AMG Q3 Deep Dive: Alternative Strategies Fuel Growth Amid Margin Compression

Asset management company Affiliated Managers Group (NYSE:AMG) missed Wall Street’s revenue expectations in Q3 CY2025 as sales rose 2.2% year on year to $528 million. Its GAAP profit of $6.87 per share was 60.9% above analysts’ consensus estimates.

Is now the time to buy AMG? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Affiliated Managers Group delivered mixed results in Q3, with the market responding positively to strong momentum in alternative asset strategies despite revenue falling below Wall Street expectations. Management attributed the quarter’s performance to record net inflows in alternative products, robust growth at affiliates Pantheon and AQR, and continued expansion of the firm's alternative assets under management. CEO Jay Horgen emphasized, “Our third quarter results reflect the building momentum in our business with a 17% year-over-year increase in EBITDA and a 27% growth rate in economic earnings per share.”

Looking ahead, management is focused on accelerating earnings growth in 2026 by expanding partnerships with new and existing alternative asset managers and leveraging recent strategic collaborations, such as the tie-up with Brown Brothers Harriman to deliver structured credit products. CFO Dava Ritchea pointed to the positive impact of organic growth in alternative strategies and new affiliate investments, stating, "This combination of organic growth in our existing business and new investment activity has led to strong year-over-year earnings growth so far in 2025 and underpins our confidence in our 2026 earnings profile."

Key Insights from Management’s Remarks

AMG’s leadership tied Q3 performance to robust inflows in alternative strategies and the ongoing evolution of its business mix. The company cited successful capital deployment and key affiliate contributions as drivers of earnings growth.

• Alternative inflows drive growth: Management highlighted $9 billion in net inflows for the quarter, notably from affiliates focused on liquid alternatives and private markets, with Pantheon and AQR leading contributions and benefiting from industry tailwinds.
• Business mix shift to alternatives: The share of EBITDA from alternative strategies rose to 55%, as AMG accelerated investments in new affiliates and focused on areas like structured credit and private markets, reflecting a major pivot away from traditional active equities.
• Strategic partnerships expand offering: AMG announced a new collaboration with Brown Brothers Harriman to develop structured credit products for the U.S. wealth channel, aiming to capitalize on growing demand from high-net-worth clients and further differentiate AMG’s distribution capabilities.
• Divestitures enhance capital flexibility: The company completed the sale of minority stakes in affiliates Peppertree and Comvest, generating significant capital proceeds that have been redeployed toward growth investments and share repurchases.
• Margin compression in legacy business: Despite strong performance in alternatives, management noted continued outflows and margin pressure in fundamental equity strategies, which partially offset gains elsewhere and contributed to the year-over-year decline in operating margin.

Drivers of Future Performance

Management expects AMG’s future performance to be shaped by organic growth in alternatives, new affiliate partnerships, and ongoing capital allocation toward higher-margin strategies.

• Expanding alternative asset base: The company is focused on increasing the proportion of its earnings from alternative investments, targeting a move from 55% to over two-thirds of EBITDA from alternatives within a few years. This is expected to improve earnings quality and fee rates as more long-duration and performance-fee eligible strategies are added.
• Pipeline of new affiliate investments: AMG’s leadership described a strong pipeline of potential investments in both private markets and liquid alternatives, emphasizing selectivity in targeting firms where the company’s strategic capabilities can add value. Management believes this disciplined approach will drive mid- to high-teens returns over time.
• Risks from legacy equity business: While alternatives are forecasted to grow, outflows and fee pressure in traditional active equities remain a headwind. Management noted that although higher-margin alternatives are offsetting losses, continued weakness in this area could temper overall growth if industry trends persist.

Catalysts in Upcoming Quarters

In upcoming quarters, our team will watch (1) the pace and breadth of net inflows into alternatives, especially through new products and channels like the BBH partnership; (2) further evidence of margin stability or expansion as the business mix shifts; and (3) execution on new affiliate investments and ongoing divestitures. The ability to offset equity outflows and maintain a high level of capital deployment will also be closely tracked.

Affiliated Managers Group currently trades at $266.56, up from $238.08 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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