In the Money, continued

Cash Flow

When Sean Healey '87 walked into Goldman, Sachs & Co. in New York as a summer associate before his final year at HLS, he had no idea what he was getting into.

"They didn't have extra training for lawyers, so it was quite an eye-opening experience," he said. "While I didn't actually look for tellers when I first got there, it wouldn't have shocked me if there had been some."

But Healey, who started law school with hopes of becoming a law professor, soon found the world of finance far more fascinating than the prospects of teaching. Now he heads one of the country's ten largest publicly traded fund companies, Affiliated Managers Group (AMG).

As president and chief operating officer at the Boston-based investment management holding company, Healey has worked alongside CEO William Nutt to take the firm from IPO to a $77.5 billion enterprise at the end of 2000, with holdings in 15 investment management firms and its own line of mutual funds.

Healey cut his financial teeth at Goldman Sachs, where he stayed for eight years after graduating from HLS. He was a vice president in mergers and acquisitions when a chance meeting with Nutt during a merger deal led to his move to AMG in 1995. The still-young AMG is growing rapidly, Healey says.

"Investment management is quite attractive as a business because it generates substantial cash flow without substantial capital expenditures--compared to law or investment banking, where you start the year at zero and have to go find your cases and find your deals. With investment management, you start with all those assets, and while clients can take them away or the market can go down, it's still a much more stable business."

AMG does not buy companies outright but rather buys equity stakes in them. Current holdings include Frontier Capital Management, Essex Investment Management, and Tweedy, Browne, a New York- and London-based firm that was named International Fund Manager of the Year for 2000 by Morningstar, the investment rating service.

According to Healey, AMG has done well because the investment management industry as a whole has been growing rapidly and shows no signs of slowing down.

"People who once had their money in a CD at a bank are now investing it directly in the stock market," he said. "And it's broadly agreed that professional investment management can add value--that investing is not something that people necessarily have the time or expertise to do on their own."

Healey says about one-quarter of AMG's earnings comes from investments in global securities and 92 percent of earnings comes from investments in equity securities. The company also has hedge fund assets totaling $3 billion and is looking to invest in firms that are exclusively focused on hedge funds.

Healey spends much of his time meeting prospective new affiliates, meeting with shareholders, and dealing with financing sources. "Our particular approach to the business is interesting because I'm regularly interacting with entrepreneurs who have built their own firm in their own way and who have achieved a lot of success. It's quite a fascinating group."

While sharp movements in the markets are always a concern, Healey says AMG's diversified collection of firms helps keep it fairly stable.

"Last year, the market went down and our earnings continued to rise," he said.

Indeed, even as the economy began to flag early this year, Healey was not terribly concerned.

"I don't have an informed opinion on whether there will be a recession," he said. "I think what it means for investors is that a long-term orientation is required. Inevitably, people who try to time the market in the short term are disappointed. Think long term and diversify. Don't pick too many advisers. Pick someone or some entity that you're comfortable with. What's right for one investor won't work well for someone else."

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