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Affiliated Managers (AMG) - 2022 Q2 - Earnings Call Transcript
AMGAffiliated Managers (AMG)2022-08-01 14:53
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Financial Data and Key Metrics Changes - Economic earnings per share for Q2 2022 were 4.03,consistentwiththesamequarterlastyear,despitechallengingmarketconditions[18][23]−Netclientcashoutflowstotaled4.03, consistent with the same quarter last year, despite challenging market conditions [18][23] - Net client cash outflows totaled 11 billion, with 6billioninoutflowswhenexcludingcertainquantitativestrategies,primarilyduetoredemptionsinglobalequities[18][21]−AdjustedEBITDAforQ2was6 billion in outflows when excluding certain quantitative strategies, primarily due to redemptions in global equities [18][21] - Adjusted EBITDA for Q2 was 213 million, down 6% year-over-year, mainly driven by lower performance fee earnings [22][23] Business Line Data and Key Metrics Changes - Alternatives businesses saw strong performance with 6billioninnetinflows,ledbyprivatemarketswith6 billion in net inflows, led by private markets with 5 billion [19] - Liquid alternatives attracted approximately 1billioninnetinflows,reflectingashiftininvestorbehaviortowardsdiversification[20]−Activeequitiesfacedchallengeswithnetoutflowsof1 billion in net inflows, reflecting a shift in investor behavior towards diversification [20] - Active equities faced challenges with net outflows of 9.8 billion, particularly in growth strategies, while U.S. equities experienced 1.7billioninoutflows[21]MarketDataandKeyMetricsChanges−Themarketenvironmenthasshiftedtowardsincreasedvolatility,leadingtoareductioninriskamonginvestors[6][8]−Thereisanotableuptickinindustryflowsintoliquidalternatives,indicatingachangeinclientbehaviortowardsseekinguncorrelatedreturnstreams[9][10]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedoninvestinginareasofseculargrowth,includingprivatemarkets,liquidalternatives,wealthmanagement,Asia,andESG[13][30]−AMG′suniquepartnershipmodelallowsforalignmentwithindependentassetmanagementfirms,enhancinggrowthopportunities[12][14]−Thecompanyaimstomaintainadisciplinedcapitalallocationstrategywhilereturningexcesscapitaltoshareholdersthroughsharerepurchases[15][30]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceintheabilitytogenerateearningsgrowthin2022andbeyond,despitemarketchallenges[26][62]−Thecurrentenvironmentisseenasanopportunitytocapitalizeonhigh−qualityinvestmentopportunities,particularlyinperiodsofmarketdislocation[12][30]−Thereisanexpectationforcontinuedstrengthinperformancefeeearningsduetothediversityofstrategiesandstronginvestmentperformance[26][39]OtherImportantInformation−Thecompanyhasastrongbalancesheetandplanstorepurchaseatleast1.7 billion in outflows [21] Market Data and Key Metrics Changes - The market environment has shifted towards increased volatility, leading to a reduction in risk among investors [6][8] - There is a notable uptick in industry flows into liquid alternatives, indicating a change in client behavior towards seeking uncorrelated return streams [9][10] Company Strategy and Development Direction - The company is focused on investing in areas of secular growth, including private markets, liquid alternatives, wealth management, Asia, and ESG [13][30] - AMG's unique partnership model allows for alignment with independent asset management firms, enhancing growth opportunities [12][14] - The company aims to maintain a disciplined capital allocation strategy while returning excess capital to shareholders through share repurchases [15][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to generate earnings growth in 2022 and beyond, despite market challenges [26][62] - The current environment is seen as an opportunity to capitalize on high-quality investment opportunities, particularly in periods of market dislocation [12][30] - There is an expectation for continued strength in performance fee earnings due to the diversity of strategies and strong investment performance [26][39] Other Important Information - The company has a strong balance sheet and plans to repurchase at least 400 million of shares for the full year [29][60] - The Baring transaction is expected to close by year-end, providing additional capital for growth investments and share repurchases [29][60] Q&A Session Summary Question: Outlook for the second half of the year and performance fee numbers - Management indicated confidence in performance fee earnings due to the breadth and excellence of performance across the business, not tied to contractual components [32][35][41] Question: Update on the M&A pipeline - The current pipeline reflects growth strategies in areas of secular growth, with independent firms increasingly seeking partnerships for support [44][48][50] Question: Capital allocation strategy in light of investment opportunities - Management plans to balance investments in new affiliates with returning capital to shareholders, maintaining a strong capital position [52][56][59]