Affiliated Managers Group, Inc. (AMG) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reveals a strong financial performance with a 22% EPS growth, significant net inflows, and strategic share repurchases. The strategic collaboration with Brown Brothers Harriman and new product innovations suggest positive future growth. However, some concerns about management's unclear responses in the Q&A and industry headwinds in equities slightly temper the outlook. Considering a $4.9 billion market cap, the stock is likely to react positively, but not strongly, to these developments.

Key Financial Performance

Economic Earnings Per Share (EPS) $26.05 for the full year 2025, an increase of 22% year-over-year. This growth was driven by strong organic growth and the positive impact of the company's capital allocation strategy.

Net Client Cash Flows $29 billion for the full year 2025, representing an organic growth rate of 4%. This was the highest level since 2013, driven by strong inflows in alternative strategies.

Alternative Assets Under Management (AUM) $373 billion in 2025, an increase of 35% year-over-year. This growth included $74 billion in net inflows from existing affiliates and $23 billion from new affiliate partnerships.

Adjusted EBITDA $1.1 billion for the full year 2025, up 11% year-over-year. The growth was attributed to investment performance, positive organic growth, and margin expansion at some of the largest affiliates.

Net Performance Fee Earnings $161 million for the full year 2025. This contributed to the overall adjusted EBITDA growth.

Share Repurchases $700 million in 2025, representing 11% of shares outstanding. This was part of the company's capital allocation strategy to enhance shareholder value.

Private Markets Fundraising $24 billion for the full year 2025, representing an annualized organic growth rate of 18%. This was driven by affiliates like Pantheon and others.

Liquid Alternatives Net Inflows $51 billion for the full year 2025, representing a 36% annualized organic growth rate. This was primarily driven by AQR and other affiliates.

Equities Net Outflows $45 billion for the full year 2025, reflecting industry headwinds.

Multi-Asset and Fixed Income Flat for both the quarter and the year 2025.

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Operating Highlights

New Affiliate Partnerships: AMG added approximately $97 billion in alternative assets under management, including $74 billion in net inflows from existing affiliates and $23 billion from new affiliate partnerships. New partnerships include NorthBridge, Verition, Montefiore, Qualitas Energy, and HighBrook.

Product Development: Collaborated with affiliates to develop new products for the U.S. wealth channel, including innovative alternative solutions across private markets and liquid alternatives. Filed for AMG BBH asset-backed credit fund.

U.S. Wealth Market Expansion: Alternatives' AUM on AMG's U.S. wealth platform reached approximately $8 billion in 2025, with $2.2 billion in alternative net new flows. Global wealth AUM at AMG and affiliates now totals more than $100 billion, growing organically at over 100% in 2025.

Capital Allocation: Committed more than $1 billion in growth investments and returned $700 million to shareholders through share repurchases. Received $730 million in pretax distributions and sale proceeds from strategic transactions.

Earnings Growth: Achieved record economic earnings per share of $26.05 in 2025, a 22% increase year-over-year. Adjusted EBITDA grew 11% to $1.1 billion.

Shift to Alternatives: Increased alternative AUM by 35% in 2025, with alternatives now contributing approximately 60% of EBITDA. Focused on private markets and liquid alternatives.

Long-term Strategy: Pivoted towards alternative strategies over the past six years, increasing their contribution to EBITDA from 33% to 60%. Reduced share count by over 40%, driving shareholder returns.

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Risk or Challenges

Market Conditions: Net outflows of $45 billion in active equities in 2025 reflect industry headwinds, which could impact AMG's financial performance and growth.

Regulatory and Compliance Risks: The company operates in highly regulated markets, and any changes in regulations or compliance requirements could adversely affect operations and financials.

Strategic Execution Risks: AMG's growth strategy relies heavily on new affiliate investments and partnerships. Failure to successfully integrate or manage these partnerships could hinder growth and profitability.

Economic Uncertainties: Global economic conditions and market volatility could impact client demand for AMG's products, particularly in alternative and liquid strategies.

Competitive Pressures: The asset management industry is highly competitive, and AMG faces pressure to maintain its market position and attract new clients.

Concentration Risks: Significant contributions to earnings from a few affiliates, such as AQR and Pantheon, pose a risk if these affiliates underperform or face challenges.

Supply Chain and Operational Risks: Operational challenges, including the ability to scale U.S. wealth platforms and alternative product offerings, could impact AMG's ability to meet client demand and sustain growth.

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Guidance & Outlook

Revenue and Earnings Growth: AMG expects adjusted EBITDA for Q1 2026 to be in the range of $310 million to $330 million, with economic earnings per share projected between $7.98 and $8.52. The company anticipates 30% growth in quarterly fee-related earnings compared to Q1 2025. Full-year 2026 net performance fee earnings are expected to be approximately $170 million, consistent with the 5-year average from 2021 to 2025.

Affiliate Contributions: AQR is expected to contribute more than 20% to AMG's earnings in 2026, with continued strong performance and innovation. Pantheon and other affiliates managing alternative strategies are also projected to deliver significant contributions to earnings growth.

Capital Allocation and Investments: AMG plans to repurchase at least $400 million in shares in 2026, subject to market conditions and capital allocation activity. The company has committed $175 million to new investments, including partnerships with HighBrook and Garda, which are expected to be immediately accretive to EBITDA.

Market Trends and Strategic Focus: AMG aims to capitalize on secular growth trends in alternative strategies, particularly in private markets and liquid alternatives. The company plans to expand its U.S. wealth platform and collaborate on new alternative credit products with BBH, leveraging its expertise in structured credit markets.

Long-Term Growth and Strategy: AMG expects to continue its growth trajectory by investing in high-quality affiliates, enhancing product innovation, and expanding distribution capabilities. The company is confident in its ability to deliver long-term value and anticipates significant growth opportunities over the next five years.

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Shareholder Return Plan

Share Repurchase Program: In 2025, AMG repurchased approximately $700 million of its shares, representing 11% of its shares outstanding. This was part of a disciplined capital allocation strategy aimed at delivering long-term value to shareholders. Additionally, in the fourth quarter of 2025, AMG executed its largest quarterly repurchase amount in the firm's history, totaling $350 million. For 2026, AMG anticipates repurchasing at least $400 million in shares, subject to market conditions and capital allocation activity.

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Key Q&A

Q:Can you expand on the diversity of flows, tax strategies, competition, and growth outlook for AQR in 2026?

A:The momentum in the flow profile is coming from private markets and liquid alternatives, notably Pantheon and AQR. Pantheon and AQR represent over 30% of AUM and adjusted EBITDA, with significant growth in U.S. wealth and global institutional channels. AQR is an innovator with strong performance, tapping into tax-aware spaces and raising assets globally. They are diversifying their distribution reach and innovating on product design, maintaining a first-mover advantage in many offerings.

Q:Can you frame the pipeline of larger funds expected to come to market from private or liquid alternatives in 2026 and their contribution to organic growth?

A:Pantheon specializes in secondaries across private equity, credit, and infrastructure, with wealth products designed for U.S. and non-U.S. investors. AMG is innovating additional products with affiliates and marketing private market products in various channels. A new partnership with Brown Brothers Harriman aims to develop multiple structured credit products, starting with the AMG BBH asset-backed credit fund. AMG is also seeding and scaling new products to create high ROI opportunities.

Q:How should we think about the combined opportunity for global wealth management growth, including the $100 billion in Global Wealth Management?

A:AMG is seeing significant growth in wealth, primarily in alternatives, but also in long-only business. They are supporting affiliates in innovating new products, including ETFs. Growth is driven by U.S. wealth and opportunities outside the U.S. in liquid alternatives, supported by market volatility and strong performance. Affiliates like Pantheon and AQR have access to wealth distribution through their own channels, complementing AMG's efforts.

Q:What is the contribution of AQR to EBITDA in 2025 and 2026, and how does this relate to performance fees and wealth channel dynamics?

A:In 2025, AQR was a double-digit contributor to EBITDA, expected to grow to over 20% in 2026. This growth is driven by strong organic growth, positive net flows, and substantial performance fees. Performance fees are expected to grow over time as AUM in performance fee-eligible strategies increases. AMG's strategy includes creating and seeding new products, increasing resources in RIA and wirehouse channels, and leveraging affiliates' distribution capabilities.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the specific incremental pickup in AQR's contribution to EBITDA in 2026 and the exact changes in wealth channel dynamics. They also provided limited details on the specific pipeline of larger funds in private or liquid alternatives for 2026.

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Earnings Word Cloud

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AMG's earnings call reflects strong financial performance, with a 17% increase in EBITDA and 27% increase in EPS. The company is expanding through new partnerships, with a robust pipeline in alternatives. Share repurchases are significant, enhancing EPS. While there are risks like market conditions and competitive pressures, the positive financial metrics, new partnerships, and optimistic guidance for 2026 suggest a positive sentiment. The market cap indicates a moderate reaction, leading to a prediction of a 2% to 8% stock price increase.

AMG Slides

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AMG Report

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AFFILIATED MANAGERS GROUP, INC. 10-K

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