Bloomberg News

AMG Climbs Most in Two Years as Profits Exceed Estimates (1)

April 29, 2014

Affiliated Managers Group Inc. (AMG:US), the company that owns stakes in more than two dozen money managers, rose the most in more than two years after earnings beat analysts’ expectations and the firm agreed to its third acquisition in two months.

AMG’s first-quarter economic net income rose 11 percent to $137.9 million, or $2.48 per share, beating the $2.38-a-share estimate of nine analysts in a Bloomberg survey. The shares advanced 8.5 percent to close at $195.11 in New York, the most since October 2011.

AMG today agreed to buy a majority stake in Veritas Asset Management LLP, a global equity manager with $17 billion in assets, adding to its collection of boutique managers specializing in stocks, hedge funds and private equity. Led by Chief Executive Officer Sean Healey, AMG is benefiting from a growing investor preference for such assets at a time when low-yielding bonds offer modest returns.

“The combination of the deals and the strong flows suggest the momentum at this company will continue,” Michael Kim, an analyst with Sandler O’Neill & Partners LP, said in a telephone interview. He rates the shares a buy.

AMG attracted $7 billion in new investor money in the most recent quarter, compared with $5.5 billion in the previous three months. The company also boosted its forecast for economic earnings per share for fiscal 2014 to a range of $11.10 to $12.20 from a previous estimate of $10.50 to $11.70.

AMG’s Acquisitions

Veritas, with offices in London and Hong Kong, manages money for institutional and retail investors. The $3.4 billion Veritas Global Focus Fund, which is based in Dublin, beat 93 percent of peers over the past five years, according to data compiled by Bloomberg. AMG buys stakes in money management firms and provides them with distribution and back-office help. The owners of the firms retain a stake in the business and autonomy in managing money.

AMG in March said it was acquiring (AMG:US) a minority stake in EIG Global Energy Partners LLC, the asset manager spun off from TCW Group Inc. The same day AMG said it was buying a stake in value-oriented investor River Road Asset Management. The two deals added about $27 million to the assets AMG oversees.

With the latest acquisitions, AMG reported $594 billion in assets under management, up 28 percent from the first quarter of 2013 and up about 9 percent from the previous quarter.

The MSCI All-Country World Index climbed 17 percent, including reinvested dividends, in the 12 months ended March 31. Investors deposited $70 billion into equity mutual funds in the first quarter, according to data from Chicago-based Morningstar Inc.

Hedge funds attracted $55 billion in the first three months of 2014, the most since the second quarter of 2007, according to eVestment, a data firm based in Atlanta.

Yacktman Redemptions

One of AMG’s boutiques, Austin, Texas-based Yacktman Asset Management, has suffered redemptions at its mutual funds this year after several strong years of deposits. The Yacktman Fund (YACKX:US) and Yacktman Focused Fund saw withdrawals of $625 million in the first quarter, Morningstar data show. In the three years ended Dec. 31, the two funds attracted almost $14 billion. Both funds have trailed at least 83 percent of peers over the past year, according to data compiled by Bloomberg.

AMG’s economic net income is a measure that doesn’t conform to generally accepted accounting principles, or GAAP. Under those rules, net income for the quarter was $77.2 million or $1.40 a share, compared with $62.4 million or $1.15 a share, a year earlier.

To contact the reporter on this story: Charles Stein in Boston at cstein4@bloomberg.net

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net Sree Vidya Bhaktavatsalam, Mary Romano


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Companies Mentioned

  • AMG
    (Affiliated Managers Group Inc)
    • $205.73 USD
    • -2.81
    • -1.37%
  • YACKX
    (AMG Yacktman Fund)
    • $25.1 USD
    • -0.01
    • -0.04%
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