Persistent Global Demand And Private Markets Will Unlock Value

Key Takeaways

• Surging demand for alternative and tax-efficient strategies is driving significant revenue and margin growth via higher management and performance fees from specialized affiliates.
  
• Ongoing affiliate investments and disciplined capital allocation support expanding shareholder value, margin improvement, and resilience against fee compression in commoditized segments.
  
• Heavy reliance on key affiliates and alternatives exposes AMG to concentration, industry shifts toward passive investing, pricing pressure, and heightened execution and earnings risk.

Catalysts

Through its affiliates, operates as an investment management company providing investment management services to mutual funds, institutional clients,retails and high net worth individuals in the United States.

• Record-breaking inflows and rapid expansion in alternative assets-AMG increased alternative AUM by 20% in six months and reported its strongest organic growth quarter in 12 years-position the company to benefit from persistent global demand for yield, diversification, and differentiated strategies, directly supporting top-line revenue and future net margin improvement due to higher fee structures in alternatives.
  
• Rising client demand for tax-aware and innovative liquid alternative strategies, especially from high net worth and wealth channels, is driving higher management and performance fees at affiliates like AQR, supporting both revenue growth and higher net margins as these strategies command premium fee rates and have longer asset duration.
  
• AMG's disciplined capital allocation-deploying nearly $1.2 billion across growth investments and share repurchases in the first half of 2025-points to ongoing per-share earnings growth and return on equity expansion, with substantial buybacks expected to continue compounding shareholder value through enhanced EPS.
  
• A robust pipeline of new affiliate investments (four new partnerships in 2025 already, mostly in private markets and liquid alternatives) and strong organic growth at existing affiliates are set to drive a step-up in EBITDA and economic EPS for 2026 and beyond, with management signaling these new investments will be increasingly accretive as they scale and begin contributing carried interest.
  
• AMG's scalable partnership model-allowing it to efficiently add new affiliates without full integration-supports margin expansion and long-term earnings stability while positioning the company to capitalize on industry-wide growth in investable assets and demand for specialist alternatives, insulating it from fee compression faced by more commoditized active managers.

Affiliated Managers Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Affiliated Managers Group's revenue will grow by 2.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 21.8% today to 27.0% in 3 years time.
• Analysts expect earnings to reach $594.9 million (and earnings per share of $24.03) by about September 2028, up from $442.4 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.7x on those 2028 earnings, down from 14.8x today. This future PE is lower than the current PE for the US Capital Markets industry at 26.3x.
• Analysts expect the number of shares outstanding to decline by 6.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.1%, as per the Simply Wall St company report.

Affiliated Managers Group Future Earnings Per Share Growth

Risks

• Persistent outflows from traditional active equity (long-only) strategies and continued "industry and near-term performance headwinds" in this category may offset alternative inflows, and long-term secular trends toward passive investing and lower-cost products could further pressure AMG's aggregate AUM and top-line revenue.
  
• AMG's earnings are increasingly concentrated among a few large affiliates, particularly Pantheon and AQR; any underperformance, reputational event, or capacity constraint at these core boutiques could result in revenue volatility and reduce overall business stability.
  
• While alternative assets are growing rapidly, the text acknowledges that private markets fundraising can be "more volatile in terms of its magnitude," subjecting AMG's growth trajectory and future management/performance fee revenues to unpredictable market cycles and investor sentiment.
  
• Fee rates in alternatives are higher today, but ongoing industry-wide fee compression and the rise of digital platforms could pressure AMG's pricing power over time and negatively impact net margins and EBITDA growth.
  
• As AMG focuses more capital on new affiliate investments and share buybacks, future earnings are increasingly reliant on successful integration and performance from newly acquired boutiques-raising execution risks, ongoing talent retention challenges, and possible adverse impacts on future earnings if acquisition returns underwhelm.

Valuation

• The analysts have a consensus price target of $253.857 for Affiliated Managers Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $331.0, and the most bearish reporting a price target of just $195.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.2 billion, earnings will come to $594.9 million, and it would be trading on a PE ratio of 12.7x, assuming you use a discount rate of 9.1%.
• Given the current share price of $230.64, the analyst price target of $253.86 is 9.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.