AMG Profit Declines 1.5% as Global Stock Markets Lose Ground

  • Third Avenue's credit fund collapse hurt AMG's retail flows
  • CEO Healey sees Third Avenue bottoming and recovering

Affiliated Managers Group Inc., whose Third Avenue Management affiliate took the rare step of freezing redemptions in a distressed debt mutual fund in December, said fourth-quarter profit declined 1.5 percent as global stock markets lost ground. The firm’s shares fell.

Economic net income, which excludes some taxes and expenses, fell to $197 million, or $3.61 a share, from $200 million, or $3.55 a share, a year earlier, the firm said Tuesday in a statement. Adjusted earnings of $3.61 a share beat the average estimate of $3.60 a share in a Bloomberg survey of 10 analysts. Revenue of $589.9 million fell short of estimates of $617.6 million.

AMG, led by Chief Executive Officer Sean Healey, was hurt by outflows from retail investors following the collapse of Third Avenue’s $788 million Focused Credit Fund. Healey said on the conference call that redemptions from Third Avenue totaled $2.2 billion in the quarter, including all of the assets of the credit fund. He said outflows at Third Avenue have moderated in 2016 and expressed optimism that the money manager would turn its business around.

“We see them bottoming and recovering,” Healey said.

AMG fell 5.4 percent to $125.03 at 10:11 a.m. in New York trading. Shares are down 22 percent for the year.

Earnings Outlook

While Third Avenue is only a tiny piece of AMG’s business, representing roughly 1 percent of the assets overseen by the dozens of money managers it owns, the publicity surrounding the failure of the fund weighed on AMG’s stock, said Michael Kim, an analyst with Sandler O’Neill & Partners LP in New York. Third Avenue shuttered its fund after losses and withdrawals left it unable to meet redemptions without selling assets at fire-sale prices.

AMG said on the call that it expected economic earnings per share of between $12.40 and $14 in 2016. That compares to $12.55 in 2015.

Another AMG affiliate, AQR Capital Management, has fared better. Its liquid alternative mutual funds, which mimic hedge funds, attracted almost $5 billion in cash last year, according to Morningstar Inc.

AMG said flow trends in general were improving after clients pulled $6.8 billion from the firm in the fourth quarter. In January, AMG’s retail funds saw deposits of $830 million, President Nathaniel Dalton said on the conference call.

The MSCI All Country World Index fell 1.8 percent, including reinvested dividends, in 2015. The MSCI Emerging Markets Index lost 15 percent.

AMG last month said it acquired an equity interest in Baring Private Equity Asia, which has assets of more than $8 billion. AMG also said in January that it completed investments in three other money managers.

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