OMAM. Investor Presentation. Fourth Quarter 2014

Transcription

1 OMAM Investor Presentation Fourth Quarter 2014

2 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 Forward looking statements are identified by words such as expect, anticipate, may, intends, believes, estimate, project, and other similar expressions. Such statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from these forward looking statements. These factors include, but are not limited to, the factors described in OMAM s filings made with the Securities and Exchange Commission, including our Prospectus, as filed with the SEC on October 9, 2014, under the heading Risk Factors. Any forward looking statements in this presentation are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events. We urge you not to place undue reliance on any forwardlooking statements. Non GAAP Financial Measures This presentation may contain non GAAP financial measures. A reconciliation of GAAP to non GAAP measures is included in the appendix to this presentation. 2

3 A MARKET LEADING BUSINESS Diversified Multi Boutique Leading Affiliates Differentiated and Aligned Operating Model Affiliate Profit Sharing and Equity Ownership Experienced Management Team Attractive Growth Strategy Strong Financial Results Further Upside from New Partnerships 3

4 WHAT WE STAND FOR OMAM stands for institutionally driven active investment management, delivered in a diversified multi boutique framework that seeks to generate sustainable alpha for its clients around the globe OMAM provides genuinely strategic capabilities to its Affiliates, helping them to become their clients' trusted partner through the delivery of superior investment performance, innovative offerings, and focused service 4

5 OMAM STRUCTURE FORM FOLLOWS FUNCTION Builds culture and structure which are highly strategic, collaborative, cross functional and Affiliatefocused, led by an experienced management team Affiliate Management & Corporate Development Finance & Capital Management The Affiliates Talent Management Global Distribution 5

6 OMAM TODAY: AT SCALE, DIVERSIFIED, PROFITABLE, AND GROWING Global multi boutique asset management company $221bn AUM across 7 Affiliates offering ~100 strategies Over 600 diverse institutional and sub advisory clients across almost 30 countries; 20% AUM outside U.S.; 38% AUM global/non U.S. equity Strong investment performance with AUM representing 63%, 66% and 78% of revenue outperforming benchmarks on a 1, 3, and 5 year basis, respectively Positive net revenue flows in ten of last twelve quarters and 2014 net flows of $9.5bn AUM with $54.5m of run rate revenue (2) ~33% pre tax economic net income growth year overyear for nine months ended 2014, with a ~39% operating margin (3) 6 Business Highlights (1) (1) Data as of December 31, 2014 (2) Annualized management fee impact, including equity accounted Affiliates (3) Operating margin before Affiliate key employee distributions. See slide 23 for a reconciliation of GAAP to ENI AUM Mix (1) AUM AUM by Affiliate $B % Total $70 32% % 7 3% 3 1% 27 12% 2 1% 12 6% Total $ % AUM AUM by Asset Class $B % Total U.S. Equity $87 40% Alternative, Real Estate & Timber 34 15% International Equity 32 14% Global Equity 30 14% Emerging Markets Equity 22 10% Fixed Income 15 7% Total $ %

7 GROWTH STRATEGY OMAM s multi boutique model is well positioned for growth, with four key areas of focus Four Key Growth Areas New Partnerships Multi Boutique Value Proposition Drives Incremental Growth Opportunities Global Distribution Collaborative Organic Growth (Growth and Product Development Capital) Core Affiliate Growth (Investment Performance and Net Client Cash Flows) OMAM s Aligned Partnership Model Operating autonomy Affiliate level employee ownership Long term perspective Talent management Profit sharing model At scale Affiliates Unique Partnership Approach Provides Stability and the Foundation For Growth 7

8 HIGH QUALITY BOUTIQUE AFFILIATES DRIVE CORE GROWTH (1) OMAM s Affiliates Are At scale, leading Affiliates Excellent individual brands Best of breed investors Institutionalized businesses with deep talent Multi generational leadership Broadly diversified Numerous product offerings Aligned with key growth trends Diverse, global client bases HQ: Richmond, VA Founded: 1969 AUM: $12.0bn A value oriented investment manager focused on small and mid cap U.S. equity, international equity and fixed income strategies HQ: Boston, MA Founded: 1986 AUM: $70.3bn A leading quantitatively oriented manager of active global and international equity, fixed income and alternative strategies HQ: Dallas, TX Founded: 1979 AUM: $99.7bn A widely recognized value oriented investment manager of U.S., international and global equities, fixed income and a range of balanced investment management strategies HQ: Portland, OR Founded: 1981 AUM: $6.8bn A leader in sustainable timberland and natural resource investment management delivering superior investment performance by focusing on unique acquisition opportunities, client objectives and disciplined management Strong investment performance 8 Competitive, consistent investment performance Long track records of success Profitable and growing Positive revenue growth Attractive operating margins HQ: Baltimore, MD Founded: 1972 AUM: $2.1bn A value driven domestic equity manager with product offerings across the entire capitalization range and a primary focus on small cap companies (1) Affiliate AUM data as of December 31, 2014 HQ: Chicago, IL Founded: 1966 AUM: $26.7bn A leading real estate investment manager of high quality global strategies focused on private real estate equity, public real estate securities and real estate debt HQ: Boston, MA Founded: 2005 AUM: $3.2bn A specialized growth equity investment manager of small cap international and emerging markets equity strategies

9 DIVERSIFIED AUM MIX BY ASSET CLASS, CLIENT AND GEOGRAPHY (1) Highlights Asset Class Client Type Well positioned across asset classes, with strong presence in attractive global demand pools Institutional focus, with significant sub advisory position As % of AUM Fixed Income EM Equity Alternatives 7% 10% Global Equity 14% 15% 29% U.S. Large Cap Value U.S. Small / SMID Cap 4% U.S. Mid Cap 4% Value 2% 14% U.S. Core / Blend Int'l Equity Client Geography As % of AUM Old Mutual Group Endowment/ Foundation Public/ Government Commingled Trust/UCITS Institutional $137bn, 62% Mutual Fund Other 1% 3% 2% 6% As % of AUM As % of Management Fee Revenue (2) 2% 32% 20% 34% Key Client Relationships Sub advisory Corporate/ Union Growing non U.S. client reach Low client concentration Australia Middle East Asia Europe Other 17% 2% 2% 4% 5% 7% 80% U.S. All Other 65% Top 5 7% 11% Top 6 10 Top Key client relationships as of June 30, 2014 (1) Data as of December 31, 2014; AUM of $221bn (2) Includes equity accounted Affiliates 9

10 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 in products outperforming their benchmarks (1) OMAM also uses equal weighted performance as it considers earlier stage products that may grow to have significant impact Asset weighted performance is broadly used across the industry Revenue Weighted (2)(3) Equal Weighted (>$100m) (2)(4) Asset Weighted (2)(5) % outperformance vs. benchmark % outperformance vs. benchmark % outperformance vs. benchmark 100% 100% 88% 100% 80% 78% 76% 80% 63% 66% 66% 80% 60% 60% 60% 48% 52% 64% 40% 40% 40% 20% 20% 20% 0% 1 Year 3 Year 5 Year 0% 1 Year 3 Year 5 Year 0% 1 Year 3 Year 5 Year 3Q 14 66% 70% 81% 3Q 14 75% 80% 91% 3Q 14 53% 57% 68% 4Q 13 71% 91% 82% 4Q 13 77% 87% 81% 4Q 13 57% 91% 85% 10 (1) Excludes revenue in products which are not benchmarked; includes management fee revenue from equity accounted Affiliates in the analysis. (2) Data as of December 31, (3) Revenue Weighted: Calculates each strategy s percentage weight by taking its estimated composite revenue over total composite revenues in each period, then sums the total percentage of strategies outperforming. (4) Equal Weighted (>$100m): Each strategy over $100m has the same weight, then sums the total percentage of strategies outperforming. (5) Asset Weighted: Calculates each strategy s percentage weight by taking its composite AUM over total composite AUM in each period, then sums the total percentage of strategies outperforming.

11 RISING NET CLIENT CASH FLOWS AND REVENUE IMPACT AUM Net Client Cash Flows ( NCCF ) Revenue Impact of NCCF (1) $B $M $4 $3.8 $20 $3.6 $18.4 $19.1 $20.0 $3.0 $3.2 $3.3 $3.1 $16.5 $15 $2 $1.2 $1.6 $1.0 $10 $10.0 $11.6 $8.6 $5 $4.5 $5.8 $0 $1.1 $0 ($1.0) ($1.0) ($2) ($1.4) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2012A 2013A 2014A ($5) ($3.0) ($4.4) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2012A 2013A 2014A $0.4 $10.5 $9.5 $11.2 $42.5 $ (1) Annualized revenue impact of net flows represents the difference between annualized management fees expected to be earned on new accounts and net assets contributed to existing accounts, less the annualized management fees lost on terminated accounts or net assets withdrawn from existing accounts, including equity accounted Affiliates. Annualized revenue is calculated by multiplying the annual gross fee rate for the relevant account by the net assets gained in the account in the event of a positive flow or the net assets lost in the account in the event of an outflow.

12 STRATEGIC ENGAGEMENT FRAMEWORK Collaborating with Affiliates begins with OMAM s aligned incentive structure Establish incentives for Affiliate partners through: i) meaningful equity ownership in their firms and ii) a profitsharing structure Bonuses set as percentage of Affiliate pre bonus profits Post bonus profits distributed based on ownership Affiliates participate in profitability as employee and owner Equity recycled to next generation through permanent formulaic structure Promotes partnership among owners Aligns economic interests through market cycles Achieves risk sharing for growth investments Offers meaningful wealth creation opportunity Aids succession planning Alignment of Incentives Provides firepower to attract and retain the best investment talent Strategic Engagement Collaborative Organic Growth Strategically expand into new products, strategies, geographies and channels, including lift outs / acquisitions Seed and co investment capital to launch new products ~$150m ongoing seed capital currently deployed ~$15bn of current AUM were generated by products seeded since 2004 Talent Management Develop talent, design incentive structures, promote equity ownership, establish succession plans Strategic Business Support Leverage scale across Affiliates and provide distinct strategic operational expertise (e.g., risk management, legal, internal audit) Global Distribution Expand distribution reach to complementary markets and channels that are more scale oriented or specialized Raised ~$9.5bn in gross flows since

13 CENTER LED GLOBAL DISTRIBUTION PLATFORM LED BY SPECIALIZED, EXPERIENCED SALES PROFESSIONALS Overview Global Distribution broadens depth and reach of the Affiliates, drives growth and provides additional value through i) accessing new markets, ii) creating new business opportunities, and iii) further diversifying client base Driven by specialist, experienced and investment centric sales professionals with broad and deep client relationships in their targeted markets and channels Proven track record, with ~$9.5bn gross flows raised since 2012 Canada (1) Toronto based 1 dedicated professional United States (4) Boston based 1 Executive 3 distribution professionals focusing on subadvisory (mutual fund and variable annuity) & DCIO Latin America (1) London based 1 dedicated professional Global Distribution Footprint (1) Middle East (1) London based 1 dedicated professional Europe (5) London based 4 distribution professionals covering U.K., continental Europe, Benelux, Nordics, and OM plc 1 compliance professional Asia (ex Japan) (3) Hong Kong based 3 dedicated professionals The team s client service and acquisition model is completely transparent and highly coordinated Funds Raised Increasing and Diversifying Global Distribution Gross Flows Raised ($bn) $7 $6 $5.5 $5 $0.6 $4 $3.7 $3 $0.8 $2.4 $2 $2.1 $2.5 $1 $0.3 $0.8 $0 $ (2) (3) Institutional Sub Advisory Old Mutual Group 13 (1) Numbers in parenthesis represent number of Global Distribution employees covering region; one individual splits time between OM plc coverage and Latin America (2) Global Distribution initiative launched in 2012 (3) Data as of December 31, 2014

14 STRATEGIC ENGAGEMENT CASE STUDIES Diversification through Globalization and Product Line Expansion Strategic Opportunity Broaden Non US Product Line through EM and ACWI: Leverage existing product suite and provide additional opportunities for global growth Enhance LDI and Credit Offerings: Larger, skilled team to drive further market penetration of the Fixed Income business as long credit demand grows Position Campbell for Global Growth: Expand beyond Campbell s market leading position in the U.S., presenting new opportunities as global timber investing gains acceptance Launch Global Fund and Expand Non US Physical Presence: Address client demand for global products and increase market share OMAM Engagement and Support Seed Capital: >$25m seed capital supporting Barrow Hanley s non U.S. platform, including $13m for ACWI and $10m for EM launches Capital Support: Provided multi year financial support for EM and Fixed Income build outs without impairing incentives for existing Barrow Hanley employees Talent Recruitment: Worked with Barrow Hanley to structure economic framework to attract, retain, and incentivize talent OMAM Global Distribution Support: OMAM supports international marketing effort; ~$6.5bn raised across three products from Co Investment Support: $30m interim financing for a $670m non U.S. timberland privatization Capital Support: Provided multi year financial support for Global build out without impairing incentives for existing Campbell employees Talent Recruitment: Assisted with strategy and implementation of hiring key global timberland talent OMAM Global Distribution Support: OMAM marketing new Global timber fund to consultants and potential clients 14

15 DISCIPLINED APPROACH TO EVALUATING POTENTIAL NEW PARTNERS OMAM utilizes a seven question approach to assess opportunities People Is there talent? Process Product Potential Profitability Price Can talent be delivered in a rigorous, repeatable and articulable process? Is the process in an attractive asset class that is strategic to OMAM and capable of delivering sustained returns? Can the firm build a meaningful presence in the identified asset class on a global basis? Can the firm run itself as a growing and successful business? Can a transaction be structured that is economically accretive and aligns the partners going forward? Partnership Can a successful partnership be established? 15

16 FINANCIAL OVERVIEW 16

17 FINANCIAL HIGHLIGHTS (1) Attractive Performance and Flows Investment Performance vs. Benchmark (2) % of revenue in products beating benchmark Contribute to Strong Top line Growth AUM $bn With Model Driven Enhanced Operating Margins and Earnings ENI Operating Margin (3)(4) % 100% 75% 50% 25% 69% 38% 73% 71% 72% 69% 91% 82% 78% 66% Year 5 Year Net Flows $bn % $250 $200 $150 $100 $137 ENI Revenue (4) $m $157 $199 $ % 34% 28% 32% 33% 34% 39% Pre Tax Economic Net Income (4) $m $10 $5 $10.5 $ % 4.8% 8% 4% $800 $600 $435 $451 $528 $635 $200 $150 $124 $131 $153 $204 $0 $ % 0% $400 $200 $100 $50 ($5) ($4.6) Net Flows % of BOP AUM (4%) $ $ (1) Data as of December 31 for each of the years (2) Based on revenue weighted investment performance (3) Earnings after variable compensation as a percentage of ENI revenue (4) See slide 23 for a reconciliation of GAAP to ENI 17

18 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, $M Q O Q Growth Y O Y Growth 1 2 Management fees $152 $136 12% $590 $500 18% Performance fees % % Other income, incl. equity accounted Affiliates % % Attractive revenue growth: High quality, recurring management fees 3 4 Total ENI revenue % % Less: Total ENI operating expenses (63) (55) 16% (221) (193) 15% Earnings before variable compensation % % Less: Variable compensation (46) (43) 8% (170) (154) 10% Expense control: Operating scale benefits support improved margin Earnings after variable compensation % % 5 Operating Margin 41% 33% 39% 34% Less: Affiliate key employee distributions (11) (10) 14% (40) (28) 41% Earnings after Affiliate key employee distributions % % Pre tax economic net income $63 $39 62% $204 $153 33% Economic net income $47 $33 43% $151 $123 23% Affiliate equitization complete at year end 2014 Lower tax rate: Estimated to be 27 30% 18 (1) See slide 23 for a reconciliation of GAAP to ENI.

19 ONGOING FINANCIAL FLEXIBILITY Attractive Financial Profile for Growth High cash flow generating business Balance sheet flexibility Debt / EBITDA (1) :.8x EBITDA / pro forma interest (2) : 53.0x Available capacity on $350m revolving credit facility: $177m Appropriate working capital retained Approach to Capital Management Sustainable dividend payment Target dividend payout of 25% of ENI earnings Collaborative organic growth Growth, seed and co investment capital to promote the development of new funds / capabilities IRR based approach to investing in the business New partnerships Disciplined approach to investing in new Affiliates Opportunistic share repurchases (1) Based on 2014 Adjusted EBITDA of $210.7m and $177m of debt (2) Based on 2014 Adjusted EBITDA of $210.7m and $4m of interest on $177m of debt 19

20 INVESTMENT HIGHLIGHTS OVERVIEW Diversified by Brand, Strategy, Client, Asset Class Strong, Consistent Investment Performance Across Cycles Positive Net Revenue Flows in Nine of Last Eleven Quarters Leading Affiliates At Scale, Diverse, Growing Collaborative Model Aligned, Enhances Growth Aligned Economic Operating Model Collaborative Framework, Focused on Active Engagement with Affiliates Global Distribution Adds Value and Expands Reach Experienced Management Opportunity to Accelerate Growth Through New Affiliate Partnerships New Partnership Opportunities Disciplined, Emphasis on Quality Strong Results Profitable, Sustainable Consistent Growth in AUM, Revenue, ENI, and Operating Margins Disciplined Approach, Clear Strategy and Process Compelling Partner to Independent Managers Seeking Growth Financial Flexibility with Strategic Approach to Capital Management Continued Growth Through Investments in the Business 20

21 APPENDIX 21

22 ECONOMIC NET INCOME FINANCIALS Overview Management uses ENI to reflect its view of the underlying economic earnings of the business and shareholder value creation ENI used to determine resource allocation, dividend payout, appropriate balance sheet leverage and compensation Types of Adjustments Reclassification of U.S. GAAP revenue and expense items to better reflect how OMAM manages the business (adjustments which have no impact on net income) Exclusion of certain non cash, non economic expenses or revenue, or inclusion of cash benefits not recognized under U.S. GAAP (which impacts net income) Reclassifications Funds: For consolidated Funds, exclusion of economics not attributable to OMAM shareholders, and inclusion of Fund management fees in management fee revenue Revenue: Shift earnings from equity accounted Affiliates into revenue Compensation: Identify variable compensation and Affiliate key employee distributions separately from the aggregate compensation line; reclassify commissions to operating expenses from compensation 22

23 ECONOMIC NET INCOME FINANCIALS (CONT D) Legacy Items: Exclusion of certain legacy expenses and revenues no longer applicable following Reorganization Exclusions Non-Cash Revaluations of Affiliate Equity: Exclusion of non-cash expenses related to revaluation of Affiliate employee-owned equity Acquisition-Related Amortization: Exclusion of acquisition-related amortization and impairments Discontinued Operations: Exclusion of discontinued operations and restructuring costs related to exit of a distinct product or line of business Tax: Tax impact of above items and other one-off tax adjustments unrelated to current operations Future Adjustments Exclusion of capital transaction costs Exclusion of seed capital and co-investment gains and losses and related financing Exclusion of non-cash interest expense related to unwinding of discount Inclusion of tax benefits related to tax amortization of acquired intangibles or NOLs 23

24 RECONCILIATION: GAAP TO ENI Three Months Ended, December 31, Years Ended December 31, $m U.S. GAAP net income attributable to controlling interests $34.3 $7.1 $51.7 $25.7 Adjustments for restructuring & reorganization related to IPO: 1i. Non cash notional parent corporate cost allocation ii. 2 Intercompany interest expense iii. 3 Co investment (gain) (1) (2.4) (2.6) (3.0) Total restructuring and reorganization adjustments $0.0 $15.7 $50.6 $72.5 Adjustments to reflect the economic earnings of the Company: iv. 4 (1) (2) Key employee owned equity and profit interest revaluations v. 5 Amortization of goodwill and acquired intangibles (1) vi. 6 Discontinued operations and restructuring costs 0.4 (2.5) 5.8 (6.3) Total adjustment to reflect earnings of the Company $26.3 $13.9 $88.9 $ (1) Less: Tax effect of above adjustments (10.4) (5.6) (33.2) (18.0) Less: ENI tax normalization (3.2) 1.7 (6.7) 1.2 Economic net income after taxes $47.0 $32.8 $151.3 $122.9 ENI Adjustments i. 1 Exclude notional non cash corporate cost allocations ii. 2 Exclude interest expense historically paid to OM plc as the related debt was restructured in connection with the Offering and intercompany interest will be eliminated from consolidated results going forward iii. 3 Exclude historical mark to market co investment gains and losses as co investments and ongoing returns have been wholly allocated to OM plc in connection with the Offering v. 4 Exclude non cash expenses representing changes in the value of Affiliate equity and profit interests held by Affiliate key employees vi. 5 Exclude amortization or impairment expenses related to acquired goodwill and other intangibles as they represent non cash charges that do not result in an outflow of tangible economic benefits from the business 6 vii. 7 viii. Exclude results of discontinued operations attributable to controlling interests as they are not part of the ongoing business, and restructuring costs incurred in continuing operations which represent an exit from a distinct product or line of business Excludes one off tax benefits or costs unrelated to current operations 24 (1) Tax affected items for which adjustments are included in Tax effect of above adjustments line; taxed at 40.2% U.S. statutory rate (including state tax). (2) Includes $31.6 million related to the purchase of additional ownership interests in an Affiliate. Please see the Company's Prospectus, filed with the SEC on October 9, 2014, for additional information regarding this transaction.

25 REVALUATION AND RECYCLING OF EMPLOYEE EQUITY GAAP Accounting vs. ENI Economics Illustrative GAAP Revaluation Expense Cash Neutral Recycling of Affiliate Equity Affiliate employees own 30% of Affiliate Affiliate earnings increase from $20m to $25m $m Year 1 Year 2 Change Affiliate earnings $20.0 $ $5.0 x Employee ownership 30% 30% Affiliate key employee distributions $6.0 $7.5 + $1.5 x Fixed valuation multiple (Illustrative) 6.0x 6.0x Value of employee equity $36.0 $ $9.0 $1.7m Cash Puts typically limited to 10% of OMAM distributions ($17.5m) Cash bonus reduced by $1.7m (paid in equity) OMAM cash distribution increased by $1.7m due to reduced cash bonus OMAM share of Affiliate earnings (70%) Less: GAAP revaluation adjustment (9.0) (9.0) (1) GAAP earnings $14.0 $8.5 ($5.5) Existing Employee Owner New Employee Owner GAAP Result: ENI Result: (1) vs. Economic net income A 25% increase in Affiliate earnings results in a $5.5m GAAP earnings decline for OMAM ($3.5m increase less $9m revaluation of Affiliate equity) $9m revaluation is excluded; ENI increases by $3.5m pre tax Recycled equity vests on 3 rd anniversary of grant, enhancing employee retention $1.7m value of Affiliate equity grant amortized ratably over 4 years for GAAP and ENI (25% at grant and each of the next 3 anniversaries) Amortization included in variable compensation (1) Represents pre tax earnings 25