AMG Profit Climbs 24% as Stock Market Rally Boosts Assets

Jul 29, 2014 4:18 pm ET

(Updates with deposits in fifth paragraph.)

July 29 (Bloomberg) --- Affiliated Managers Group Inc., the company that owns stakes in more than two dozen money managers, said second-quarter profit rose 24 percent as rising stock prices boosted assets.

Economic net income, which excludes some taxes and expenses, climbed to $149.8 million or $2.65 per share, compared with $121.1 million or $2.18 per share, a year earlier, the Beverly, Massachusetts-based firm said today in a statement. AMG was expected to earn $2.60 per share, according to the average of nine estimates in a Bloomberg survey.

Led by Chief Executive Officer Sean Healey, AMG is benefiting from a growing investor preference for alternative assets at a time when low-yielding bonds offer modest returns. AMG has invested in three money-management businesses this year, adding to its collection of boutique managers specializing in stocks, hedge funds and private equity.

“AMG can continue to take market share, because their strategies are still in demand,” Michael Kim, an analyst with Sandler O’Neill & Partners LP, said in a telephone interview before the results were announced. He rates the shares a buy.

AMG attracted $6.9 billion in client deposits in the quarter, which helped boost assets under management to $625 billion.

The company, in a conference call, said earnings for the year would be between $11.20 and $12.10 a share. AMG declined 1.1 percent to close at $204.08, extending losses this year to 5.9 percent.

Manager Stakes

AMG in April agreed to buy a majority stake in Veritas Asset Management LLP, a global equity manager with $17 billion in assets. In March, AMG said it was acquiring a minority stake in EIG Global Energy Partners LLC, and a stake in value-oriented investor River Road Asset Management. The two deals added about $27 billion to the assets AMG oversees.

AMG’s economic net income is a measure that doesn’t conform to generally accepted accounting principles, or GAAP. Under those rules, net income for the quarter was $100.1 million or $1.77 a share, compared with $64.7 million or $1.18 a share, a year earlier.

AMG attracted $6.9 billion in client deposits in the quarter, which helped boost assets under management to $625 billion.

AMG invests in money-management firms and provides them with distribution and back-office help. The owners of the firms retain a stake in the business and autonomy in managing money.

Third Avenue

In June, Third Avenue Management, a New York-based AMG affiliate, said the Third Avenue Value Fund, run for more than two decades by value investor Martin Whitman until he stepped back in 2012, replaced Ian Lapey as Whitman’s successor. Lapey was succeed by Robert “Chip” Rewey III. The $2.4 billion fund trailed 98 percent of peers over the past five years, according to data compiled by Bloomberg.

The MSCI All-Country World Index gained 24 percent, including reinvested dividends, in the 12 months ended June 30. Investors added $48.2 billion to hedge funds in the second quarter, according to eVestment, a data firm based in Atlanta.