Affiliated Managers Group Inc.AMG

Morningstar Rating

Stock Research and Analysis

by Greggory Warren, CFA

Even though it lacks the level of operating leverage inherent in the business models of most asset managers, Affiliated Managers Group was still affected by the dramatic decline in the markets last year. Although assets under management have recovered Read more

Bulls Say

AMG has built up a portfolio of well-respected affiliates, including Tweedy, Browne Company, Third Avenue Management, Genesis Investment Management, AQR Capital Management, and Foyston Gordon & Payne.

AMG's affiliates collectively managed close to $200 billion in assets at the end of the third quarter, offering more than 300 investment products across the retail (mutual fund), institutional, and high-net-worth distribution channels.

Although heavily skewed toward equities, the affiliates provide AMG with a well-diversified AUM and revenue stream, with exposure to both value and growth investment styles, as well as fixed-income and alternative investments.

Higher tax rates on the wealthy and ongoing succession planning at boutique asset management firms are expected to accelerate the sale of equity stakes in many of these small and midsize firms to larger financial institutions like AMG. Read more

Bears Say

With each affiliate remaining independent, AMG's acquisition roll-up strategy hasn't generated significant synergies or efficiencies. The lack of operating leverage in its business model also means that profits do not expand exponentially as revenues increase.

With the disruption in the financial markets sparking consolidation among many of the brokers, advisors, and bankers that sell mutual funds to retail investors, asset managers have lost some of the leverage they've traditionally had negotiating payments for shelf space.

AMG's business model is based on a continual acquisition of new affiliates, with the firm issuing dilutive equity and convertible debt when it is unable to cover purchases with cash flow generated by its operations. Read more

Strategy

AMG acquires equity interests in boutique asset management firms, using the earnings generated by these affiliates to not only support growth at these firms but acquire additional affiliates. The company Read more

Management

Sean Healy has been CEO of AMG since January 2005. He follows in the footsteps of William Nutt, who founded the firm in 1993 and continues to serve as chairman of AMG's board of directors. Nutt is widely credited with devising and successfully executing Read more

Profile

Affiliated Managers Group owns stakes in a loosely affiliated group of small to midsize boutique asset managers. The company typically buys a majority interest in these Read more

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