MGRD - Retire With Long-Term Investment Grade Bonds (Part 2): Affiliated Managers Group

2025-06-02 10:34:47 ET

Summary

• AMG's common stock is unattractive due to declining revenues, low dividend yield, and historical underperformance versus the market.
• AMG's baby bonds offer high yields to worst (7.63%-7.75%) and are investment-grade, making them appealing for income-focused investors.
• Among the baby bonds, MGRD and MGRB stand out with a 7.63% yield to worst and a discounted price, providing an attractive risk-reward profile.
• I recommend AMG's baby bonds, particularly MGRD and MGRB, over the common stock for investors seeking stable, long-term income with moderate risk.

We have been avoiding high-duration securities for almost 2 years. There are very few that we liked in this period. The reason was straightforward. All investment-grade quality securities have seen their credit premium narrow to historical lows. Currently, there are a few investment-grade securities that are somehow normally priced, and they attract our attention due to their high credit quality and high absolute yield. These are still not undervalued historically, but present us with Alpha on a relative basis compared to the overall narrower credit spreads....

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