Acadian Asset Management Inc. · NYSE:AAMI
Acadian Asset Management — OM Asset Management — Q4 2015 Earnings Presentation
26 slides from Acadian Asset Management's earnings presentation, Feb 4, 2016
Slide 1: Q4 2015 Earnings Presentation
Q4 2015 EARNINGS PRESENTATION February 4, 2016
Slide 2: Disclaimer
Disclaimer Forward Looking Statements This presentation may contain forward looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are identified by words such as “expect,” “anticipate,” “may,” “intends,
Slide 3: Overview and Highlights
Overview and Highlights • 2015 ENI per share of $1.24 down (1.6)% from 2014 ENI per share of $1.26, primarily driven by a decrease in performance fees, as reflected in the Q4'15 ENI per share of $0.30 versus $0.39 in the prior year quarter • Net Client Cash Flows of $(3.2) billion for Q4’15 and $(5.
Slide 4: Growth Strategy
Growth Strategy OMAM's multi-boutique model is well positioned for growth, with four key areas of focus... Four Key Multi-Boutique Value Proposition Drives Growth Areas New Incremental Growth Opportunities Partnerships Global Distribution Collaborative Organic Growth (Growth and Seed / Co-Investment
Slide 5: AUM Progression and Mix
AUM Progression and Mix AUM Progression (Annual) AUM Mix (12/31/15) % Change: (3.8)% AUM $B AUM by Affiliate $B %Total $220 $ 66.8 31% $200 $(5.1) $(3.3) 89.2 42% $180 (2.3)% (1.5)% 6.3 3% $160 $220.8 $212.4 $140 4.7 2% $120 29.1 14% $100 Market and 1.8 1% 2014 Net flows other 2015 14.5 7% th AUM Pr
Slide 6: Net Client Cash Flows and Revenue Impact
Net Client Cash Flows and Revenue Impact AUM Net Client Cash Flows (“NCCF”) Revenue Impact of NCCF(1) $B $M $3.8 $4 $3.6 $20.0 $3.2 $3.3 $20 $19.1 $3.1 $18.4 $3.0 $16.5 $15 $13.5 $2 $11.6 $11.3 $1.0 $0.8 $10 $8.6 $5.8 $0 $5 $(0.2) $0.7 $(1.0) $0 -$2 -$5 $(3.0) $(2.5) $(3.2) $(6.6) -$4 -$10 Q1 Q2 Q3
Slide 7: Net Client Cash Flows Breakdown
Net Client Cash Flows Breakdown AUM Net Client Cash Flows (“NCCF”) - by Asset Class Revenue Impact of NCCF - by Asset Class $B $M $5 $25 $4 $20 $1.3 $3 $7.8 $0.3 $15 $2 $0.7 $0.1 $5.2 $4.2 $0.7 $0.0 $10 $2.6 $0.2 $1 $1.8 $0.1 $1.3 $0.9 $13.0 $2.0 $0 $5 $10.7 $9.8 $(0.4) 25 $5.6 $(0.9) -$1 $(1.9) $(2
Slide 8: Competitive Investment Performance
Competitive Investment Performance Products representing ≥ 60% of revenue outperforming on a 1-, 3- and 5-year basis Commentary • OMAM uses revenue-weighted performance as its primary investment metric ◦ Ties investment performance to business performance ◦ Reflects percent of management fee revenue
Slide 9: OMAM Growth Strategies Generating Flows
OMAM Growth Strategies Generating Flows $3.8 Collaborative Organic Growth Global Distribution Initiatives $B Seed Capital: Sales of Seeded Products $B Growth Capital: Sales of Products Related to $B Mandates Funded by Global Distribution(2) OMAM Strategic Initiatives $5.0 $2.0 $1.8 $5.5 $6.0 $3.8 $3
Slide 10: Contribution of Growth Strategies to Flows: 2012 - 2015
Contribution of Growth Strategies to Flows: 2012 - 2015 Commentary • Successful seeding program is contributing meaningfully to sales • Global distribution contributed $1.4 billion of funded assets in 2015 • Investment in new product initiatives at early stage, but already generating results Source
Slide 11: Diversified Sources of Flows - 2015
Diversified Sources of Flows - 2015 Commentary • Organic growth across a wide range of Affiliates and products • Significant sales diversification as top-5 selling strategies represent only 40% of gross sales and are generated by four different Affiliates Gross Sales ($B) Top Five Products # Product
Slide 12: Financial Highlights – Q4 2015 v. Q4 2014
Financial Highlights – Q4 2015 v. Q4 2014 • Q4’15 Economic Net Income down (22.3)% to $36.5 million ($0.30 per share) from $47.0 million ($0.39 per share) in Q4’14 ◦ Lower performance fees drive decline • ENI Revenue decrease of $(17.5) million, or (9.5)%, to $166.9 million in Q4’15 ◦ Performance fe
Slide 13: Steady Results in a Volatile Market
Steady Results in a Volatile Market Average AUM ENI Revenue(1)(5) Pre-tax ENI(5) Performance Performance % Change Q4'14 to Q4'15: (2)% % Change Q4'14 to Q4'15: (9)% % Change Q4'14 to Q4'15: (22)% Fees Fees $250 $200 $184 % Change ex. perf. fees: 3% $70 $63 % Change ex. perf. fees: 1% $227 $168 $166
Slide 14: A Long-Term Record of Growth
A Long-Term Record of Growth Average AUM ENI Revenue(1)(5) Pre-tax ENI(5) Performance Performance CAGR ('11-'15): 12% CAGR ('11-'15): 11% Fees CAGR ('11-'15): 13% Fees $221 $250 $225 $210 $635 $664 $204 $204 $200 $178 5% $600 4% $528 $200 (0.3)% $175 $435 $451 $153 $143 $148 $150 $150 $124 $131 $400
Slide 15: Key Drivers of Financial Performance
Key Drivers of Financial Performance Economic Net Income (“ENI”) reflects the underlying economic earnings of the business Financial Highlights (1) Three Months Ended Twelve Months Ended December 31, December 31, Q-Q-Q Y-O-Y $M 2015 2014 2015 2014 Growth Growth 1 Management Fees $ 157.0 $ 152.0 $ 63
Slide 16: Management Fee Growth Driven by Higher Fee Global/non-U.S. Assets and Alternatives
1 Management Fee Growth Driven by Higher Fee Global/non-U.S. Assets and Alternatives(1) Average AUM and Fee Rate by Asset Class Gross Management Fee Revenue by Asset Class Avg. AUM % Change: 5.0% % Change: 8.3% $B % Change $M % Change $220.9 34.3 $758.6 $220 33.3 $210.3 $750 $700.3 $35.7 (16%) 44 12
Slide 17: Decline in Q4 Performance Fees Impacted 2015 Revenue and Profit
2 Decline in Q4 Performance Fees Impacted 2015 Revenue and Profit Commentary • $(22.7) million decline in Q4'15 performance fees drove Q4 revenue decline of $(17.5) million • Performance fees impacted by volatile market and performance in U.S. equity sub-advisory • OMAM retained approximately 60% of
Slide 18: Core Expense Growth In Line With Growth of Management Fees
3 Core Expense Growth In Line With Growth of Management Fees Commentary • Total ENI operating expenses reflect Affiliate operating expenses, Center expenses including public company expenses, and key initiatives, including Global Distribution (excluding variable compensation) • Core operating expens
Slide 19: Cash Variable Compensation Reduced in Line with Business Profitability
4 Cash Variable Compensation Reduced in Line with Business Profitability Commentary • Variable compensation typically awarded based on contractual percentage (e.g., ~25 – 30%) of each Affiliate’s ENI earnings before variable compensation, plus Center bonuses ◦ Affiliate variable compensation include
Slide 20: Affiliate Key Employee Distributions Typically Will Move In-Line With Affiliate Profitability
5 Affiliate Key Employee Distributions Typically Will Move In-Line With Affiliate Profitability Commentary • Represents employees’ share of profit from their respective Affiliates, ranging from 15 - 35%, in some cases following an initial preference to OMAM(1) • Q4'15 increase in Distribution Ratio
Slide 21: Balance Sheet Management Provides Multiple Opportunities to Increase Shareholder Value
Balance Sheet Management Provides Multiple Opportunities to Increase Shareholder Value • New fund consolidation guidance adopted by OMAM in 2015 results in removal of Consolidated Funds from GAAP balance sheet and income statement Balance Sheet Capital ($M) December 31, • In 2015, repaid $87 million
Slide 22: Structural Cost Variability of Business Model
Structural Cost Variability of Business Model Index Weighted AUM Impact Commentary January • Market volatility in 2015 made 2016 a challenging year December 31, 2016 Index for revenue growth, even before January ($ in billions) 2015 Return Primary Index U.S. equity, small/ ◦ Average assets for 2015
Slide 23: Appendix
Appendix gQ OMAM 23
Slide 24: Reconciliation: GAAP to ENI and Adjusted EBITDA
Reconciliation: GAAP to ENI and Adjusted EBITDA Three Months Ended Years Ended December 31, December 31, ENI Adjustments $m 2015 2014 2015 2014 i.1 Exclude notional non-cash corporate cost U.S. GAAP net income attributable to controlling interests $ 36.9 $ 34.3 $ 155.5 $ 51.7 allocations Adjustments
Slide 25: Definitions and Additional Notes
Definitions and Additional Notes References to “OMAM” or the “Company” refer to OM Asset Management plc; references to the “Parent” or “Old Mutual” refer to Old Mutual plc; references to the “Offering” refer to the Company’s initial public offering dated October 8, 2014 and references to the “Prospe
Slide 26: Definitions and Additional Notes
Definitions and Additional Notes Methodologies for calculating investment performance(1): Revenue-weighted investment performance measures the percentage of management fee revenue generated by Affiliate strategies which are beating benchmarks. It calculates each strategy’s percentage weight by takin