AlTi Global, Inc. (ALTI) Earnings Call Transcript & Summary

Good afternoon. My name is Irene, and I will be your conference operator today. At this time, I would like to welcome everyone to AlTi's conference call. [Operator Instructions] I'd like to advise all parties that this conference call is being recorded, and a replay of the webcast is available on AlTi's Investor Relations website. I will now turn the call over to Lily Arteaga, Head of Investor Relations for AlTi. Please go ahead.

Good afternoon, and welcome. We are excited to be with you today. We will share some brief prepared remarks from Michael Tiedemann, AlTi's CEO, followed by a question-and-answer session, in which Steven Yarad, AlTi's CFO, will also participate. Before we begin, I want to note that our remarks today may contain forward-looking statements. So we ask that you please review the disclaimer about forward-looking statements in the presentation. We invite you to visit the Investor Relations section of our website at www.alti-global.com. for the presentation we posted this afternoon, which will be referenced on this call. With that, I will turn the call over to Mike.

Thank you, Lily, and welcome to all listening today. We were thrilled to announce our strategic relationship with Allianz X and Constellation Wealth Capital, CWC, this morning, and plan to offer some more color around the transaction, the opportunity at hand and AlTi's go-forward investment thesis. Let's start by discussing the announcement itself on Page 7. Allianz X and CWC are making combined strategic investment of up to $450 million into AlTi. Allianz X will invest $300 million through a combination of Class A shares and convertible preferred stock, and CWC is investing up to $150 million through convertible preferred stock. Two Allianz X representatives will join AlTi's Board as independent directors and one representative of CWC will join AlTi's Board as an observer. The investments are subject to customary closing conditions and in the case of Allianz X, subject to regulatory approvals. These investments enable AlTi to establish long-term partnerships with experienced and well-respected players in the global financial services sector, accelerating our strategy to become the leading global independent multifamily office or MFO platform for the ultra high net worth segment, with an intentional and targeted expertise in alternatives. This is a transformative day for AlTi. We believe the partnerships we are establishing result in a pioneering transaction for the insurance, wealth management, and asset management sectors, delivering long-term benefits to all 3 parties. It will advance the scale and reach of AlTi's expansion strategy, accelerating top line growth in existing and new markets across the U.S., Europe and Asia. The investments fortify our balance sheet, providing us with ample capital to execute organic and inorganic growth initiatives and, ultimately, achieve operating leverage through economies of scale. These investments accelerate AlTi's path to become the leading global platform in the attractive ultra high net worth wealth management vertical, and advance Allianz X and CWC's participation in the estimated $609 trillion global wealth market. The wealth management sector is characterized by stable recurring revenues in a capital-light model, which is what made it so attractive to us, and one of the core reasons our partners are making this investment today. Our organic growth initiatives will be enhanced through expanded lead generation opportunities and importantly, the potential to service Allianz's clients and families, as well as the ability to leverage our partners' footprints and relationships as we enter new markets. I'm looking forward to welcoming the deep global financial services expertise our partners bring to our Board, as we embark on this new phase of AlTi. As we can see on Page 9, we are privileged to count on 2 partners who share our long-term vision and this capital, experience, network and global operating expertise will accelerate AlTi's growth strategy. Allianz Group is a leading global insurer and asset manager, with an operating history of over 130 years, more than 160,000 employees in 70 countries. They serve more than 120,000 clients. Through PIMCO and AGI, they have nearly EUR 1.7 trillion in third-party AUM. As a growth investor in AlTi, Allianz X will gain further exposure to the wealth management sector, while enabling us to accelerate our M&A plans and support our organic growth. Importantly, the relationships offer Allianz, the opportunity to service the ultra high net worth clients more holistically. CWC is an investment advisory firm that specializes in making investments in industry-leading wealth managers. They have an experienced team with deep sector expertise and relationships, particularly in the U.S., which will be one of considerable value as we continue to execute AlTi's growth plans. I'll now provide a brief overview of our platform. Our unique business model combines a global multifamily office focused on ultra-high net worth clients and a long-standing presence in alternatives. We have a 20-plus year operating history, with a global presence in 8 countries across 3 continents and nearly 50 billion in assets under management or advisement in our wealth management business. We have a long tenured, multigenerational client base, with a retention rate of 97%. In addition to investment advisory services, as an integrated multifamily office, we offer a full suite of customized capabilities, including estate, wealth planning, philanthopy and trust and fiduciary services. We pride ourselves in being a net positive impact firm. Assets invested impact strategies are a key area of growth within our wealth management platform. On the alternative side, AlTi is a differentiated provider of public and private market solutions, with 20 billion of assets under management and advisement. Our 40-plus year operating history and experienced team has resulted in a global platform, consisting of our liquid alternatives platform that invest in select strategies that are uncorrelated to broader markets and our real estate division, which offers investors co-investment opportunities globally across a variety of strategies. The hallmark of AlTi is the alignment we have with our clients. We've invested over 1 billion long clients across various strategies. Now that we've offered an overview of the AlTi ecosystem, I'd like to touch on the attractive market opportunity on Page 12. As you can see in the slide, there is a clear generational wealth transfer taking place, as Baby Boomers transferred significant wealth to their heirs, foundations, charities and endowments. Currently estimated to be over $80 trillion in scale, this wealth transfer is a multi-decade tailwind for our work head. AlTi is an institution that is curated to serve the evolving ultra-high net worth demographic, participate in the generational wealth transfer and meet the growing demand for alternatives globally. Significant wealth continues to be created around the world, but the traditional private banking offer remains characterized by conflicts, service limitations and adviser turnover. AlTi high net worth clients are increasingly focused on transparency and alignment, and demand direct investments and impact investing. Clients are attracted to an independent advisory firm that hold similar values and its curated set of solutions that address their holistic wealth management needs. AlTi is the only public company in the market, offering global multifamily office services and alternatives on the same platform. This not only creates attractive crossover opportunities and enhances solutions, but also strengthens AlTi's business model through the diversification provided by the distinct growth drivers and profiles of the 2 business lines. The Wealth Management business is characterized by long-term deep and trusted client relationships that result in stable fee-based recurring revenues and benefits from the powerful wealth creation trend that exists globally, and the attractiveness of the independent model described earlier. With our global infrastructure, we compete directly against the global banks, with a differentiated and independent offering and are well positioned for consolidation of the sector. The Alternatives business is characterized by high margins and strong cash flow generation. It can be more easily scaled due to the streamlining integration and global distribution capabilities. Our current focus has been on liquid alternatives in real estate. We are now shifting to private markets and impact investing, which has significant appeal to ultra high net worth clients, foundations and institutional investors. All of the strategies can leverage our global proprietary distribution platform. With this unique platform as a foundation, we have a defined set of priorities for the partnership, which are based on AlTi's existing growth road map. Together, we will focus on expanding and fortifying AlTi's footprint and executing on organic growth opportunities and strategic acquisitions. The first priority is to deepen AlTi's reach and expansion in current markets, and position us for expansion into new markets in the U.S., Europe and Asia, where we can expand our client base as well as enhance our service offering to existing clients across multiple jurisdictions. We will continue to focus on complementary domestic and international markets with attractive characteristics including significant market size, low regulatory barriers and limited competition. Our expansion plans will leverage AlTi's existing presence as well as the relationships and footprint of our partners. As indicated on Page 17, another important priority is executing our organic growth opportunities. We will leverage our partner scale, relationships and global footprint to deepen AlTi's current offerings and solutions. There is an opportunity to expand revenue and lead generation opportunities across the larger and more globally diverse client base. In addition, we may provide a bespoke solution for our clients through co-investment opportunities across strategic alternatives, impact, and when appropriate, Allianz's Asset Management product suite. Strategic and accretive M&A is a key priority and driver of top line growth and margin expansion as we build off the existing platform. AlTi has a robust M&A pipeline and is positioned to execute attractive, accretive deals across both businesses. We take a disciplined approach to our pipeline and acquisition criteria, taking into consideration the prospective profile footprint and fit as it relates to AlTi. We will now turn to the highlights of these investments, including the benefits and how these fit into AlTi's overall investment thesis. As Slide 20 demonstrates, these transactions serve as a powerful catalyst for AlTi. At their core, these partnerships position AlTi to further evolve into a diversified global financial services player. They also evolve AlTi's long-term growth plan through both organic and strategic initiatives, furthering AlTi's reach and scale across its business lines. We have a clear line of sight on key market strategies, an expanded customer base and an enhanced suite of offerings. Before we open up for questions, I would like to discuss the go-forward AlTi investment highlights. These partnerships enhance AlTi's current strengths to further differentiate the firm from the competition, as client demand continue to evolve. Our unique platform, including wealth management and strategic alternatives, benefits from complementary growth drivers. We have a strong leadership team, bolstered by partners with deep experience in financial services. And all this already large addressable market is expanding by an increased global footprint and product offerings. AlTi is delivered on the thesis we brought to market, and wealth management firms are choosing AlTi as a strategic partner that preserves client relationships, while offering a comprehensive suite of services. Upon the completion of these transactions, we expect to execute our near-term M&A pipeline. Given the closings are subject to customary closing additions and in the case of Allianz, certain regulatory approvals, we are reserving any updates to our financial targets for a later point. We want you to know that we are focused on executing the priorities we've laid out today, as we believe they will accelerate the growth strategy we have shared since our listing. This is a transformative day for AlTi and we look forward to sharing consistent, transparent progress against our growth initiatives in the coming months. With that, operator, please open the line for questions.

[Operator Instructions] The first question we have is from [ Jie Cheng ] of Raymond James.

It's Jie on for Wilma. Congratulations on the investments. We just have a couple of questions. The first one is, has AlTi identified any long-term opportunity for the deployment of this capital? And please discuss the AlTi's attractiveness of the valuation and opportunities available in the Wealth Management and Asset Management segment.

Thank you, Jie, and thank you, Raymond James, for your coverage of us since our launch. We do have identified near-term opportunities in both the alternative and wealth side of the platform. We -- first of all, in a human capital, what we consider an ultimate human capital business -- it's not just the quality of the organization, it's the quality of the people which drive that. And then valuations and the strategic fit and complement needs to be there and present. So there is an obvious economic component to the discussion, but then there has to be a perfect strategic shift, a complement to perhaps geography or added capabilities to the platform. And when we combine and evaluate all of those, that is what ultimately drives our M&A strategy. But yes, we do have a pipeline. We're excited to get started on it and look forward to reporting on it over the course of the year.

Okay. And do you expect that AlTi can deploy the full $450 million of investment?

Yes. That is -- this is really a growth capital investment and obviously fortifies, significantly fortifies our balance sheet. It enables us a good runway to approach the opportunities that are in front of us.

So what types of additional solutions will Allianz X offer to AlTi's clients?

Well, a few things. Allianz, for those who don't know it as well, is an organization in many ways that we share, and we're very lucky to share identical principles of operation. Number one, we are serving, in their case, for over 100 years, serving family businesses, businesses themselves, individuals, and they are always there as a permanent organization with a focus on excellence. And so we, at AlTi, have always had that as the underpinning of a promise to our clients on the wealth side and to the institutions that we invest on behalf of on the alternative side. So whether they can help us expand, first of all, they and Constellation add considerably to the ecosystem, the network, the talent acquisition, the opportunity set at large. And Allianz, as we stated in the call, has over 2 trillion of assets in their asset management division. They have superb asset managers as well as scale, which ultimately can accrue to our end clients, opportunities can be discussed internally as having sort of you're in the ecosystem of these organizations and the ideas that get generated from them over time. So there's obviously the ecosystem, but then really there is having a global footprint that they have, which surpasses ours, but certainly is a complement to what we're looking to do and build in the coming years.

Okay. So well, the relationship with Allianz and CWC compromised independence of AlTi's wealth managers?

No. Very specifically, it will not. In fact, both organizations fully endorsed underwrite and recognize the importance of that, the independence of the model of how the advisers or families have the business at large serve families, and recognize that's one of the primary differentiations of the independent model, away from more conflicted or certainly the banking system at large historically has been. So this -- they view this as the right platform to back and the right model back importantly, and the independence is foundational to that.

Okay. Our last question. Why Allianz and the CWC are good long-term strategic partners for AlTi? And how does investment position AlTi for growth?

Well, for starters, they're terrific. The individuals who we've been engaging in both organizations are terrific to deal with, who want to help us build the business succeed and add value, and both of them offer different ways of doing that. Constellation is more U.S.-oriented, but is exceptionally deep in the networks across the wealth management, and that will help us find talent and opportunities over time, already is beginning to. And Allianz obviously has the global footprint and the -- is one of the best run, if not, the best-run organizations, public listed businesses in the world. And so we are associated ourselves with specialists in an area in which we operate and then absolutely top flight global institution, which we aspire to be ourselves. So that is -- there are other answers that can go further into detail, but those are the primary things that I would highlight.

The next question we have is from Chris Kotowski of Oppenheimer & Co.

Yes. I'm wondering just if you can give us a little bit more color about -- I know you can't give us specifics, but about what we should in terms -- expect in terms of manner of deployment of this capacity, the time frame, are we talking about 1 year or 4 years? And then should we expect just a small number of very significant transactions? Or is this multiple transactions over multiple smaller transactions? And did -- is there a leaning currently about the focus, whether wealth management or asset or by geography, U.S., Europe, Asia?

Okay. Chris. I'm going to try to parse through that. That's a great series of questions. One, in terms of the deployment time frame, we will be drawing -- Constellation will be helping to draw earlier in the process and as they do not have to go through the regulatory process. So Allianz has to go through a regulatory process, which will -- the closing of Allianz will be at a later date. But the opportunities in front of us will be -- we are evaluating in short order. The entire facility, we absolutely expect to be from the closing of Allianz to be deployed within 12 months from that point. In terms of the deals themselves, there are a range of deals. They're all within sort of our stated target to date. Obviously, there will be -- we would imagine, post this announcement, additional supply of opportunities that we will evaluate. So I would say, allow us to update over time that pipeline and opportunity set. But as we sit here today, we have a very clear defined pipeline that we've spent a fair amount of time with both of these parties on, and they obviously fully support. So we plan on executing on those.

Okay. And then I mean, I've never followed it closely, but we know Allianz, the world-class asset manager, but I'm not aware of to what extent they have a presence in wealth management. And thinking about why did they pick you for this? What do they see in AlTi? And is there kind of a mission to build a presence in wealth management that will somehow be strategic for Allianz?

I will let Allianz answer that more directly. But clearly, this is a strategic and financial investment for Allianz. And by that, I mean, what they believe is complementary to their exceptional business model and also aligned with the ethos in which they've operated for over 100 years, is serving of multigenerational either businesses or family-owned businesses or families themselves. And so what we bring to Allianz is a holistic model of wealth management at the highest level. So very large families that have a measure of complexity, a service level expectation and also a jurisdictional coverage that often comes with having wealth and multiple generations that move across countries, et cetera. Allianz viewed our platform in aggregate as one, and obviously, Constellation felt the same, as one that really covered the global footprint. This was very important to them, in so much that it really gave them the opportunity to use their preexisting -- all of the infrastructure and resources they have across the jurisdictions to complement ours. And ultimately, to create a service offering to their clients that didn't exist yesterday.

There are no further questions at this time. I would like to turn the floor back over to Michael Tiedemann for closing comments.

Terrific. I wanted to thank you all for dialing in, for your interest. And obviously, we look forward to giving you updates in the coming weeks and in our earnings call in March. Thank you again.

This concludes today's conference. Thank you for joining us. You may now disconnect your lines.