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Diamond Hill Investment Group, Inc. Revenue Boosted By Higher AUM

By Joe Tenebruso - Mar 2, 2016 at 10:07AM

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The asset management firm enjoyed nearly $1.5 billion in net cash inflows in 2015.

Image source: Diamond Hill Investment Group.

Diamond Hill Investment Group (DHIL 0.44%) reported fourth-quarter results on Feb. 25. The investment management firm experienced strong net cash inflows that helped to drive asset management fees and revenue higher, but lower investment-related gains dented profits.

Diamond Hill Investment Group results: The raw numbers


Q4 2015

Q4 2014

Growth (YOY)


$32.302 million

$28.471 million


Net Income

$11.655 million

$12.553 million


Earnings Per Share




Data source: Diamond Hill Investment Group Q4 2015 earnings press release.

What happened with Diamond Hill Investment Group this quarter?
Diamond Hill saw net cash inflows of nearly $1.5 billion during the year, which helped the firm's assets under management grow to $16.8 billion as of Dec. 31, up from $15.7 billion at the end of 2014.

Diamond Hill's higher AUM boosted investment advisory revenue by 14% year over year to $28 million in the fourth quarter. Mutual fund administration revenue also rose 8% to $4.3 million. Together, that drove total revenue 13% higher to $32.3 million.

Net operating income, however, fell to 5% to $17.3 million, as operating expenses jumped 47%. Yet that sharp increase appears to be related to the timing of certain expenses, as full-year operating expenses rose a more modest 15%.

Investment income was $973 million, compared with $2 billion in the prior year quarter. These gains and losses can change significantly from one period to another, and market fluctuations can distort the underlying operating performance of the company. As such, Diamond Hill's management focuses more on net operating income after tax, a metric that excludes the impact of investment related activity. For the full year, net operating income after tax rose 26% to $37.5 million, and 23% on a per share basis to $11.17.

Looking forward
With volatility returning to the markets so far in 2016, it's possible that Diamond Hill Investment Group could see lower assets under management -- possibly including both market losses and net cash outflows -- in the quarters ahead.

Even so, Diamond Hill has held up relatively well through previous market downturns, while increasing its assets under management from $500 million in 2005 to more than $16 billion by the end of 2015. That's a period that included the severe market crash during the financial crisis of 2008-2009, as well as numerous other market corrections. As such, any potential further market weakness in the year ahead is likely to be more of a short-term drag on Diamond Hill's financial results, rather than a significant blow to the long-term health of its business.

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