10-KPeriod: FY2014

AFFILIATED MANAGERS GROUP, INC. Annual Report, Year Ended Dec 31, 2014

Filed February 23, 2015For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) presented a strong performance in its 2014 fiscal year, as detailed in its 2015 10-K filing. The company, which invests in and provides support to leading boutique investment management firms (Affiliates), saw its assets under management grow to $620.2 billion by the end of 2014, a significant increase from previous years. This growth was driven by a combination of new investments, organic growth from net client cash flows, and positive investment performance across its Institutional, Mutual Fund, and High Net Worth distribution channels. Financially, AMG demonstrated robust growth in net income and earnings per share. Net income attributable to controlling interests increased by 25% year-over-year, reaching $452.1 million, with diluted EPS rising to $8.01. The company also highlighted its non-GAAP "Economic Net Income" and "EBITDA," which also showed substantial increases, reflecting the operational performance before certain non-cash expenses. Despite a notable increase in debt, the company maintained strong liquidity and positive operating cash flow, supporting its growth strategy which includes further investments in new Affiliates.

Financial Highlights

39 data points
Beta

Net Income

$433.90M

EPS (Diluted)

$7.70

Total Assets

$7.68B

Cash & Equivalents

$550.60M

Free Cash Flow

$1.42B

Financial Statements
Beta
SG&A Expenses$485.50M
Operating Expenses$1.70B
Operating Income$815.20M
Interest Expense$76.60M
Net Income$433.90M
EPS (Basic)$7.89
EPS (Diluted)$7.70
Shares Outstanding (Basic)55.00M
Shares Outstanding (Diluted)58.40M

Key Highlights

  • 1Assets Under Management (AUM) grew to $620.2 billion by year-end 2014, a 15% increase from the prior year, demonstrating continued expansion.
  • 2Net income attributable to controlling interests rose by 25% to $452.1 million, with diluted EPS increasing to $8.01, showcasing strong profitability.
  • 3Revenue increased by 15% to $2.51 billion, driven by growth in AUM across all distribution channels, particularly Mutual Fund and Institutional.
  • 4The company completed three majority investments in new Affiliates (SouthernSun, River Road, Veritas) and a minority investment in EIG Global Energy Partners in 2014, fueling its growth strategy.
  • 5Operating cash flow significantly increased by 45% to $1.39 billion, indicating strong operational cash generation.
  • 6Total assets grew to $7.7 billion, with significant increases in goodwill and acquired client relationships, reflecting the impact of acquisitions.
  • 7Despite increasing long-term debt to $1.89 billion, the company maintained compliance with its credit facility covenants and reported a healthy bank leverage ratio.

Frequently Asked Questions

AMG's revenue is primarily derived from investment management fees earned by its Affiliates. These fees are typically based on a percentage of assets under management (asset-based fees). Some Affiliates also earn performance fees, which are based on the investment performance of their products. Revenue is thus closely tied to the value and growth of assets managed across its Institutional, Mutual Fund, and High Net Worth distribution channels.

AMG's growth strategy centers on two main pillars: growing its existing Affiliates and making new investments in high-quality boutique investment management firms. They aim to add value by providing centralized support in areas like distribution, marketing, and technology, while preserving the Affiliates' entrepreneurial culture and operational autonomy. Demographic trends, such as founders seeking succession planning or liquidity, are identified as key drivers for future investment opportunities.

AMG faces several key risks. A significant risk is the dependence on investment management fees, which are directly impacted by market returns and investment performance. Declines in capital markets, especially equity markets, can reduce assets under management and, consequently, fees. Competition within the asset management industry is also intense, and regulatory changes pose another significant risk that could impact operations and compliance costs. Additionally, reliance on key personnel within their Affiliates and the potential for reputational damage are critical concerns.

AMG's accounting treatment for its Affiliates depends on its level of ownership and control. Majority-owned or otherwise controlled Affiliates are consolidated into AMG's financial statements. For minority investments where AMG can still exercise significant influence, the equity method of accounting is used. This means AMG recognizes its share of the Affiliate's earnings (or losses) rather than consolidating their full revenues and expenses.