Affiliated Managers Group (NYSE: AMG) is one of the world's largest asset managers in the world, managing $280.0 billion as of December 31, 2009.^[1] AMG is not structured like traditional asset managers such as T. Rowe Price Group (TROW) or Franklin Resources (BEN); instead of hiring and firing managers to invest its clients' money, AMG buys ownership stakes in small to mid-sized investment firms, and lets the residing managers remain autonomous. In exchange, the managers agree to a revenue sharing contract, in which a designated portion of revenue is allocated to expenses, the affiliate's management team, and AMG.

AMG's affiliates primarily offer equity investments through mutual funds, institutional investing, and asset management of high-net worth individuals. AMG business has a natural equity tilt as it borrows money to finance acquisitions of companies that manage equities. Essentially, AMG pays interest on borrowed money, but its revenue is tied to equity prices. When stock prices are rising, AMG's AUM expand, which in turn increases revenue through higher management fees collected; yet the company's interest expense stays flat. Declining stock prices results in lower revenue, but AMG still pays interest on its debt.

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