Victory Capital Holdings, Inc. (VCTR): Business Model Canvas [11-2024 Updated]

In the competitive landscape of asset management, Victory Capital Holdings, Inc. (VCTR) stands out with a robust business model that drives its success. By leveraging strategic partnerships and a diverse range of investment products, the company effectively caters to both institutional and retail investors. This blog post delves into the essential components of Victory Capital's Business Model Canvas, exploring how its key activities, resources, and value propositions create a compelling framework for growth and sustainability in the financial sector. Discover the intricacies of their model below!

Victory Capital Holdings, Inc. (VCTR) - Business Model: Key Partnerships

Collaborations with Institutional Investors

As of September 30, 2024, Victory Capital Holdings, Inc. (VCTR) managed assets totaling approximately $176.1 billion, with a significant portion attributable to institutional investors. The total assets under management (AUM) have seen a year-over-year increase from $148.9 billion in 2023. For the nine months ended September 30, 2024, the company generated $19.4 billion in gross flows, while experiencing $5.5 billion in net outflows.

Strategic Alliances with Financial Advisors

Victory Capital has established strategic alliances with various financial advisors to expand its distribution network. These partnerships enable the firm to leverage advisors' client relationships, enhancing its market reach. The company reported that as of September 30, 2024, 43 of its mutual funds and ETFs achieved overall Morningstar ratings of four or five stars, indicating strong performance that financial advisors can leverage to attract clients.

Partnerships with Asset Management Firms

In July 2024, Victory Capital entered into a significant partnership with Amundi, a major asset management firm. This partnership involves the acquisition of Amundi US, which will enhance Victory's capabilities in providing investment solutions. The transaction is expected to close in early 2025 and will result in Amundi holding 26.1% of Victory's fully diluted shares.

Agreements with Third-Party Distributors

Victory Capital collaborates with third-party distributors to enhance its product accessibility. These agreements are crucial for distributing its mutual funds and ETFs across various platforms. In the three months ended September 30, 2024, the company reported total revenue of $225.6 million, driven by investment management fees and fund administration services.

Partnership Type	Description	AUM (in billions)	Gross Flows (in billions)	Net Outflows (in billions)
Institutional Investors	Collaborations to manage large portfolios	$176.1	$19.4	$(5.5)
Financial Advisors	Strategic alliances to enhance distribution	N/A	N/A	N/A
Asset Management Firms	Acquisition of Amundi US	N/A	N/A	N/A
Third-Party Distributors	Agreements to distribute mutual funds and ETFs	N/A	N/A	N/A

Victory Capital Holdings, Inc. (VCTR) - Business Model: Key Activities

Asset management and investment strategy development

The primary activity of Victory Capital Holdings, Inc. is asset management. As of September 30, 2024, the company reported a total of $176.1 billion in assets under management (AUM), which represents an increase from $148.9 billion in the same period of the previous year. The company generated $6.1 billion in gross flows and experienced $2.6 billion in net outflows during the three months ended September 30, 2024. The firm focuses on developing tailored investment strategies across various asset classes, including U.S. mid cap, small cap, large cap equity strategies, and fixed income. The investment performance is noteworthy, with 46% of strategies by AUM outperforming their respective benchmarks over a one-year period.

Research and analysis of market trends

Victory Capital places significant emphasis on market research and trend analysis to inform its investment strategies. The firm utilizes quantitative and qualitative research methods to assess market conditions and identify investment opportunities. This is crucial in a competitive landscape, as evidenced by the company's ability to adapt to market changes, resulting in an AUM increase of $14.8 billion from December 31, 2023, to September 30, 2024. The company employs a range of analysts and portfolio managers who monitor economic indicators, market movements, and sector performance to optimize investment decisions. This proactive approach to research has led to 60% of its strategies outperforming benchmarks over a three-year horizon.

Client relationship management and support

Victory Capital prioritizes client relationship management as a key activity to ensure client satisfaction and retention. The company reported $225.6 million in total revenue for the three months ending September 30, 2024, reflecting a growth compared to $209.7 million in the same period in 2023. The firm maintains a diverse client base, including institutional investors, corporations, and individual investors. As of September 30, 2024, the distribution of AUM by channel was as follows: 35% from investor, 25% from institutional, and 40% from retail. This diversified approach helps mitigate risk and enhance client engagement through tailored services and support.

Regulatory compliance and risk management

Regulatory compliance and risk management are critical activities for Victory Capital, particularly in the asset management industry. The company has established robust compliance frameworks to adhere to regulations set forth by the SEC and other governing bodies. As of September 30, 2024, the company had $139.6 million in contingent consideration related to acquisitions, indicating active risk management practices. Victory Capital also engages in continuous monitoring of its investment strategies and client portfolios, ensuring that risks are managed effectively. The company reported net income of $211.9 million for the nine months ended September 30, 2024, showcasing its ability to balance growth with prudent risk management.

Key Performance Indicators	Q3 2024	Q3 2023
Total AUM	$176.1 billion	$148.9 billion
Gross Flows	$6.1 billion	$5.1 billion
Net Outflows	$2.6 billion	$2.0 billion
Total Revenue	$225.6 million	$209.7 million
Net Income	$211.9 million	$158.0 million
Adjusted EBITDA Margin	53.7%	51.1%

Victory Capital Holdings, Inc. (VCTR) - Business Model: Key Resources

Experienced investment professionals

Victory Capital Holdings employs a team of experienced investment professionals, with a total AUM of approximately $176.1 billion as of September 30, 2024. The firm has 43 of its mutual funds and ETFs rated four or five stars by Morningstar, demonstrating the expertise and performance of its investment teams.

Proprietary investment strategies

The company has developed proprietary investment strategies that have led to substantial performance metrics. As of September 30, 2024, 46% of strategies by AUM had investment returns exceeding their benchmarks over a one-year period. This figure rises to 77% over a ten-year period. The firm's investment management fees for the three months ended September 30, 2024, amounted to $177.8 million.

Advanced technology and analytics platforms

Victory Capital utilizes advanced technology and analytics platforms to enhance its investment processes. The firm reported total revenue of $225.6 million for the three months ended September 30, 2024, reflecting the effectiveness of its technological investments. The average revenue realization on AUM was 52.1 basis points.

Strong brand reputation in the investment community

Victory Capital has established a strong brand reputation, evidenced by its significant market presence. The company reported net income of $82.0 million for the three months ended September 30, 2024, compared to $52.0 million for the same period in 2023. This growth in profitability underlines its respected position in the investment community.

Key Resource	Description	Quantitative Measure
Experienced investment professionals	Team managing assets	AUM: $176.1 billion
Proprietary investment strategies	Strategies outperforming benchmarks	46% one-year returns exceeding benchmarks
Advanced technology and analytics platforms	Investment management and analytics	Total revenue: $225.6 million
Strong brand reputation	Market positioning and profitability	Net income: $82.0 million

Victory Capital Holdings, Inc. (VCTR) - Business Model: Value Propositions

Diverse range of investment products

Victory Capital Holdings, Inc. offers a comprehensive suite of investment products, including mutual funds, exchange-traded funds (ETFs), and separately managed accounts. As of September 30, 2024, the company reported total assets under management (AUM) of approximately $176.1 billion, significantly up from $148.9 billion a year earlier. This growth reflects the company's ability to attract a diverse clientele through its varied investment offerings.

Product Type	AUM (in millions)	Percentage of Total AUM
Mutual Funds	$117,044	66.4%
ETFs	$6,694	3.8%
Separately Managed Accounts	$52,375	29.8%
Total AUM	$176,113	100%

High-performance mutual funds and ETFs

The performance of Victory Capital's mutual funds and ETFs is a key differentiator in the competitive asset management landscape. As of September 30, 2024, 43 of the company's mutual funds and ETFs received an overall Morningstar rating of four or five stars. Approximately 67% of AUM in funds and ETFs were rated four or five stars, highlighting the strong performance relative to peers.

Investment returns have consistently outperformed benchmarks, with 73% of strategies exceeding their benchmarks over a five-year period. This performance excellence is critical in attracting and retaining clients seeking reliable investment growth.

Tailored solutions for institutional and retail clients

Victory Capital provides customized investment solutions that cater to both institutional and retail clients. In the nine months ended September 30, 2024, the firm generated $19.4 billion in gross flows. The company’s ability to tailor its offerings ensures that diverse client needs are met effectively, enhancing client satisfaction and loyalty.

The breakdown of AUM by distribution channel as of September 30, 2024, illustrates the balanced approach towards different client segments:

Distribution Channel	AUM (in millions)	Percentage of Total AUM
Retail	$70,829	40%
Institutional	$43,295	25%
Investor	$61,989	35%
Total AUM	$176,113	100%

Commitment to responsible and sustainable investing

Victory Capital is increasingly focused on responsible and sustainable investing. This commitment is reflected in the growing demand for ESG (Environmental, Social, and Governance) investment strategies. The firm has integrated ESG factors into its investment decision-making processes, appealing to the rising number of investors prioritizing sustainability. As of September 30, 2024, the company has seen a positive response, with notable inflows into its ESG-compliant offerings.

Victory Capital’s strategy not only addresses the ethical concerns of investors but also positions the firm favorably in a market that is progressively leaning towards sustainable finance solutions.

Victory Capital Holdings, Inc. (VCTR) - Business Model: Customer Relationships

Personalized client service and support

Victory Capital Holdings, Inc. emphasizes personalized client service to enhance client satisfaction and retention. The company aims to maintain strong relationships with its clients through dedicated account management teams, which are tailored to meet the specific needs of institutional and retail clients.

Regular performance reporting and updates

The firm provides regular performance reporting and updates, ensuring clients are informed about their investments. As of September 30, 2024, Victory Capital reported a total of $176.1 billion in assets under management (AUM), reflecting a growth of 4.4% from the previous quarter, driven by market appreciation of $10.1 billion. The company offers detailed performance metrics for its funds, with 67% of its fund and ETF AUM rated four or five stars by Morningstar.

Educational resources for investors

Victory Capital invests in educational resources for investors. This includes webinars, whitepapers, and investment guides designed to empower clients with knowledge about market trends and investment strategies. Their educational approach is aimed at enhancing client engagement and promoting informed investment decisions.

Engagement through digital platforms and events

The company actively engages clients through various digital platforms and events. This includes online investment seminars and interactive tools that allow clients to track their investment performance in real-time. Victory Capital reported generating $19.4 billion in gross flows for the nine months ended September 30, 2024, indicating strong client engagement. Furthermore, the company facilitated a net outflow of $5.5 billion during the same period, suggesting ongoing client interactions are crucial for retention.

Performance Metrics	Q3 2024	Q3 2023
Total AUM	$176.1 billion	$148.9 billion
Net Income	$82.0 million	$52.0 million
Total Revenue	$225.6 million	$209.7 million
Adjusted EBITDA	$121.3 million	$107.2 million
Gross Flows	$6.1 billion	$5.1 billion

Victory Capital Holdings, Inc. (VCTR) - Business Model: Channels

Direct sales through institutional and retail teams

Victory Capital Holdings, Inc. generates revenue through direct sales teams that focus on both institutional and retail clients. As of September 30, 2024, the company's total Assets Under Management (AUM) reached $176.1 billion, with a breakdown of $43.3 billion (25%) in institutional assets and $70.8 billion (40%) in retail assets.

Online investment platforms and portals

Victory Capital has also established a presence on various online investment platforms. The firm recorded gross client cash inflows of $6.1 billion for the three months ended September 30, 2024, reflecting the effectiveness of these digital channels. The company's online offerings are integral to its strategy, allowing for broader access to its investment products.

Financial intermediaries and broker-dealers

The company leverages financial intermediaries and broker-dealers to distribute its investment products. The significant role of these partners is underlined by the $19.4 billion in gross flows that Victory Capital achieved for the nine months ended September 30, 2024. This channel provides a vital link between the company's offerings and a diverse client base, enhancing market reach.

Marketing through digital and traditional media

Victory Capital employs a robust marketing strategy that encompasses both digital and traditional media. The total revenue for the three months ended September 30, 2024, was reported at $225.6 million, up from $209.7 million in the same period in 2023. This increase is partially attributed to enhanced marketing efforts aimed at raising brand awareness and promoting its investment solutions across various media platforms.

Channel Type	Gross Flows (2024)	AUM Distribution (2024)	Total Revenue (2024)
Direct Sales	$6.1 billion	$43.3 billion (Institutional)	$225.6 million
Online Platforms	$6.1 billion	$70.8 billion (Retail)	$225.6 million
Intermediaries	$19.4 billion (9 months)	$176.1 billion (Total AUM)	$661.1 million (9 months)
Marketing	—	—	$225.6 million

Victory Capital Holdings, Inc. (VCTR) - Business Model: Customer Segments

Institutional investors (pensions, endowments)

Total Assets Under Management (AUM) for institutional clients as of September 30, 2024, was $43.3 billion, representing 25% of total AUM. The institutional segment has seen significant gross client cash inflows of $11.4 billion for the nine months ended September 30, 2024, though it also experienced gross outflows of $16.5 billion during the same period.

Retail investors (individuals, families)

The retail investor segment accounted for $70.8 billion in AUM, or 40% of the total AUM as of September 30, 2024. Gross client cash inflows for retail investors reached $6.1 billion for the three months ended September 30, 2024. The retail segment has experienced net outflows of approximately $5.1 billion during the same period.

Financial advisors and wealth management firms

Victory Capital provides tailored solutions to financial advisors, contributing to its diverse client base. As of September 30, 2024, the firm reported that 35% of its total AUM, equivalent to $61.9 billion, is attributed to investor channels that include financial advisors. The firm has also seen a trend of increasing advisor engagement, reflected in gross inflows of $6.1 billion in the latest quarter.

Retirement platforms and plans

Victory Capital's Solutions platform, which includes retirement plans, accounted for $62.5 billion in AUM as of September 30, 2024. The firm has been actively expanding its offerings to retirement plans, with gross inflows of approximately $6.1 billion recorded for the three months ended September 30, 2024. This segment remains crucial, contributing significantly to overall client assets and revenue.

Customer Segment	AUM (in billions)	Percentage of Total AUM	Gross Inflows (in billions)	Net Outflows (in billions)
Institutional Investors	$43.3	25%	$11.4	$16.5
Retail Investors	$70.8	40%	$6.1	$5.1
Financial Advisors	$61.9	35%	$6.1	N/A
Retirement Platforms	$62.5	35.4%	$6.1	N/A

Victory Capital Holdings, Inc. (VCTR) - Business Model: Cost Structure

Personnel Compensation and Benefits

The personnel compensation and benefits for Victory Capital Holdings, Inc. for the three months ended September 30, 2024, was $43.2 million, a decrease of 20.7% from $54.5 million in the same period of 2023. For the nine months ended September 30, 2024, the total was $158.4 million, down 5.2% from $167.0 million in 2023. The breakdown of personnel compensation includes:

Component	Q3 2024 (in thousands)	Q3 2023 (in thousands)	YTD 2024 (in thousands)	YTD 2023 (in thousands)
Salaries, payroll related taxes	$21,824	$20,495	$67,548	$67,800
Incentive compensation	$26,472	$23,897	$74,920	$67,131
Sales-based compensation	$6,401	$4,850	$18,096	$15,372
Equity awards granted	$3,714	$3,895	$11,448	$12,389
Acquisition-related compensation	($15,168)	$1,364	($13,655)	$4,351
Total	$43,243	$54,501	$158,357	$167,043

Operational and Administrative Expenses

The total operational and administrative expenses for the three months ended September 30, 2024, were $105.3 million, compared to $129.6 million for the same period in 2023. For the nine months ended September 30, 2024, the total was $345.3 million, down from $373.1 million in 2023. The significant components include:

Expense Type	Q3 2024 (in thousands)	Q3 2023 (in thousands)	YTD 2024 (in thousands)	YTD 2023 (in thousands)
Broker-dealer distribution fees	$5,049	$5,114	$15,060	$15,428
Platform distribution fees	$22,406	$23,673	$66,821	$69,863
Sub-administration	$4,313	$4,032	$12,590	$11,900
Sub-advisory	$2,330	$2,693	$7,008	$8,120
Middle-office	$2,730	$2,648	$8,086	$7,847
Total Operational Expenses	$105,265	$129,639	$345,337	$373,094

Marketing and Distribution Costs

Marketing and distribution costs are crucial for Victory Capital, reflecting investments in client acquisition and retention. For the three months ended September 30, 2024, these costs totaled $36.8 million, down from $38.2 million in the same period in 2023. For the nine months ended September 30, 2024, they reached $109.6 million, compared to $113.2 million in 2023.

Technology and Infrastructure Investments

Technology and infrastructure investments are essential for maintaining competitive advantages in asset management. The company invested $1.1 million and $4.4 million in property and equipment for the three and nine months ended September 30, 2024, respectively. This was a decrease compared to $4.4 million and $6.3 million in the same periods of 2023.

Victory Capital Holdings, Inc. (VCTR) - Business Model: Revenue Streams

Investment management fees

For the three months ended September 30, 2024, Victory Capital reported investment management fees of $177.8 million, compared to $164.0 million for the same period in 2023. For the nine months ended September 30, 2024, these fees totaled $520.8 million, up from $480.2 million in 2023.

The breakdown of investment management fees by category for the three months ended September 30, 2024, is as follows:

Type	Fees (in thousands)
Mutual funds (Victory Funds)	$119,936
ETFs (VictoryShares)	$6,355
Separate accounts and other vehicles	$49,483
Total	$177,809

Fund administration and distribution fees

Victory Capital earned $47.8 million in fund administration and distribution fees for the three months ended September 30, 2024, a slight increase from $45.7 million in the same period of 2023. For the nine-month period, the fees were $140.3 million, up from $135.0 million in 2023.

The detailed structure of these fees is as follows:

Type	Fees (in thousands)
Administration fees (Mutual funds)	$27,666
ETFs (VictoryShares)	$897
Distribution fees (Mutual funds)	$5,641
Transfer agent fees (Victory Funds III)	$13,615
Total	$47,819

Performance-based fees on assets under management

Performance-based fees are a significant component of Victory Capital's revenue model. For the three months ended September 30, 2024, performance-based fees amounted to $2.0 million, compared to $1.2 million in the same quarter of the previous year. For the nine months ended September 30, 2024, these fees totaled $6.2 million, a notable increase from $3.4 million in 2023.

The performance-based fees are derived from:

• Mutual funds (Victory Funds III): $1.9 million for Q3 2024
• Separate accounts and other vehicles: $0.1 million for Q3 2024

Income from proprietary investment products

Victory Capital also generates income from its proprietary investment products, primarily through seed capital investments in its own funds. As of September 30, 2024, the fair value of these investments was approximately $596,000, with an unrealized gain of $93,000 compared to the previous reporting period.

Additionally, the deferred compensation plan investments held by Victory Capital amounted to $34.1 million at fair value, reflecting a gross unrealized gain of $3.3 million.

Updated on 16 Nov 2024

Resources:

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