Investments spell growth for Affiliated Managers

For Affiliated Managers Group, the Beverly asset management company, 2005 was a year when the firm's long-term strategy paid off at all levels.

AMG's revenue grew 39 percent last year to $916.5 million, while net income grew 54 percent to $119 million. The company's stock rose nearly 20 percent.

Behind that success story is a classic business tale of making the right moves early, then watching them pay off.

Rather than directly managing money itself, AMG's big idea since its 1993 founding has been to own majority stakes in a broad portfolio of money management firms. In 2005, the lion's share of its growth in assets under management -- $30 billion -- came from companies in which AMG already holds an interest. AMG has also taken advantage of two fast-growing areas: international equities and alternative investments, such as hedge funds. International equities now deliver about 35 percent of AMG's earnings, while alternative investments are about 15 percent.

''We continue to be very optimistic about our prospects for continued growth," said AMG chief executive Sean M. Healey, who is also well known as the husband of Massachusetts Lieutenant Governor Kerry M. Healey. ''We feel our position in the market from the standpoint of new investment opportunities has never been stronger."

Last year, AMG acquired First Asset Management Inc., a privately held Canadian company that held interests in six midsized asset management firms managing nearly $25 billion. The $250 million deal added to both AMG's earnings growth and potential future profits from international stocks.

Some of AMG's good fortune also stems from last year's bullish stock market, which helped all asset managers make more money. AMG would have a hard time if the market tanked.

Analysts and investors in AMG affiliates rave about the company. Mark Lane, a stock analyst who follows AMG for William Blair & Co., a Chicago investment firm, said in the fourth quarter alone AMG firms took in $4.8 billion in new money to manage, a number Lane called ''eye-popping."

''We continue to believe AMG is one of the top growth companies in the asset management space," Lane recently wrote. ''It also remains one of the top long-term ideas within our entire coverage universe, which includes asset management, insurance, and financial guaranty."

Healey said he believes AMG's basic business model is an important driver of the company's success. Managers in companies in which AMG has taken a majority stake keep their own equity interest in the performance of the firm. They have enough autonomy to run their businesses as they see fit but also a direct financial incentive to perform well.

''We have done well in being a supportive partner to our affiliates," Healey said. ''What's most important is understanding that the best thing a partner can do is help provide the most appropriate incentive structure, allowing firms that are performing well to continue to perform well. It's not to substitute our judgment for theirs."

Sasha Talcott can be reached at stalcott@globe.com.