Affiliated Managers Group: A Strategic Shift to Alternatives Fuels Buy Opportunity

Affiliated Managers Group (AMG) is undergoing a transformative shift toward alternative investments, a strategic pivot that Goldman Sachs recently deemed compelling enough to upgrade its rating to Buy with a price target of $218. This move reflects growing confidence in AMG's ability to capitalize on rising demand for alternative assets, even as it navigates near-term headwinds tied to equity market volatility and temporary performance fee declines.

The Strategic Shift: From Traditional to Alternative

AMG's evolution from a traditional asset manager to a leader in alternative strategies is now central to its growth narrative. The company's first-quarter 2025 results highlight this transition: $14 billion in net client cash inflows into alternative strategies—a record—were driven by standout performance at its affiliates AQR and Pantheon. Liquid alternatives, a key focus area, saw $10 billion in net inflows, the highest quarterly figure in AMG's history. Meanwhile, private markets raised $3 billion, underscoring institutional investor confidence in specialized strategies like real estate and infrastructure.

The shift is not just about asset flows. Alternative strategies now account for 50% of AMG's earnings, up from 30% in prior years. This diversification reduces reliance on volatile equity markets, where $14 billion in net outflows occurred in Q1 due to broader market headwinds.

Catalysts to Watch: Goldman's Buy Rating and Strategic Deals

Goldman Sachs' upgrade, announced in June → 2025, hinges on organic growth inflection points and a robust pipeline of strategic partnerships:
- AQR's momentum: The firm's quantitative equity strategies continue to attract institutional capital, with AQR's performance fees contributing to AMG's top-tier earnings stability.
- Verition acquisition: AMG's minority stake in Verition Fund Management—closed in Q2 2025—adds $12.6 billion in assets under management (AUM) and exposure to multi-strategy alternatives. This partnership exemplifies AMG's “capital-light” approach, enabling it to grow without heavy upfront investments.
- Private markets expansion: Commitments totaling $700 million to new partnerships with NorthBridge, Verition, and Qualitas Energy further diversify AMG's alternative revenue streams.

Near-Term Challenges: EBITDA Pressures and Valuation Concerns

AMG's Q1 2025 results were mixed. While alternative inflows surged, adjusted EBITDA fell 12% year-over-year to $228 million due to lower performance fees and the absence of a one-time private market catch-up fee from 2024. Analysts also flagged equity outflows and a $77 million write-down tied to mutual fund impairments.

These headwinds have kept a lid on near-term profits. Goldman Sachs expects Q2 2025 EBITDA of $210–$225 million, citing seasonally weak performance fees. However, these challenges are seen as temporary. Analysts emphasize that AMG's long-term growth drivers—$400 million in annual buybacks, institutional fundraising momentum, and retail product innovation—will outweigh short-term volatility.

Valuation: A Discounted Entry Point?

At a price-to-EBITDA multiple of 7.5x, AMG trades in line with its historical average, offering a margin of safety. Goldman's $218 price target assumes a conservative 7.5x multiple by 2026, while consensus estimates suggest upside potential. The average analyst target of $200.83 implies a 4.5% premium to current levels, while GuruFocus's GF Value of $193.00 highlights minimal near-term risks.

Critics, like TD Cowen—which maintains a “Hold” rating—argue that AMG's stock has already reflected much of its positive news. Yet, with 7% annual core EBITDA growth projected for 2026–2027 and alternative strategies driving half of earnings, the case for long-term outperformance remains strong.

Investment Thesis: Buy the Dip, Play the Long Game

AMG's strategic shift to alternatives is no longer a bet on the future—it's already materializing. The company's ability to attract capital in liquid and private markets, paired with its disciplined capital returns, positions it to thrive in a low-growth macro environment.

While near-term EBITDA pressures and equity outflows warrant caution, they are outweighed by:
1. Structural tailwinds: Alternatives now represent $15 trillion in global AUM, growing 3x faster than traditional assets.
2. Leadership continuity: Thomas M. Wojcik's promotion to President signals a sustained focus on high-margin alternatives.
3. Valuation upside: A potential expansion to 8.0–8.5x EBITDA (in line with peers) could unlock significant shareholder value.

Final Analysis

Affiliated Managers Group is a BUY at current prices. Despite Q2 headwinds, its pivot to alternatives has created a durable earnings base, with catalysts like Verition and AQR's performance fees still underappreciated by the market. Investors should view dips below $190 as opportunities to build positions, with a long-term horizon.

As the alternative investment sector matures, AMG's partnerships-first strategy—combining scale with affiliate autonomy—could make it a leader in one of the most resilient segments of financial services.