AMG announced that it will sell $460 million of senior convertible senior notes. The notes carry a 3.95% per annum interest and a conversion price of $125.65. AMG borrows money to fund acquisitions of small to mid-sized companies. This strategy creates a natural equity tilt, which makes the company business model vulnerable to changes in equity market prices.
AMG purchased a stake in Gannett Welsh & Kotler, LLC (GW&K), an investment management unit of The Bank of New York Mellon. Gannet Welsh managest $7 billion in primarily municipal bonds. AMG also is buying global equity and alternative asset companies to diversify its holdings.
With 80% of AUM in equity positions, falling equity prices drive revenue lower. Weakness directly lowers AUM through capital depreciation, but also, slows net fund inflows.