AMG Third-Quarter Profit Increases 20% on Market Rally

Affiliated Managers Group Inc., the company that owns stakes in more than two dozen money managers, said third-quarter profit rose 20 percent as client deposits and a stock-market rally boosted assets.

Economic net income, which excludes certain taxes and expenses, climbed to $121.8 million, or $2.19 a share, in the three months ended Sept. 30, compared with $101.2 million or $1.91 per share, a year earlier, the Beverly, Massachusetts-based firm said today in a statement. Adjusted earnings beat the $2.15-a-share estimate of nine analysts surveyed by Bloomberg.

AMG, which owns a collection of boutique money managers specializing in stocks, hedge funds and private equity, is benefiting from an investor shift into equities and alternative-investment products. In a reversal of a trend that started in 2008, clients have been shying away from bond funds while adding money to equities this year. AMG attracted $10.1 billion in client deposits in the quarter and more than $40 billion in the past year.

“They continue to gain momentum and attract among the best flows in the industry,” Michael Kim, a New York-based analyst with Sandler O’Neil & Partners LP, said in a telephone interview.

AMG shares fell 2.6 percent to $193.20. They gained 48 percent this year, compared with the 36 percent increase for the 20-member Standard & Poor’s Index of asset managers and custody banks.

GAAP Earnings

AMG’s economic net income is a measure that doesn’t conform to generally accepted accounting principles, or GAAP. Under those rules, net income for the quarter was $75.2 million, or $1.37 per share, compared with $54.9 million, or $1.04, a year earlier.

Assets at AMG rose 8.3 percent to $508.4 billion during the quarter, compared with the 7.4 percent increase in the MSCI All-Country World Index.

Investors added $149 billion to U.S. equity mutual funds in the first nine months of 2013 and $4.9 billion to bond funds, data from Chicago-based Morningstar Inc. show. Hedge funds attracted an estimated $44.2 billion in the third quarter, the largest quarterly allocation since the first quarter of 2011, according to eVestment, a data firm based in Atlanta.

Yacktman Acquisition

Led by Chief Executive Officer Sean Healey, AMG buys stakes in money-management firms and provides them with distribution and back-office help. The owners of the firms retain a stake in the business and autonomy in managing money.

AMG last acquired a holding in April 2012, when it bought a stake in Yacktman Asset Management, the Austin, Texas-based firm founded in 1992 by Donald Yacktman. The two stock mutual funds Yacktman runs gathered $4.4 billion this year through Sept. 30, Morningstar data show.

“What we have learned over the years is that we need to be patient and wait for the opportunities with the very best firms to develop,” Healey said in a July 30 conference call, explaining why the company has not made any recent acquisitions.

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