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Money Management

AMG leader declares it’s about the people

Former CEO Healey talks about growing the money management franchise

Sean Healey said it was clear early on that partnerships with alpha generators were the best approach for AMG.

For Sean M. Healey, the most gratifying aspect of working for nearly a quarter of a century at Affiliated Managers Group Inc. is the deep relationships that developed with employees, money management partners, clients and investors during his tenure.

While he acknowledged in an interview that one of AMG's more tangible accomplishments is the 1,186% growth of assets under management by the firm's 39 affiliated investment boutiques to $831 billion in the 24 years ended March 31, he stressed "one of the best things about working at AMG has been watching our employees grow and celebrating their successes with them as their partner."

Mr. Healey served as CEO of the West Palm Beach, Fla.-based firm from 2005 through the end of May, when he was named executive chairman. He has been diagnosed with amyotrophic lateral sclerosis, known as Lou Gehrig's disease, and is stepping back from active involvement in daily operations to receive medical treatment.

Nathaniel Dalton succeeded Mr. Healey as CEO; he was president, chief operating officer and an AMG co-founder.

Prior to being recruited to AMG as executive vice president in 1995 by then-CEO William J. Nutt, Mr. Healey was an investment banker in the mergers and acquisitions group at Goldman Sachs Group (GS) Inc.

Of the financial companies he worked with while at Goldman Sachs, Mr. Healey said he found asset management companies to be particularly interesting and attractive because of "the unique elements, especially in active management. In 1993, in comparison to big banks and other financial institutions, active money managers put a primacy on people. There was something magic about the brilliance of a relative few individuals who could take an idea and together create a culture and value, and generate alpha for their clients."

Mr. Healey's fascination with and admiration for active management was a good fit for AMG, which was launched in 1993 to assemble a lineup of active managers.

Mr. Healey attributed AMG's success primarily to its practice of creating incentive-oriented partnerships with investment boutiques by acquiring minority stakes — typically amounting to a 30% share of the revenue of the manager — in contrast to its larger competitors at the time that nearly always acquired 100% of the equity of small managers.

"In 1995, it was not obvious that there was something wrong with the other firms' approach, but it was clear to us that there was something right about an approach that was more partnership oriented," he said.

Money management barbell

The focus of AMG's executive leadership on the acquisition of stakes in active money managers led to a recognition of the investment management universe's barbell — passive management on one end and alpha-generating strategies on the other.

"We saw the barbell early, and we were on the alpha end," Mr. Healey said. "We have had very strong, sustained organic growth from our active managers because passive strategies can't generate alpha over time."

The executives' conviction that alpha generators were the future source of success for the firm led to pre-financial-crisis acquisitions of alternative investment managers such as hedge fund managers AQR Capital Management LLC, BlueMountain Capital Management LLC and ValueAct Capital Management LP, as well as Capula Investment Management LLP, First Quadrant LP and Systematica Investments Services Ltd.

The firm also loaded up on non-U.S. managers such as Baring Private Equity Asia Group Ltd. and Genesis Asset Managers LLP.

AMG's boutique ranks now are split 60%-40% between traditional and alternative managers and about 75% of total assets under management are in global equities and alternative investment strategies.

The firm also very deliberately diversified its client base, adding offices in Asia, Australia, Canada, Europe and the Middle East that provide centralized support and distribution services for AMG investment affiliates as well as marketing support, Mr. Healey said.

Ultimately, Mr. Healey said the secret of AMG's success in manager selection is in finding owners who are intent on creating an "enduring franchise that extends beyond their working life and creates value for their clients and successors. They want to create and leave behind a legacy of excellence."

"For that to happen, the incentive and partnership structure needs to be in place and succession should be planned well ahead of when it's upon you," Mr. Healey said, with a bittersweet comparison to AMG's own succession plan.

"This didn't come in the time or the manner I expected, but the succession is being managed incredibly well and seamlessly," Mr. Healey said.

Mr. Dalton expressed the sentiment of many when he said that he stands in "resolute support of Sean as he pursues treatment in his fight against ALS," in a company news release about his promotion to CEO.

Confidence in AMG team

As a public company, AMG had to file an 8-K form with the Securities and Exchange Commission announcing the change of leadership.

The substance of the filing was a letter from Mr. Healey to "colleagues and partners" in which he expressed his "absolute confidence" in AMG's executive team generally and specifically in Mr. Dalton's capability to lead the firm. "AMG has been and will continue to be the professional project of my life" and that leading the firm was "the greatest honor" in his career, he wrote.

"While ALS is a progressive disease, the rate of progression varies by individual," Mr. Healey wrote in the letter, expressing his intent to play an active role in pushing AMG's strategy forward and assisting Mr. Dalton and the rest of the management team.

Mr. Healey said in the interview that he felt "such an incredible wave of support and friendship" from people all over the world, particularly from people in the AMG affiliates, after his letter was made public.

Those relationships with the leaders of the AMG affiliates were professional at the outset, but Mr. Healey said they grew deeper and more personal over the years, adding "I'm feeling that now. People have been so kind, gracious and supportive, which is consoling and gratifying to me personally, but it also speaks to the culture we've built that will be sustained with Nate as CEO."