Acadian Asset Management Inc. Q1 FY2025 earnings call

• Acadian is the only pure-play publicly traded systematic manager, founded in 1986, pioneering systematic investing. • Manages $121.9 billion of AUM. • 94% of strategies by revenue outperform benchmarks over 5 years with 4.4% annualized excess return. • Extensive global distribution platform with 4 offices, over 90 client and distribution team professionals serving over 1,000 client accounts in 40 countries. • $9 billion of gross sales in Q1 2025 after $21 billion in 2024. • Positive net flows: from negative $2.3 billion in 2023 to positive $1.8 billion in 2024 and $3.8 billion in Q1 2025. • Key product initiatives: enhanced equity, extension equity, systematic credit, and equity alternatives, with strong progress. • Enhanced equity strategies have $12 billion AUM at end of Q1 2025, doubling from prior year. • 6 clients among top 20 global asset owners and 27 clients among top 50 U.S. retirement plans. • Over 50% of assets from clients invested in multiple strategies, 37% from outside U.S. • Offers over 80 institutional quality funds.

Acadian Asset Management, Inc. reported managing $121.9 billion of AUM. Net income attributable to controlling interest was up 38% compared to prior year, and U.S. GAAP EPS was up 46%. ENI diluted EPS was $0.54 per share, up 23% with adjusted EBITDA up 10%. $3.8 billion of positive net flows were delivered, the strongest quarter in 19 years. 94% of our strategies by revenue are outperforming benchmarks over a 5-year period with 4.4% annualized excess return. By revenue weight, more than 94% of Acadian strategies outperformed their respective benchmarks across 3-, 5- and 10-year periods as of the end of March 2025. By asset weight, more than 90% of Acadian strategies outperformed their respective benchmarks across those periods.

• Expect growth through expanding distribution capabilities and product development in high demand areas. • Continue to drive growth through targeted distribution initiatives and key product initiatives like enhanced equity. • Expect to continue generating strong free cash and deploying excess capital towards organic growth and share buybacks. • Board has $61 million remaining on share repurchase authorization, with buyback activity dependent on stock price, capital needs, etc.

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from projections, as detailed in SEC filings including Form 8-K and 2024 Form 10-K.

Q: Congratulations on the strong flows here, best in 19 years. Nearly $9 billion gross sales, nearly $4 billion of net inflows. Maybe you could just unpack some of the key strategies that you saw contributing? And can you just remind us what the revenue impact was of those flows as we think about the organic base fee impact stemming from the strong flows in the quarter?

A: Mike, nice to speak to you again. Yes, so flows in Q1 were really pretty diversified in terms of where we've seen those asset raising efforts. Particularly, we've seen, as I noted in my prepared remarks, a huge interest in our enhanced equity strategies and those different implementations, particularly, I'd say, across global and sort of broader equity and emerging markets implementation. So continuing to see real interest and momentum there as well as in our extension strategies, which, again, as you know, as we noted, they are 2 of our sort of key initiatives. So very excited to see the growth there. Other areas of conversation that we're having with investors and where we're seeing interest is sort of broadly, I would say, in non-U.S. strategies. And I think that's sort of some momentum and a bit of a pivot that we've seen through this quarter after last year, where there was tended to be quite a U.S.-centric bias. So certainly, I'd say kind of broad across the spectrum of our new initiatives as well as some of our core strategies. In terms of overall fee impact, so our blended rate remains around 38 basis points. Obviously, in the near term, we don't expect that to change. Obviously, over the longer term, things like enhanced tend to attract a lower fee as the sort of lower risk, lower return expectations on those strategies. But obviously, where we're seeing on the other side, interest in areas like extensions, like small cap, those attract higher fees, they're limited capacity in some cases. And so certainly, over the near term, we don't expect a change to that blended rate. But obviously, over the longer term, market dynamics, flows into different areas, may have an impact of medium to longer term.

Q: And then just a follow-up question on the pipeline. Maybe you could just help unpack how the composition of that looks today, size, magnitude, types of strategies in there, how that compares versus last quarter. And clearly, very strong, quite impressive investment performance. Just curious how that is evolving here in April given the volatile market backdrop.

A: Yes, sure. So yes, in terms of pipeline, as I said, the momentum continues to build in those -- 2 of those key initiatives in the near term in both enhanced and extensions. So I expect those to continue to be a theme in terms of pipeline and asset raising through this year. And as I say, Michael, we're having kind of more conversations now than non-U.S. nature or sort of broader in terms of global and sort of some -- I'd say, some resurgence of interest in emerging markets. So pretty broad in terms of pipeline. Obviously, Q1, very strong quarter in terms of gross sales. The pipeline remains very robust. So again, we're obviously looking to continue to build on that momentum and feel pretty positive about where we are now going into Q2 and Q3. Perhaps, maybe I'll just comment a little bit on performance. Q1 saw some mixed performance across some of the strategies. I think the benefit of being long-term investors, we're steadfast and committed to our process. And as we noted in the presentation, our long-term returns obviously remain very strong. There's obviously been some very sharp swings in the market since early April. And I think this is where I think it's important to emphasize that Acadian's process adapts systematically and not emotionally to these types of environments. The process we've built is continually integrating new data and allowing us to respond, I'd say, objectively and systematically to evolving risks. So I always think it's a good reminder that we find opportunities in periods of dislocation and periods of stress often lead to mispricings. And so for a process like ours, again, this is when we can find particularly attractive opportunities, particularly in less efficient markets. But certainly, the macro backdrop has obviously been a little more challenging than perhaps 2024 was. But again, still with some good areas and bright spots of performance for us. And as things we hope start to settle down in Q2, again, I think we're well positioned for some good performance this year.

Q: Just one on capital management. Wondering if you could share any updated thoughts around outlook for share repurchases for the rest of the year? And perhaps just remind us again what's remaining in terms of the share repurchase authorization at this point?

A: Ken, nice to speak to you again. Yes, as we've previously disclosed over a number of quarters, one of our key objectives is obviously to return capital to shareholders through stock buybacks. So in Q1, as we noted, we bought back 0.8 million shares or $19 million in total. The most recent authorization has approximately $61 million remaining on it as of the end of the quarter. But maybe just to be clear on that, any actual buyback activity is obviously subject to a number of factors. That's obviously the company's stock price, the capital needs of the business, the economic backdrop, market conditions. So the Board does refresh the amount of that authorization from time to time when we think it's prudent to do so. But we don't have a specific time frame in mind to sort of finish those buybacks under that current authorization, Ken. And as I say, again, that's going to depend on a variety of factors such as stock price being one of them, but there is $61 million remaining on the current authorization.

Q: Just one follow-up, if I may. Looking through the slides, it looks as if the various expense ratios, the outlooks there are unchanged from last quarter, wonder if you could just talk a little bit more about potential levers Acadian might have for further expense reductions if needed, if market volatility were to continue, for example, for a longer period of time?

A: Ken, this is Melody. Yes, our expenses, operating expenses and variable comp ratio remain the same. I think we are going to be continued laser-focused on expense management. And in terms of the market volatility, we will manage our expenses, make sure that we continue to achieve the similar margin. So that's currently, the expenses ratio for the full year remains unchanged.

Q: I wonder just with the market moves we've had so far in 2Q, maybe could you give us a little color on what of your strategies is seeing demand in April and particularly managed well, which I think have been out of favor for a while and maybe this might be a more constructive environment for it.

A: Sure. Yes, no, I mean, April has been a similar theme, I would say, to what we saw in sort of Q1 and the back half of Q1. The areas of interest have really tended to be our broader strategy, so sort of global and equity implementations, things that are not perhaps as focused on just the U.S. enhanced, again, I think the sort of lower risk, more consistent return profiles are proving to be pretty popular and resonating with clients. As you know, management has been a bit of a headwind for us in the most recent few quarters. But as you know, it's a strategy that I think that's recently had an opportunity to kind of reassert its value in this type of market environment. And we've certainly sort of seen that in, I'd say, the first 4 months of this year. I don't imagine that we're going to see a strong tailwind in terms of asset raising in that strategy in the next few quarters. But I do believe that investors that are -- that remain in those types of strategies will be pleased with their decision to keep those allocations given the current market environment. So again, not necessarily a strong tailwind and expecting to see huge growth in management, but I suspect it's going to be less of a headwind as those strategies kind of prove their worth in this type of environment.

Q: Maybe you have any thoughts on the potential for even greater demand for non-U.S. strategies as people potentially look to put more money outside the U.S.

A: Yes. I think it's going to be a theme in our -- it's a theme in our pipeline. I think it's going to be a theme in -- as we actually move to fund those mandates. Certainly, last year, there was a lot of focus and interest in sort of U.S. domestic strategies. We are seeing, I think, a number of investors think more carefully about their strategic asset allocation and perhaps adjusting those to either kind of broader developed markets mandates. Obviously, that includes U.S. in a global implementation, but also a lot of kind of [indiscernible] type mandates. So I agree with you. There has, I think, been a shift over the last 2 or 3 months in terms of investor focus and attention on those sort of broader implementations and things perhaps of more of an ex-U.S. nature.