Affiliated Managers Is Doing This to Stabilize Revenues


Dec. 4 2020, Updated 10:52 a.m. ET

Revenues to stabilize

Affiliated Managers Group (AMG) is expected to post revenues of $567 million in the September quarter. That’s higher than the June quarter but a 7.5% decline on a YoY (year-over-year) basis. The company’s economic EPS (earnings per share) fell by 15% on a YoY basis in the June quarter.

Its revenue fell to $554 million in the same period compared to $646 million in the prior year’s quarter. The fall was mainly due to lower inflows and weaker performance on a YoY basis. A marginal recovery in the current quarter is expected, mainly due to improved global equities and the addition of strong affiliates.

The performance of the company’s affiliates led to an $8.4 billion appreciation in its assets. Its generated EBITDA (earnings before interest, tax, depreciation, and amortization) is $220.3 million. Its EBITDA-to-assets under management ratio stood at 13.6 basis points, or ~13.1 basis points excluding performance fees. This reflects low performance fees, which is seasonal in the third quarter.

The company’s performance on a relative basis was weaker compared to other players in the industry. Alternative asset managers such as KKR (KKR) and Blackstone (BX) reported improved earnings and valuations.

AMG reported net income of $834 million in the last fiscal year. In comparison, its competitors reported the following net incomes:

  • BlackRock (BLK): $3.3 billion
  • T. Rowe Price (TROW): $1.2 billion
  • Bank of New York Mellon (BK): $2.7 billion

Together, these companies form 2.8% of the Vanguard Financials ETF (VFH).

Expense management to drive margins

Affiliated Managers Group boosted its margins through expense management. Its operating expenses fell to $372 million in 2Q16 compared to $451 million in the same quarter the previous year. It was driven mainly by lower compensation as well as lower selling and general expenses.

Affiliated Managers Group’s interest expenses fell to $21.9 million from $22.5 million due to a lower interest rate. The company expects interest expenses of $24 million in 3Q16 due to a higher revolver balance from closing Capula.

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