Mutual funds are getting increasingly more important to Affiliated Managers Group (AMG), even as its deal pipeline is changing.

Yesterday the Boston-based multi-boutique asset manager reported first quarter 2015 economic earnings per share of $2.91, beating estimates by $0.01, and rising $0.43 from Q1 2014. Its Q1 2015 revenue clocked in at $635 million, below estimates by $15.89 million, but $41.9 million up year-over-year. Its assets under management rose 1.93 percent in Q1 2015 to $632.163 billion on March 31.

AMG's complete earnings release with financial tables shows an uptick in mutual funds' importance to AMG's business. In Q1 2015, mutual funds accounted for 50 percent of AMG's revenue and 41 percent of its EBITDA, up from 49 percent and 39 percent in Q1 2014. Mutual funds also accounted for 25.5 percent of AMG's Q1 2015 net inflows and 58.8 percent of the "market changes" driving AMG's AUM up.

On AMG's earnings call (transcribed by Seeking Alpha) yesterday morning, president and chief operating officer Nate Dalton told analysts that most of the mutual fund inflows went into "global and emerging market equities and alternative strategies" from AMG affiliates like AQR, Artemis, Harding Loevner, and Tweedy Browne. He also remarked on AMG's own mutual fund effort:

Turning to our U.S. retail platform, AMG Funds, the team there is making good progress continuing to diversify the product and distribution relationships. However, that part of our business has a very significant exposure to active U.S. equities, which as everyone knows have been out of favor with investors resulting in outflows. Looking ahead, we are optimistic about the opportunity we see to continue to build a world class U.S. retail distribution platform for our affiliates. And especially, as retail clients and the intermediaries to serve them ultimately need to reallocate to return-oriented managers in order to meet their liabilities. As I indicated earlier, this is also an area where we can help some of our more institutionally focused alternative firms’ access additional pools of capital.

William Blair analyst Chris Shutler asked about what types of alternative mutual funds AMG would be prepping next under the AMG Funds brand. Dalton didn't offer details but reiterated that the AMG team sees "a very big opportunity to marry the scale of the retail platform ... with excellent alternative boutiques and allow them to access the retail marketplace."

Also on the call Sean Healey, chairman and CEO of AMG, reiterated that "AMG's new investment strategy [i.e. buying stakes in boutiques] continues to be a material driver of earnings growth":

Going forward, the transaction environment remains highly favorable for us and our pipeline includes a strong and diverse group of traditional and alternative new investment prospects. We are confident in our ability to continue to make additional investments in outstanding firms which would add meaningful accretion to our earnings while also enhancing the diversity of our performance-oriented products set with excellent immediately salable products.

Later, in response to a question from Jefferies analyst Dan Fannon, Healey described the current asset manager M&A market as having "a little less activity" than a year ago with only "a few third party sales."

"We are very busy, mainly with succession oriented transactions," Healey said on the call:

if you would look at the largest prospective affiliates, the 150 core prospects that we have been talking about, the thing that is striking, notwithstanding all of the transaction activity that has occurred in the industry and including substantially by us, is that so much of it is yet to come. And there is inevitability about forward transaction activity for the simple reason that the partners who have founded and built these firms have generated, created enormous wealth and value and the equity of their firms. And in some cases, they will transition that to a next generation in their own family. But in almost all cases, they are looking to have a succession solution which in part, of course involves transitioning equity to the next generation, but also involves a measure of liquidity and a state planning for these senior partners and so all of that – not all of that, a big – the biggest portion of that forward opportunity is yet to come. So we look at the next 5 years to 7 years. And at current asset levels, the investable opportunity for us, meaning not the total enterprise value of these 150 firms, just the value the transaction value to us is over $40 billion. And so I would look at that, the size of that opportunity and I think what our expected market share will be. And as you can imagine, we are very optimistic and enthusiastic about that opportunity.

Healey also noted that AMG's deal "pipeline is skewed more non-U.S. and more alternative than it would be normally." 

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