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American Capital, Ltd. Message Board

  • donedealer donedealer May 21, 2014 1:10 PM Flag

    Value of Assets Under Management

    ACAS has about $14 billion of EAUM (Earning Assets Under Management) AGNC and MTGE are heavily leveraged and ,therefore, bring the Total Assets Under Management to a multiple of EAUM. ACAM is valued by ACAS at $805 million or $3.06 per ACAS share. This valuation amounts to 5.75% per dollar of EAUM.

    ValueLine gives the AUM (Assets Under Management) for various money managers and it is assumed that this is essentially EAUM. The resulting percentages of market values of these companies to their AUM's are as follows (in descending order): BK 8.13%, KKR 6.45%, TROW 3.65%, BEN 3.64%, LAZ 3.37%, INS 1.32%, BLK 1.1%, LM .81%.

    It has been postulated that ACAM is worth more than $3 per share. If so, it would be approaching close to 10% of EAUM. I do not know if this is realistic or not. However, comparable to other investment managers it appears it may be a stretch.

    Any views on this or suggestions as to another metric to be used to value ACAM?.

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    • Don .. very good info and question ..

      Of course, Asset Managers aren't simply valued on EAUM .. or AUM. Comparing (E)AUM is more beneficial within a company and over time within the given company's model, thus allowing investors to understand the benefits of scaling up over time. Your list of companies demonstrates the variability.

      The (E)AUM in some sense is really just a stand-in for earnings and when applicable distributable NOI in the form of dividends to shareholders, and to get to (E)AUM to NOI you have to look at the over head, the fee structures, the assets classes and quality, etc. ... or .. in other words .. the individual business.

      Finally, the value model isn't necessarily that ACAM isn't valued properly in the portfolio .. but rather the rest of the contained assets' value (in the form of NAV) in ACAS isn't valued in the PPS .. and that if separated we can realize current NAV, write-up some components of NAV (removing ECAS' discount for instance) as well as possibly get better than NAV on much of ACAS's debt-assets if in a separate, dividend paying BDC. Also, looking at the cash that ECAS has been spinning out, it certainly should be valued ABOVE NAV .. not below .. but it can't because the valuation model is a read-for-sale FV model.

      What would make ACAM grow is that these spin-offs will be managed by ACAM, so the value of ACAM grows because more of ACAS will be part of it's (E)AUM.


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