10-KPeriod: FY2020

AFFILIATED MANAGERS GROUP, INC. Annual Report, Year Ended Dec 31, 2020

Filed February 19, 2021For Securities:AMGMGRBMGRMGRDMGRE

Summary

Affiliated Managers Group, Inc. (AMG) reported its full-year 2020 financial results, showcasing a robust partnership model in the asset management industry. Despite the challenges posed by the COVID-19 pandemic, AMG maintained operational continuity and strategic investments, completing minority investments in three firms: Comvest Partners, Inclusive Capital Partners LP, and Jackson Square Partners LLC. The company's strategy revolves around partnering with independent active investment management firms, providing them with growth capital, global distribution, and other strategic support while allowing them operational and investment autonomy. Financially, AMG reported consolidated revenue of $2,027.5 million, a decrease of 9% from the prior year, primarily driven by a decline in asset-based fees due to outflows in certain quantitative and equity strategies, and a shift in asset composition. However, performance-based fees saw an increase. Net income attributable to controlling interest significantly improved year-over-year, largely due to a substantial decrease in equity method intangible amortization and impairments. The company also maintained a strong liquidity position with $1,039.7 million in cash and cash equivalents as of December 31, 2020, and continued its capital return initiatives through share repurchases.

Financial Highlights

41 data points
Beta

Revenue

$2.03B

Net Income

$202.20M

10.0% Net Margin

EPS (Diluted)

$4.33

Total Assets

$7.89B

Cash & Equivalents

$1.04B

Free Cash Flow

$1.00B

Financial Statements
Beta
Revenue$2.03B
SG&A Expenses$321.40M
Operating Expenses$1.51B
Interest Expense$92.30M
Net Income$202.20M
EPS (Basic)$4.34
EPS (Diluted)$4.33
Shares Outstanding (Basic)46.50M
Shares Outstanding (Diluted)46.70M

Key Highlights

  • 1Total assets under management stood at $716.2 billion as of December 31, 2020.
  • 2Aggregate fees generated were $4,626.4 million, reflecting a 7% decrease from the prior year, primarily due to lower asset-based fees.
  • 3Net income (controlling interest) saw a significant increase from $15.7 million in 2019 to $202.2 million in 2020, largely driven by a decrease in equity method intangible amortization and impairments.
  • 4The company completed three new minority investments in independent investment management firms in 2020: Comvest Partners, Inclusive Capital Partners LP, and Jackson Square Partners LLC.
  • 5AMG actively returned capital to shareholders, repurchasing 5.0 million shares of common stock in 2020 for $430 million.
  • 6The company ended the year with a strong liquidity position, holding $1,039.7 million in cash and cash equivalents.
  • 7The company's debt-to-EBITDA ratio was 1.6x and its EBITDA to cash interest expense ratio was 10.1x as of December 31, 2020, indicating compliance with financial covenants.

Frequently Asked Questions

AMG's core strategy is to act as a partner to independent active investment management firms globally. They invest in these firms, known as 'Affiliates,' offering growth capital, global distribution, and other strategic support while allowing the Affiliates to maintain operational and investment autonomy. This partnership approach aims to generate long-term value through the growth of these independent businesses.

While the COVID-19 pandemic significantly impacted the global economy, AMG maintained operational continuity with minimal disruption. Financially, consolidated revenue decreased due to outflows in certain strategies and a shift in asset composition, impacting asset-based fees. However, performance-based fees increased, and the company reported a substantial year-over-year increase in net income (controlling interest) primarily due to reduced intangible amortization and impairments.

Key risks identified include dependence on asset and performance-based fees, which are sensitive to investment performance and industry trends like the rise of passively-managed products. Other risks include potential harm to reputation, intense competition within the asset management industry, the termination of investment management contracts on short notice, the need for future capital, potential impairment of substantial intangible assets, market risks (interest rates, foreign currency), and operational risks related to technology, cybersecurity, and key personnel.

AMG generates long-term value by investing in Affiliates and returns excess capital to shareholders primarily through share repurchases. As of December 31, 2020, the company had substantial capacity under its share repurchase programs and actively repurchased shares throughout the year. They also manage their capital structure consistent with an investment-grade profile, maintaining credit ratings from Moody's and S&P.