AFFILIATED MANAGERS GROUP, INC. Q4 2025 earnings call

Good morning, and thank you for joining us today to discuss AMG's results for the Fourth Quarter and Full Year 2025. Before we begin, I'd like to remind you that during this call, we may make a number of forward-looking statements which could differ from our actual results materially, and AMG assumes no obligation to update these statements. Also, please note that nothing on this call constitutes an offer of any products, investment vehicles, or services of any AMG affiliate. A replay of today's call will be available on the Investor Relations section of our website, along with a copy of our earnings release and reconciliations of any non-GAAP financial measures, including any earnings guidance provided. In addition, we have posted an updated investor presentation to our website and encourage investors to consult our site regularly for updated information.

With us today to discuss the company's results for the quarter are Jay Horgen, Chief Executive Officer, Tom Wojcik, President and Chief Operating Officer, and Dava Ritchea, Chief Financial Officer. With that, I'll turn the call over to Jay.

Thanks, Patricia, and good morning, everyone. AMG delivered outstanding results in 2025, one of the strongest years in our company's history. With record annual economic earnings per share and substantial organic growth, including record net inflows and alternative strategies, our results reflect the accelerating evolution of our business towards areas of secular demand, most notably in private markets and liquid alternatives. AMG generated full-year economic earnings per share of $26.05, an increase of 22% year-over-year, driven by our strong organic growth and the positive impact of our capital allocation strategy. Our affiliates generated approximately $29 billion in annual net client cash flows, the highest level since 2013, and representing an organic growth rate of 4%.

As evidenced by our strong earnings growth and flow profile, our business momentum is accelerating, and given our confidence in our long-term prospects, in 2025, we repurchased approximately $700 million of our shares for 11% of our shares outstanding. It was a landmark year for growth at AMG. Throughout 2025, across both organic growth and new affiliate investments, AMG added approximately $97 billion in alternative assets under management, representing an increase of 35% in our total alternative AUM. This increase includes $74 billion in net inflows generated by existing affiliates managing alternative strategies, and $23 billion in additional alternative AUM from partnerships with new affiliates. As we have seen in recent years, our growing footprint in alternatives has fueled significant organic growth and accelerated earnings.

With more than $1 billion in capital committed across five new investments, we deployed near-record levels of capital and growth opportunities in 2025. We began the year with an investment in Northbridge, a private markets manager specializing in industrial logistics, followed by a partnership with Verition, a premier multi-strategy liquid alternatives firm. Next, we invested in Montefiore, a European private equity firm focused on the services sector, and then Qualitas Energy, a leading renewables-focused global infrastructure manager specializing in energy transition. Then later in the year, we announced a strategic collaboration with Brown Brothers Harriman to develop structured and alternative credit products for the U.S. wealth market. In addition, we continued to invest our capital and resources in and alongside our affiliates, collaborating with our partner firms to develop new products for the U.S. wealth channel, including additional innovative alternative solutions across private markets and liquid alternatives.

Each of our new affiliate partnerships reflects AMG's differentiated partnership approach, which magnifies our affiliates' long-term success through strategic engagement while preserving their independence. Our unique investment model continues to attract outstanding independent firms seeking a strategic partner, and our new investment pipeline remains strong. As further evidence, we just announced a new partnership with HighBrook, a private markets manager operating in the real estate sector that invests across the U.S. and Europe in high-growth areas, including logistics, data centers, and housing. We also announced an incremental minority investment in Garda, an existing affiliate operated in liquid alternatives. This incremental investment reflects the strength of our partnership and supports Garda's long-term objective of building an enduring independent firm. Garda's outstanding multi-decade track record of performance and its leading position in the fast-growing area within liquid alternatives underpin our strong conviction in the firm's long-term prospects.

Both investments are consistent with our strategy and are expected to be accretive to our earnings in 2026. In addition, in 2025, we collaborated with Peppertree, Comvest, and MBI on strategic transactions that created value for all stakeholders and resulted in liquidity events for AMG. Across these three transactions, AMG received more than $730 million in pre-tax distributions and sale proceeds, more than 2.5x our invested capital, and with an average IRR of more than 35%. We were pleased that AMG's strategic engagement ultimately resulted in an excellent outcome for all stakeholders, including AMG shareholders. The significant proceeds from these liquidity events highlights the underlying value of our affiliates and enhances our flexibility to execute our growth strategy.

The growth investments we have strategically and deliberately made over the last several years have played a critical role in reshaping AMG's business profile. Today, our affiliates manage $373 billion in alternative AUM, which contributes approximately 60% of our EBITDA on a run rate basis, including sizable contributions from two of AMG's largest and long-standing affiliates, Pantheon and AQR. As you know, AQR continues to deliver excellent performance and capitalize on emerging secular trends, including in tax-aware solutions in the wealth channel, which is driving significant organic growth and an increasing EBITDA contribution to AMG on an absolute and percentage basis. In addition, Pantheon has established itself as a leading secondaries manager across private equity, private credit, and infrastructure, and also has a significant presence in the U.S. wealth channel.

Beyond AQR and Pantheon, our affiliates managing alternative strategies delivered organic growth in 2025 and contributed to AMG's strong results in the year. As we continue to execute on our strategy, investing our capital in firms and initiatives aligned with long-term growth trends, we expect to further accelerate the evolution of our business towards a greater participation in alternatives, driving future growth and further differentiating AMG. Now, stepping back, over the past six years, we have fundamentally transformed AMG and built a strong foundation and business profile, which we believe will benefit shareholders for years to come. During this period, our business generated more than $4.5 billion in capital from operations and approximately $1.4 billion in after-tax proceeds from the sales of our interest in our affiliates.

All of which, through our disciplined capital allocation strategy, we have reallocated to both high-conviction growth investments and meaningful return of capital to shareholders, exemplifying our commitment to long-term value creation. In doing so, over this period, we have strategically evolved our business mix towards areas of secular growth, pivoting towards alternative strategies and increasing the contribution of these strategies from roughly 1/3 of our EBITDA to approximately 60% today. In addition, we have grown our alternative AUM by approximately 55%, and that's net of affiliate sales, primarily driven by a combination of net client inflows from existing affiliates and the addition of nine new affiliates operating across private markets and liquid alternatives. We also reduced our share count by more than 40%, further compounding our growth in economic earnings per share.

Together, these strategic actions have resulted in exceptional shareholder returns, with AMG stock appreciating at a 23% compound annual growth rate over the past six years. Despite these transformational results, we believe we are still in the early innings of our growth story with much more opportunity ahead. Looking forward, we will continue to press our advantages, executing the same proven strategy with the same level of discipline that brought us here. This means investing in additional high-quality affiliates in areas of secular growth, while also leaning further into product innovation and distribution expansion to enhance our affiliate success and drive organic growth. We expect to see ongoing growth from our existing affiliates operating in alternatives, most notably from AQR and Pantheon. With our unique, partnership-centric, cash-generative, return-focused model, we are well positioned to continue delivering long-term value.

As we enter 2026, AMG's reputation, value proposition, and capital flexibility have never been stronger. A powerful combination for our firm and for our shareholders. With this durable foundation and our accelerating momentum, we are very excited about what we can accomplish over the next five years, and we are confident that the best is yet to come. We look forward to delivering even greater success for our affiliates, our clients, and our shareholders. Finally, I would like to take a moment to recognize Tom Wojcik for his meaningful contributions to AMG over the past seven years, and to thank him for being part of our executive team during a critical period for AMG. Tom has informed us that he is ready to take a next step in his career and will leave AMG to pursue other leadership opportunities.

Tom joined AMG in 2019, distinguishing himself as our CFO and contributing more broadly to the organization in areas such as strategy and team development over the years. Today, we have a clear and effective strategy that is being executed by an outstanding leadership team that has even greater depth and breadth than we've ever had at AMG. With Tom's exceptional talent and experience, I have every confidence that he will be tremendously successful in whatever role he chooses next. With that, I'll turn it over to Tom.

Thank you, Jay, and good morning, everyone. I'd like to start by thanking the AMG team for giving me the opportunity to be part of such a great organization over the past seven years. The relationships I've had a chance to build within AMG and its broader set of constituents have made this an incredible experience, and I'm grateful to have been part of a strategy and an organization that I believe in. Time has come for me to contemplate the next stage of my career, and the team is in an excellent position for this transition to begin. I'm highly confident that the team will continue to successfully prosecute AMG's opportunity set ahead. 2025 was a pivotal year in AMG's ongoing evolution, one that reflects both the strength of our strategy and the discipline with which we've executed on that strategy. We entered 2026 with significant momentum.

Our alternatives business continues to scale, underpinned by strong organic growth from existing affiliates, and further enhanced by the addition of a number of new, high-quality partnerships. Our presence in the U.S. wealth market continues to expand, and our opportunity set to invest in growth remains robust. This year also marked a significant inflection point. AMG returned to organic growth, fueled by accelerating client demand for liquid alternative strategies and ongoing fundraising strength in private markets. In the fourth quarter, net client cash inflows of $12 billion brought full year inflows to $29 billion, representing an annualized organic growth rate of 6% for the quarter and 4% for the full year, respectively.

With $23 billion in net inflows in alternatives, the fourth quarter capped a record year for flows from alternative strategies at AMG, which totaled $74 billion in the year, more than offsetting $45 billion in outflows in active equities and highlighting the advantages of AMG's business profile, which is increasingly weighted toward high growth alternative asset classes. In liquid alternatives, our affiliates' value proposition continues to resonate with clients. AMG posted another record quarter in liquid alternatives with $15 billion in net inflows. Full year net inflows of $51 billion, which represent a 36% annualized organic growth rate, were primarily driven by AQR, with positive contributions from a number of affiliates, including Capula, Garda, and Verition. Importantly, alongside the significant ongoing opportunity in U.S. wealth, including for solutions focused on after-tax returns, we are seeing strong demand and increasingly constructive sentiment for liquid alternatives from institutional clients.

Building on this momentum, AMG's diverse group of affiliates managing liquid alternative strategies is well-positioned to deliver excellent risk-adjusted returns for clients and continue to attract new flows over time. Our private markets affiliates raised $9 billion in the quarter, bringing full year fundraising to $24 billion, which represents an annualized organic growth rate of 18%. These inflows were mainly driven by Pantheon, as well as fundraising at Ara, Abacus, EIG, Forbion, and Montefiore. The ongoing fundraising momentum of our private markets affiliates reflects investors' conviction in their specialized investment strategies, along with their position at the forefront of secular growth trends. Looking ahead, the fee-related earnings growth and carried interest potential across our private markets affiliates represents a significant source of upside for the long-term earnings profile of our business.

In equities, we saw net outflows of approximately $12 billion in the quarter and $45 billion in the year, reflecting industry headwinds. Multi-asset and fixed income was flat for both the quarter and the year. We continue to have an outstanding group of differentiated long-only firms with multi-decade track records, which have been able to perform and deliver for clients through cycles. Notwithstanding some of the challenges in the industry, we think a lot of these businesses continue to be very well-positioned to deliver for clients. As we continue to form new partnerships with growing, high-quality independent firms, such as our new investment in HighBrook and our follow-on investment in Garda this year. We are broadening our exposure to fast-growing specialty areas within alternatives and further diversifying our business.

Over the past few years, we have made significant investments in our capital formation capabilities, transforming our U.S. wealth platform from one focused primarily on long-only mutual funds, to a platform with a proven track record of developing, launching, and distributing alternative products in the high-growth U.S. wealth market. Alternatives AUM on AMG's U.S. wealth platform reached approximately $8 billion in 2025, with $2.2 billion in alternative net new flows during the year. Today, our platform has five continuously offered alternative solutions, including Pantheon products, covering each of private equity, credit secondaries, and infrastructure, giving clients direct access to a diverse range of differentiated, institutional-quality investment capabilities. We continue to work with our affiliates to bring new in-demand products to market to capitalize on the multi-decade growth opportunity in alternatives in U.S. wealth.

In December, we filed for the registration of the AMG BBH Asset-Backed Credit Fund, leveraging BBH's expertise in structured credit markets. Looking ahead, we expect to collaborate on a number of alternative credit products, leveraging BBH's differentiated investment engine and AMG's strengths in evergreen product development and distribution, further expanding our alternatives offering for the U.S. wealth market and bringing additional innovative solutions to help clients achieve their long-term investment goals. Along with the growth we are generating on AMG's U.S. wealth platform, our affiliates, especially Pantheon and AQR, continue to take advantage of tailwinds and wealth through their own product development and distribution capabilities, and as a result, AMG and our affiliates are collectively among the largest sponsors of alternative products for wealth markets globally.

Today, global wealth AUM at AMG and affiliates now totals more than $100 billion and grew organically at more than 100% in 2025. The success that we are having in the wealth channel is resonating not only with clients and existing AMG affiliates, but also with new investment prospects, as accessing this attractive market requires scale and is difficult, if not impossible, for independent firms to do on their own, given the resources required to be effective in the channel. With the ongoing growth of our existing affiliates in both liquid alternatives and private markets, our proven strategic capabilities to enhance our affiliates' long-term success, and our expanded opportunities to invest in growth, we have entered 2026 in a position of strength. With that, I'll turn the call over to Dava to discuss our fourth quarter results and guidance.

Thank you, Tom, and good morning, everyone. 2025 was a very exciting year for AMG. We continued to successfully execute on our disciplined capital allocation strategy and further evolved our business composition towards areas of secular growth. Together with the strength and momentum of our existing affiliates, our strategic actions and execution contribute to record economic earnings per share in 2025. We committed more than $1 billion in capital across growth investments and returned $700 million to shareholders through share repurchases. Given our strong balance sheet, significant cash generation, and the overall positive trajectory of our business, we are in an excellent position heading into 2026 to build on these results and generate further meaningful earnings growth.

I will start by discussing results for the quarter, then talk about the positive impact of recent capital activity and existing business growth on our forward earnings, and conclude with a discussion of our balance sheet. In the fourth quarter, we reported Adjusted EBITDA of $378 million, which grew 34% year-over-year and included $125 million in net performance fee earnings. On a full year basis, we reported Adjusted EBITDA of $1.1 billion, up 11% versus 2024, which included $161 million of net performance fee earnings. Fee-related earnings, which exclude net performance fees, grew 20% year-over-year for the quarter and 8% for the full year, driven by the positive impact of our investment performance, positive organic growth, and margin expansion at some of our largest affiliates.

Economic earnings per share of $9.48 for the fourth quarter, and $26.05 for the full year 2025, further benefited from the impact of share repurchases. Economic earnings per share grew 45% year-over-year in the fourth quarter and 22% on a full year basis. Now moving to first quarter guidance. We expect Adjusted EBITDA to be in the range of $310 million-$330 million, based on current AUM levels reflecting our market blend, which was up 3% quarter to date as of February 11, and including net performance fees of $40 million-$60 million.

Based on this, we expect first quarter economic earnings per share to be between $7.98 and $8.52, assuming an adjusted weighted average share count of 27.4 million for the quarter, which represents 60% growth versus Q1 2025, at the midpoint of the range. This guidance includes the impact of 2025 announced new investments and affiliate sales, as well as the partial impact from our recently announced incremental investment in Garda and new investment in HighBrook. Combined, we expect these two newly announced transactions to add an incremental $20 million to Adjusted EBITDA on a full year basis, a portion of which will be in Q1.

Q1 fee-related earnings guidance of $270 million, which is our Adjusted EBITDA guidance less net performance fees in the quarter, is a good starting point for purposes of modeling full year 2026, incorporating all our capital allocation activity and organic growth in 2025, and represents 30% expected growth in quarterly fee-related earnings versus Q1 2025. As it relates to performance fees, we are starting the year from a solid point, given our first quarter guidance range. We expect net performance fee earnings of approximately $170 million for 2026, which is consistent with our five-year average from 2021-2025. However, it is still early, and we plan to provide an update later in the year.

Overall, we continue to have significant capacity to execute on new investments beyond Garda and HighBrook that could further enhance AMG's earnings power over time. Our capital allocation strategy, together with strong organic growth in our existing business, has driven growth in AUM, Fee-Related Earnings, Adjusted EBITDA, and Economic Earnings Per Share in 2025, and this momentum that we've built in our business has set the stage for meaningful growth potential in 2026 and beyond. Growth in alternatives in 2025 included substantial contributions from two of our largest affiliates, Pantheon and AQR, both of which were double-digit contributors to AMG's earnings. Given their strong performance, ongoing innovation, and differentiated expertise, we expect a growing contribution in 2026, with AQR likely to contribute more than 20% to our earnings.

Further, we continue to diversify our business through new partnerships, and we feel good about the opportunities ahead as we strategically engage with our new and existing affiliates. Finally, turning to the balance sheet and capital allocation. Our balance sheet is in a strong position, given our long-dated debt, low leverage level, and access to our revolver. In August 2025, our ten-year senior $350 million institutional bond matured and was repaid. In December 2025, we completed the issuance of a ten-year, $425 million senior note at a 5.5% coupon rate and used the proceeds to redeem and settle conversions related to our 2037 junior convertible trust preferred securities, which were settled fully in cash in January 2026.

The total cost to refinance the security was $516 million, which included $342 million of debt and $174 million of conversion premium. The $174 million of conversion premium effectively represents the repurchase of approximately 600,000 adjusted diluted shares at a stock price of $293. Given this occurred in Q1 of this year, you can still see these shares in our Q4 2025 average adjusted diluted shares outstanding. The share dilution associated with these securities has now been fully removed for purposes of our Q1 2026 share count guidance of 27.4 million. Together, these transactions resulted in a simplified balance sheet and removed share count dilution from our capital structure. 2025 was an active year for us in terms of capital allocation.

We committed more than $1 billion to growth investments, which included new partnerships with Northbridge in Q1, Verition in Q2, and Qualitas Energy and Montefiore in Q4, plus our announced strategic collaboration with BBH Credit Partners. We repurchased $350 million in shares in the fourth quarter, our largest quarterly repurchase amount in firm's history, bringing full-year repurchases to approximately $700 million for the second consecutive year. We received aggregate pretax proceeds of approximately $570 million from the sale of our minority stakes in Peppertree, which closed in Q3, and Comvest's private credit business and Montrusco Bolton, both of which closed in Q4. These transactions represented positive outcomes for all stakeholders and collectively supported our $1.7 billion gross capital deployment in 2025 across new investments and share repurchases. We have continued to actively allocate capital into 2026.

We announced a new partnership with HighBrook and a follow-on investment in Garda. The combination of the $175 million committed to new investments, which are immediately accretive to EBITDA, and the $174 million conversion premium on the settlement of the trust preferred, which further reduces our share count, creates strong earnings momentum to start the year. As we have demonstrated over the years, we aim to maintain a balance of strong deployment of capital across both growth investments and return of capital to shareholders. Along these lines, we anticipate repurchasing at least $400 million in shares in 2026. Beyond the conversion premium on the trust preferred securities, subject to market conditions and capital allocation activity. This does not reflect our full deployment capacity, and we plan to update everyone throughout the year as the quantum and pace of growth investments come into view.

2025 was a year in which every element of our growth strategy, from affiliate performance to organic growth, to new affiliate investments and other growth investments, to share repurchases and effective capital management, all contributed to standout business results. Looking ahead, we are very excited to continue to build on this momentum in 2026. We have a diverse set of opportunities ahead of us, and we remain deliberate and disciplined in our approach to deploying capital. We have entered the year in a position of strength, and we are confident in our ability to continue to generate meaningful incremental value for our shareholders. Now we are happy to take your questions.