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Group of Affiliated Managers
The stock soared after the company said it would acquire Parnassus Funds, a sustainable investing expert, indicating the growing appeal of environmental, social, and governance (ESG) investing. AMG’s shares (ticker: AMG) were up 7.2 percent to $167.25 in early afternoon trade on Tuesday. In the meanwhile, the
S&P 500 Index
was down 0.8 percent on the day.
AMG CEO Jay Horgen told Barron’s that sustainable investing is “a portent of the future.” “We see ESG investing as one of the industry’s fastest growing categories, as well as one of AMG’s fastest growing segments.” “Given its authenticity and length of history in that region, Parnassus is truly ahead of that trend,” Horgen remarked. AMG is buying the majority of Parnassus Funds, a leading socially responsible investment business formed in 1984, for $600 million, as previously reported. Parnassus, based in San Francisco, has seen rapid growth in recent years as the trend for sustainable investing has expanded, and the firm has built a reputation for consistently outstanding results. It has five mutual funds, all of which are free of fossil fuels.
Affiliated Managers Group CEO Jay Horgen
Shawn G. Henry is a writer.
AMG invests in boutique active management firms as a shareholder. With the addition of Parnassus, AMG’s ESG-dedicated assets under management will reach $80 billion, while assets incorporating ESG elements into the investment process will reach $600 million, according to the company. Through its affiliates, AMG manages approximately $738 billion in assets. Parnassus manages around $47 billion in assets. Parnassus CEO Ben Allen and chief investment officer Todd Ahlsten, both veteran workers, will sign contracts to stay with the company as part of the deal. Ahlsten is also a Barron’s Roundtable member. According to Horgen and Allen, other important fund managers will have contracts as well. The Parnassus acquisition is estimated to add $70 million in earnings before interest, taxes, depreciation, and amortization to AMG’s 2022 earnings before interest, taxes, depreciation, and amortization, and $1.30 in economic earnings per share. According to Bloomberg, analysts predict EPS of $16.64 per share and EBITDA of $938 million in 2021. The deal should be completed in the second half of 2021. In recent years, sustainable investing, also known as ESG investing, has become a big and consistent trend. Nearly a quarter of all fund flows in 2020 will go to sustainable funds. As more retirement plans in the United States open up to sustainable investing, this trend may gain traction. According to US SIF, the trade body for the sustainable-investment industry, around a third of the $51.4 trillion in assets under administration in the United States is managed sustainably. Indeed, 69 percent of retirement-plan participants said they would or might boost their overall contribution rate if their plan offered ESG options, according to a survey by investment management Schroders. The two companies have been chatting casually over the previous ten years, but the conversations have intensified after Parnassus founder Jerome Dodson stepped down and Allen was made CEO in 2018. Horgen explained, “It’s a really long dating process.” AMG also has shares in Boston Common Partners and Inclusive Capital Partners, both of which are led by Jeff Ubben, a well-known sustainable investor who is now sitting on a $1 billion fund.
Exxon’s
members of the board of directors As it improves interaction with companies in its portfolios, Parnassus is expected to call on Boston Common’s expertise, according to Allen. “Because of the function of active management, this is one of AMG’s fastest-growing segments,” Horgen added. “Clients have a stronger desire to influence outcomes, and seeing that capital spent through Parnassus necessitates a proactive approach. You really need engagement, and you need to keep taking a forward-thinking approach.” AMG will also assist Parnassus with distribution, particularly with overseas investors and wirehouses in the United States. Employees own about 35 percent of Parnassus, while founder Dodson and his family own 65 percent. Some of the most renowned names in sustainable investing in the United States have been purchased by larger corporations in recent years. In 2016, Eaton Vance bought Calvert Research & Management, which was then bought by Eaton Vance, which was then bought by Eaton Vance, which was then bought by Eaton Vance, which was then bought by
Morgan Stanley is a financial services firm based in
This year’s theme is (MS). Pax World Management was purchased by Pax World Management in 2018.
Impax Asset Management is a company that specializes in asset management.
(United Kingdom IPX). Perpetual, an Australian financial services company, bought Trillium Asset Management last year. AMG purchased 15% of Boston Common Partners this year, but the management team and founders kept the other 85%. Leslie P. Norton can be reached at leslie.norton@barrons.com./n
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