Affiliated Managers to Acquire Yacktman Asset Management

Affiliated Managers Group Inc. (AMG), the company that owns stakes in more than two dozen money managers, agreed to buy Yacktman Asset Management Co., the Austin, Texas- based firm founded in 1992 by Donald Yacktman.

Yacktman, 70, and other management partners will retain a “substantial” equity position and continue to direct day-to- day operations in the company which manages $17 billion, Beverly, Massachusetts-based AMG said today in a statement. Terms were not disclosed.

AMG, which owns firms that together oversaw about $352 billion as of Dec. 31, specializes in taking stakes in boutique asset managers, typically allowing management to own a portion of their business and remain operationally autonomous. All of Yacktman’s “senior professionals” have agreed to long-term commitments with the firm, according to the statement.

“With a remarkable long-term track record of outperformance, Yacktman is positioned for continued success globally,” AMG’s Chairman and Chief Executive Officer Sean M. Healey, said in the statement.

AMG rose 2.1 percent to $112.82 at 10:47 a.m. in New York. It has increased 18 percent this year, compared with the 16 percent gain by Standard & Poor’s 20-company index of asset managers and custody banks.

Technology Boom Losses

The $7.6 billion Yacktman Fund (YACKX) and the $6 billion Yacktman Focused Fund (YAFFX), which invest in stocks of large companies seen as undervalued, have each beaten 99 percent of competing funds over the past five years, according to data compiled by Bloomberg. The funds returned an annual average of 8.8 percent and 9.7 percent, respectively, in that period.

The funds posted losses in the technology boom of the late 1990s, when Yacktman’s strategy of holding stocks with low prices and strong cash flows kept it out of some of the era’s big winners. Its outperformance during the market slumps of 2002 and 2008 helped it return an annual average of 6.6 percent in the decade, about 8 percentage points more than peers, according to data compiled by Chicago-based research firm Morningstar Inc.

Morningstar named Yacktman and his son Stephen Yacktman as finalists for its 2011 manager-of-the-year award in the domestic stock fund category.

Evaluating Cash

Yacktman said in 2010 he evaluates stocks as if they were bonds, estimating how much cash a company will produce relative to what he has to pay for it per share. Macroeconomic issues are “fun to talk about” while offering little use in deciding which stocks to own because forecasting the economy’s future is too difficult, he said.

PepsiCo (PEP), the Purchase, New York-based food and beverage maker, and New York’s News Corp. (NWSA), the media company embroiled in a phone-hacking scandal in the U.K., are the top holdings in both Yacktman funds.

AMG was started in 1993 by William Nutt, who founded the firm after serving as president of the Boston Co. The company became publicly listed in 1997. Its first investment was in New York-based J.M. Hartwell LP in 1994. Healey, a former Goldman Sachs Group Inc. executive, succeeded Nutt as CEO in 2005.

The firm’s affiliates include Third Avenue Management LLC, the New York firm founded by Martin J. Whitman; Foster S. Friess’ Friess Associates in Greenville, Delaware; and New York- based Tweedy, Browne Co., founded by Christopher H. Browne.

To contact the reporters on this story: Christopher Condon in Boston at ccondon4@bloomberg.net; Charles Stein in Boston at cstein4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

Enlarge image

Affiliated Managers to Acquire Yacktman Asset Management

Brian Smale

Donald, right, and Stephen Yacktman.

Donald, right, and Stephen Yacktman. Photographer: Brian Smale