10-KPeriod: FY2007

AFFILIATED MANAGERS GROUP, INC. Annual Report, Year Ended Dec 31, 2007

Filed February 29, 2008For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) in its 2007 10-K filing presents a robust asset management business with significant growth in assets under management (AUM) across its Mutual Fund, Institutional, and High Net Worth distribution channels. Total AUM reached $274.8 billion as of December 31, 2007, an increase driven by positive investment performance and strategic new investments in firms like ValueAct Capital and BlueMountain Capital Management. The company's financial performance showed strong revenue growth, increasing by 17% to $1.37 billion in 2007. This growth was underpinned by a 27% rise in average AUM, although the revenue growth was less than AUM growth due to the impact of equity method investments where revenue is not consolidated. Net income also saw a healthy increase of 20% to $182 million. AMG's strategy focuses on partnering with high-quality boutique investment management firms, maintaining their entrepreneurial culture while providing scale benefits. The company's balance sheet reflects substantial intangible assets and equity investments in its Affiliates, indicating a business model heavily reliant on acquisitions and organic growth within its acquired firms.

Key Highlights

  • 1Assets Under Management (AUM) grew to $274.8 billion by December 31, 2007, up from $241.1 billion in 2006, indicating strong client inflows and investment performance.
  • 2Total revenue increased by 17% to $1.37 billion in 2007, driven by higher average AUM across all distribution channels.
  • 3Net income grew by 20% to $182 million in 2007, demonstrating profitable growth in the asset management business.
  • 4The company made strategic investments in alternative investment managers ValueAct Capital and BlueMountain Capital Management in late 2007, diversifying its product offerings.
  • 5AMG's business model relies on acquiring minority stakes in boutique asset management firms, aiming to preserve their culture while leveraging AMG's resources for growth.
  • 6Significant debt is carried on the balance sheet, including a $950 million senior credit facility and various convertible securities, managed through a leverage ratio of 1.6:1 as of December 31, 2007.
  • 7The company has a substantial amount of intangible assets ($1.7 billion) and equity investments in Affiliates ($0.8 billion) on its balance sheet, reflecting its acquisition-driven growth strategy.

Frequently Asked Questions

AMG's business model involves making equity investments in a diverse group of boutique investment management firms, referred to as Affiliates. Their growth strategy focuses on internal growth within existing Affiliates, acquiring new investment management firms, and engaging in strategic transactions. AMG aims to preserve the entrepreneurial culture and operational autonomy of its Affiliates while providing them with economies of scale in distribution, operations, compliance, and technology.

In 2007, AMG demonstrated strong financial performance. Total revenue increased by 17% to $1.37 billion, primarily driven by a 27% increase in average assets under management. Net income rose by 20% to $182 million. Assets under management grew to $274.8 billion by year-end, reflecting positive investment performance and net client cash flows.

Key risks highlighted by AMG include a dependency on equity market returns and the investment performance of its Affiliates, the success of its growth strategy which relies on finding and investing in suitable firms, the highly regulated nature of its Affiliates' businesses, potential volatility in its common stock price, reliance on key personnel, and the competitive landscape of the asset management industry.

AMG has substantial debt obligations, including a senior credit facility with $519.5 million outstanding as of December 31, 2007, and various convertible securities such as zero coupon senior convertible notes, floating rate senior convertible securities, mandatory convertible securities, and junior convertible trust preferred securities totaling over $1.9 billion in principal amounts. The company manages its debt using a leverage ratio, which was 1.6:1 as of December 31, 2007.