Victory Capital Holdings, Inc. Annual Report: A Year in Review

1. Business Overview Victory Capital Holdings, Inc. is a diversified global asset management firm that offers a wide range of investment strategies and products. It serves institutional and retail clients, including corporations, public funds, Taft-Hartley funds, endowments, foundations, and high net worth individuals. The firm's offerings span various asset classes—equity, fixed income, and alternative investments—delivered through specialized investment teams, each with its own distinct philosophy and process. This business model empowers independent investment teams with centralized support for distribution, operations, and technology.

2. Financial Performance Overall Performance Snapshot: Victory Capital Holdings delivered solid performance this past fiscal year, successfully navigating volatile markets and rising interest rates. The company achieved meaningful growth in key financial metrics, primarily driven by AUM growth, strategic acquisitions, and cost management. However, it also faced challenges such as net outflows in certain strategies and competitive pressures.

3. Risk Factors

• Market Volatility: Global market fluctuations can significantly impact AUM, investment performance, and fee revenue.
• Competition: The highly competitive asset management industry creates pressure on fees and challenges in attracting and retaining clients and talent.
• Regulatory Changes: Evolving regulations, such as new SEC rules or tax policy changes, could increase compliance costs or restrict business activities.
• Investment Performance: Poor investment performance, failing to meet client expectations or benchmarks, could lead to client withdrawals and reputational damage.
• Acquisition Integration: Integrating acquired businesses, like Amundi US, carries risks, including challenges in realizing expected synergies and cost savings.
• Cybersecurity Risks: Cybersecurity breaches pose risks of compromising sensitive data, disrupting operations, and harming the company's reputation.
• Key Personnel Risk: Losing key investment professionals or senior management could negatively impact investment performance, client relationships, and business operations.

4. Management Discussion (MD&A Highlights) Operational Performance & Key Drivers:

• Investment Performance: Many of the company's strategies outperformed their benchmarks over 1, 3, and 5-year periods, helping retain clients and attract new business.
• Client Flows: Strong demand in active fixed income and alternative strategies partially offset outflows in passive equity or specific traditional strategies.
• Strategic Acquisitions: The successful integration of Amundi US significantly boosted AUM and diversified product offerings. This added new ESG capabilities or expanded institutional client segments.
• Product Innovation: Victory Capital launched new funds/strategies in areas like ESG, thematic investing, and private markets, expanding its market reach and meeting evolving investor demands.
• Cost Management: The company continued to prioritize operational efficiency, effectively managing expenses while investing in strategic growth initiatives.

5. Future Outlook Strategic Initiatives & Outlook:

• Growth Strategy: The company continues to pursue organic growth through consistent investment performance and expanded distribution channels. It also seeks opportunistic acquisitions that enhance capabilities or market share.
• Technology & Efficiency: Ongoing technology investments aim to boost operational efficiency, enhance client experience via digital platforms, and support scalable growth across diverse product offerings.
• Market Positioning: Victory Capital is well-positioned to capitalize on trends like demand for specialized active management, growth in retirement solutions, or increasing allocation to alternative assets in the coming year.
• Capital Allocation: The company maintains a balanced capital allocation strategy, prioritizing investments in organic growth, strategic acquisitions, and returning capital to shareholders.

6. Competitive Position Victory Capital operates in a highly competitive global asset management industry. Its strengths include a multi-boutique investment model that fosters diverse strategies and entrepreneurial autonomy, a robust distribution platform reaching various client segments, and a focus on consistent investment performance. The company competes with a wide range of firms, including large diversified financial institutions, independent asset managers, and specialized investment boutiques. Key competitive factors are investment performance, brand reputation, client service, distribution capabilities, product innovation, and pricing. Victory Capital differentiates itself through its specialized investment teams, a client-centric approach, and its broad offering of active and passive solutions across asset classes.