10-KPeriod: FY2008

AFFILIATED MANAGERS GROUP, INC. Annual Report, Year Ended Dec 31, 2008

Filed March 2, 2009For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) operates as an asset management company by holding equity investments in a diverse portfolio of boutique investment management firms. The company's strategy centers on driving shareholder value through the internal growth of its existing affiliates, making new investments in other asset management firms, and pursuing strategic transactions to enhance its affiliates' capabilities. As of December 31, 2008, AMG managed approximately $170.1 billion in assets across its Mutual Fund, Institutional, and High Net Worth distribution channels. However, the report highlights significant challenges faced by AMG in the current economic climate. The company's financial results are heavily reliant on equity market performance, which experienced unprecedented volatility in 2008, leading to a substantial decline in assets under management and a corresponding decrease in revenue and net income. The report also details substantial debt obligations and contingent liabilities, alongside a large intangible asset base which carries impairment risk. Despite these headwinds, AMG maintains a strategy focused on long-term growth and operational autonomy for its affiliates, while navigating a complex and evolving regulatory landscape.

Financial Highlights

25 data points
Beta

Net Income

-$1.32M

EPS (Diluted)

$-0.03

Cash & Equivalents

$396.40M

Free Cash Flow

$498.41M

Financial Statements
Beta
SG&A Expenses$201.47M
Operating Expenses$791.50M
Operating Income$366.72M
Interest Expense$73.36M
Net Income-$1.32M
EPS (Basic)$-0.03
EPS (Diluted)$-0.03
Shares Outstanding (Basic)38.21M
Shares Outstanding (Diluted)38.21M

Key Highlights

  • 1Assets Under Management (AUM) declined significantly by 38% from $274.8 billion in 2007 to $170.1 billion in 2008, primarily due to adverse investment performance and client cash outflows.
  • 2Revenue decreased by 15% year-over-year to $1.158 billion in 2008, largely driven by the decline in AUM.
  • 3Net income plummeted by 87% to $23.2 million in 2008, down from $182.0 million in 2007, reflecting the impact of market downturns and a significant $150 million non-cash charge to reduce the carrying value of certain equity method investments.
  • 4The company has substantial debt obligations, including convertible notes and credit facilities, with a total debt to EBITDA ratio of 1.3:1 as of December 31, 2008.
  • 5Intangible assets represent a significant portion of the balance sheet, totaling $1.73 billion as of December 31, 2008, which are subject to potential impairment charges.
  • 6Despite the challenging market, the company's strategy remains focused on partnering with high-quality boutique asset management firms, maintaining their operational autonomy and entrepreneurial culture.
  • 7AMG's stock experienced significant price volatility, trading as low as $17.93 in the fourth quarter of 2008, down from a high of $136.51 in the same quarter of 2007.

Frequently Asked Questions

The primary driver of AMG's financial performance decline in 2008 was the severe downturn in global equity markets, which significantly reduced assets under management (AUM). This led to lower advisory fees, reduced revenue, and impacted profitability. Additionally, a $150 million non-cash impairment charge related to equity method investments further contributed to the net income decrease.

AMG has several debt obligations, including senior bank debt and various convertible securities. As of December 31, 2008, the company reported a debt-to-EBITDA ratio of 1.3:1, which is within its bank covenant limits. The company also has a substantial credit facility available. However, the significant intangible asset base on its balance sheet is subject to impairment risk, which could impact its financial position.

AMG's core strategy remains focused on investing in and partnering with high-quality boutique investment management firms. The company aims to support the internal growth of its existing affiliates and pursue new investment opportunities. A key tenet of its strategy is to preserve the operational autonomy and entrepreneurial culture of its affiliates, aligning interests through shared equity ownership.

AMG faces several key risks, including: dependence on equity market returns and affiliate investment performance; potential inability to find or successfully invest in new firms; counterparty risk in financial transactions; stock price volatility; significant government regulation of its affiliates' businesses; risks associated with international operations; limitations on its ability to alter affiliate management practices; and the risk that affiliate contracts may be terminated on short notice. The report also highlights the competitive nature of the asset management industry.