Liquid Alternatives: Takeaways From The AMG Q2 Earnings Call
Affiliated Managers Group, Inc. (NYSE: AMG) is a leading partner to independent active investment management firms globally. AMG’s strategy is to generate long-term value by investing in a diverse array of high-quality independent partner-owned firms.
Affiliated Managers Group’s (NYSE: AMG) Q2 Earnings Call on Monday, August 2, had some valuable takeaways for alternatives investing, particularly liquid alternatives.
· “The era of globally coordinated monetary policy has been replaced by inflationary pressures, rising rates and increased geopolitical uncertainty, creating challenging economic conditions.
· Markets are reflecting these dynamics and investors reduced risk in their portfolios in the first half of 2022.
· During the quarter, changes in client behavior resulted in elevated outflows in our equity strategies, particularly in global equity.
· However, given the impact of our capital decisions and our affiliates’ investment performance, especially in liquid alternatives, our earnings per share grew in the first half of the year relative to the year ago period.
· With the unprecedented combination of losses in equity and fixed income markets, we expect a sense of urgency among investors to review exposures and diversify into uncorrelated return streams.
· We are seeing early signs of this shift as evidenced by a significant uptick in industry flows into liquid alternatives this year, and a number of our affiliates are benefiting.
· With 25% of our business in private markets, ESG and wealth management and another 25% in liquid alternatives, our overall positioning is distinctly advantaged given the current market dynamics.
· Net client cash outflows at AMG were $11 billion. Excluding certain quantitative strategies, net outflows were $6 billion. These flows were primarily a result of redemptions in global equities while we saw continued strong demand in private markets, liquid alternatives and ESG strategies.
· We saw another strong quarter for our alternatives businesses with $6 billion in net inflows led by private markets with $5 billion.
· Demand for liquid alternatives continued with approximately $1 billion of net inflows in the second quarter. The volatility and correlation in traditional equity and fixed income markets has led many investors to seek alternative sources of return and diversification.
· Our liquid alternative managers, including Systematica, Capula and Garda, are delivering outstanding performance with many strategies producing meaningfully positive returns for clients.
· The strong performance we are seeing in this category supports our positive outlook for earnings this year and continued momentum for these products.
· We believe we are in the early days of clients repositioning portfolios with diversification and stability in mind after a period of complacency. And we expect liquid alternatives to be well positioned for future inflows.
· Given the strong year-to-date performance at our absolute return liquid alternatives managers — we expect full year earnings per share in 2022 to be above those we generated in 2021.”
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