EUR 850.00 For Business Accounts Only

Morningstar | Organic growth and acquisitions are key drivers of AMG's long-term growth.

A confluence of several different issues--poor relative active investment performance, the growth and acceptance of low-cost index-based products, and the expanding power of the retail-advised channel--has made it increasingly difficult for asset managers running predominantly active portfolios to generate organic growth, leaving them more dependent on market gains to drive managed asset levels higher. While we continue to believe there will be room for active management, which is hard to do in an environment where an overwhelming majority of the flows are going into index funds and exchange-traded funds, we believe the advantage (when it comes to getting placement on platforms) will go to asset managers with greater scale, established brands, solid long-term performance, and reasonable fees.With $824.2 billion in total assets under management at the end of June, Affiliated Managers Group has the size and scale necessary to be competitive. With 39% of its AUM dedicated to alternative strategies and 12% in multiasset products, AMG is not as heavily exposed to the impact that passive investing has had on active equities. Additionally, its equity lineup (48% of total AUM) is fairly diverse, composed of U.S. equities (14%), global/international equities (26%), and emerging-market equities (8%). Relatively small exposure to the retail market (28% of total AUM) and broader geographic exposure also leave the firm better positioned than some of its peers.During the past 5 (10) calendar years, AMG's annual organic growth rate averaged 2.9% (2.5%) with a standard deviation of 4.0% (5.6%), stronger than the industry, which generated negative 0.6% (positive 0.7%) average annual organic growth with a standard deviation of 2.1% (3.1%). While we expect the headwinds to be stiff as we move forward (even forecasting in a major equity market decline midway through our five-year forecast), we believe AMG can generate 1%-3% average annual organic AUM growth (as investors continue to gravitate toward products with more lucrative return profiles, along with low-cost passively managed products), with somewhat higher levels of revenue growth and improving margins, during 2018-22.