MPI Valuation Opinions & Transaction Advisory

Industry Update Q4’ 2013

Asset Management Industry

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Asset Management Industry – Fourth Quarter 2013 MPI
Contents*

02 Industry Overview
Performance and Trends

03 In the News
• Global banks and asset managers return to the Asian hedge fund market
• Carlyle acquires Canadian hedge fund sponsor DGAM
• KKR raises capital for its first real-estate fund
• PIMCO’s Total Return Fund hit with record redemptions
• A former SAC portfolio manager convicted
• SAC Capital pleads guilty
• Timothy Geithner joins Warburg Pincus
• Blackrock markets a new credit fund

04 Key Indicators
• Industry Revenue
• Assets Under Management
• Personal Savings Rate
• Hedge Fund Assets and Net Asset Flow
• Private Equity Capital Raised and Number of Funds Closed

07 M&A Overview
• U.S. Activity
• Highlighted Transactions
• Industry Trends
• Recent Transactions

09 Public Market Data

Comparable metrics of selected public companies in the Asset Management Industry

11 About MPI

* This publication is also available in soft copy on the MPI website: www.mpival.com/newsletter.html.

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Asset Management Industry – Fourth Quarter 2013 MPI
Industry Overview
This publication focuses on major events, developments and trends within the traditional (mutual funds, wealth
managers) and alternative (hedge funds, private equity) segments of the Asset Management Industry.

The Asset Management Industry is in the midst of a recovery: Revenue grew at an annual rate of 6.9% in the
traditional space in the last five years through 2013 and 6.5% in the alternative space over the same period.
Revenue for both traditional and alternative managers surpassed pre-recession highs in 2012. In the last twelve
months the traditional and alternative asset manager stock prices are up 49.0% and 58.8%, respectively.
Presently, the following trends are shaping the industry:

Passive ETFs Challenge the Status Quo: While revenues in the traditional asset management sector have
risen since 2011 on greater demand for professional investment services and lower expenses, the growth in
passive exchange-traded funds has heightened competition and led to lower profits.

The Demographic Benefit: The aging populations of developed economies are contributing to greater AUM
through pension funds and demand for capital preservation.

Markets Bolster Returns: The strong performance of worldwide equities in 2013, including record-high levels
for the S&P500 and DJIA, have led to greater inflows of capital and higher returns for asset managers.

As the stock price performance graph below suggests, the Asset Management Industry as a whole kept pace
with the S&P 500 at the outset of the recovery and has outperformed over the last year, with the alternative
asset managers showing the largest gains.

450.0% Quarterly Benchmark Performance

Traditional Asset Managers Alternative Asset Managers S&P 500
400.0%

350.0%

300.0%

250.0%

200.0%

150.0%

100.0%

50.0%

0.0%

Source: S&P Capital IQ.

*Includes selected companies presented on pages 9-10.
Chart above is presented on an index basis: Q1 2009.

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Asset Management Industry – Fourth Quarter 2013 MPI
In the News…
• Major global banks and asset managers such as Goldman Sachs Group, Inc., UBS AG and GLG
Partners, Inc. are opening up hedge funds in Asia for the first time since the financial crisis of 2008.
The move poses a threat to the smaller independent funds which have grown in the area since the
crisis. (Bloomberg, 11/27).

• Alternative asset manager Carlyle Group LP acquired Diversified Global Asset Management Co. in a
bid to expand its hedge fund business and diversify its operations which are heavily weighted
toward leveraged buyouts. The deal is valued at $33 million and includes incentive agreements
which could increase that number by as much as $70 million. The deal is expected to close in
February 2014. (Bloomberg, 11/26).

• KKR raised $1.5 billion for its first real estate fund. The fund, KKR Real Estate Partners Americas LP,
is expected to invest a majority of its assets in North America, along with a sizable portion in
Western Europe. The fund plans to target both property-level equity and debt and businesses with
sizeable real-estate holdings. (Bloomberg, 12/14).

• PIMCO’s signature Total Return Fund was hit with $41 billion in redemptions in 2013, the most in its
history. The fund returned -1.9% in 2013 as rising interest rates and the Federal Reserve’s
reduction in bond purchases adversely impacted bond holdings. Investors are pulling money out of
traditional fixed-income funds across the board, as the three-decade bull-market for bonds may
finally be reversing. (Bloomberg, 1/3).

• Former SAC Capital portfolio manager Michael Steinberg was found guilty of insider trading charges
in the latest development of the government’s decade-long investigation into the hedge fund’s
affairs. Mr. Steinberg was accused of shorting shares of Dell and Nvidia after receiving insider tips
related to the companies. (CNN Money, 12/18).

• On a related note, SAC Capital pled guilty to all federal charges and agreed to shutter its investment
advisory business, leaving only employee-owned capital. (New York Daily News, 11/4).

• Former U.S. Treasury Secretary Timothy Geithner joined private equity firm Warburg Pincus, where
he will serve as the company’s president. The move continues the tradition of former Treasury
Secretaries accepting lucrative Wall Street positions: Robert Rubin joined Citigroup after serving as
Treasury Secretary in the Clinton administration and John Snow joined private-equity firm Cerberus
following his service in the George W. Bush administration. (New York Times Dealbook, 11/16).

• Blackrock began marketing its own credit hedge fund Blackrock Credit Alpha Fund in October. The
Company is seeking $3 billion in capital in its attempt to grow the alternative investment side of its
business and meet investor demand for diversification beyond traditional stocks and bonds.
(Bloomberg, 12/19).

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Asset Management Industry – Fourth Quarter 2013 MPI
Key Indicators

$120 Asset Management Industry Revenue (in $billions)

$100

$80

$60

$40

$20

$-

AAM Revenue TAM Revenue

30% Asset Management Industry Revenue % Change

20%

10%

0%

-10%

-20%

-30%

AAM Revenue % Change TAM Revenue % Change

7.0% Personal Savings Rate

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

Sources: IBISWorld.

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Asset Management Industry – Fourth Quarter 2013 MPI
Key Indicators (continued)

$25,000 Traditional Asset Management Total Net Assets (in $billions)

$20,000

$15,000

$10,000

$5,000

$-

$6,000 Alternative Asset Management AUM (in $billions)

$5,000

$4,000

$3,000

$2,000

$1,000

$-

25% Asset Management Industry AUM & Total Net Assets % Change
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%

AAM AUM % Change TAM Total Net Assets % Change

Sources: IBISWorld.

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Asset Management Industry – Fourth Quarter 2013 MPI
Key Indicators (continued)

$3,000,000 Hedge Fund Industry Assets

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$-

Assets ($millions)

$250,000 Hedge Fund Industry Net Asset Flow

$200,000

$150,000

$100,000

$50,000

$-

$(50,000)

$(100,000)

$(150,000)

$(200,000)

Net Asset Flow ($millions)

$300 Private Equity: Capital Raised & Number of Funds Closed 500
450
$250
400
350
$200
300
$150 250
200
$100
150
100
$50
50
$- 0

Capital Raised ($billions) Number of Funds Closed

Sources: HedgeFundResearch

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Asset Management Industry – Fourth Quarter 2013 MPI
M&A Overview

U.S. Activity

In the fourth quarter, total U.S. volume and deal count were down approximately 5% and 9%,
respectively, from Q3’ 2013. Despite slight improvements in Q3, deal activity pulled back slightly. Overall,
the U.S. M&A market is still relatively quiet compared to pre-recessionary levels. This time last year in
Q4’, M&A was extremely busy with deals that were in motion to close on or before December 31st, ahead
of anticipated capital gains increases, which likely induced companies to accelerate plans. In recent
quarters, growth in deal count has exceeded volume indicating a much more active middle market and
smaller deal sizes. It also suggests that buyers are still hesitant to pull the trigger on larger deals.

Highlighted Transactions

Investor Group Led by Lightyear Capital Acquires RidgeWorth Capital Management

• Asset manager RidgeWorth Capital Management, Inc. was acquired

from SunTrust Banks Inc. by a group of investors led by private equity
firm Lightyear Capital LLC and including employees of RidgeWorth on
Acquired By: December 11, 2013 for $265 million.
• The transaction increases employee ownership of RidgeWorth, which
hopes the resources of Lightyear Capital will enable an expansion of
service offerings
• Enterprise Value: $265 million, EV/AUM: 0.5%

Private Equity Giant Carlyle Acquires DGAM in Effort to Expand Hedge Fund Offerings

• The Carlyle Group LP acquired Canadian hedge fund sponsor

Diversified Global Asset Management Corporation (DGAM) on
November 24, 2013 for up to $103 million.
Acquired By: • The acquisition increases the size and product offerings of Carlyle
Solutions, which manages $48 billion in multi-asset strategies.
• Enterprise Value: $103 million, EV/AUM: 1.5%

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Asset Management Industry – Fourth Quarter 2013 MPI
M&A Overview (continued)

Industry Trends

Industry M&A Activity Median M&A EBITDA Multiples

(Announced Transactions)
Median EBITDA Multiple Overall Median (13.6x)
Volume ($bn) Deal Count
60.0x 56.8x
$25.0 40

35 50.0x
$20.1
$20.0
30
$14.4 $16.8 40.0x
33.0x
25
$15.0
30.0x
20

$10.0 15
$7.8 20.0x
$7.0 15.3x 15.7x 12.8x 12.0x
10 12.5x
$5.0 10.0x 8.0x
$2.1 $2.2 5
$1.4
$0.0 0 0.0x
2006 2007 2008 2009 2010 2011 2012 2013 2006 2007 2008 2009 2010 2011 2012 2013

Recent Transactions

Announced
Buyer Target Target Description
Date

12/11/2013 Lightyear Capital LLC RidgeWorth Capital RidgeWorth Capital Management, Inc. is a privately owned investment manager.
Management, Inc.
11/24/2013 The Carlyle Group LP Diversified Global Asset Diversified Global Asset Management Corporation is an employee owned hedge fund
Management Corporation sponsor.
10/1/2013 RCS Advisory Services, LLC Hatteras Funds Hatteras Funds is a principal investment firm.

9/9/2013 Richardson GMP Limited Macquarie Private Wealth Inc. Macquarie Private Wealth, Inc. is a venture capital firm and a privately owned investment
manager.

9/3/2013 Fiera Capital Corporation Wilkinson O'Grady & Co., Inc. Wilkinson O'Grady & Co., Inc. is a privately owned investment manager.

9/3/2013 Fiera Capital Corporation Bel Air Investment Advisors Bel Air Investment Advisors LLC is an employee owned investment manager.
LLC

8/15/2013 AllianceBernstein L.P. W.P. Stewart & Co., Ltd. WP Stewart & Co., Ltd is a publicly owned investment manager.

7/16/2013 Industrial Alliance Insurance Jovian Capital Corporation Jovian Capital Corporation is a publicly owned investment holding company.
and Financial Services, Inc.

7/15/2013 Aston Hill Financial Inc. Connor, Clark & Lunn Capital Connor, Clark & Lunn Capital Markets, Inc. is a privately owned investment manager.
Markets, Inc. (nka:Aston Hill
Capital Markets Inc.)

5/8/2013 National Holdings Corporation Gilman Ciocia, Inc. Gilman Ciocia, Inc., together with its subsidiaries, provides financial planning, accounting,
income tax preparation, and asset management services in the United States.

Source: S&P Capital IQ.

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 Asset Management Industry – Fourth Quarter 2013 MPI
Public Market Data(1)

12/31/2013 52-Week Enterprise AUM Mkt Cap/AUM EV/AUM EV/Revenue EV/EBITDA Market Cap/Earnings Consensus Growth (4)
Company Close(2) High Low Value (EV)(3) 12/31/2013 YTD LTM NFY LTM NFY LTM NFY EBITDA EPS

Traditional Asset Managers

BlackRock, Inc. 316.47 323.00 208.77 56,279 4,096,356 1.30% 1.40% 5.7x 5.6x 13.6x 13.5x 19.3x 19.0x 12.3% 15.0%

Calamos Asset Management Inc. 11.84 12.26 9.46 93 27,462 0.90% 0.30% 0.3x 0.3x 1.1x 1.2x 19.6x 23.6x (21.5%) (20.6%)

Cohen & Steers Inc. 40.06 44.44 29.19 1,613 46,336 3.80% 3.50% 5.5x 5.4x 14.0x 14.4x 25.2x 26.0x 14.8% 5.3%

Diamond Hill Investment Group Inc. 118.34 126.74 66.30 360 11,040 3.50% 3.30% 4.7x 4.5x 12.8x NA 19.1x NA NA 7.4%

Eaton Vance Corp. 42.79 44.58 32.34 5,713 280,669 1.90% 2.00% 4.2x 3.7x 11.8x 9.9x 26.9x 17.1x 12.2% 14.8%

Federated Investors, Inc. 28.80 30.87 20.68 3,047 366,715 0.80% 0.80% 3.4x 3.5x 10.8x 11.5x 17.7x 19.2x (2.3%) (2.2%)

Franklin Resources Inc. 57.73 57.85 42.67 31,684 844,700 4.30% 3.80% 4.0x 3.7x 10.6x 9.4x 16.9x 15.3x 11.4% 11.5%

GAMCO Investors, Inc. 86.97 88.38 44.51 1,949 43,507 5.20% 4.50% 5.2x NA 15.3x NA 22.4x 19.1x NA 26.4%

Invesco Ltd. 36.40 36.79 25.46 20,223 745,500 2.20% 2.70% 4.4x 4.3x 17.2x 14.4x 19.9x 17.9x 20.6% 20.0%

Janus Capital Group, Inc. 12.37 12.74 7.86 2,135 166,700 1.40% 1.30% 2.5x 2.5x 8.2x 8.1x 21.7x 20.4x 8.2% 10.5%

Legg Mason Inc. 43.48 44.09 25.43 5,284 656,000 0.80% 0.80% 2.0x 1.9x 11.4x 10.9x -18.1x 18.9x 12.8% 20.2%

SEI Investments Co. 34.73 34.97 23.68 5,398 218,530 2.70% 2.50% 5.0x 4.8x 20.8x 13.9x 21.2x 22.8x 31.4% 21.5%

T. Rowe Price Group, Inc. 83.77 83.99 66.18 20,117 647,200 3.40% 3.10% 6.0x 5.8x 12.2x 11.7x 22.0x 21.2x 15.6% 14.5%

Virtus Investment Partners, Inc. 200.05 248.89 121.22 1,485 55,007 3.30% 2.70% 4.1x 3.8x 13.8x 11.3x 29.1x 24.9x NA 51.2%

Waddell & Reed Financial, Inc. 65.12 66.09 35.67 5,130 113,744 4.90% 4.50% 4.0x 3.8x 13.6x 12.9x 24.4x 22.8x 24.0% 24.3%

Westwood Holdings Group Inc. 61.91 62.26 39.77 387 17,122 2.70% 2.30% 4.4x 4.4x 15.0x NA 29.1x NA NA 17.4%

Median 192,615 2.7% 2.6% 4.3x 3.8x 13.2x 11.5x 21.5x 19.8x 12.6% 14.9%

Median EBITDA Multiples - Traditional Asset

Managers
16.0x 14.1x
14.0x 13.2x
11.3x 11.2x
12.0x
10.0x 9.4x
8.2x
8.0x
5.6x
6.0x
4.0x
2.0x
0.0x
2007 2008 2009 2010 2011 2012 2013

Overall Median (11.1x)

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Asset Management Industry – Fourth Quarter 2013 MPI
Public Market Data (continued)(1)

12/31/2013 52-Week Enterprise Fee- Paying EV/AUM EV/Revenue EV/EBITDA Consensus Growth (4)
Company Close(2) High Low Value (EV)(3) AUM YTD LTM NFY LTM NFY EBITDA EPS

Alternative Asset Managers

Apollo Global Management, LLC 31.61 34.88 17.72 8,647 79,343 10.90% 3.4x 3.3x 6.0x 5.9x (21.4%) (25.1%)

Ashmore Group PLC 4.01 4.36 3.19 2,347 10,394 22.60% 6.5x 5.7x 9.5x 8.3x (7.7%) (10.0%)

Fortress Investment Group LLC 8.56 9.10 4.41 3,015 57,971 5.20% 2.6x 2.4x 7.8x 6.7x 1.6% 11.3%

Kohlberg Kravis Roberts & Co. 24.34 25.87 15.38 11,036 73,612 15.00% 5.0x 4.9x 5.2x 4.4x NA (4.5%)

Och-Ziff Capital Management Group LLC 14.80 15.06 8.73 6,634 36,780 18.00% 4.6x 4.1x 7.6x 7.1x (0.5%) (5.2%)

Partners Group Holding AG 237.90 273.50 209.30 5,596 35,175 15.90% 10.1x 6.8x 16.1x 14.1x 14.0% NA

Polar Capital Holdings plc 4.90 5.17 2.01 317 7,208 4.40% 4.1x 3.2x 10.5x 8.0x NA 18.2%

Sprott Inc. 2.62 4.31 2.21 310 7,336 4.20% 2.5x 2.2x 6.5x 5.6x NA NA

The Blackstone Group L.P. 31.50 31.94 15.93 29,605 188,650 15.70% 4.7x 4.2x 10.1x 10.4x 41.4% 8.4%

Median 36,780 15.0% 4.6x 4.1x 7.8x 7.1x 0.6% -4.5%

Notes:
(1) Source: As reported by S&P Capital IQ.
(2) Reported in local currency.
(3) In millions of local currency.
(4) Represents two-year analyst estimates.

Definitions:
Enterprise Value – defined as “market cap. + total debt + preferred equity – cash and equivalents – long-term investments”
AUM – Assets Under Management
YTD – Year to Date
LTM – the latest twelve months.
EBITDA – adjusted earnings before interest, taxes, depreciation and amortization.
NFY – next fiscal year.
EPS – earnings per share.
NA – not available, NM – not meaningful.

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Asset Management Industry – Fourth Quarter 2013 MPI
About MPI

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Since 1939, MPI has prepared thousands of valuations in a wide variety of industries and for many purposes. Our
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Contacts For This Report:

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