AMG (AMG) Q2 2025: Alternative AUM Jumps 20%, Secular Growth Strategy Accelerates
AMG’s secular pivot to alternatives is reshaping its earnings power, with alternative AUM up 20% in six months and organic growth at a 12-year high. The firm’s record inflows into private markets and liquid alternatives, combined with disciplined capital allocation and strategic affiliate partnerships, are fundamentally altering its business mix and future trajectory. Management signals a step up in earnings for 2026 as new partnerships and alternatives growth fully flow through.
Summary
- Secular Growth Pivot Drives Business Mix Shift: Alternatives now comprise over half of EBITDA, up from one-third five years ago.
- Affiliate-Led Innovation Fuels Inflows: Record alternative net inflows offset equity outflows, with AQR and Pantheon each driving double-digit earnings contributions.
- 2026 Earnings Set for Step Up: Recent affiliate investments and alternative growth will meaningfully raise next year’s earnings profile.
Performance Analysis
AMG delivered its strongest organic growth quarter in over a decade, powered by more than $8 billion in net client inflows—primarily into alternative strategies. Alternative AUM surged by $55 billion in the first half, a 20% increase, now representing 45% of total AUM and 55% of EBITDA on a run-rate basis. This marks a decisive shift from legacy long-only equities, which continue to see outflows and now represent just 40% of AUM, down from 55% at the end of 2021.
Private markets affiliates raised $8 billion in the quarter, with Pantheon, Comvest, Aura, and EIG all contributing. Liquid alternatives—especially tax-aware strategies led by AQR—drove nearly $12 billion in net inflows, reflecting both innovation and a growing wealth channel opportunity. While active equities and multi-asset strategies experienced $11 billion in outflows, the robust alternative inflows more than offset these declines, underpinning AMG’s positive organic growth rate of 5% annualized for the quarter.
- Alternative Inflows Outpace Legacy Outflows: $19 billion in alternative inflows more than offset $11 billion in equity outflows.
- Affiliate Scale and Fee Mix Improve Earnings Quality: Higher fee rates and performance fee potential from alternatives are lifting EBITDA growth prospects.
- Capital Deployment Remains Balanced: Nearly $1.2 billion allocated to growth investments and buybacks, with $273 million in shares repurchased year-to-date.
AMG’s financial profile is increasingly tied to durable, higher-fee, and performance-fee-eligible assets, with the business now positioned for compounding growth as recent investments and new affiliate contributions scale up through 2026.
Executive Commentary
"In the first half of 2025, AMG has added approximately $55 billion in alternative assets under management, increasing our total alternative AUM by 20% in just six months... Today, more than 15 affiliates manage $331 billion in alternative AUM, contributing approximately 55% of our EBITDA on a run rate basis."
Jay Horgan, Chief Executive Officer
"Our liquid alternatives net inflows in the first half of 2025 were really driven by AQR, which has had more than $20 billion of positive net flows into liquid all year to date... This growth has shifted their business profile to being much more absolute return oriented and less beta sensitive."
Deva Ritchie, Chief Financial Officer
Strategic Positioning
1. Alternatives as Core Growth Engine
Alternatives—private markets and liquid alternatives—are now AMG’s primary drivers of growth, with management targeting a business mix of two-thirds alternatives within three years. This shift is underpinned by strong secular demand, especially for secondary strategies, private credit, infrastructure, and tax-aware liquid alts, enabling higher fee rates and performance fee optionality.
2. Affiliate Model and Innovation Edge
AMG’s independent partnership model allows it to attract and scale leading innovators like AQR and Pantheon. AQR’s tax-aware Flex Series and Pantheon’s secondaries platforms are both cited as category leaders, with each affiliate now contributing double-digit percentages to AMG’s earnings. The firm’s product development and distribution infrastructure further amplifies affiliate reach, especially into the U.S. wealth channel.
3. Disciplined Capital Allocation and Buybacks
Capital deployment is balanced between new affiliate investments and share repurchases, with management emphasizing flexibility and discipline. Recent divestitures, such as the sale of Peppertree, have unlocked capital for redeployment, while buybacks remain a key lever for shareholder returns—management expects $400 million in repurchases for 2025, subject to market conditions.
4. Global Diversification Mitigates Regional Risks
AMG’s affiliate network spans geographies and asset classes, with recent partnerships in Europe (Montefiore, Qualitas) broadening exposure beyond the U.S. This diversification positions AMG to benefit from shifting regional flows and insulates the business from isolated market or policy headwinds.
5. Earnings Visibility and Operating Leverage
Recent affiliate investments will only partially impact 2025 earnings, setting up a step change in 2026 as full-year contributions and scaling carried interest flow through. Higher fee rates, longer duration assets, and embedded performance fee potential all point to improved operating leverage and earnings quality.
Key Considerations
AMG’s transformation is delivering tangible results, but the pace and sustainability of alternative inflows and affiliate execution remain central to the story. Investors should monitor:
- Alternative Growth Sustainability: Continued net inflows into private markets and liquid alts are essential for maintaining the organic growth trajectory.
- Affiliate Innovation and Capacity: The ability of affiliates like AQR to maintain their innovation edge and scale operationally will determine future fee growth and stickiness.
- Buyback and Capital Allocation Balance: Management’s discipline in balancing growth investments with share repurchases is crucial for compounding shareholder value.
- Regional Flow Dynamics: European and U.S. institutional allocation trends, especially regarding ESG and policy, could create both headwinds and opportunities depending on how flows shift.
- Fee Rate and Performance Fee Realization: The mix of management fees and performance fees from new strategies will drive margin and earnings variability.
Risks
AMG’s reliance on alternative inflows and affiliate performance creates exposure to fundraising cycles, market volatility, and competitive innovation risk. Outflows in legacy equities persist, and any slowdown in alternative demand or affiliate underperformance could pressure organic growth and fee realization. Regional policy shifts and evolving client preferences (e.g., ESG, U.S. vs. Europe) add layers of uncertainty.
Forward Outlook
For Q3 2025, AMG guided to:
- Adjusted EBITDA of $230 million to $240 million, reflecting current AUM levels and seasonally lower performance fees
- Economic earnings per share of $5.62 to $5.87, assuming a 29.4 million share count
For full-year 2025, management expects:
- Approximately $400 million in share repurchases, subject to market and investment activity
Management emphasized that the full impact of recent affiliate investments and alternative AUM growth will be realized in 2026, setting up a meaningful step up in earnings power as carried interest and performance fees scale.
- Strong new investment pipeline in private markets and liquid alternatives
- Continued shift toward higher-fee, longer-duration assets
Takeaways
AMG’s secular growth strategy is fundamentally reshaping its earnings base, with alternatives now driving the majority of EBITDA and setting up a multi-year compounding opportunity.
- Secular Growth Momentum: Record alternative inflows and affiliate innovation are delivering organic growth at the highest rate in over a decade, with durable earnings quality improvements.
- Affiliate Model as Differentiator: The independent partnership approach is attracting category leaders and creating a scalable platform for product and distribution innovation.
- 2026 Earnings Inflection: Investors should focus on the full-year impact of new affiliate contributions and alternative AUM compounding, which will drive the next leg of earnings growth.
Conclusion
AMG’s strategic pivot to alternatives is delivering tangible results, with business mix, organic growth, and earnings quality all improving. The firm’s disciplined capital allocation, affiliate innovation, and global diversification position it for continued secular tailwinds. The next major earnings step-up will materialize in 2026 as recent investments and alternative growth fully scale.
Industry Read-Through
AMG’s results underscore the asset management industry’s accelerating shift from legacy active equities to alternatives, especially private markets and liquid alternatives. The success of tax-aware and secondary strategies signals strong demand from wealth channels and high-net-worth clients, while the affiliate partnership model demonstrates the value of independence and innovation at scale. Other asset managers with legacy equity exposure face mounting pressure to pivot or risk margin compression, while those with differentiated alternatives capabilities are positioned for superior growth and fee realization.