AMG’s investment pipeline to include more growth capital

Dialogues with potential new investments are expanding beyond just succession and liquidity-driven transactions and into growth capital, chief executive Jay Horgen said on the firm's latest earnings call.

NYSE-listed investor Affiliated Managers Group‘s investment pipeline for the coming quarters will focus on growth capital and resources for its existing affiliates, according to president and chief executive Jay Horgen.

Jay Horgen, AMG
Horgen: new investment activity has rebounded

Speaking on the firm’s second-quarter earnings call on Monday, Horgen noted that investment activity for the firm rebounded in Q2 with $3.7 billion of new transactions through June.

Horgen said on the firm’s first-quarter earnings call in April that with market volatility at the onset of the pandemic, it was “a natural time for us to take a step back and reassess”, as it anticipated more favourable pricing structures in the months to come.

On Monday, Horgen said dialogues with potential new investments are expanding beyond just succession and liquidity-driven transactions and into deploying growth capital.

AMG would invest for its ownership stake onto a company’s balance sheet, which would then would use that capital to leverage its new product development or any existing products to scale, he explained.

In June, AMG acquired a minority stake in Inclusive Capital Partners, which is focused on investing in solutions for climate change and social inequity, following the completion of a generational transition at its affiliate ValueAct Capital. In the first quarter of the year, AMG bought a minority stake in PE and credit manager Comvest Partners and also invested in distribution technology platform iCapital.

Throughout the pandemic, a number of investment themes have remained intact, including the ongoing demand for illiquids as well as increasing appetite for responsible and impact investing, according to Horgen.

“This is an uncertain time. We’ve been through times like this before,” he said. “We’ve seen a pretty sharp rebound in [the] market environment in the last 45 days, really. With that has come a rebound in our own prospecting pipeline.”

AMG owns stakes in fund of funds Pantheon, Baring Private Equity Asia and EIG Global Energy Partners, as well a number of asset managers in different segments of the market.

Using Pantheon as an example of how the firm helps its affiliates grow, Horgen said: “We invested strategic capital four years ago to launch their ’40 Act fund, their CIT, and to support their efforts in the wealth and individual channel and private equity, we put capital in. That capital has been returned to us because those products have now scaled.”

He also noted that the most recent Department of Labor letter confirming that defined contribution pension plans could incorporate certain private equity products without violating the Employee Retirement Income Security laws, while limited in scope, is a “significant milestone foreshadowing a shift in attitudes and in access of illiquids in the individual retirement and wealth channels”.

Fundraising across AMG’s affiliates has “been going well or even better than expected”, following a few months of slowdown, Horgen said on the call. The firm expects from its GPs a number of new planned capital-raising campaigns toward the end of this year or the early part of next year, he added.

In alternatives, AMG reported net inflows of $3 billion in the six months through June, according to the earnings statement. This was driven by strong demand at AMG’s private markets affiliates, particularly at Pantheon, which saw significant fundraising momentum in regional primary strategies and in infrastructure, noted AMG chief financial officer Tom Wojcik. EIG likewise raised $1.1 billion for its fifth private debt fund, and Comvest’s fifth direct lending fund has raised $570 million against a $1.25 billion target.

AMG’s assets under management stood at $638.4 billion as of the end of June, a 17 percent decrease from the equivalent period last year. Alternatives made up $220.5 billion, or close to 35 percent of the portfolio.

Total revenues fell 20.4 percent year-on-year to $471.1 million. Adjusted EBITDA was $162.1 million, down 26.1 percent from the previous year.