Acadian Asset Management Inc. · NYSE:AAMI
Acadian Asset Management — OM Asset Management — Q4 2014 Earnings Presentation
25 slides from Acadian Asset Management's earnings presentation, Feb 27, 2015
Slide 1: 4Q 2014 Earnings Presentation
4Q 2014 EARNINGS PRESENTATION February 27, 2015
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 • 2014 ENI of $1.26 per share up 24% from $1.02 per share in 2013; 4Q ENI of $0.39 per share up 44% over prior period ENI of $0.27 per share • AUM of $221 billion up 11% from year-end 2013 and 3% from end of 3Q • Net Client Cash Flows of $9.5 billion for 2014 and $3.8 billion
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 C
Slide 5: AUM Progression and Mix
AUM PROGRESSION AND MIX AUM Progression (Annual) AUM Mix (12/31/14) AUM $B AUM by Affiliate $B % Total $220 $9.5 $12.5 $200 $70 32% 6.3% $180 4.8% 100 45% $160 $220.8 7 3% $198.8 $140 3 1% $120 27 12% $100 2013 2014 2 1% AUM Progression (4th Quarter) 12 6% Total $221 100% $B $3.8 $3.2 AUM $220 AUM b
Slide 6: Rising Net Client Cash Flows and Revenue Impact
RISING NET CLIENT CASH FLOWS AND REVENUE IMPACT AUM Net Client Cash Flows (“NCCF”) Revenue Impact of NCCF(1) $B $M $20.0 $4 $3.8 $20 $19.1 $3.6 $18.4 $3.3 $3.2 $3.1 $16.5 $3.0 $15 $11.6 $2 $1.6 $10.0 $10 $1.2 $8.6 $1.0 $5.8 $4.5 $5 $0 $1.1 $0 ($1.0) ($1.0) ($1.4) ($3.0) ($2) ($5) ($4.4) 1Q 2Q 3Q 4Q
Slide 7: Diversified Sources of Flows - 2014
DIVERSIFIED SOURCES OF FLOWS - 2014 Commentary • Organic growth across a wide range of Affiliates and products – Six out of seven Affiliates experienced positive net flows – Ten of top fifteen strategies by revenue were positive • Global/non-U.S. and alternative strategies generated largest flows •
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 Collaborative Organic Growth Global Distribution $B Seed Capital: Sales of Seeded Products $B Growth Capital: Sales of Products Related to $B Mandates Funded by Global Distribution(2) $5.0 $2.0 OMAM Strategic Initiatives $6.0 $5.5 $1.8 $3.8 $5.0 $0.6 $4.0 $0.3
Slide 10: Contribution of Growth Strategies to Flows: 2012-2014
CONTRIBUTION OF GROWTH STRATEGIES TO FLOWS: 2012 – 2014 Commentary • Successful seeding program is contributing meaningfully to sales • Global distribution contributed $5.5 billion of funded assets in 2014; 17% of gross sales • Investment in new product initiatives at early stage, but already genera
Slide 11: Financial Highlights – 2014
FINANCIAL HIGHLIGHTS – 2014 • 2014 Economic Net Income up 23% to $151 million from $123 million in 2013 • ENI Revenue increase of 20% to $635 million from $528 million – Average asset increase of 18% drives an 18% rise in management fees to $590 million – $34 million of performance fees (up 90%) an
Slide 12: Quarterly AUM Growth and Performance Fees Drive Increases in Revenue and Profit
QUARTERLY AUM GROWTH AND PERFORMANCE FEES DRIVE INCREASES IN REVENUE AND PROFIT Average AUM ENI Revenue (1) Pre-tax ENI $B $M Performance Fees $M % Change: 14% % Change: 26% $250 $200 $184 $70 % Change: 62% $216 $218 $63 $225 $208 $159 $192 $199 $146 $151 $60 $200 $142 $49 $150 $48 $50 $43 $175 $39
Slide 13: 2014 Continues Multi-Year Record of Growth
2014 CONTINUES MULTI-YEAR RECORD OF GROWTH Average AUM ENI Revenue (1) Pre-tax ENI $B $M Performance Fees $M CAGR (’11-’14): 14% CAGR (’11-’14): 13% $225 $210 $700 $635 $250 CAGR (’11-’14): 18% $200 $204 $178 $528 $200 $175 $525 $451 $143 $148 $435 $153 $150 $150 $131 $124 $125 $350 $601 $100 $510 $
Slide 14: 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 December 31, Years Ended December 31, Q-O-Q Y-O-Y $M 2014 2013 Growth 2014 2013 Growth 1 Management fees $152 $136 12% $590 $500 18%
Slide 15: Management Fee Growth Driven by Higher Fee Global/Non-U.S. Assets
1 MANAGEMENT FEE GROWTH DRIVEN BY HIGHER FEE GLOBAL/NON-U.S. ASSETS(1) Average AUM and Fee Rate by Asset Class Gross Management Fee Revenue by Asset Class Avg. AUM $B % Change $M % Change % Change: 18% % Change: 17% $220 $210 33.3 $750 $700 $32 (15%) 41.9 12% $178 33.6 $625 $597 $134 (19%) 14% $14 (
Slide 16: Significant 4Q Performance Fees Contributed to 2014 Profit Growth
2 SIGNIFICANT 4Q PERFORMANCE FEES CONTRIBUTED TO 2014 PROFIT GROWTH Commentary • 2014 performance fees of $34 million meaningfully higher than previous years • Performance fees tend to be concentrated in the fourth quarter • Approximately one-third of 2014 performance fees earned in a high-water mar
Slide 17: Moderate Expense Growth Creates Operating Leverage in Business
3 MODERATE EXPENSE GROWTH CREATES OPERATING LEVERAGE IN BUSINESS Commentary • Total ENI operating expenses reflect Affiliate operating expenses, Center expenses, and key initiatives, including Global Distribution (excluding variable compensation) • 4Q operating expenses cyclically higher than remain
Slide 18: Variable Compensation Scalable as the Business Grows
4 VARIABLE COMPENSATION SCALABLE AS THE BUSINESS GROWS Commentary • Variable compensation typically awarded based on contractual percentage (e.g., ~25 – 30%) of each Affiliate’s ENI earnings before variable compensation, plus Center bonuses ‒ Affiliate variable compensation includes cash and equity
Slide 19: Affiliate Key Employee Distributions Will Grow Generally In-Line with the Business
5 AFFILIATE KEY EMPLOYEE DISTRIBUTIONS WILL GROW GENERALLY IN-LINE WITH THE BUSINESS Commentary • Represents employees’ share of profit from their respective Affiliates, ranging from 15 – 35%, in some cases following an initial preference to OMAM(1) • As of year-end 2014, employee ownership levels p
Slide 20: Strong Balance Sheet Provides Financial Flexibility
STRONG BALANCE SHEET PROVIDES FINANCIAL FLEXIBILITY Balance Sheet Capital ($M ) (Non-GAAP) • $177 million drawn on OMAM’s $350 million (U.S. GAAP) Balance Sheets attributable to Balance Sheets as of controlling interests, as of revolving credit facility December 31, December 31, December 31, Decembe
Slide 21: Appendix
APPENDIX 21
Slide 22: Reconciliation: GAAP to ENI
RECONCILIATION: GAAP TO ENI Three Months Ended, December 31, Years Ended December 31, ENI Adjustments $m 2014 2013 2014 2013 i.1 Exclude notional non-cash corporate cost allocations U.S. GAAP net income attributable to controlling interests $34.3 $7.1 $51.7 $25.7 ii. 2 Exclude interest expense histo
Slide 23: Reconciliation: ENI to Adjusted EBITDA
RECONCILIATION: ENI TO ADJUSTED EBITDA Three Months Ended, Adjusted EBITDA Adjustments December 31, Years Ended December 31, $m 2014 2013 2014 2013 i.1 Exclude net interest (income) expense Economic Net Income $47.0 $32.8 $151.3 $122.9 ii.2 Exclude depreciation and amortization 1 Net interest (incom
Slide 24: 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 25: Definitions and Additional Notes
DEFINITIONS AND ADDITIONAL NOTES Methodologies for calculating investment performance: 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 taking i