demand, particularly for AQR's tax-advantaged products? A: Jay Horgen, CEO, mentioned that carried interest is expected to grow as AMG's private market investments mature. Thomas Wojcik, COO, highlighted strong growth in AQR's tax-advantaged products, driven by a focus on after-tax returns in wealth management. AQR's improved investment performance and innovative tax-aware strategies are contributing to significant asset growth.

Q: How is AMG scaling its democratization pipeline for new products across private affiliates? A: Thomas Wojcik, COO, emphasized AMG's success in launching products like the AMG Pantheon fund, which has grown significantly. The company is collaborating with affiliates to develop new strategies and products, leveraging its vertically integrated US wealth platform. AMG sees substantial growth potential in scaling this platform over the next 5 to 10 years.

Q: Are there any expectations for changes in flow seasonality or alternative distributions in Q4? A: Thomas Wojcik, COO, stated that AMG does not anticipate significant changes in flow seasonality for Q4. The company expects continued strong fundraising in alternatives, with no material headwind from alternative distributions. AMG's diversified and specialized private market exposures have supported strong performance and fundraising.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.