Acadian Asset Management Q4 2024 Earnings Report

Acadian Asset Management EPS Results

• Actual EPS: $1.30
• Consensus EPS: $1.03
• Beat/Miss: Beat by +$0.27
• One Year Ago EPS: N/A

Acadian Asset Management Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Acadian Asset Management Announcement Details

• Quarter: Q4 2024
• Date: 2/6/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, February 6, 2025
• Conference Call Time: 11:00AM ET

Acadian Asset Management (NYSE:AAMI) is a publically owned asset management holding company. The firm provides its services to individuals and institutions. It manages separate client focused portfolios through its subsidiaries. The firm also launches equity mutual funds for its clients. It invests in public equity, fixed income, and alternative investment markets through its subsidiaries. The firm was founded in 1980 is based Boston, Massachusetts. It was formally known as BrightSphere Investment Group plc. BrightSphere Investment Group Inc. was formed in 1980 and is based in Boston, Massachusetts.

Acadian Asset Management Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Acadian Asset Management Inc. Earnings Conference Call and Webcast for the Fourth Quarter twenty twenty four. Please note that this call is being recorded today, Thursday, 02/06/2025, at 11AM Eastern Time. I would now like to turn the call over to Melody Huang, Senior Vice President and Director of Finance and Investor Relations. Please go ahead, Melody.

[Melody Huang, SVP & Director of Finance & IR at Acadian Asset Management LLC]

Good morning, and welcome to Acadian Asset Management Inc. Conference call to discuss our results for the fourth quarter ended 12/31/2024. Before we get started, please note that we may make forward looking statements about our business and financial performance. Each forward looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected. Additional information regarding these risks and uncertainties appears in our SEC filings, including the Form eight K filed today containing the earnings release, our 2023 Form 10 ks and our Form 10 Q for each of the first, second and third quarters of twenty twenty four.

[Melody Huang, SVP & Director of Finance & IR at Acadian Asset Management LLC]

Any forward looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update them as a result of new information of future events. We may also reference certain non GAAP financial measures. Information about any non GAAP measures referenced, including a reconciliation of those measures to GAAP measures, can be found on our website along with the slides that we will use as part of today's discussion. Finally, nothing herein shall be deemed to be an offer or solicitation to buy any investment products. Kelly Young, our President and Chief Executive Officer, will lead the call.

[Melody Huang, SVP & Director of Finance & IR at Acadian Asset Management LLC]

And now, I'm pleased to turn the call over to Kelly.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Thanks, Melody. Good morning, everyone, and thanks for joining us today. As I take on the role of CEO of Acadian Asset Management Inc, I'm mindful of the incredible journey that has brought us here. Acadian has been around for nearly forty years. And for most of that time, we've been under the umbrella and brand name of another holding company.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

But today marks the first time that Acadian releases earnings as a standalone company. Our firm has been built on an impressive performance track record through various market cycles. We have a stellar reputation among institution investors and we're the only standalone publicly traded systematic manager. The BrightSphere chapter closed at the end of last year. And today, I'm delighted to share Acadian's results for the fourth quarter and to update you on our long term growth strategy.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Since this is the first Acadian's earnings call, I'll also introduce you to Acadian's CIO, Brendan Bradley, and Brendan will walk you through our investment performance. Finally, Melody Hung will close with an update on our capital allocation. And after my closing remarks, we'll move to Q and A. I'm happy to report that we ended 2024 on a high note. During Q4, AAMI achieved the highest level of quarterly E and I EPS in the firm's history.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

E and I per share was $1.3 compared to $0.77 in the fourth quarter of twenty twenty three. The 69% increase in E and I per share compared to the year ago quarter was primarily driven by 50% growth in E and I. And E and I for the fourth quarter of twenty twenty four was $49,000,000 a $16,000,000 increase from prior year, primarily driven by higher E and I management fee revenue and higher incentive fees. Adjusted EBITDA of $73,000,000 was up 41% from Q4 of twenty twenty three. Higher AUM from both market appreciation and investment returns over the last twelve months also drove the full year 2024 E and I and adjusted EBITDA increase.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Acadian's twenty twenty four E and I was $106,000,000 and adjusted EBITDA was $177,000,000 for the twelve months ended 12/31/2024, a 4032% increase respectively from the prior year. Record E and I EPS of $2.76 for the full year represented a 55% increase compared to 2023 and was additionally driven by the company's accretive share repurchases. Net client cash flows for the fourth quarter of twenty twenty four were positive by $900,000,000 as Acadian continued to produce consecutive quarters of net inflows. Total positive MCCF were $1,800,000,000 in 2024, the first positive annual net flow since 2019, which was driven by Acadian's highest ever gross sales year of $21,000,000,000 in 2024. This success is a testament of our proven investment process as well as Acadian's world class investment and distribution teams.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

As a systematic investing pioneer, Acadian was among the first firms in the world to apply data and technology to the systematic evaluation of global assets. This edge enables Acadian to deliver strong risk adjusted returns that help our clients meet their long term investment goals. Now let me introduce you to our Chief Investment Officer, Brendan Bradley, who's going to walk you through Acadian's investment performance this quarter.

[Brendan Bradley, EVP & CIO at Acadian Asset Management LLC]

Thanks, Kelly. While markets were mixed in Q4, with much of the equity world losing value, The U. S. Market continued its strong year. Around the globe, equities did well with most major markets realizing double digit returns in local currency.

[Brendan Bradley, EVP & CIO at Acadian Asset Management LLC]

U. S. High yield and investment grade bonds had a positive year as credit spreads tightened and yields rose. Overall, MSCI World was up 19%, while EP was up 4% and MSCI Emerging Markets was up 8% in dollar terms. U.

[Brendan Bradley, EVP & CIO at Acadian Asset Management LLC]

S. Equities led the way and within The U. S, it was the continued strength of a small number of large technology oriented companies driving the market. In a year in which over half the world's population went to the polls, equity markets remained resilient and Acadian's investment process delivered strong performance across nearly all our strategies. While Q4 saw most equity markets giving back, our relative performance was particularly strong, adding over 300 basis points in active performance in our core benchmark oriented strategies.

[Brendan Bradley, EVP & CIO at Acadian Asset Management LLC]

It was a great finish to a great year. In 2024, nearly every strategy and every geography added significant value for our clients. Our performance was highly diversified across our universe of signals and in most major strategies between 80100% of our major signal categories contributed positively to value add. Over the long term, our systematic investment process has created significant value for our clients. In five major implementations, comprising the majority of our assets, 100% of our strategies are outperforming their respective benchmarks for the three-, five- and ten year windows ending in 2024.

[Brendan Bradley, EVP & CIO at Acadian Asset Management LLC]

On the consolidated basis, as of 12/31/2024, more than 90% of our strategies by revenue outperformed their respective benchmarks over these three, five and ten year periods and more than 89% of our strategies by assets outperformed their respective benchmarks. We generated annualized excess returns of approximately 4% in the most recent five years for our clients. In short, Acadian had another outstanding active quarter and year. Back to you, Kelly.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Thanks, Brendan. Next, I'd like to focus on Acadian's robust distribution platform and team, which helped Acadian generate record gross sales in 2024 and will be a major driver of growth in the years ahead. For many years, Acadian has had a strong global presence with offices in Boston, London, Sydney and Singapore. We have continued to expand our client and distribution team with over 90 experienced professionals serving more than 1,000 accounts in 40 countries. The team has established strong long term relationships with many institutional clients and consultants across both market segments and geographies leading to a diverse client base with deep relationships dating back many years and in many cases across multiple strategies.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

In tandem with expanding our distribution capabilities, Acadian's business and product development team have been focused on increasing our strategy and vehicle offerings in high demand and growing areas where Acadian's systematic approach is particularly well suited and our current pipeline is very robust. Looking ahead, there are four key product initiatives in addition to our core strategies that we expect will drive Acadian's future growth. In no particular order, these are our enhanced equity, our extensions equity, systematic credit, and equity alternatives platforms. And we've made excellent progress in each of these endeavors. Our enhanced strategies drove a lot of our asset raising in 2024.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Enhanced equity strategies offer risk adjusted returns with comparatively lower active risk relative to standard active offerings. These strategies can satisfy broader investment demand for lower fee, more consistent return allocations as well as providing alternatives for investors in a $16,000,000,000,000 passive market, and we expect to see strong momentum in this space going forward. Our extension portfolios are a form of high conviction investing, which leverage both long and short positions to increase the managers active views. An example would be our one thirty thirty products. Acadian has years of extensions experience and our alpha is effective for both long and short positions.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

These strategies have excellent returns and have seen some major new accounts funded recently. On systematic credit, we have three live track records: U. S. High yield, global high yield, and U. S.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Investment grade, with the first offering seeded in Q4 of twenty twenty three. We believe our data infrastructure, systematic platform and culture of transparency will produce excellent results for Acadian's credit products and enable us to access the $3,000,000,000,000 active corporate credit space. We recently onboarded our first external client assets in credit, and we will continue to incubate our track records. Finally, Acadian's equity alternative strategies are targeting the multi strategy hedge fund market, one of the fastest growing segments of the global hedge fund industry. We are producing high returns with low market correlations and have already gathered external assets in this strategy.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

To sum up, over time, we expect these four initiatives, enhanced, extensions, credit and equity alternatives, to help generate sustained growth for Acadian, while we continue to deliver strong returns on our core offerings, which include global, non U. S, emerging markets and small cap equities. I'm now delighted to turn the call over to Melody to provide you with an update on capital allocation.

[Melody Huang, SVP & Director of Finance & IR at Acadian Asset Management LLC]

Thanks, Kelly.

[Melody Huang, SVP & Director of Finance & IR at Acadian Asset Management LLC]

Our balance sheet provides the liquidity and financial flexibility to execute our growth strategy and to enhance shareholder value. At the end of fourth quarter twenty twenty four, we have $95,000,000 in cash and $90,000,000 in CE investments. With approximately $274,000,000 of long term debt and nothing drawn on our $140,000,000 revolving credit facility, our debt to adjusted EBITDA ratio was 1.5 times as of twelvethirty onetwenty four and our net leverage ratio was just one time as of twelvethirty onetwenty four. Over the past five years, we demonstrated a track record of creating significant value to our shareholders through returning $1,400,000,000 of excess capital. Outstanding diluted shares went down 56% from $86,000,000 in Q4 twenty nineteen to 38,000,000 shares in Q4 twenty twenty four.

[Melody Huang, SVP & Director of Finance & IR at Acadian Asset Management LLC]

Share buybacks were not only highly accretive to EPS growth, but also very tax efficient. As our business continues to generate strong free cash flow, we expect to continue deploying excess capital to support our organic growth and to buyback our shares whenever opportunities come up. Now, Kelly will deliver her closing remarks.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Thanks, Melody. Before going into Q and A, I'd like to recap the key points we've covered in this presentation. We're the only stand alone publicly traded systematic manager. Our results were outstanding in the fourth quarter and full year of 2024 with E and I EPS growth of 6955% respectively. Dollars 1,800,000,000.0 of net cash flows were generated in 2024, the first positive year since 2019.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Our track record is robust. More than 90% of Acadian's strategies by revenue outperformed their respective benchmarks across the three, five and ten year period. Acadian is currently only trading at around 9x 2024 earnings, while our peers average PE multiple is at approximately 14x. With exceptional investment performance and several organic growth initiatives well in place, Acadian is positioned for meaningful growth, and I'm truly excited about the opportunities that lie ahead. This concludes my prepared remarks, and I'll turn the call back to the operator and we'll be happy to answer any questions you may have.

[Operator]

Thanks, And it looks like our first question today comes from the line of Kenneth Lee with RBC Capital.

[Kenneth Lee, Vice President at RBC Capital Markets]

Just want to get a better sense of whether there were any specific strategies that drove the positive net flows that you saw in the quarter there?

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Hi, Ken. It's nice to speak to you again. Yes, I think what was really exciting about Q4 sales and sales for 2024 was actually the breadth of strategies that we saw clients funding. We've seen clear growth in both enhanced equities and our extension strategies recently, but also saw substantial assets moving into a number of our more traditional core strategies as well where we are gaining market share in a number of areas. So it was pretty broad in Q4, but as I say, with those themes of enhanced extensions being sort of two of the more prevalent.

[Kenneth Lee, Vice President at RBC Capital Markets]

Got you. Very helpful there. And just on that, and thanks again for the additional details around some of the newer systematic strategies, the enhanced equity, the systematic credit, the equity alternatives. I wonder if you could just help us frame out the longer term AUM opportunity specifically for Acadian for these kind of strategies. How much growth could you see AUM grow over time there?

[Kenneth Lee, Vice President at RBC Capital Markets]

And then somewhat relatedly, what's sort of like the fee rate opportunity here? Is the typical fee rate a little bit higher or lower than the average fee rate that you're seeing currently for KBM?

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Sure. Yes. I'd say, we're very pleased, I think, with the progress that we've made in both of those initiatives. And we're in a strong position and don't anticipate any sort of additional investments really needed for those. We're obviously still in the period of incubating both of those track records sort of building longer term tracks there.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

But I think as I said in my prepared remarks, there's a very, very large credit market. Systematic credit is certainly something more newer and more nascent. But we think the opportunities there really could be substantial over time, sort of large mandates that we would expect to see there as we continue to incubate those track records. On the XT alternatives platform, again, multi strategy has been a very popular area I think over the last few years in the market. And as we continue to build, I think, a strong compelling offering there, again, we think there's sort of substantial upside in terms of AUM growth.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

So hard to put those hard to put sort of numbers on those. But again, I think we feel very positive about the opportunities in both of those. With respect to fees, certainly on the credit side, you would expect to see sort of fees I think would in terms of the blended fee that we see for average fees across the business perhaps a little lower there. But again, I think that's certainly going to depend on the dynamics and where we see flows coming into across the credit business. Equity alternatives and sort of the hedge fund platform, again, you would see expect to see much higher average fees there versus what we see in our more sort of traditional core strategy.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

So I think we feel very positive about both AUM potential growth there as well as I'm excited about the impact on revenue and certainly for the equity alternatives platform.

[Kenneth Lee, Vice President at RBC Capital Markets]

Got you. Very helpful there. And just one last one, if I could squeeze one in. Given the cash on balance sheet, wonder if you could just talk a little bit more about potential cash needs for this coming year. And I think you have an upcoming note maturity as well.

[Kenneth Lee, Vice President at RBC Capital Markets]

Any plans around that?

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Sure. Yes. As you know, I mean, the balance sheet is very strong and the business generates very good free cash flow. So it gives us financial flexibility to whether it's to fund those organic growth strategies, returning capital to shareholders and paying down debt. So we haven't got pre allocations in mind.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

As you noted, the senior note matures next year. We'll start looking into refinancing options for that note and want to be prudent in terms of maintaining good leverage ratios and financial flexibility there and obviously focusing on what makes most sense for shareholder value.

[Kenneth Lee, Vice President at RBC Capital Markets]

Got you. Very helpful. Thanks again.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Pleasure.

[Operator]

Alright. Looks like we do have another question, and it is from Michael Cypress with Morgan Stanley. Michael, please go ahead. Your line is live.

[Annalei Davis, Analyst at Morgan Stanley]

Hi. This is Annalie on for Mike. Thanks for taking the question. Just wondering if you could maybe provide some color on, composition and the magnitude of the pipeline, maybe, frame that how frame that versus how, it was like three to six months ago? Thanks.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Sure. Thanks, Natalie. Yes, we have a very strong robust pipeline, I'd say, across a number of different strategies and a very strong one not funded pipeline that we expect to see those clients fund over the next, I'd say, one to two quarters. We've seen the pipeline pick up quite significantly, I'd say, through the second half of twenty twenty four going into 2025. And again, I think the themes you're going to see are going to be consistent with my prepared remarks earlier that enhanced and extensions are two areas where we continue to see areas of focus for clients.

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

But again, our traditional core equity strategies and certainly in some of our more niche areas like small cap approving very popular and gaining a lot of attention. So I'd say the pipeline looks incredibly robust, perhaps more robust even than six months ago when we felt very positive going into the second half of last year. And as I said, across the breadth of strategy, which from our point of view, from the diversification point of view is really nice to see.

[Annalei Davis, Analyst at Morgan Stanley]

Awesome. Thanks.

[Operator]

All right. Thank you so much, Annalie. And this does conclude our question and answer session. I'd like to turn the conference call back to Kelly Young. Kelly?

[Kelly Young, CEO, President & Director at Acadian Asset Management LLC]

Okay. Thank you, everyone, for taking the time today. Have a good day.

Participants

Executives

• Melody Huang, SVP & Director of Finance & IR
• Kelly Young, CEO, President & Director
• Brendan Bradley, EVP & CIO

Analysts

• Kenneth Lee, Vice President at RBC Capital Markets
• Annalei Davis, Analyst at Morgan Stanley