Please ensure Javascript is enabled for purposes of website accessibility

Affiliated Managers Group Is Still Fighting Back From 2018's Setback

By Dan Caplinger – Updated May 6, 2019 at 9:56AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The asset manager has high hopes for the future.

The market plunge in late 2018 took many Wall Street experts by surprise, and the fear of a prolonged downturn sent many investors into a near-panic. Asset management companies like Affiliated Managers Group (AMG 4.72%) had to reassure investors that the long-term prospects for their investments were still solid. In that light, the subsequent rebound in financial markets to start 2019 was especially welcome.

Coming into Monday's first-quarter financial report, AMG shareholders were ready to see a bit of a hangover show up in the asset manager's results. That did in fact happen, but AMG believes that it should be able to get back on track and find new ways to grow as it brings in a new CEO and seeks to add new financial partners.

Three people standing at front of room with dozens of monitors showing charts and numbers.

Image source: Getty Images.

How AMG held up

Affiliated Managers Group's first-quarter results reflected the extent of the loss of investor confidence at the close of 2018. Consolidated revenue came in at $543.1 million, down 11% from the first quarter of 2018 and roughly matching the size of the decline that those following the stock had expected. A massive $415 million noncash expense led to more red ink for AMG, and although the preferred net economic earnings metric came in at $3.26 per share -- matching the consensus forecast among investors -- it was still down 17% from year-ago levels.

It was evident from AMG's fundamental performance that investors are still reeling from the market's turbulence. Assets under management finished at $774.2 billion, up more than $38 billion over the past three months. Yet despite more than $51 billion in positive market-related returns, AMG continued to see outflows, which totaled $7.4 billion for the quarter. Global equities and alternative investments suffered the lion's share of the flows out of AMG funds, but even the U.S. equity side of the business saw an exodus despite the sharp bounce among major stock indexes. Aggregate fee revenue came in down almost $400 million, with just over $1.25 billion coming in during the period.

Among AMG's various groups of clients, only the high net worth category showed resolve to stick with the market during its turbulent recovery. Inflows for that group amounted to $1.1 billion. But big outflows from both institutional and regular retail investors were considerable, as ordinary investors seemed to pull the most money out on a percentage basis.

Can AMG recover?

Outgoing CEO Nathaniel Dalton was hopeful, saying, "Looking ahead, in addition to the positive earnings impact of the year-to-date market rebound, we believe that our long-term organic growth profile will be enhanced by our affiliates' improving investment performance across multiple product areas, including global and emerging-markets equities, and U.S. growth equities." Dalton also said that AMG's agreement to bring on alternative asset manager Garda Capital Partners was just one example of how the company is looking to bring on partners with strong track records of investment performance to add to its overall value proposition.

AMG also took major steps ahead with its long-term succession plan. In a separate news release, AMG said that incoming CEO Jay Horgen will succeed Dalton at the conclusion of the annual shareholders meeting. Horgen has been with AMG since 2007, most recently as its chief financial officer. The new CEO intends to keep moving forward with the same culture and values that AMG has had in place for years, but his private equity and investment banking experience could give him a chance to put his skills to the test in driving new business for AMG.

As markets returned to turbulent conditions on Monday, investors in AMG had to deal with the question of whether the investing climate will be favorable for the company's future results. The asset manager has overcome difficult times before, though, and there's reason for shareholders to believe that AMG is on the right path to weather the storm and mount a long-term rebound.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends Affiliated Managers Group. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Affiliated Managers Group, Inc. Stock Quote
Affiliated Managers Group, Inc.
$121.89 (4.72%) $5.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.