Victory Capital Holdings, Inc. (VCTR)

Victory Capital Holdings, Inc. operates as a diversified global asset management firm with total assets under management of $313.8 billion ¹ and $316.6 billion ² in total client assets as of December 31, 2025. The industry is intensely competitive, with competition based on a variety of factors including investment performance, fees, continuity of investment professionals and client relationships, the quality of services provided to clients, corporate positioning and business reputation, continuity of selling arrangements with intermediaries and differentiated products. The investment management industry is consolidating, and a number of competitors have greater financial, technical, marketing and other resources, more comprehensive name recognition and more personnel than Victory Capital does. Recent trends in the industry include increased demand for passive management, low fee products or alternative asset classes, which could reduce AUM, revenues and net income. The asset management industry is facing transformative pressures from increased fee pressure, a continued shift away from actively managed core equities and fixed income strategies towards alternative, passive and smart beta strategies, increased demands from clients and distributors for client engagement and services, a trend towards institutions developing fewer relationships and partners, increased regulatory activity, advances in technology and digital wealth and distribution tools, and growing digital asset markets.

Victory Capital competes with other investment firms in attracting and retaining client assets and with other acquirers of investment management firms, including independent, integrated investment management firms and multi-boutique businesses, insurance companies, banks, and other financial institutions. The company competes effectively based on investment performance track record of delivering alpha, the specialized nature of its investment strategies, fees charged, access to distribution channels, client service, and its employees' alignment of interests with investors. As of December 31, 2025, 78% ³ of strategies by AUM had returns in excess of their respective benchmarks over a ten-year period, 68% ⁴ over a five-year period, 63% ⁵ over a three-year period, and 63% ⁶ over a one-year period. On an equally weighted basis, 68% ⁷ of strategies outperformed their benchmarks over a ten-year period, 69% ⁸ over a five-year period, 62% ⁹ over a three-year period, and 60% ¹⁰ over a one-year period. 54 ¹¹ of Victory Capital mutual funds and ETFs with Morningstar overall ratings earned ratings of four or five stars overall and 65% ¹² of mutual fund and ETF AUM were rated four or five stars overall by Morningstar.

Victory Capital generates substantially all of its revenues from asset-based fees from investment management products and services to individuals and institutions. The company's revenues are recurring in nature, as they are based on the level of client assets managed. Revenue is derived from investment management fees and fund administration and distribution fees. For the year ended December 31, 2025, 75% ¹³ of total revenues were derived from services to investment companies registered under the 1940 Act, i.e., mutual funds and ETFs. The company's business model combines boutique investment qualities with the benefits of a scaled, integrated, centralized operating and distribution platform. Approximately two-thirds of operating expenses are variable in nature, consisting of the incentive compensation pool for employees, sales commissions, third-party distribution costs, sub-advising and fees paid to certain vendors. Primary customer segments include institutions, intermediaries, retirement platforms and individual investors.

Victory Capital offers a wide array of investment products through its eight Investment Franchises and Solutions Platform, which collectively managed 187 ¹⁴ investment strategies as of December 31, 2025. Products include actively and passively managed mutual funds, rules-based and active exchange traded funds, institutional separate accounts, variable insurance products, alternative investments, private closed end funds, and a 529 Education Savings Plan. Strategies are also offered through third-party investment products including mutual funds, third-party ETF model strategies, retail separately managed accounts and unified managed accounts through wrap account programs, Collective Investment Trusts, and undertakings for the collective investment in transferable securities. The Investment Franchises are Integrity Asset Management, New Energy Capital, Pioneer Investments, RS Investments, Sycamore Capital, Trivalent Investments, Victory Income Investors, and WestEnd Advisors. As of December 31, 2025, Pioneer Investments managed $132.3 billion ¹⁵ in AUM, Sycamore Capital managed $28.4 billion ¹⁶, Victory Income Investors managed $35.6 billion ¹⁷, RS Investments managed $19.8 billion ¹⁸, Trivalent Investments managed $8.5 billion ¹⁹, Integrity Asset Management managed $6.0 billion ²⁰, WestEnd Advisors had AUA and AUM totaling $26.9 billion ²¹, and New Energy Capital managed less than $1 billion ²². The Solutions Platform managed $55.8 billion ²³ in AUM as of December 31, 2025.

The Solutions Platform consists of multi-asset, multi-manager, quantitative, rules-based, factor-based, and customized portfolios designed to achieve specific return characteristics, with products that include values-based and thematic outcomes and exposures. The Solutions Platform is offered through a variety of vehicles including separate accounts, mutual funds, UMA accounts, and rules-based and active ETFs under the VictoryShares ETF brand. As of December 31, 2025, the Solutions Platform team of 20 ²⁴ includes 14 ²⁵ investment professionals with average industry experience of approximately 17 ²⁶ years. The Solutions Platform managed $55.8 billion ²⁷ in AUM as of December 31, 2025. The company's asset class mix as of December 31, 2025 includes Fixed Income of $80.5 billion ²⁸, Solutions of $91.2 billion ²⁹, U.S. Mid Cap Equity of $30.0 billion ³⁰, U.S. Small Cap Equity of $11.2 billion ³¹, U.S. Large Cap Equity of $63.4 billion ³², Global/Non-U.S. Equity of $30.7 billion ³³, Alternative Investments of $3.0 billion ³⁴, and Money Market/Short-Term of $3.7 billion ³⁵.

During 2025, Victory Capital closed on a strategic transaction with Amundi SA to combine their U.S. operations into Victory Capital, established exclusive long-term global distribution agreements, and Amundi became a strategic shareholder of Victory Capital. The addition of Amundi US, which was rebranded back to Pioneer Investments, increased the Company's AUM by $114.6 billion ³⁶ as of April 1, 2025. The company also entered into a 15-year ³⁷ exclusive offshore distribution agreement with Amundi, which is scheduled to automatically renew in 2040 ³⁸ and then remain effective for successive five-year terms. As of December 31, 2025, the company had $983 million ³⁹ of outstanding debt and maintained a $100 million ⁴⁰ revolving credit facility with no amounts outstanding. The Board of Directors approved a share repurchase program authorizing the repurchase of up to $200.0 million ⁴¹ through December 31, 2026, which was increased to up to $500.0 million ⁴² through December 31, 2027. During the quarter ended December 31, 2025, the company repurchased 803,370 ⁴³ shares under the program. The company paid $1.94 ⁴⁴ of cash dividends per share in 2025, an increase of $0.38 ⁴⁵, or 24% ⁴⁶, from the $1.56 ⁴⁷ per share in 2024.

Total revenue for the year ended December 31, 2025 was $1.3 billion ⁴⁸ compared to $893.5 million ⁴⁹ for the year ended December 31, 2024. Net income was $330.1 million ⁵⁰ and $288.9 million ⁵¹, respectively, for the years ended December 31, 2025 and 2024. GAAP earnings per diluted share was $4.08 ⁵² for the year ended December 31, 2025 compared to $4.38 ⁵³ for the same period in 2024. Adjusted Net Income was $472.6 million ⁵⁴ for the year ended December 31, 2025 compared to $312.9 million ⁵⁵ for the year ended December 31, 2024. Adjusted EBITDA and Adjusted EBITDA margin were $682.9 million ⁵⁶ and 52.3% ⁵⁷, respectively, for the year ended December 31, 2025 compared to $475.6 million ⁵⁸ and 53.2% ⁵⁹, respectively, for the year ended December 31, 2024. AUM at December 31, 2025 was $313.8 billion ⁶⁰ compared to $171.9 billion ⁶¹ at December 31, 2024. The company generated $60.0 billion ⁶² in gross flows and $4.5 billion ⁶³ in net outflows for the year ended December 31, 2025 compared to $26.2 billion ⁶⁴ in gross flows and $7.4 billion ⁶⁵ in net outflows for the same period in 2024.

A key growth vector is the strategic acquisition of Amundi US, which closed on April 1, 2025, adding Pioneer Investments as the company's largest Investment Franchise with $132.3 billion ⁶⁶ in AUM as of December 31, 2025. This transaction meaningfully enhanced scale, expanded the global client base, and further diversified investment and product capabilities. The company also established a 15-year ⁶⁷ exclusive offshore distribution agreement with Amundi, under which Victory Capital is the exclusive supplier of traditional U.S.-manufactured active asset management products for Amundi's distribution outside of the U.S. Amundi has a presence in 35 ⁶⁸ countries, clients in 60 ⁶⁹ countries, and access to 200 million ⁷⁰ retail clients. The agreement is scheduled to automatically renew in 2040 ⁷¹ and then remain effective for successive five-year terms. This strategic partnership positions Victory Capital's investment solutions within a global distribution ecosystem with substantial scale and reach.

Another growth vector is the company's focus on organic growth through enhancing the strength of existing Investment Franchises by providing access to the operating platform, technology, distribution, marketing, product development, and other support functions. The company continually evaluates and makes investments to improve its operating platform, including recent initiatives in artificial intelligence, data and analytics, technology, product development, U.S. and International distribution, and marketing to enhance organic growth and increase the effectiveness of distribution channels. The company also seeks to grow through strategic acquisitions of investment management firms that will add high quality investment teams, enhance growth and financial profile, improve diversification by asset class and investment capability, achieve integration and synergy expectations, and expand distribution capabilities. The company also focuses on alternative investments, offering both open-end liquid alternative investments and closed-end private funds, with attractive fee rates, margins, longer capital commitments, and less likelihood of being disintermediated by non-active strategies.

Approximately two-thirds of the company's operating expenses are variable in nature, consisting of the incentive compensation pool for employees, sales commissions, third-party distribution costs, sub-advising and fees paid to certain vendors. This automatic flexing of the operating expense base helps to support profitability throughout various market cycles. The company has identified three primary net income growth drivers: growing AUM organically through inflows and market appreciation, growing via strategic and synergistic acquisitions, and constructing a scalable and efficient platform. The company believes both the scalability of its business and its cost structure, in which approximately two-thirds of operating expenses are variable, drives industry-leading margins and facilitates free cash flow conversion. Having most expenses tied to AUM and the number of client accounts provides downside margin protection should there be sustained net outflows or adverse market conditions.

The company outsources certain middle- and back-office activities, such as sub-transfer agent, trade settlement, portfolio analytics, custodian reconciliation, portfolio accounting, corporate action processing, performance calculation and client reporting, to scaled, recognized service providers on a variable-cost basis. Outsourcing these functions enables the company to grow AUM, both organically and through acquisitions, without the incremental capital expenditures and working capital that would typically be needed. The company maintains relationships with multiple vendors for most outsourced functions, which mitigates vendor-specific risk. The company has relatively minimal capital expenditure requirements because it largely outsources middle- and back-office functions as well as certain aspects of technological support. As of December 31, 2025, the company had 699 ⁷² full-time employees with 231 ⁷³ in investment management, 251 ⁷⁴ in sales and marketing roles and 217 ⁷⁵ in management and support functions.

The company's capital allocation strategy includes share repurchases and dividends. In December 2024, the Board of Directors approved a share repurchase program authorizing the repurchase of up to $200.0 million ⁷⁶ of common stock through December 31, 2026. On August 7, 2025, the Board authorized an increase in the program from $200.0 million ⁷⁷ to up to $500.0 million ⁷⁸ through December 31, 2027. During the quarter ended December 31, 2025, the company repurchased 803,370 ⁷⁹ shares under the program. The company paid $1.94 ⁸⁰ of cash dividends per share in 2025, an increase of $0.38 ⁸¹, or 24% ⁸², from the $1.56 ⁸³ per share in 2024. Potential future dividend payments will be at the sole discretion of the board of directors and will depend upon then-existing conditions, including capital requirements to execute the growth strategy, results of operations, financial condition, projected cash flow, and terms associated with the current credit facility or any future financing. Potential increases to the cash dividend rate will be assessed annually.

A structural headwind is the trend in the investment management industry toward increased demand for passive management, low fee products or alternative asset classes, which could reduce AUM, revenues and net income. The company's strategies are generally considered active, and in recent years across the industry, passive products have experienced inflows and traditional actively managed products have experienced outflows in the aggregate. The company must be able to continue to provide clients with investment products and services that are viewed as appropriate in relation to the fees charged, which may require demonstrating that its strategies can outperform such passive products. The competitive nature of the industry has led to a trend toward lower fees in certain segments, and the company's ability to sustain fee levels depends on future growth in specific asset classes and distribution channels. Institutional clients may have significant negotiating leverage in establishing the terms of an advisory relationship, particularly with respect to the level of fees paid.

Another constraint is the company's substantial indebtedness, with approximately $983 million ⁸⁴ of outstanding debt as of December 31, 2025, and a $100 million ⁸⁵ revolving credit facility. This indebtedness may make it more difficult for the company to withstand or respond to adverse or changing business, regulatory and economic conditions or to take advantage of new business opportunities or make necessary capital expenditures. The 2019 Credit Agreement contains financial and operating covenants that may limit the company's ability to conduct its business. The company also faces risks from its international activities, including the need to comply with legal and regulatory requirements of various foreign jurisdictions, exposure to political environments, difficulty in managing and operating international services, the inability to transact in various investments or to repatriate proceeds, potential nationalization of property, and significant adverse changes in international legal and regulatory environments.

Management's message emphasizes the company's purposeful strategy designed to achieve lasting profitable growth and success for clients, employees, and shareholders, with focused strategies for pursuing both organic and inorganic growth. Key themes include the successful closing of the strategic transaction with Amundi SA to combine their U.S. operations into Victory Capital, which meaningfully enhanced scale, expanded the global client base, and further diversified investment and product capabilities. Management highlights that the company has grown total client assets 1,669% ⁸⁸ from $17.9 billion ⁸⁹ to $316.6 billion ⁹⁰ since the management-led buyout from KeyCorp in 2013. The company's strategic priorities include enhancing the strength of existing Investment Franchises through access to the operating platform, technology, distribution, marketing, product development, and other support functions; pursuing strategic acquisitions that add high quality investment teams and enhance growth and financial profile; and maintaining a diversified platform across investment strategies, franchises, client type, and domicile. Management also emphasizes the economic and structural alignment of interests through the revenue share compensation model for investment professionals and broad firmwide employee equity and product ownership, noting that as of December 31, 2025, 69% ⁹¹ of employees controlled 12% ⁹² of the fully diluted common shares and employees had invested more than $350 million ⁹³ in the products managed, with the combined value of ownership in the company and products at year-end 2025 being over $825 million ⁹⁴.

Total revenue for the year ended December 31, 2025 was $1,306,131 ⁹⁵ compared to $893,477 ⁹⁶ for the year ended December 31, 2024. Net income was $330,100 ⁹⁷ and $288,900 ⁹⁸, respectively, for the years ended December 31, 2025 and 2024. GAAP earnings per diluted share was $4.08 ⁹⁹ for the year ended December 31, 2025 compared to $4.38 ¹⁰⁰ for the same period in 2024. Adjusted Net Income was $472,600 ¹⁰¹ for the year ended December 31, 2025 compared to $312,900 ¹⁰² for the year ended December 31, 2024. Adjusted EBITDA was $682,900 ¹⁰³ for the year ended December 31, 2025 compared to $475,600 ¹⁰⁴ for the year ended December 31, 2024. Adjusted EBITDA margin was 52.3% ¹⁰⁵ for the year ended December 31, 2025 compared to 53.2% ¹⁰⁶ for the year ended December 31, 2024. Revenue realization on average AUM was 48.6 ¹⁰⁷ basis points for the year ended December 31, 2025 compared to 52.6 ¹⁰⁸ basis points for the year ended December 31, 2024. Investment management fees were $1,045,469 ¹⁰⁹ for the year ended December 31, 2025 compared to $704,583 ¹¹⁰ for the year ended December 31, 2024. Fund administration and distribution fees were $260,662 ¹¹¹ for the year ended December 31, 2025 compared to $188,894 ¹¹² for the year ended December 31, 2024. Personnel compensation and benefits were $362,991 ¹¹³ for the year ended December 31, 2025 compared to $217,214 ¹¹⁴ for the year ended December 31, 2024. As of December 31, 2025, the company had approximately $983 million ¹¹⁵ of outstanding debt and goodwill and intangible assets totaled $3.7 billion ¹¹⁶. The tax benefit of goodwill and acquired intangibles was $41,400 ¹¹⁷ for the year ended December 31, 2025 compared to $40,200 ¹¹⁸ for the year ended December 31, 2024.

Victory Capital earns substantially all of its revenues based on AUM, and any reduction in AUM would reduce revenues and profitability, with AUM fluctuating based on investment performance, client withdrawals, and difficult market conditions. The company derives substantially all of its revenues from contracts and relationships that may be terminated upon short or no notice, including investment advisory agreements with registered funds that are generally terminable by the funds' boards or a vote of a majority of the funds' outstanding voting securities on not more than 60 days' written notice. For the year ended December 31, 2025, approximately 80% ⁸⁶ of total revenues were generated from mutual funds and other pooled investment vehicles that the company advises. The loss of key investment professionals or members of senior management could have a material adverse effect on the business, as the company depends on the skills and expertise of portfolio managers and other investment professionals. The company's substantial indebtedness of approximately $983 million ⁸⁷ as of December 31, 2025 may expose it to material risks, including making it more difficult to withstand adverse conditions or take advantage of new business opportunities. The investment management industry is intensely competitive and is consolidating, with recent trends including increased demand for passive management, low fee products or alternative asset classes that could reduce AUM, revenues and net income.