Affiliated Managers Group Q1 2025 Earnings Report

Affiliated Managers Group EPS Results

• Actual EPS: $5.20
• Consensus EPS: $5.10
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: $5.37

Affiliated Managers Group Revenue Results

• Actual Revenue: $496.60 million
• Expected Revenue: $508.00 million
• Beat/Miss: Missed by -$11.40 million
• YoY Revenue Growth: N/A

Affiliated Managers Group Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 12:00PM ET

Affiliated Managers Group (NYSE:AMG), through its affiliates, operates as an investment management company providing investment management services to mutual funds, institutional clients,retails and high net worth individuals in the United States. It provides advisory or sub-advisory services to mutual funds. These funds are distributed to retail, high net worth and institutional clients directly and through intermediaries, including independent investment advisors, retirement plan sponsors, broker-dealers, major fund marketplaces, and bank trust departments. The company also offers investment products in various investment styles in the institutional distribution channel, including small, small/mid, mid, and large capitalization value and growth equity, and emerging markets. In addition, it offers quantitative, alternative, and fixed income products, and manages assets for foundations and endowments, defined benefit, and defined contribution plans for corporations and municipalities. Affiliated Managers Group provides investment management or customized investment counseling and fiduciary services. Affiliated Managers Group, Inc. was formed in 1993 and is based in West Palm Beach, Florida with additional offices in Prides Crossing, Massachusetts; Stamford, Connecticut; London, United Kingdom; Dubai, United Arab Emirates; Sydney, Australia; Hong Kong; Tokyo, Japan, Zurich, Switzerland and Delaware.

Affiliated Managers Group Q1 2025 Earnings Call Transcript

Key Takeaways

• AMG generated record $14 billion in net client cash inflows into alternative strategies in Q1, offsetting long-only outflows and reflecting its shift toward higher-fee, longer-duration assets.
• The company announced three new partnerships with Northbridge Partners, Qualitas Energy and Verition, committing about $700 million and adding approximately $18 billion in AUM, all expected to be accretive to earnings.
• In Q1, AMG reported adjusted EBITDA of $228 million (down 12% y-o-y) driven by performance fee comps, but fee-related earnings grew 4% on increased AUM and alternative momentum; Q2 EBITDA guidance is $210–225 million.
• AMG repurchased $173 million of shares in Q1 and plans roughly $400 million in buybacks for 2025, supported by a strong balance sheet with low leverage, a $1.25 billion revolver and long-dated debt.
• Affiliates raised $3 billion in private markets and saw $10 billion in liquid alternatives inflows, underscoring investor demand for AMG’s differentiated partnership model and fueling expectations for improved organic growth.

Presentation

[Operator]

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms.

[Operator]

Patricia Figueroa, Head of Investor Relations for AMG. Thank you. You may begin.

[Patricia Figueroa, VP - Investor Relations at Affiliated Managers Group]

Good afternoon, and thank you for joining us today to discuss AMG's results for the first quarter of twenty twenty five. Before we begin, I'd like to remind you that during this call, we may make a number of forward looking statements, which could differ from our actual results materially, and AMG assumes no obligation to update these statements. Also, note that nothing on this call constitutes an offer of any products, investment vehicles or services of any AMG affiliate. A replay of today's call will be available on the Investor Relations section of our website, along with a copy of our earnings release and a reconciliation of any non GAAP financial measures, including any earnings guidance announced on this call. In addition, we have posted an updated investor presentation to our website and encourage investors to consult our site regularly for updated information.

[Patricia Figueroa, VP - Investor Relations at Affiliated Managers Group]

With us today to discuss the company's results for the quarter are Jay Horgan, President and Chief Executive Officer Tom Wojcick, Chief Operating Officer and Deva Ritchie, Chief Financial Officer. With that, I'll turn the call over to Jay.

[Jay Horgen, President & CEO at Affiliated Managers Group]

Thanks, Patricia, and good afternoon, everyone. Our first quarter results reflect the positive impact of our strategic capital allocation to areas of secular growth over the past several years. Through our growth investments in new and existing affiliates particularly those operating in private markets and liquid alternatives, we are continuing to evolve our business towards a substantially greater contribution from higher fee and longer duration client assets. In the quarter led by significant momentum at two of our largest affiliates AQR and Pantheon, we generated a record $14,000,000,000 in net client cash inflows into alternative strategies, which largely offset outflows from our long only business. We believe that the evolution of our business composition towards alternatives is fundamental to achieving sustained organic growth.

[Jay Horgen, President & CEO at Affiliated Managers Group]

And given the progress we have made over the past several years along with the current momentum in our alternative strategies, we expect our flow profile to continue to improve as our mix shift accelerates. From a new affiliate investment perspective, we have announced three new partnerships so far in 2025 with Northbridge, Verition and Qualitas Energy. Having committed approximately $700,000,000 to these new partnerships year to date And given our pipeline of prospective new affiliates, the pace of our new investment activity is at one of the fastest levels in nearly a decade. We expect that each investment will be accretive to our earnings and will improve our organic growth profile. Despite the recent market volatility, we continue to execute on our strategy investing in growing businesses that we believe are operating in areas of durable client demand.

[Jay Horgen, President & CEO at Affiliated Managers Group]

And we are able to make these new investments from a position of strength given the diversity of our business and flexibility of our balance sheet. On the private market side, we have recently announced two new partnerships with firms operating in areas of secular growth. In February, we announced a new investment in Northbridge Partners, a private markets manager specializing in industrial logistics real estate, a fast growing sector benefiting from the expanding digital economy. Over the past decade, the firm's experienced and entrepreneurial management team has delivered excellent performance for its LPs, while also diversifying its strategies and expanding its team and geographic footprint. And this week we announced a new investment in Qualitas Energy, a leading global infrastructure manager specializing in energy transition with a focus on Europe and a track record of delivering strong returns for clients over the past two decades.

[Jay Horgen, President & CEO at Affiliated Managers Group]

Energy security and independence are critical issues to the European region that are driving demand for investments into renewable energy sources and energy transition assets. Qualitas Energy has a distinctive competitive position with its opportunistic value added approach, a vertically integrated industrial platform and locally based teams with deep knowledge of their respective geographic regions. On the liquid alternative side, we have been focused on the multi strategy sector given its growing investor allocations, strong risk adjusted returns and low correlation to other asset classes. And in April, we announced our partnership with Verition. Verition is a leader in the multi strategy space with a strong risk framework and a proven ability to consistently deliver excellent results for clients.

[Jay Horgen, President & CEO at Affiliated Managers Group]

In addition, Verition's ability to attract and retain talent across its 150 teams managing more than $12,000,000,000 in AUM distinguishes the firm relative to its peers and is highly attractive to new and existing clients. Our three new partnerships are in line with our strategy of investing in high quality independent firms operating in areas of secular growth. And together these new investments will add approximately $18,000,000,000 in assets under management across liquid alternatives and private markets. Verition, Northbridge and Qualitas Energy were each attracted to AMG's value proposition given our unique approach. We collaborate and strategically engage with our affiliates to make their great firms even better providing access to a broad range of proven strategic capabilities to enhance their long term success while actively preserving each affiliate's independence.

[Jay Horgen, President & CEO at Affiliated Managers Group]

These new partnerships underscore the ongoing demand for AMG's differentiated partnership approach, our ability to source new opportunities organically and our focus on investing in areas of secular growth. Finally, we also announced the transaction that demonstrates our ability to create shareholder value by supporting our affiliates long term strategic goals. Earlier this week, Peppertree agreed to be acquired by diversified private markets manager resulting in a significant gain on AMG's minority stake doubling our initial investment. Given that our partnership structure aligns us with our affiliates, their success is our success and we are very pleased that this partnership will culminate in an excellent outcome for all stakeholders. Looking ahead, our new investment pipeline remains strong and given the ongoing attraction of AMG's differentiated partnership approach along with our excellent competitive position and proprietary relationships, we continue to have active discussions with a number of firms in our pipeline.

[Jay Horgen, President & CEO at Affiliated Managers Group]

And with our strong capital position we have ample flexibility to execute on these opportunities and also return capital through share repurchases as we did in the first quarter repurchasing $173,000,000 in additional shares. As always, we will remain disciplined in our capital allocation decisions as we evaluate our opportunities against the common framework to create value for shareholders. Taken all together with our enhanced opportunity set, our excellent capital position and our unique competitive advantages, we are confident in our ability to generate incremental shareholder value over time. And with that, I'll turn it over to Tom.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

Thank you, Jay, and good afternoon, everyone. AMG allocated significant capital toward growth investments to start the year, furthering our strategy to evolve our business mix toward areas of secular demand, most notably alternatives. Our affiliate partners are increasingly focused on leveraging AMG's unique strategic capabilities, including product development and distribution through our capital formation platform. We continue to believe that our growth investments across new and existing affiliates as well as AMG's strategic capabilities will collectively lead to sustainable long term organic growth, earnings growth and shareholder returns. In the first quarter, net client cash flows were roughly flat, reflecting ongoing strength in alternatives, offset by industry headwinds in long only equities.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

As we continue to shift our business mix more toward alternatives, we expect AMG's organic growth trajectory and the quality of our flows to continue to improve over time. Our private markets affiliates raised $3,000,000,000 in the quarter, primarily in credit, infrastructure and private market solutions aided by AMG's efforts in The U. S. Wealth channel. On the heels of a record fundraising year in 2024, our affiliates' ongoing fundraising strength reflects investors' conviction in their specialist investment strategies and the positive fundamentals of their sectors.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

AMG's private markets affiliates continue to generate outstanding investment performance across a number of attractive areas, including infrastructure, credit, private market solutions and specialty areas, including industrial decarbonization, life sciences, multifamily real estate and industrial logistics. As we continue to form new partnerships with the highest quality independent firms in areas of secular growth, such as our recently announced investments in Northbridge Partners and Qualitas Energy, we are broadening our exposure to fast growing specialty areas within private markets and further diversifying our affiliates value proposition continued to gain momentum with clients and resulted in $10,000,000,000 in net inflows, driven primarily by tax aware solutions and representing the strongest quarterly flow number in liquid alts that AMG has delivered in our history. As market volatility increases following more than a decade of falling rates and rising equity markets, we continue to believe that high quality liquid alternative firms are well positioned to deliver excellent risk adjusted returns for clients and attract new flows over time. Our affiliates managing liquid alternative strategies have excellent long term track records across both beta sensitive and absolute return strategies, including global macro, relative value fixed income, tax aware solutions and trend following. Our recently announced investment in Verition, one of the industry's premier multi manager businesses is an excellent addition to our liquid alternatives portfolio and will enhance the diversification and stability of our earnings profile.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

Verition's excellent long term risk adjusted return profile and low correlation to risk assets demonstrated over nearly two decades positions the firm for future success and we are excited to welcome them to AMG. In equities, we saw net outflows of approximately $14,000,000,000 in the quarter reflecting industry and near term performance headwinds. Multi asset and fixed income net flows were flat in the quarter. Over the last several years, AMG has invested in and broadened its strategic capabilities that can magnify affiliates efforts, most prominently in product development and capital formation, and we are seeing strong results. Our continued collaboration with affiliates to develop and support alternative products for The U.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

S. Wealth market has driven approximately $2,500,000,000 in net flows over the last twelve months, including at the AMG Pantheon Fund, one of the largest and most established private markets products in the channel, which has grown its assets under management to approximately $5,000,000,000 today. We continue to work with our affiliates to bring new products to market to capitalize on the multi decade growth opportunity that is clearly ahead of us in alternatives in U. S. Wealth.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

Importantly, the success that we are having in the wealth channel is resonating not only with clients and existing AMG affiliates, but also with new investment prospects, as accessing this attractive market requires scale and is difficult, if not impossible, for independent firms to do on their own given the resources required to be effective in the channel. As we continue to make new investments in alternative firms, we look forward to collaborating with additional affiliates to broaden their reach and expand their platforms. Our capital formation efforts also contributed to an excellent outcome for all stakeholders in PepperTree's recently announced sale. When we partnered with PepperTree, its partners were focused on diversifying their client base and growing their business as an independent firm, and AMG was able to make meaningful contributions to support their growth. We wish the Peppertree team the best in the next leg of their journey and are proud to have been their partner.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

Our approach to investing in the growth of our business is highly intentional. The successful execution of AMG's growth strategy through the deliberate capital allocation decisions we are making across new investments, investments in existing affiliates and investments to enhance our capabilities is driving the evolution of our business mix more towards secular growth areas. And as we continue to execute our strategy, we expect the contribution from alternatives to further increase. With that, I'll turn the call over to Deva to discuss our first quarter results and guidance.

[Dava Ritchea, Chief Financial Officer at Affiliated Managers Group]

Thank you, Tom, and good afternoon, everyone. As Jay and Tom described, we have had an active start to the year in terms of capital allocation, committing nearly $700,000,000 in capital across growth investments and completing 173,000,000 of share repurchases during the first quarter. The strength of our balance sheet and underlying health and diversity of our business enabled us to execute our growth and capital allocation strategy during a period of relative market turbulence. I will start with the results for the quarter before covering the impact of this capital activity on the forward earnings power of our business and conclude with the impact on our balance sheet. In the first quarter, we reported adjusted EBITDA of $228,000,000 which included $20,000,000 in net performance fee earnings.

[Dava Ritchea, Chief Financial Officer at Affiliated Managers Group]

These results represent a decline of 12% year over year, driven by lower EBITDA from performance fees and the comparison to a one time private market catch up fee occurring during the prior year quarter. Excluding these items, fee related earnings grew 4% year over year driven primarily by higher average AUM as a result of organic growth in our alternative strategies and market beta. This was partially offset by outflows within fundamental equity strategies. Economic earnings per share of $5.2 benefited from $720,000,000 of share repurchases over the last four quarters and declined 3% year over year. In the quarter, a $77,000,000 write down was recorded to the indefinite lived carrying value of certain mutual fund assets and a product closure at a fundamental equity affiliate, which also impacted intangible related deferred taxes for the quarter.

[Dava Ritchea, Chief Financial Officer at Affiliated Managers Group]

Now moving to second quarter guidance. We expect adjusted EBITDA to be in the range of $210,000,000 and $225,000,000 This is based on current AUM levels reflecting our market blend, which was up 1% quarter to date as of May 7 and includes seasonably lower net performance fees of up to $10,000,000 This guidance includes a partial contribution from our new investment in Verition and no impact from our recently announced investment in Qualitas Energy or the sale of AMG's interest in Peppertree, both of which are expected to close later this year. We expect collective accretion in run rate economic earnings per share from our three new investments in Northbridge Partners, Verition and Qualitas Energy, net of the sale of our stake in PepperTree to be approximately 8% with strong future upside potential to both earnings and organic growth given the excellent positioning of our three new affiliates. This assumes the after tax proceeds from the Peppertree sale are redeployed into growth investments, share repurchases or other capital allocation purposes. The AUM table will be adjusted to include new investments as they close with Verition's AUM of 12,600,000,000 to be added in the second quarter and Qualitas likely following later this year.

[Dava Ritchea, Chief Financial Officer at Affiliated Managers Group]

In the case of PepperTree, approximately $5,000,000,000 in AUM will be removed in the third quarter when the transaction is expected to close. Finally, turning to the balance sheet and capital allocation. The work we've done on strengthening our balance sheet over the last several years well positioned us to be able to execute our growth strategy across all stages of a market cycle. We entered the year with: one, a strong liquidity position operating at a historically lower leverage level two, a long dated capital structure with average debt duration of more than twenty years and three, access to additional capital from our $1,250,000,000 undrawn revolver. Our balance sheet is further supported by a healthy underlying business generating annual recurring cash flow from a highly diverse set of affiliates.

[Dava Ritchea, Chief Financial Officer at Affiliated Managers Group]

The combination of these factors enables us to effectively deploy capital as attractive opportunities materialize. With the announcements of Northbridge Partners, Verition and Qualitas Energy, we have committed to deploying nearly $700,000,000 of capital to growth investments so far this year. And our new investment pipeline continues to be full with active dialogues ongoing, as Jay had discussed earlier. And the expected proceeds from the Peppertree transaction of approximately $240,000,000 at closing, which is not only a sizable gain and return on capital for our shareholders, but a liquidity event that enhances our ability to continue capital towards strategic growth areas and deliver value to our shareholders. We repurchased approximately $173,000,000 in shares in the first quarter.

[Dava Ritchea, Chief Financial Officer at Affiliated Managers Group]

And for the full year 2025, we expect to repurchase approximately 400,000,000 subject to market conditions and new investment activity. Inclusive of the commitments to new investments and repurchases to date, our balance sheet remains strong, and we continue to be well positioned to deploy capital into attractive opportunities. We will continue to apply our disciplined capital allocation framework and we are confident in our ability to make forward thinking decisions for the benefit of our shareholders that will generate meaningful long term value. Now we are happy to take your questions.

[Operator]

Thank Our first question comes from the line of Alex Blostein with Goldman Sachs. Please proceed with your question.

[Alex Blostein, Analyst at Goldman Sachs]

Hey, good morning. Good afternoon. Thank you for the question. First, maybe a little bit on the strategic side for you guys. Over the last couple of years, we've seen several private market manager sales, obviously, Peppertree being the latest one.

[Alex Blostein, Analyst at Goldman Sachs]

Can you just maybe walk through what drives the decision to decide to part with one of the affiliates, especially in areas like private markets, which obviously have seen the fastest growth for you and the industry broadly? And as you kind of think forward, should we expect any other potential sales? And would those be limited just to minority stakes? Or you could see yourself also selling down one of your majority owned affiliates as well? Thanks.

[Jay Horgen, President & CEO at Affiliated Managers Group]

Yes. Thanks Alex. Good afternoon to you. I'll see if I can take that question that had several parts. If I miss anything maybe Tom you can add please.

[Jay Horgen, President & CEO at Affiliated Managers Group]

So the first thing to address your strategic question is our strategy it remains unchanged. We partner with high quality independent firms to magnify their success and actively support their independence. So as you know and you've been following us for some time now, our business model is centered around the competitive advantages of independent firms aligned with their clients. And AMG has developed a range of capabilities that enable these partner owned firms to grow and maintain their independence over time. So when an affiliate chooses AMG, it's choosing to stay independent.

[Jay Horgen, President & CEO at Affiliated Managers Group]

It selects our model that aligns with their long term direction and it also aligns us to their long term direction and the choices that they make. So at the inception of a partnership, our expectation is that our affiliates will remain independent because that's why they chose us. But all businesses and partnerships evolve and sometimes circumstances change such that independence is no longer the optimal long term structure for any given firm. So in those cases, in some cases I should say, this may result in a transaction which we and our affiliates mutually agree to evolve our relationship. And given the structure, the partnership structure that we have, strategic decisions that are driven by our affiliates in collaboration with AMG results sometimes in these transactions.

[Jay Horgen, President & CEO at Affiliated Managers Group]

I think it's important to note and you kind of alluded to it that in our partnership model we cannot unilaterally impose strategic decisions on our affiliates. And in the same vein, we have certain rights to ensure that AMG shareholders are treated fairly to the extent of strategic transaction occurs. One of the things I would say is to me these liquidity events that we've had and I'll address them in total in a minute, they highlight the underlying business value of our affiliates in the cases of Bering, Veritable and PepperTree. It highlights how much these businesses grew and thrived under AMG. And because we're aligned with those affiliates their success is our success.

[Jay Horgen, President & CEO at Affiliated Managers Group]

I will just make one other point which is across bearing Veritable and PepperTree, we did have significant realized return on our invested capital. So that's good for AMG and AMG shareholders. We're able to redeploy that capital and also return capital to shareholders. We continue to push forward with our strategy of continuing to invest in alternatives both liquid alternatives and private markets which you've seen year to date as Dave had mentioned $700,000,000 of capital that went to those investments and we continue to change our business mix in favor of alternatives. That has not changed.

[Jay Horgen, President & CEO at Affiliated Managers Group]

And even though we've had a few affiliates that have chosen a different direction over the long term we see that business mix moving very much in favor of alternatives. And also keeping in the spirit of our ethos, we would like our independent firms to be healthy and thriving and we'll do everything that we can to help them. But to the extent that they choose a different direction for strategic reasons, again their success is our success.

[Operator]

Thank you. Our next question comes from the line of Dan Fannon with Jefferies. Please proceed with your question.

[Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc]

Thanks. Good afternoon. Just wanted to follow-up on the liquid alternative flows. As you mentioned record quarter and some of the you mentioned a few firms, but I was hoping you could talk about just the diversity of flows in the quarter, the conversations with clients you're having around these products and how to think about this quarter versus the outlook based upon the conversations in the backlog you're having around the institutional products that is driving these flows?

[Jay Horgen, President & CEO at Affiliated Managers Group]

Great. Well, thank you, Dan, for your question. Good afternoon. I think this one Tom should take.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

Thanks, Dan. So you're right, liquid alternatives definitely were the standout for us this quarter with $10,000,000,000 in net inflows. And that was driven primarily by Tax Aware Solutions. And we've really begun to see those Tax Aware Solutions ramp quite a bit over the course of the last couple of quarters. And I think importantly, lot of that is actually in the wealth space.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

And equally as important, the combination of that liquid alternative wrapper and exposure to wealth means that the stickiness as well as the fee rate associated with some of these flows is really attractive to us. Overall, across liquid alternatives and Jay has been talking about this theme really over the course of the last couple of years, As we see market volatility continuing to increase and we sort of move out of this world where it's simply an up into the right rate driven equity market, we continue to believe that these high quality liquid alternative firms are really well positioned to deliver excellent risk adjusted returns for their clients and to attract new flows over time. And the trajectory that we've seen in terms of that flow profile has been building nice momentum over the last couple of quarters and really came through for us this quarter. In addition to that, the recently announced investment that we made in Verition gives AMG yet another opportunity to really benefit from the growth that we expect to see in the overall hedge fund space on the back of some of those volatility and absolute return driven themes and in particular in the multi strat space.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

So I think, Dan, as you know, we have a lot of great businesses in our liquid alternatives set of affiliates. And that diversification and the fact that year in year out we have businesses that continue to perform for clients puts us in a really good place. It puts us in a good place in terms of attracting flows and delivering outcomes for clients as well as benefiting from performance fees as those businesses outperform over time.

[Operator]

Thank you. Our next question comes from the line of Bill Katz with TD Cowen.

[William Katz, Senior Equity Analyst at TD Cowen]

Maybe

[William Katz, Senior Equity Analyst at TD Cowen]

just switching gears a little bit on the equity side of the equation. I was wondering if you could talk a little bit about what you're seeing there in terms of allocation discussions by investors either coming into equities just given the market dynamics going out of equities and if there is any kind of change maybe overlaying growth versus value or international versus domestic appeal? Thank you.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

Thanks Bill. Why don't I take a first shot at that and Jay may want to add as well. In equities as you saw from the flows this quarter we do continue to see some headwinds along with the overall industry. That said, as you kind of alluded to in your question, there's a lot going on beneath the surface with respect to the overall loan only equity complex in the industry. We are seeing this recent market volatility create some opportunities for very high quality investment teams at our affiliates to differentiate themselves.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

And many of our affiliates do have more of a quality oriented or a more defensive approach to building portfolios. So we've seen some nice pockets of outperformance so far in 2025 we'll certainly continue to watch some of those trends at our long only managers. The other element that you asked about in your question, we do have quite a bit of exposure to international global products as well. And we've seen a bit of a change in this multiyear theme of a stronger dollar being a bit of a headwind there. With the weakening of the dollar in the quarter, you were able to see the beta and sort of market driven impact and uplift in some of our global strategies.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

And I think that's also changing the conversations a bit in terms of the overall thought process around allocations. So I'd say overall, a lot of moving parts in equities. We continue to have an outstanding group of long only firms with multi decade track records who have been able to perform and deliver for clients through cycles. And notwithstanding some of the challenges in the industry, we think a lot of these businesses continue to be very well positioned to deliver for clients into the themes that they are most focused on.

[Operator]

Thank you. Our next question comes from the line of Brian Bedell with Deutsche Bank. Please proceed with your question.

[Brian Bedell, Director at Deutsche Bank Securities]

Great. Thanks. Good afternoon folks. If I can ask a two parter, just to clarify again, I think you said like 8% accretion from the three investments in the sale of Peppertree on a net basis. And I assume that's a run as an annualized run rate basis after fully completed as opposed to 2025.

[Brian Bedell, Director at Deutsche Bank Securities]

And then if you can comment on is that 8% on EBITDA and or economic EPS? And then if I can layer another question on organic growth, it's kind of a perfect balance this quarter between alternatives versus long only equities on both sides. So kind of a neutral overall AUM net flow profile, but can you comment on whether it was a positive or negative base fee organic growth profile considering the fee rates in your ownership stakes in those entities?

[Jay Horgen, President & CEO at Affiliated Managers Group]

Great. Well, thanks Brian. Thanks for your question. Good afternoon. David, why don't you take the first question and then maybe Tom can follow it up on the organic growth.

[Dava Ritchea, Chief Financial Officer at Affiliated Managers Group]

Great. Thanks Brian. Appreciate the question. Your point is exactly right. So when you think about the 8% accretion overall, we are thinking about that on an annualized basis really beginning in 2026.

[Dava Ritchea, Chief Financial Officer at Affiliated Managers Group]

As you know, the Pepper Tree sale has not yet closed yet. That will close sometime in the third quarter. Qualitas will close most likely before the end of the year. And so as we were guiding here, we were really talking impact of this on a full year basis starting in 2026 and we'll provide you with some guidance along the way as to how it could impact over the course of this year. When you think about that 8% accretion number it is to economics earnings per share.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

And I think with respect to the organic growth question, there are obviously a lot of elements that go into that. And as you know, we don't disclose an organic growth impact to EBITDA or to earnings. But if you think about the drivers, on the alternative side, continued strong growth in private markets, very long duration locked up capital, high fee rates on a base fee basis as well as the ability to generate long term carry, which we'll own going into the future as well. And then on the liquid alternative side, which was the lion's share of flows in the quarter, as I mentioned in the response to a previous question, a lot of that was driven by tax aware liquid alternative strategies. Again, very sticky asset base, attractive fee rates.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

So across liquid alternatives and private markets, you get not only the combination of high base fee rates, but also the opportunity to gain earnings from performance fees over time. So all those things extremely valuable. On the loan on the outflow side, you tend to see lower fee rates from a base fee perspective. Oftentimes we do tend to own a little bit more of those businesses, so that balances it a bit. But I would say overall, the fee impact and the earnings impact from flows in a quarter like this, pretty positive to us on a long term basis.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

And in particular, that duration and stickiness and the ability to earn over the course of years on those assets is really valuable to our long term earnings growth story.

[Jay Horgen, President & CEO at Affiliated Managers Group]

Yes, those were great summaries. Thanks, David. Thanks, Tom. I wanted to maybe take it up a level and look forward a bit more, Brian. And so, and maybe using this year to date period, just as a lens to talk about that.

[Jay Horgen, President & CEO at Affiliated Managers Group]

So this has been an incredibly exciting period for AMG year to date, which is really the output of our strategy that we've been executing on for more than five years now. And just to kind of recap, we've announced three new partnerships that we believe will add not only to our earnings as Dave mentioned, but also to our organic growth profile. In this quarter, we saw improving flow trends driven by our alternative managers. And we expect with a combination of these new investments and the continued growth of our existing business that our mix shift is going to change in favor of longer duration higher fee assets as we see this new growth contribute to that profile. So we do expect looking ahead that alternatives are now over 50% of our earnings in the future growing from there, which will have positive implications to our future organic growth.

[Jay Horgen, President & CEO at Affiliated Managers Group]

And then finally, may I just round it out on the forward outlook to say, we remain committed to discipline in capital allocation. It resulted in $173,000,000 of additional repurchases this year after $700,000,000 last year. And I'm excited about the remainder of the year as we see the pace of new investment activity remain high. And, I'm excited about the future of our strategy which as it continues to drive our business towards areas of secular growth.

[Operator]

Thank you. Our final question this morning comes from the line of Patrick Davitt with Autonomous Research. Please proceed with your question.

[Patrick Davitt, Partner at Autonomous Research]

Hey, good afternoon everyone. You mentioned the alternative wealth opportunity. So maybe update us on how distribution expansion for the existing products is going, if there are any newly filed products you could point to and then maybe medium to longer term help frame how many new products are in the laboratory to be launched later in the year and into 2026? Thank you.

[Jay Horgen, President & CEO at Affiliated Managers Group]

Yes, excellent question, Patrick. Really appreciate it. Good afternoon to you. I'm going to

[Jay Horgen, President & CEO at Affiliated Managers Group]

let Tom take it, but

[Jay Horgen, President & CEO at Affiliated Managers Group]

I wanted to say just one thing that we believe as part of our strategy that our ability to offer resources and help to our affiliates to help magnify their own business objectives is key to our strategy to both winning new investments as well as supporting the growth of our affiliates. So wealth is a key important area, that we are focused on. So maybe I'll let Tom elaborate further.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

Thanks for the question Patrick and for the intro there Jay. I think it leads right into thinking about U. Wealth specifically. AMG has a vertically integrated U. S.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

Wealth platform, meaning we're able to cover all the different elements that are required for an affiliate to move into that market and it's a very complex market for our affiliates to cover. And therefore, we play a very important role in helping them to move into this space. We've been successful in bringing affiliate strategies to market through this platform. Over the last five years, alternatives AUM on our U. Wealth platform has grown more than tenfold.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

We ended last year north of $6,000,000,000 and we started the year off to a good start as well. In the past year, we've invested alongside our affiliates and launched three new Evergreen products and also filed for two additional strategies that we anticipate to go live later this year. And that spans across credit secondaries and infrastructure with Pantheon, a non traded BDC with Comvest and two liquid alternative funds with Systematica. In combination with the AMG Pantheon Fund, which I mentioned earlier, crossed $5,000,000,000 in AUM, we'll now have six alternative continuously offered solutions designed specifically for AMG's U. Wealth platform in the market.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

And to your question Patrick, we continue to work with our affiliates and have a number of new ideas that we're working on both in terms of alternative product but also importantly in terms of active ETFs on the long only side as well. So there's a lot of product development and innovation happening at AMG. Along with our own U. S. Wealth platform, think it's also important that our affiliates, especially Pantheon outside of The U.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

S. And AQR, they also continue to take advantage of these tailwinds in wealth through their own product development. And as a result, when you really put AMG, what we're doing at the center and our affiliates together, collectively, we're one of the largest sponsors of alternative products for wealth markets globally. We have more than $40,000,000,000 now in total AUM in the wealth space around the world at AMG and at our affiliates. And the other thing that you alluded to is how this is helping us and Jay made this point as well in terms of not only helping our existing affiliates to grow, but also continuing to fuel that flywheel to bring in excellent new investment prospects.

[Thomas Wojcik, Chief Operating Officer at Affiliated Managers Group]

Jay referenced the strength of the ongoing pipeline. We have a number of things on the future pipeline where wealth is core to that value proposition and firms are looking to AMG as their entry point to build a third, fourth or fifth leg of the stool in a way that they know that is very difficult or even impossible for them to do on their own. So this is a big part of our story. It's really been working and driving growth and we see it being a much larger part of the story going forward.

[Operator]

Thank you. Ladies and gentlemen this does conclude our Q and A session and thus concludes our call today. We thank you for your interest and participation. You may now disconnect your lines.

Participants

Executives

• Patricia Figueroa, VP - Investor Relations
• Jay Horgen, President & CEO
• Thomas Wojcik, Chief Operating Officer
• Dava Ritchea, Chief Financial Officer

Analysts

• Alex Blostein, Analyst at Goldman Sachs
• Dan Fannon, Managing Director - Research Analyst at Jefferies & Company Inc
• William Katz, Senior Equity Analyst at TD Cowen
• Brian Bedell, Director at Deutsche Bank Securities
• Patrick Davitt, Partner at Autonomous Research