Five years after opening a sales office in Sydney, AMG is assessing Australian boutiques as potential investments.
Affiliated Managers Group (AMG) is watching the Australian market for opportunities to invest in boutique investment managers.
Five years since opening a sales office in Sydney, AMG, whose affiliate managers together oversee about US$327 billion, is open to discussing potential deals with boutique founders willing to sell part of their business, says Andrew Dyson, the company’s head of global distribution.
“We’d love to have an Australian affiliate,” Dyson says.
AMG invests in established boutiques and shares revenue with them. Such managers include equities and hedge fund manager AQR Capital Management, equities manager Harding Loevner, private equity manager Pantheon and credit hedge fund Blue Mountain Capital Management.
Affiliates held $7 billion in assets from Australian and New Zealand investors when the office was opened in January 2007. This has more than doubled to $18.7 billion today.
In Australia, AMG would prefer to buy an equity stake in a boutique whose founder aimed to step down from day-to-day work. “Succession planning deals are the hallmark of AMG,” Dyson says.
Many Australian boutiques, such as equity managers Paradice Investment Management and Ausbil Dexia, have succeeded in gaining superannuation and retail money.
Investors are attracted by the investment talent of managers and the opportunity to secure “capacity”, or future investments, with boutiques they commit money to.
“Australian investors are a bit more pro-boutique. Investors appreciate the alignment of interest,” Dyson says.
However, the affiliate model of AMG is not prevalent in Australia. So-called “incubators”, or businesses that provide seed funding and administrative and sales support to fledgling investment managers, are entrenched in the domestic funds management industry.
“It’s been a great market for seeding boutiques,” Dyson says.
“The investors get it.”
Twenty-three of AMG’s 27 affiliates are US businesses. Three are European and one is Asian. Non-US investors provide 55 per cent of the capital these managers oversee.
AMG aims to expand its set of non- US managers to diversify its business.
“We’d love to find more affiliates outside the US. We’re global in terms of the client set but would love to have more global affiliates.”
Tough investment markets, which diminish revenue for funds managers, are providing opportunities for AMG to buy into boutiques. “The situation for us is as favourable as it’s ever been,” Dyson says. “The pipeline we’ve got in terms of prospective new affiliates is very strong.”