After reporting a 50 percent increase in second quarter earnings compared to a year ago, reaching $1.77 for the quarter, chairman and chief executive Sean Healey got to flex his muscles before analysts during a conference call where he explained at least four pillars of AMG's continued strength.
1. Healey Is Still Hungry for Deals 2. AMG Is Becoming a Global Distro Goliath 3. Healey Has Big Plans for the AMG Funds Arm 4. AMG Is Confident in His Powers of Affiliation
1. Healey Is Still Hungry for Deals
In response to an analyst's question about "capital deployment," Healey had this to say:
Clever and relatively novel way of asking me how many deals we're likely to do, Dan. But I think the answer, as always, is that we remain very optimistic. We have a tremendous competitive position. Really better than it's ever been. You're correct that the market environment is favorable. And some firms are in product categories where their assets and revenues reflect a lot of growth, but of course there are other product categories where there hasn't been as much growth. And inevitably, all of our new investments, virtually all of our new investments, arise out of the relationships that we have developed and maintained with the very best boutique firms around the world now over the past 20 years. And it's the opportunity that we see from all of these firms inevitably needing to do some kind of transaction to provide a solution to their succession, transition issues, that gives us the underlying confidence. And over time, while it's hard to gauge in any period, we are very, very confident. You're seeing, as I said, the beginnings of what we believe over the -- certainly over the medium to long term, will be a very substantial set of new investment opportunities. The industry backdrop and competition is relevant but really very much on the margin. Virtually, all of our investments arise out of these relationships and our negotiated transactions. So as I said in the prepared remarks, the pipeline continues. Even though we've had a very good year already, the pipeline continues to be very strong, and we're very busy.
2. AMG Is Becoming a Global Distro Goliath
President and chief operating officer Nathaniel Dalton had this to say on the subject:
There's been 3 things we're focusing on. So one is, if you sort of go back in last year, we've been increasing with specialization by country. So sort of Benelux higher, German higher, Swiss higher, those kind of things, yes. And then as you say, we've been looking at deepening our penetration, and we did speak about Australia and this quarter spoke about the Middle East. And it looks like we've already built very strong businesses at scale especially at the high institutional end. And so that's leveraging that brand and much greater awareness of us, our business model and our affiliates in these geographies. And then we continue to look at additional regions. Japan is one that we talked about last quarter, and we continue to work on. We are building relationships institution to institution. Those high-level institutional relationships that we talked about, and we are also having conversations with intermediaries and thinking about both the institutional side and over time the sort of platform side of that market and others. I think we've talked about it in prior calls as both for us looking at the organic opportunities in the markets and looking our existing product set, and where the sort of more short-term specific opportunities are. And then a lot of it is finding the right people and building the right sort of relationships that we can find. The people that we really want to represent our Affiliates in these marketplaces.
3. There Are Big Plans for the AMG Funds Arm
Dalton had this to say on the suvject:
So with the largest intermediaries, as well as with sort of regional intermediaries in big networks and independent networks, we absolutely think there's an opportunity to be the single point of contact through which they access a broad array of return-oriented products across a range of packages. And I think especially at the bigger ones, that across the range of packages, it is an important piece to add. So absolutely that opportunity is there. I should mention, just to step back for a second, the AMG Funds platform is really a reasonably large-scale platform, and we have signed agreements in place with all of the large -- well actually we've got over 2,000 signed agreements in place And so we got signed agreements in place with some of these places already and so the opportunity to bring additional products -- moving to the first part of the question, to bring additional product from existing Affiliates as well as to offer to new prospective Affiliates. As they come on line, the opportunity to access that breadth in distribution as well as the breadth in operations, looking at a firm like SouthernSun, you can bring their products right onto our platform. Both ways there's a lot of leveraged opportunity there.
4. AMG Is Working Hard to Develop Its Powers of Affiliation
Dalton had this to say on the subject:
You're exactly right, we have to do a very good job making sure that we understand our Affiliate products well and are able to appropriately represent them in the marketplace, and that's a huge area of focus for us. The other thing I'll say is sort of just the next step to it is that breadth is allowing us to build institution-to-institution relationships with many of the largest pools of capital in the world. Then, as I said in my prepared remarks, as we're building those relationships, we are beginning to make those first sales in here. And here's where the big opportunity -- the big sort of medium-term opportunity is. We're beginning to make those first sales. For many, we still have the opportunity to make the first sale. And as we build a relationship and make the initial sale, the opportunity to sort of, I'll use the word, cross-sell. It's not really cross-sell, but the opportunity to cross-sell within that Affiliate to other Affiliates and then to additional Affiliates as they come online is very, very powerful. It's also powerful that institutions are interacting with us, the end users, understand that we're going to be adding new Affiliates. But all of these pieces really do knit together.