Under the terms of the agreement, AMG will acquire the interests in the firms from Petershill Fund I for approximately $800 million in total consideration, which will be paid in cash at closing, funded up to 50% in equity. Upon the closing of the transaction, senior management at each of the firms will continue to hold an unchanged majority of the equity in each respective business and retain operating autonomy in the business under the same terms as the prior arrangements with Petershill Fund I. In addition, upon closing, AMG’s assets under management are expected to increase by $55 billion to nearly $700 billion (pro forma as of March 31, 2016), and AMG expects that the transaction will increase Economic earnings per share by $0.50 to $0.80 in 2017. These firms are recognized as among the industry’s best managers across an array of alternative investment strategies, including systematic trading and managed futures; fixed income relative value; equity long/short; and global macro, and serve a wide range of institutional, retail, and high net worth investors around the world:

• Winton Capital Group Ltd. is a global investment manager that utilizes scientific methods to develop investment systems across a broad range of products from diversified multi-asset offerings to regional long-only equities, with approximately $34.5 billion in assets under advisement for a diverse set of investors including some of the world’s largest institutions. Founded in 1997, the firm is headquartered in London and has over 400 employees, with additional offices in Oxford, Zurich, Hong Kong, Shanghai, New York, Tokyo, Sydney, and San Francisco
• Capula Investment Management LLP is a global fixed income specialist firm located in London with affiliated entities in Greenwich, CT, Hong Kong, and Tokyo. With approximately $12.7 billion under management, the firm manages absolute return, enhanced fixed income and tail risk strategies. Established in 2005, the firm focuses on developing innovative investment strategies that exhibit low correlation to traditional equity and fixed income markets
• Partner Fund Management, L.P. (“PFM”) manages approximately $4.3 billion, primarily in global equities, across global diversified long/short, global long, and global healthcare strategies. Founded in 2004, PFM seeks to generate long-term capital appreciation through a fundamental research process integrated with a macro framework. The firm is headquartered in San Francisco, CA and has 69 employees
• Mount Lucas Management LP manages approximately $1.7 billion across global macro, a diversified futures index strategy, a commodity futures index strategy, and large cap equity. The firm was founded in 1986 with the launch of an innovative, actively managed diversified futures program, and is headquartered in Newtown, PA with over 20 employees
• CapeView Capital LLP is a London-based alternative manager operating a European credit and distressed fund as well as a European equity long/short fund. Founded in 2001, the firm currently has 23 staff and manages approximately $1.7 billion

“We are delighted to be investing in these excellent firms, and have tremendous regard for the businesses built by their outstanding management teams,” said Sean M. Healey, Chairman and Chief Executive Officer of AMG. “Consistent with AMG’s partnership philosophy, the management team of each firm will continue to have operating autonomy and substantial retained equity in their own businesses.”

“With our global scale and capabilities, and 23-year track record of successful investments, AMG is the preeminent partner to leading boutique firms around the world, and has an expanding forward opportunity set to invest in the world’s most successful independent investment managers,” Mr. Healey continued. “We are confident in our ability to continue to generate earnings growth both from the organic growth of our existing business and through making accretive investments in additional outstanding firms around the world.”

Closing of the transaction is subject to customary closing conditions, and AMG’s investment in interests representing approximately half of the total transaction value is expected to close during the third quarter of 2016, with the balance of the investment expected to close by year-end 2016.

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Based in Hong Kong, Baring Asia is the largest dedicated Asian private equity firm, and advises funds with total assets under management of over US$8 billion. Founded by Jean Eric Salata in 1997, Baring Asia’s investment philosophy is deeply rooted in the principles of capital preservation and diversified portfolio construction. Through its pan-Asian investment platform spanning offices in Hong Kong, Shanghai, Beijing, Mumbai, Singapore, Jakarta, and Tokyo, Baring Asia’s 66 investment professionals specialize in growth-oriented investments, sponsoring management buyouts and providing capital to companies for expansion, recapitalization or acquisitions.

With an 18-year track record of alpha generation across multiple business cycles, Baring Asia’s proprietary deal origination is facilitated by the firm’s excellent reputation across Asia and lengthy list of IPO success stories, as well as the depth of its local networks across an array of industries. Baring Asia has received numerous awards for its outstanding performance, including 2013 “Firm of the Year” by Asian Venture Capital Journal India and 2013 “Mid-Market Firm of the Year in Asia” by Private Equity International, and most recently, the Asian Venture Capital Journal selected Baring Asia as the 2015 winner for “Fundraising of the Year – Large Cap” and Jean Salata as “PE Professional of the Year.”

Baring Asia has over 30 portfolio companies across Asia which had in aggregate 100,000 employees and US$30 billion in revenues in 2014, and the firm’s diversified presence limits its exposure to volatility in any single market. The firm’s client base comprises over 200 leading institutional investors from over 20 countries, including pension plans, insurance companies, endowments, foundations, and sovereign wealth funds.

“Baring Asia is AMG’s first Affiliate based in Asia, and with its exceptional two-decade investment track record of returns and outstanding prospects for future growth, the firm is an excellent addition to our Affiliate group,” said Sean M. Healey, Chairman and Chief Executive Officer of AMG. “As the leading pan-Asian private equity firm, with over 70 investments across its history, Baring Asia has a tremendous forward opportunity set in its private equity strategies; we see meaningful demand from sophisticated clients globally for exposure to secular growth opportunities in Asia, including through the private equity format. Baring Asia also has a real estate fund, leveraging its regional investment experience and offering excellent prospects for further growth over time.

As with other recent new Affiliate investments in Europe and Africa, our partnership with Baring Asia demonstrates the global appeal and broad applicability of AMG’s partnership approach. I am very pleased to welcome Jean Salata and his partners to our Affiliate group, and we look forward to working with our new partners on a variety of initiatives to enhance the firm’s future growth and development.”

“We are extremely excited about this new partnership with AMG, and believe it brings significant competitive advantages for our business. AMG’s investment is an endorsement of our firm’s position as a leading Asian alternative asset manager, and its unique partnership model allows us to preserve our investment independence, operational autonomy, and focus on generating strong returns for our clients over the long term,” said Jean Eric Salata, Founding Partner and Chief Executive Officer of Baring Asia. “With its unparalleled track record as a partner to independent firms, including leading boutique alternative firms globally, and the proven results of its global marketing and distribution platform, we believe AMG is the ideal permanent partner for Baring Asia as we move into our next phase of growth.”

Baring Asia will use the proceeds of the transaction to fund the growth of its business and further align interests between its LPs and staff at the firm. As part of the transaction, Baring Asia’s leadership has agreed to long-term commitments with the firm. The terms of the transaction were not disclosed.

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Based in Philadelphia, myCIO is a Comprehensive, Independent and Objective (CIO) financial advisory firm founded in 2005, advising approximately $7 billion in client assets.  Senior partners David Lees, James Biles and Paul Bracaglia lead a team of over 30 professionals providing comprehensive and integrated advice regarding financial, tax and estate planning, asset allocation and investment management to corporate executives, families, endowments, trusts and retirement plans.  myCIO offers tailored portfolios and strategies designed to meet clients’ overall financial objectives while seeking to minimize taxes and market risk.

“myCIO is a leading wealth advisory boutique that complements our existing Affiliate group,” said John W. Copeland, President of AMG Wealth Partners.  “As the demand for tailored, high-end wealth advisory services increases, myCIO’s unique focus on corporate executive financial and retirement planning, combined with customized investment advice, provides an outstanding platform for continued growth.  David, Jim, Paul and their team have built an impressive business over the past decade.  We look forward to helping expand their capabilities to a broader client base while setting the course for incremental future growth.”

“Our partnership with AMG Wealth Partners allows us to continue our focus on serving clients, while ensuring our long-term independence and autonomy,” said Mr. Lees.  “Jim, Paul and I are excited by this opportunity to elevate our key next generation advisors to partners in the firm.  We believe that AMG Wealth Partners will play an important role in supporting our growth and scale while further strengthening our ability to meet the current and future needs of our clients.”

As part of the transaction, myCIO’s senior professionals have agreed to long-term commitments with the firm.  The terms of the transaction were not disclosed.

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The analysis incorporated data from more than 1,200 investment management firms and nearly 5,000 institutional equity strategies comprising approximately $7 trillion in assets under management. The study found that active boutique investment managers have consistently outperformed both non-boutique peers and indices over the past twenty years, in many cases by a wide margin.

Key Highlights from the Study

The analysis found that over the last twenty years:

• Boutiques significantly outperformed non-boutiques: The average boutique outperformed the average non-boutique in 9 of 11 equity product categories, by an average annual 51 basis points. Investing exclusively with boutiques across all categories would have created 11 percent greater wealth for clients over the last twenty years, as opposed to investing with non-boutiques.
• Boutiques delivered significant value as compared to primary indices: The average boutique strategy outpaced its primary index in 9 of 11 equity product categories, by an average annual 141 basis points after fees.
• Top-performing boutiques generated exceptional excess returns: Top-decile and topquartile boutique strategies added 1,133 basis points and 589 basis points, respectively, on an average annual basis after fees as compared to their primary indices.

“Our comprehensive study demonstrates that boutique investment managers have outperformed non-boutique peers and created significant value for clients over the long term,” stated Sean M. Healey, Chairman and Chief Executive Officer of AMG.

“In addition, top-performing boutiques added 55 basis points more value than poorly performing boutiques detracted on an annual basis, illustrating that these strong returns were not simply a function of higher risk,” said Andrew C. Dyson, AMG’s Executive Vice President and Head of Global Distribution. “The top-performing boutiques also created exceptional net excess returns, with top-quartile boutique strategies outperforming their primary indices by an average annual 589 basis points after fees. These results support our belief that the alignment of interests fundamental to the boutique model creates significant value for clients.”

Several core characteristics position boutiques to deliver consistent, superior long-term investment performance, including:

• Principals have significant, direct equity ownership, ensuring alignment of interests with clients;
• Presence of a multi-generational management team, fully engaged across the business; • Entrepreneurial culture with a partnership orientation, which attracts and retains the most talented investors;
• Investment-centric organizational alignment, including careful management of investment capacity; and
• Principals have a long-term orientation and are committed to building an enduring franchise.

“The primacy of a boutique investment manager lies in its focused, entrepreneurial culture and ownership structure, with principals maintaining significant, direct equity in their business,” Mr. Healey added. “We believe that these core characteristics give boutiques a competitive advantage in generating consistent outperformance. Our research clearly demonstrates the significant value that boutiques have generated for investors over an extended time horizon.”

To review this analysis in full, download “The Boutique Premium” at www.amg.com.

Methodology: The Boutique Premium

The study incorporated data from more than 1,200 investment management firms around the world and nearly 5,000 institutional equity strategies comprising approximately $7 trillion in assets under management. The study analyzed rolling one-year returns for the trailing 20-year period ending December 31, 2014, across 11 broad institutional equity product categories, on a strategy-by-strategy basis.

The classification of firms as either “boutiques” or “non-boutiques” was based on AMG’s proprietary analysis, while the MercerInsight® database was utilized for return data. Primary indices for comparison included MSCI Emerging Markets, MSCI World, Russell 1000® Value, Russell 1000® Growth, S&P 500®, Russell Midcap® Value, Russell Midcap® Growth, Russell Midcap®, Russell 2000® Value, Russell 2000® Growth and Russell 2000®.

The study estimated boutique net excess returns as compared to indices – incorporating boutiques’ available published or “rack” fee rates in the MercerInsight® database – in order to assess net value creation for investors.

The classification of investment managers and their corresponding strategies as “boutiques” in the study was based on four criteria. First, principals were required to hold a significant amount of equity in their own firms, defined as at least 10 percent ownership. Second, investment management was the sole focus of each firm; investment managers captive in broader financial services platforms were excluded. Third, firms with assets under management greater than $100 billion were not eligible for inclusion. Finally, exclusively “smart beta” or fund-of-funds platforms were removed from consideration, as the analysis concentrated on active boutique investment managers with distinct investment philosophies and highly-focused investment processes.

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Baker Street, a San Francisco-based wealth management firm, provides customised wealth management and comprehensive investment advisory solutions to individuals, families and foundations.  Founded by Jeff Colin in 2003, the firm advises on approximately $6 billion in assets.  Baker Street focuses on simplicity, cost-effectiveness and tax-efficiency, while seeking to generate the highest risk-adjusted rates of return, after taxes and fees, for each client.

“We are pleased to welcome Baker Street, a leading wealth advisory boutique, to our Affiliate group,” said John W. Copeland, President of AMG Wealth Partners.  “Jeff Colin, Mike van den Akker, Chris Wilkens, Jim Milligan and the rest of the Baker Street team have a strong record of helping clients achieve excellent results using a highly specialized, unbiased approach to investing.  We look forward to working alongside our new partners and bringing Baker Street’s expertise to more investors.

“Through our partnership with AMG Wealth Partners, we are able to maintain our independence and autonomy as we continue to serve the best interests of our clients,” said Mr. Colin.  “We will focus, as always, on providing objective, customised wealth management and investment advisory solutions to private clients, families and foundations.”

As part of the transaction, Baker Street’s senior professionals have agreed to long-term commitments with the firm.  The terms of the transaction were not disclosed.

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