Diamond Hill Investment Group, Inc. (DHIL): Business Model Canvas [11-2024 Updated]

In the competitive landscape of asset management, Diamond Hill Investment Group, Inc. (DHIL) stands out with its strategic focus on long-term investment solutions tailored for institutional investors and high-net-worth individuals. This blog post delves into the Business Model Canvas of DHIL, exploring its key components including partnerships, activities, resources, and revenue streams. Discover how this firm cultivates client relationships and maintains a proven track record of performance in the investment community.

Diamond Hill Investment Group, Inc. (DHIL) - Business Model: Key Partnerships

Collaborations with institutional investors

Diamond Hill Investment Group collaborates with various institutional investors to enhance its asset management capabilities and expand its market reach. As of September 30, 2024, the firm's total assets under management (AUM) were approximately $31.3 billion, an increase from $27.4 billion at the beginning of the year. Institutional investors represent a significant portion of this AUM, contributing to the firm's steady revenue growth.

Relationships with financial advisors

Financial advisors play a crucial role in Diamond Hill's business model. The company’s investment advisory fees for the nine months ended September 30, 2024, totaled $106.4 million, compared to $97.2 million for the same period in 2023, marking a 9% increase. The firm’s relationships with financial advisors help facilitate access to a broader client base, including high-net-worth individuals and retail investors, thereby driving growth in assets under management.

Partnerships with investment platforms

Partnerships with various investment platforms are integral to Diamond Hill's distribution strategy. The company utilizes these platforms to provide its investment strategies to a wider audience. As of September 30, 2024, the firm reported $1.8 million in mutual fund administration fees, reflecting its engagement with these platforms. The collaboration with investment platforms not only enhances visibility but also aids in the efficient distribution of its investment products.

Partnership Type	Details	Impact on AUM	Revenue Contribution
Institutional Investors	Collaborations to enhance asset management capabilities	$31.3 billion AUM as of September 30, 2024	Investment advisory fees: $106.4 million (9M 2024)
Financial Advisors	Relationships to access broader client base	Significant contributor to AUM growth	Investment advisory fees: $106.4 million (9M 2024)
Investment Platforms	Partnerships for product distribution	$1.8 million in mutual fund administration fees	Revenue from mutual fund administration

Diamond Hill Investment Group, Inc. (DHIL) - Business Model: Key Activities

Active portfolio management

Diamond Hill Investment Group engages in active portfolio management, focusing on delivering superior performance for its clients. As of September 30, 2024, the firm's assets under management (AUM) reached approximately $31.3 billion, marking an increase from $27.4 billion at the beginning of the period. The company reported a net income attributable to common shareholders of $35.8 million for the nine months ended September 30, 2024, reflecting a 25% increase compared to $28.6 million for the same period in 2023.

Investment research and analysis

Investment research and analysis form the backbone of Diamond Hill's investment strategy. The firm employs a rigorous research process, utilizing both quantitative and qualitative analysis to evaluate investment opportunities. For the nine months ending September 30, 2024, Diamond Hill generated total investment advisory fees of $106.4 million, a 9% increase from $97.2 million in the same period of 2023. The increase in fees was primarily driven by a 14% rise in average AUM and assets under advisement (AUA) during the same period.

Metric	September 30, 2024	September 30, 2023	% Change
Total AUM	$31.3 billion	$27.4 billion	6.3%
Investment Advisory Fees	$106.4 million	$97.2 million	9%
Net Income	$35.8 million	$28.6 million	25%

Client advisory services

Client advisory services are a critical component of Diamond Hill's business model, providing tailored investment solutions to meet individual client needs. The firm emphasizes building long-term relationships with its clients, which is reflected in the steady growth of AUM. As of September 30, 2024, total average AUM and AUA increased by 14% year-over-year. The average advisory fee rate for equity assets decreased slightly from 0.50% to 0.48%, while the fee rate for fixed income assets remained steady at 0.30%.

Type of Asset	Average Advisory Fee Rate (2024)	Average Advisory Fee Rate (2023)
Equity	0.48%	0.50%
Fixed Income	0.30%	0.30%

Diamond Hill Investment Group, Inc. (DHIL) - Business Model: Key Resources

Skilled investment professionals

Diamond Hill Investment Group employs a team of skilled investment professionals who are critical to the firm's operational success. As of September 30, 2024, the firm reported total assets under management (AUM) of approximately $31.3 billion, up from $25.0 billion a year earlier, reflecting the expertise and effectiveness of its investment team.

Advanced research tools and databases

The company has invested significantly in advanced research tools and databases to support its investment strategies. For the nine months ended September 30, 2024, general and administrative expenses, which include costs related to technology and research management systems, increased to $12.8 million from $11.0 million in the same period of 2023, indicating a focus on enhancing research capabilities.

Research Investment (in millions)	2024	2023
General and Administrative Expenses	$12.8	$11.0
Technology Support Expenses	$1.4	N/A

Strong brand reputation

Diamond Hill has established a strong brand reputation in the asset management industry. The company generated net income attributable to common shareholders of $35.8 million for the nine months ended September 30, 2024, compared to $28.6 million for the same period in 2023. This growth in profitability underscores the firm's positive market perception and brand strength.

Net Income (in millions)	2024	2023
Net Income Attributable to Common Shareholders	$35.8	$28.6
Earnings Per Share (EPS)	$12.90	$9.61

Diamond Hill Investment Group, Inc. (DHIL) - Business Model: Value Propositions

Long-term investment strategies

Diamond Hill Investment Group, Inc. focuses on long-term investment strategies that aim to deliver superior returns over time. As of September 30, 2024, the company reported total assets under management (AUM) of $31.3 billion, a significant increase from $24.8 billion in the prior year, reflecting a growth of approximately 26% year-over-year.

The average advisory fee rate for the nine months ended September 30, 2024, was 0.46%, down slightly from 0.48% in the same period of 2023. This fee structure is designed to align the firm’s interests with those of its clients, ensuring that the focus remains on long-term value creation rather than short-term gains.

Focus on client alignment and transparency

Client alignment and transparency are central to Diamond Hill's business model. The company emphasizes open communication with clients, providing them with clear insights into investment strategies and performance metrics. For the nine months ended September 30, 2024, the company generated net income attributable to common shareholders of $35.8 million, or $12.90 per diluted share, up from $28.6 million, or $9.61 per diluted share, in the same period of 2023.

Furthermore, the firm has implemented a performance-based fee structure for select accounts, which is calculated based on investment results over rolling five-year periods. As of September 30, 2024, AUM subject to this performance fee was approximately $531.6 million.

Proven track record of performance

Diamond Hill’s proven track record is a key aspect of its value proposition. The firm has consistently outperformed its benchmarks over various periods. As of September 30, 2024, the company reported an investment income of $18.4 million for the nine months ended September 30, 2024, compared to $9.7 million for the same period in 2023. This reflects a robust investment performance amid challenging market conditions.

The following table summarizes the company's financial performance metrics:

Metric	2024 (Nine Months)	2023 (Nine Months)	% Change
Total AUM	$31.3 billion	$24.8 billion	+26%
Net Income	$35.8 million	$28.6 million	+25%
Earnings per Share	$12.90	$9.61	+34%
Investment Income	$18.4 million	$9.7 million	+90%

This strong performance underscores Diamond Hill's commitment to delivering value through effective investment management and client-focused services.

Diamond Hill Investment Group, Inc. (DHIL) - Business Model: Customer Relationships

Personalized client service

Diamond Hill Investment Group, Inc. (DHIL) emphasizes personalized client service through dedicated account management. The firm employs a relationship-based approach, providing tailored investment strategies to meet individual client needs. As of September 30, 2024, DHIL reported an increase in total assets under management (AUM) to $31.3 billion, reflecting a commitment to enhancing client relationships and service quality.

Regular performance reporting

Clients receive regular performance reports detailing investment performance, market conditions, and strategic insights. For the three months ended September 30, 2024, DHIL generated $39.0 million in total revenue, with $37.2 million attributed to investment advisory services. The firm’s investment advisory fees increased by 11% compared to the same period in 2023, indicating the effectiveness of their reporting and communication strategies in retaining clients.

Performance Reporting Metrics	Q3 2024	Q3 2023	% Change
Total Revenue (in thousands)	$39,018	$35,554	10%
Investment Advisory Fees (in thousands)	$37,230	$33,668	11%
Average AUM (in billions)	$31.3	$24.9	25%

Educational resources and insights

DHIL provides clients with educational resources, including market insights and investment strategies. These resources aim to enhance client understanding of market dynamics and investment opportunities. The firm also conducts webinars and publishes research reports that cover various asset classes. In the nine months ended September 30, 2024, DHIL reported investment income of $18.4 million due to favorable market conditions, which underscores the value of their educational efforts in guiding client investment decisions.

Educational Resources Offered	Details
Webinars	Monthly educational sessions covering market trends
Research Reports	Quarterly reports on asset classes and investment strategies
Client Newsletters	Regular updates on portfolio performance and market outlook

Diamond Hill Investment Group, Inc. (DHIL) - Business Model: Channels

Direct sales through financial advisors

Diamond Hill Investment Group, Inc. (DHIL) leverages a network of financial advisors to facilitate direct sales of its investment products. For the three months ended September 30, 2024, DHIL reported investment advisory fees of $37.2 million, representing an 11% increase from $33.7 million in the same period of 2023. This growth is attributed to a 17% increase in total average Assets Under Management (AUM) and Assets Under Advisement (AUA), which reached approximately $33.2 billion as of September 30, 2024.

Online investment platforms

In addition to traditional financial advising, DHIL has integrated online investment platforms to reach a broader audience. The company’s investment strategies are accessible through digital channels, which have gained traction in recent years. For the nine months ended September 30, 2024, DHIL's revenue from investment advisory services totaled $106.4 million, up 9% from $97.2 million in the same period in the prior year. The average advisory fee rate slightly declined from 0.48% to 0.46%, indicating a competitive pricing strategy to attract more clients through online platforms.

Institutional client engagements

Institutional clients represent a significant portion of DHIL's business model. The company engages with institutional investors to provide tailored investment solutions. As of September 30, 2024, total AUM from institutional clients was reported at approximately $31.3 billion, which includes various pooled vehicles and collective investment trusts. DHIL's model delivery programs, which provide strategy-specific portfolios to institutional sponsors, further enhance its institutional engagement. The firm recorded performance-based fees of $0.9 million for the three and nine months ended September 30, 2024, highlighting the successful alignment of interests between DHIL and its institutional clients.

Channel Type	Total Revenue (in millions)	Growth Rate (%)	AUM (in billions)
Direct Sales through Financial Advisors	$37.2	11%	$31.3
Online Investment Platforms	$106.4	9%	$31.3
Institutional Client Engagements	$0.9 (performance-based fees)	N/A	$31.3

Diamond Hill Investment Group, Inc. (DHIL) - Business Model: Customer Segments

Institutional investors

Diamond Hill Investment Group, Inc. (DHIL) primarily serves institutional investors, which include large entities like mutual funds, insurance companies, and hedge funds. As of September 30, 2024, DHIL managed approximately $31.3 billion in assets under management (AUM), reflecting a significant increase from $24.8 billion at the end of 2023.

High-net-worth individuals

High-net-worth individuals (HNWIs) are also a key customer segment for DHIL. The firm offers tailored investment solutions designed for this demographic, often focusing on personalized asset management strategies. The average advisory fee rate for equity assets decreased from 0.51% for the three months ended September 30, 2023, to 0.49% for the same period in 2024. This indicates DHIL's competitive pricing strategy aimed at attracting more HNWIs.

Pension funds and endowments

Pension funds and endowments represent another critical segment of DHIL's clientele. These institutions seek long-term investment strategies that align with their financial goals. For the nine months ended September 30, 2024, DHIL reported net cash inflows of $1.5 billion from fixed income strategies, which are often favored by pension funds. The company’s investment income due to market appreciation reached $18.4 million for the same period, highlighting the effectiveness of its strategies in attracting institutional capital.

Customer Segment	Assets Under Management (AUM)	Average Advisory Fee Rate	Investment Income
Institutional Investors	$31.3 billion	0.46% (2024)	$18.4 million (9M 2024)
High-net-worth Individuals	Data not specifically disclosed	0.49% (2024)	Data not specifically disclosed
Pension Funds and Endowments	Data not specifically disclosed	Data not specifically disclosed	$1.5 billion net inflows (9M 2024)

Diamond Hill Investment Group, Inc. (DHIL) - Business Model: Cost Structure

Compensation and Related Costs

For the nine months ended September 30, 2024, compensation and related costs, excluding deferred compensation expense, amounted to $55.99 million, compared to $51.60 million for the same period in 2023, reflecting a 9% increase. Deferred compensation expense for the same period was $4.57 million, up from $1.87 million, representing a 145% increase.

Details of compensation-related costs are summarized in the table below:

Expense Type	2024 (in millions)	2023 (in millions)	% Change
Compensation excluding deferred	$55.99	$51.60	9%
Deferred Compensation Expense	$4.57	$1.87	145%

General and Administrative Expenses

General and administrative expenses for the nine months ended September 30, 2024, totaled $12.76 million, reflecting a 16% increase from $10.96 million in 2023. This increase was attributed to higher expenses related to technology support and improvements in the research management system.

Category	2024 (in millions)	2023 (in millions)	% Change
General and Administrative	$12.76	$10.96	16%

Marketing and Sales Costs

Marketing and sales expenses for the nine months ended September 30, 2024, were $5.42 million, which is a 10% increase from $4.94 million in the previous year. This increase was driven by higher payments to third-party intermediaries and increased advertising expenses.

Expense Type	2024 (in millions)	2023 (in millions)	% Change
Marketing and Sales	$5.42	$4.94	10%

Overall, the total operating expenses for Diamond Hill Investment Group, Inc. for the nine months ended September 30, 2024, amounted to $81.32 million, compared to $71.81 million in 2023, reflecting a 13% increase.

Total Expenses	2024 (in millions)	2023 (in millions)	% Change
Total Operating Expenses	$81.32	$71.81	13%

Diamond Hill Investment Group, Inc. (DHIL) - Business Model: Revenue Streams

Investment Advisory Fees

For the nine months ended September 30, 2024, Diamond Hill Investment Group generated $106.4 million in investment advisory fees, an increase of 9% compared to $97.2 million for the same period in 2023. This increase was primarily driven by a 14% rise in total average assets under management (AUM) and assets under advisement (AUA). The average advisory fee rate decreased from 0.48% to 0.46% during this timeframe.

Mutual Fund Administration Fees

Mutual fund administration fees for the nine months ended September 30, 2024, totaled $5.6 million, a slight decrease of 2% from $5.7 million in the same period of 2023. These fees are calculated as a percentage of the funds' average AUM.

Performance-Based Fees from Clients

Diamond Hill recorded $887,717 in performance-based fees for both the three and nine months ended September 30, 2024, consistent with the same periods in 2023. The performance-based fee structure is based on client investment results measured over rolling five-year periods, with approximately $531.6 million in AUM subject to these performance-based fees as of September 30, 2024.

Revenue Stream	Q3 2024 Revenue (in millions)	Q3 2023 Revenue (in millions)	9M 2024 Revenue (in millions)	9M 2023 Revenue (in millions)	% Change (9M)
Investment Advisory Fees	$37.2	$33.7	$106.4	$97.2	9%
Mutual Fund Administration Fees	$1.8	$1.9	$5.6	$5.7	-2%
Performance-Based Fees	$0.9	$1.2	$0.9	$1.2	0%

Updated on 16 Nov 2024

Resources:

1. Diamond Hill Investment Group, Inc. (DHIL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Diamond Hill Investment Group, Inc. (DHIL)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Diamond Hill Investment Group, Inc. (DHIL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.