Executive Summary / Key Takeaways

• Silvercrest Asset Management Group Inc. ($SAMG) is strategically investing in organic growth, particularly in its global value equity strategy and international expansion, aiming to unlock substantial long-term value despite near-term impacts on profitability.
• The firm achieved record total Assets Under Management (AUM) of $37.6 billion in Q3 2025, driven by market appreciation and strong organic new client inflows, including a significant $1.3 billion seed investment in its global value equity strategy in Q4 2024.
• Current strategic investments in talent and global marketing initiatives are elevating compensation and general and administrative expenses, resulting in lower reported net income and Adjusted EBITDA in the short term.
• Management anticipates these investments will yield significant operating leverage, with discretionary AUM potentially exceeding all-time highs and a return to higher EBITDA margins by the end of 2026 or 2027, assuming supportive markets.
• Silvercrest maintains a strong balance sheet with no outstanding debt and a commitment to shareholder returns through a consistent dividend and ongoing share repurchase programs.

The Silvercrest Foundation and Strategic Evolution

Silvercrest Asset Management Group Inc. ($SAMG) operates as a full-service wealth management firm, specializing in financial advisory and family office services for ultra-high net worth individuals and institutional investors. The firm's core strength lies in its personalized, high-touch service model, which has fostered consistently high client retention rates exceeding 98%. This client-centric approach, coupled with deep intellectual capital, differentiates Silvercrest in a competitive landscape.

The company's business model is primarily driven by discretionary Assets Under Management (AUM), which generate recurring management and advisory fees. Beyond traditional equity and fixed income strategies, Silvercrest advises on non-traditional investments like hedge funds, private equity, real estate, and commodities. Its comprehensive family office services, including financial planning and tax preparation, further solidify client relationships, although these are typically fixed-fee and represent a smaller portion of total revenue.

Technological Approach and Future Productivity

While Silvercrest does not highlight a single, proprietary "core differentiated technology" in the same vein as a specialized software company, its strategic use of technology focuses on enhancing operational efficiency and client service. The firm maintains "research, trading and portfolio accounting systems" to support its investment processes. Management recognizes the potential for "productivity gains" from "innovations in technology" over the medium term, specifically through the end of 2026-2027, which could eventually help reduce operational costs and improve the bottom line.

In the broader industry, technological advancements, particularly in AI and data centers, are reshaping asset management. While larger competitors like BlackRock leverage extensive platforms such as Aladdin for scalability and data analytics, Silvercrest's personalized advisory model positions it to guide clients through these complex trends. This allows Silvercrest to benefit from investment opportunities arising from AI-driven growth and data center demands, potentially improving revenue by advising clients on these emerging areas. The firm's focus on data-driven decision-making within its strategic asset management framework aims to optimize asset longevity, proactively schedule maintenance, and prioritize spending for long-term investment returns.

A History of Calculated Growth and Client Centricity

Silvercrest's journey is marked by a series of strategic acquisitions and a consistent focus on expanding its service capabilities. The foundation was laid with the formation of Silvercrest L.P. (SLP) in 2008, following earlier acquisitions like James C. Edwards Asset Management in 2004 and LongChamp Group in 2004. The current corporate structure, with Silvercrest Asset Management Group Inc. as the sole general partner of SLP, was established with its 2013 IPO.

Significant growth milestones include the acquisition of Neosho Capital in 2019 and Cortina Asset Management in July 2019, the latter described by management as "very good for the company and highly accretive." These historical moves have shaped Silvercrest's current strategic emphasis on organic growth, leveraging its established platform and intellectual capital to attract new clients.

Strategic Investments Fueling Future Expansion

Silvercrest has embarked on a period of significant strategic investments aimed at promoting long-term growth opportunities. These investments are primarily directed towards intellectual capital and headcount, reflecting a concerted effort to expand the firm's reach and capabilities.

A key initiative is the new global value equity strategy, which received a substantial $1.3 billion (AUD2 billion) seed investment in the fourth quarter of 2024. This strategy's performance has been "outstanding" and is "beating" its core benchmark, generating a "very large" pipeline of potential allocations. Management anticipates "significant new inflows" for this capability in 2025, expecting follow-on institutional investors from Europe and Asia. To support this, Silvercrest is building an Australian trust and developing a UCITS in Europe.

International expansion is a core component of the growth strategy. The firm has obtained a full MAS license and opened an office in Singapore, with plans to add more personnel. In Europe, Silvercrest is establishing a European entity and pursuing regulatory licensing to proactively market its services, with a U.K. presence also in development. Domestically, the company is expanding its wealth management footprint by hiring business development and market leads in Atlanta, with plans to open an office there. The Outsourced Chief Investment Officer (OCIO) business has also grown to almost $2.2 billion in assets, with a strong pipeline.

Financial Performance: Investing for Tomorrow's Returns

Silvercrest's recent financial performance reflects a transitional period marked by strategic investments. For the third quarter of 2025, total revenue increased by 2.9% year-over-year to $31.3 million, primarily driven by market appreciation despite net client outflows. For the nine months ended September 30, 2025, total revenue rose 1.8% to $93.4 million.

Discretionary AUM, the primary driver of revenue, increased by $687 million during Q3 2025, reaching $24.3 billion, an 8% increase year-over-year. Total AUM hit a new firm high of $37.6 billion at the end of Q3 2025. Organic new client accounts have shown strong momentum, adding $46.4 million in Q3 2025 and $564 million year-to-date through Q3 2025, contributing to approximately $2 billion in new organic client accounts year-over-year.

However, these growth investments have impacted short-term profitability. Total expenses for Q3 2025 increased by 15.4% year-over-year to $30.0 million, mainly due to a $3.1 million increase in compensation and benefits and a $0.9 million rise in general and administrative expenses. Compensation and benefits were higher due to merit-based increases, new hires, and increased bonus accruals, while general and administrative expenses reflected higher professional fees, occupancy costs (including new Singapore office space), and recruiting. Consequently, reported consolidated net income for Q3 2025 was $1.1 million, with net income attributable to Silvercrest at $0.6 million, or $0.07 per diluted Class A share, down from $2.3 million ($0.24 per share) in Q3 2024. Adjusted EBITDA for Q3 2025 was $4.5 million, representing a 14.5% margin, compared to $6.3 million and a 20.9% margin in Q3 2024.

The average annual management fee was 0.34% for the three and nine months ended September 30, 2025, a slight decrease from 0.36% in the prior year, primarily due to changes in the mix of AUM.

Liquidity and Capital Returns

Silvercrest maintains a robust financial position, with cash and cash equivalents of $36.1 million as of September 30, 2025. The company has no outstanding borrowings under its credit facility, which has seen its term loan maturity extended to June 18, 2028, and the revolving credit facility to June 18, 2026. This strong balance sheet supports ongoing capital returns to shareholders.

The firm completed a $12 million share repurchase program in April 2025 and subsequently announced a new $25 million program in May 2025. As of the end of Q3 2025, approximately $16 million worth of shares had been repurchased under this new program. The quarterly dividend was increased by 5% to $0.21 per share in July 2025, with a dividend payout ratio of 118.31%. Management views share buybacks as a "great investment" when the price is compelling, akin to acquiring a known entity.

Competitive Positioning: A Boutique Edge in a Crowded Market

Silvercrest operates in a highly competitive wealth and asset management industry, where it distinguishes itself through a specialized focus on ultra-high net worth individuals, families, and select institutional investors. This boutique model emphasizes personalized service and deep intellectual capital, contrasting with the broader, more institutionalized approaches of larger competitors like BlackRock Inc. (BLK), Invesco Ltd. (IVZ), Franklin Resources Inc. (BEN), and Ameriprise Financial Inc. (AMP).

Silvercrest's competitive advantages include its strong brand reputation for personalized wealth management, proprietary expertise in family office services, and regulatory licenses for institutional advisory. These factors contribute to exceptional client loyalty and recurring revenue streams, allowing the firm to command premium pricing in its niche. For instance, its high-touch advisory services can foster stronger client relationships, potentially outperforming competitors that offer more standardized, technology-driven solutions.

However, Silvercrest's smaller scale presents certain vulnerabilities. It may face higher operational costs per client compared to the economies of scale enjoyed by larger rivals. While the firm utilizes "research, trading and portfolio accounting systems", it may lag in the speed of innovation in digital platforms compared to firms like BlackRock, which leverage advanced platforms like Aladdin for scalability and data analytics. This could limit its appeal to tech-oriented clients or those seeking purely digital solutions, a segment increasingly served by indirect competitors like robo-advisors.

The U.S. wealth management market is mature and highly competitive, with a trend of smaller RIAs being acquired by private equity, driving up acquisition multiples. This makes M&A a challenging avenue for growth. Silvercrest's strategy to grow organically in key regions like Atlanta, rather than solely through expensive acquisitions, is a direct response to this competitive dynamic. Globally, however, markets in Europe, Australia, and Asia are often "underserved by what I would call the RIA model," presenting significant opportunities for Silvercrest to leverage its differentiated business model.

Outlook and Guidance: A Long-Term Vision Unfolding

Silvercrest's management is optimistic about the firm's long-term growth trajectory, viewing the current period of elevated expenses as a necessary investment phase. They anticipate that discretionary AUM will "exceed all-time highs in the coming quarters," assuming supportive markets and continued business development. To provide clearer business metrics, the firm plans to adjust how it reports non-discretionary AUM in 2026, which will lower the reported figure without affecting revenue.

The compensation ratio is expected to remain "elevated for the foreseeable future" due to ongoing investments in personnel and global marketing initiatives across Europe, Oceania, and Asia. While acknowledging that achieving significant operating leverage will "take time," management projects an 18-to-24-month horizon for these investments to bear fruit. Specifically, flows from institutional marketing and the global value equity team could impact profitability within 6 to 12 months. The goal is to return to higher EBITDA margins, potentially in the "high twenties" or "low thirties," in the medium term, possibly by the end of 2026, if all strategic initiatives align.

Management is "highly optimistic" about securing a "very large second seed investment" for the global value equity strategy in 2025, alongside follow-on flows. The OCIO business, currently at almost $2.2 billion, also holds strong potential for growth. The European licensing process, enabling proactive marketing, is expected to conclude within 6 to 10 months.

Key Risks and Considerations

Investors should be aware of several key risks. Market volatility remains a significant factor, directly impacting AUM values and, consequently, revenue and income. While Silvercrest believes market dislocations present opportunities, short-term volatility can lead to client pauses in asset allocation.

The Tax Receivable Agreement (TRA) introduces uncertainty, as payments to SLP partners are imprecise and depend on various factors, including the timing of Class B unit exchanges and future tax rates. There is also a risk that the IRS could challenge tax basis increases, potentially leading Silvercrest to make TRA payments in excess of actual cash savings. Furthermore, the evolving nature of institutional searches makes traditional pipeline measurement challenging, requiring investors to rely more on qualitative assessments of management's progress.

Conclusion

Silvercrest Asset Management Group is executing a bold, long-term growth strategy centered on expanding its specialized wealth and asset management services globally and domestically. The firm's history of calculated acquisitions and unwavering client focus provides a strong foundation for its current investments in intellectual capital, talent, and international market penetration. While these strategic outlays are currently impacting short-term earnings and EBITDA, they are designed to unlock substantial organic growth, particularly through the high-capacity global value equity strategy and underserved international markets.

The commitment to enhancing its "research, trading and portfolio accounting systems" and leveraging technological innovations for future productivity gains, alongside its differentiated, personalized service model, positions Silvercrest to capitalize on evolving industry trends. With a robust balance sheet supporting both growth initiatives and consistent shareholder returns through dividends and buybacks, Silvercrest presents a compelling investment thesis for those seeking exposure to a high-quality asset manager poised for compounding returns as its strategic vision unfolds over the coming years. The anticipated return to higher operating margins by 2026-2027 underscores the potential for these investments to translate into significant shareholder value.