Diamond Hill Investment Group, Inc. operates in the investment management industry through its wholly-owned subsidiary, Diamond Hill Capital Management, Inc., a registered investment adviser under the Investment Advisers Act of 1940. The firm provides investment advisory and fund administration services to a range of vehicles including open-end mutual funds, an exchange-traded fund (the Diamond Hill Large Cap Concentrated ETF), a closed-end registered investment company (the Diamond Hill Securitized Credit Fund), a private fund (the Diamond Hill Micro Cap Fund, LP), separately managed accounts, collective investment trusts, other pooled vehicles including sub-advised funds, and model delivery programs. The company's investment philosophy centers on valuation-disciplined active portfolio management, fundamental bottom-up research, a long-term business-owner mindset, and a client alignment philosophy that prioritizes clients' interests. The company estimates its capacity as of December 31, 2025 at $50 billion to $60 billion in domestic equities, $20 billion to $30 billion in international equities, and $50 billion to $70 billion in fixed income.

The company faces intense competition from investment management firms, broker-dealers, banks, and insurance companies, many of which are better known, offer a broader range of investment products including passive index strategies and private equity and credit strategies, and have more dedicated resources for business development and marketing. Diamond Hill's competitive positioning is built on its shared investment principles, a strategic capacity discipline that protects portfolio managers' abilities to generate excess returns, personal investment by portfolio managers in the strategies they manage, and a fee philosophy focused on fair sharing of economics among clients, employees, and shareholders. The company's core cultural values of curiosity, ownership, trust, and respect are designed to create an environment where investment professionals focus on investment results and all teammates focus on the overall client experience.

Diamond Hill generates consolidated revenue and net income from investment advisory and fund administration services. Investment advisory fees are earned from managing client accounts under investment advisory and sub-advisory agreements, with fees depending on the type of investment strategy, account size, and servicing requirements. Fund administration services are provided to the Proprietary Funds and include portfolio and regulatory compliance, treasury and financial oversight, oversight of back-office service providers, and general business management and governance. The company also provides strategy-specific model portfolios to sponsors of model delivery programs, for which it is paid at a pre-determined rate based on assets under advisement, though it does not have discretionary investment authority over individual client accounts in these programs. The company's revenues are highly dependent on both the value and composition of AUM and AUA.

As of December 31, 2025, total AUM was $29.382 billion ¹, comprising Proprietary Funds of $18.785 billion ², separately managed accounts of $5.110 billion ³, other pooled vehicles of $3.746 billion ⁴, and collective investment trusts of $1.741 billion ⁵. Total AUA was $1.580 billion ⁶, primarily comprised of model portfolio assets related to the Large Cap and Select strategies. By investment strategy, U.S. Equity AUM totaled $17.932 billion ⁷, with Large Cap representing $14.398 billion ⁸, Small-Mid Cap $1.374 billion ⁹, Mid Cap $882 million ¹⁰, Select $778 million ¹¹, Small Cap $264 million ¹², Large Cap Concentrated $190 million ¹³, and Micro Cap $46 million ¹⁴. Alternatives AUM totaled $2.344 billion ¹⁵ from the Long-Short strategy. International Equity AUM totaled $161 million ¹⁶. Fixed Income AUM totaled $8.945 billion ¹⁷, with Short Duration Securitized Bond at $5.064 billion ¹⁸, Core Fixed Income at $3.691 billion ¹⁹, Securitized Credit at $133 million ²⁰, Securitized Total Return at $31 million ²¹, and Long Duration Treasury at $26 million ²².

During 2025, advisory contracts with the Diamond Hill Large Cap strategy, Diamond Hill Long-Short strategy, and Diamond Hill Short Duration Securitized Bond strategy represented approximately 50% ²³, 12% ²⁴, and 10% ²⁵ of total revenues, respectively, with the Diamond Hill Large Cap Fund representing the single largest source of revenue. The company generated approximately 70% ²⁶, 66% ²⁷, and 68% ²⁸ of its 2025, 2024, and 2023 revenues, respectively, from its advisory and administration agreements with the Proprietary Funds. The average advisory fee rate was 0.44% ²⁹ for 2025, compared to 0.45% ³⁰ for 2024 and 0.47% ³¹ for 2023. The average advisory fee rate for equity assets remained flat at 0.48% ³² in 2024 and 2025, while the average advisory fee rate for fixed income assets increased from 0.30% ³³ in 2024 to 0.33% ³⁴ in 2025.

On December 10, 2025 ³⁵, Diamond Hill entered into an Agreement and Plan of Merger with First Eagle Investment Management, LLC and Soar Christopher Holdings, Inc., pursuant to which each issued and outstanding DHIL common share will be automatically converted into the right to receive $175.00 ³⁶ in cash. The obligations of First Eagle and Merger Sub to consummate the Merger are subject to the Company obtaining the consent of clients generating an aggregate revenue run-rate of at least 78% ³⁷ of the Company's aggregate revenue run-rate as of November 30, 2025 ³⁸. The Company currently expects the Merger to be completed in the second quarter of 2026 ³⁹. Under certain circumstances, DHIL may be required to pay First Eagle a termination fee of $18.0 million ⁴⁰ if the Merger Agreement is terminated prior to completion, or $9.0 million ⁴¹ if terminated during the go-shop period which ended on January 14, 2026 ⁴². During 2025, the company repurchased 120,081 ⁴³ shares at an average price of $140.61 ⁴⁴ per share for a total purchase price of $16,884,763 ⁴⁵. The company paid total dividends of $27,185,693 ⁴⁶ in 2025, including regular dividends of $6.00 ⁴⁷ per share and a special dividend of $4.00 ⁴⁸ per share. As of December 31, 2025, $24.6 million ⁴⁹ remained available for repurchases under the 2024 Repurchase Program.

Total revenue for 2025 was $147.098 million ⁵⁰, a decrease of 3% ⁵¹ compared to $151.095 million ⁵² in 2024. Net operating income was $36.736 million ⁵³ in 2025, compared to $43.892 million ⁵⁴ in 2024. Net income attributable to common shareholders was $48.762 million ⁵⁵ in 2025, compared to $43.178 million ⁵⁶ in 2024. Diluted earnings per share was $17.91 ⁵⁷ in 2025, compared to $15.66 ⁵⁸ in 2024. Adjusted net operating income was $43.046 million ⁵⁹ in 2025, compared to $48.696 million ⁶⁰ in 2024. Net operating profit margin was 25% ⁶¹ in 2025, compared to 29% ⁶² in 2024. Adjusted net operating profit margin was 29% ⁶³ in 2025, compared to 32% ⁶⁴ in 2024. Investment income, net was $30.545 million ⁶⁵ in 2025, compared to $15.119 million ⁶⁶ in 2024. Income tax expense was $17.921 million ⁶⁷ in 2025, compared to $15.833 million ⁶⁸ in 2024.

The company's growth strategy centers on delivering an investment and client experience that enables investors to experience better outcomes over the long term. The company looks to attract like-minded, long-term focused clients across all of its offerings and has dedicated resources toward content-led marketing and sales enablement efforts. The distribution team focuses primarily on asset allocators with centralized research teams, including institutional consulting firms, wirehouses, banks, independent broker dealers, and independent registered investment advisory firms. The company also believes having a focus on plan sponsors with their own investment research teams is important. The company's intention is to deliver investment strategies to clients in the investment vehicle that best meets their unique needs.

The company's growth in fixed income strategies represents a significant vector, with fixed income AUM growing from $3.709 billion ⁶⁹ in 2023 to $6.224 billion ⁷⁰ in 2024 and $8.945 billion ⁷¹ in 2025. Net cash inflows into fixed income strategies were $2.290 billion ⁷² in 2025, $2.255 billion ⁷³ in 2024, and $1.371 billion ⁷⁴ in 2023. The Short Duration Securitized Bond strategy experienced net inflows of $1.1 billion ⁷⁵ in 2025 and the Core Bond strategy also experienced net inflows of $1.1 billion ⁷⁶ in 2025. The company has also developed new products, including the Diamond Hill Securitized Credit Fund and the Diamond Hill Core Plus Composite, which had inception dates of October 31, 2024 ⁷⁷ and December 31, 2024 ⁷⁸, respectively. The company's capacity increases with the development of new products or strategies.

The company's adjusted net operating profit margin was 29% ⁷⁹ for 2025, compared to 32% ⁸⁰ for 2024 and 30% ⁸¹ for 2023. The decrease in operating profit margin from 29% ⁸² in 2024 to 25% ⁸³ in 2025 was primarily driven by an increase in selling, general and administrative expenses (3% of the 4% margin decrease) and deferred compensation expense (1% of the 4% margin decrease). Included in selling, general and administrative expenses were $2.9 million ⁸⁴ of transaction-related expenses associated with the pending merger with First Eagle, which reduced operating profit margin by approximately 2% ⁸⁵. The company expects that its operating margin will fluctuate from period to period based on various factors, including revenues, investment results, employee performance, staffing levels, and gains and losses on investments held in the Deferred Compensation Plans.

The company's overall headcount was 120 ⁸⁶ as of December 31, 2025, seven employees fewer than as of December 31, 2024 ⁸⁷. The average employee tenure is 9.3 years ⁸⁸, and approximately 42.5% ⁸⁹ of its employees have been with the company more than 10 years. The company's five-year average employee turnover rate is approximately 6.6% ⁹⁰. The company's employees are based in 9 ⁹¹ states, and approximately 85% ⁹² of its employees reside in Ohio. The company has developed various backup systems and contingency plans but cannot be assured that those preparations will be adequate in all circumstances.

The company is restricted from repurchasing shares during the pendency of the Merger pursuant to the terms of the Merger Agreement. As of December 31, 2025, $24.6 million ⁹³ remained available for repurchases under the 2024 Repurchase Program, which authorizes management to repurchase up to $50.0 million ⁹⁴ of DHIL's common shares. The 2024 Repurchase Program will expire on May 4, 2026 ⁹⁵, or upon the earlier completion of all authorized purchases. Under the Merger Agreement, the company is restricted from declaring or paying dividends during the period from the signing of the Merger Agreement to the completion or termination of the Merger. The company does not expect to declare or pay additional dividends prior to the consummation of the Merger. The company is also restricted from issuing equity securities or making, increasing, reducing, redeeming, or otherwise modifying seed capital investments prior to the consummation or termination of the Merger.

The company has experienced sustained net outflows in its Large Cap strategy, which experienced net outflows of $4.1 billion ⁹⁶ during 2025, marking the fourth consecutive year of outflows in the Large Cap strategy. Large Cap has historically represented a significant portion of the company's total AUM and investment advisory fee revenue (49% of AUM and 52% of advisory fee revenues as of December 31, 2025 ⁹⁷). Net cash outflows during 2025 continued to be concentrated in the company's equity strategies, with total equity net outflows of $5.031 billion ⁹⁸. The company's investment strategies may not perform well during certain periods of time, and the company has, and is expected to continue to have, common positions and industry concentrations across its strategies at the same time. The trend in the growth in fixed income assets as a percentage of total assets could cause the total average advisory fee rate to continue to decline.

The company faces headwinds from industry trends toward lower fee products, passive strategies, and model portfolio arrangements that may adversely impact revenues. Total mutual fund and ETF inflows reached $765 billion ⁹⁹ in 2025, with passively managed strategies accounting for $951 billion ¹⁰⁰ in inflows while actively managed funds experienced $186 billion ¹⁰¹ in outflows. Within U.S. equities, the share of actively managed fund assets has declined from 47% ¹⁰² in 2020 to 35% ¹⁰³ in 2025. The company also faces increasing competition from ETFs, including low-cost, passively managed ETFs. The company's ability to attract additional AUM is dependent on its relationship with third-party financial intermediaries, and fees paid to financial intermediaries for investor access and marketing services have generally increased in recent years.

Management's message emphasizes that the company's growth centers first and foremost on delivering an investment and client experience that enables investors to experience better outcomes over the long term. The company's client alignment philosophy guides it to develop strategies and offer vehicles that meet clients' objectives, capitalize on its investment team's research capabilities, and align with its investment principles. Management highlights that the company's core cultural values of curiosity, ownership, trust, and respect create an environment where investment professionals focus on investment results and all teammates focus on the overall client experience. The strategic priorities emphasized for the period ahead include completing the proposed merger with First Eagle, which is expected to be completed in the second quarter of 2026 ¹¹⁴, and continuing to focus on diversification of the company's asset base and alignment of resources with areas of client demand. Management notes that the company's investment advisory relationships are subject to client consent requirements, and one of the closing conditions in the Merger Agreement requires the company to obtain the consent of clients generating an aggregate revenue run-rate of at least 78% ¹¹⁵ of a defined aggregate revenue run-rate.

Total revenue was $147.098 million ¹¹⁶ for 2025, compared to $151.095 million ¹¹⁷ for 2024 and $136.716 million ¹¹⁸ for 2023. Net income attributable to common shareholders was $48.762 million ¹¹⁹ for 2025, compared to $43.178 million ¹²⁰ for 2024 and $42.226 million ¹²¹ for 2023. Diluted earnings per share was $17.91 ¹²² for 2025, compared to $15.66 ¹²³ for 2024 and $14.32 ¹²⁴ for 2023. Net operating income was $36.736 million ¹²⁵ for 2025, compared to $43.892 million ¹²⁶ for 2024 and $35.504 million ¹²⁷ for 2023. Net operating profit margin was 25% ¹²⁸ for 2025, 29% ¹²⁹ for 2024, and 26% ¹³⁰ for 2023. Adjusted net operating income was $43.046 million ¹³¹ for 2025, $48.696 million ¹³² for 2024, and $41.434 million ¹³³ for 2023. Adjusted net operating profit margin was 29% ¹³⁴ for 2025, 32% ¹³⁵ for 2024, and 30% ¹³⁶ for 2023. Investment income, net was $30.545 million ¹³⁷ for 2025, $15.119 million ¹³⁸ for 2024, and $23.071 million ¹³⁹ for 2023. Income tax expense was $17.921 million ¹⁴⁰ for 2025, $15.833 million ¹⁴¹ for 2024, and $15.490 million ¹⁴² for 2023. The increase in investment income in 2025 reflects favorable market conditions, including higher equity market returns and improved performance across portions of the fixed income markets. The increase in income tax expense in 2025 was primarily due to an increase in the company's income before taxes. Included in selling, general and administrative expenses were $2.9 million ¹⁴³ of transaction-related expenses associated with the pending merger with First Eagle, which reduced operating profit margin by approximately 2% ¹⁴⁴. Cash and cash equivalents, investments held directly by DHCM, accounts receivable, and other current assets represented $200.4 million ¹⁴⁵ and $187.4 million ¹⁴⁶ of total assets as of December 31, 2025 and 2024, respectively. Investment advisory fees were $139.869 million ¹⁴⁷ for 2025, $143.342 million ¹⁴⁸ for 2024, and $129.180 million ¹⁴⁹ for 2023. Fund administration fees, net were $7.229 million ¹⁵⁰ for 2025, $7.753 million ¹⁵¹ for 2024, and $7.536 million ¹⁵² for 2023. Total expenses were $110.362 million ¹⁵³ for 2025, $107.203 million ¹⁵⁴ for 2024, and $101.212 million ¹⁵⁵ for 2023. Compensation and related costs, excluding deferred compensation expense, were $72.468 million ¹⁵⁶ for 2025, $74.589 million ¹⁵⁷ for 2024, and $70.731 million ¹⁵⁸ for 2023. Deferred compensation expense was $6.095 million ¹⁵⁹ for 2025, $4.776 million ¹⁶⁰ for 2024, and $5.600 million ¹⁶¹ for 2023. General and administrative expenses were $19.670 million ¹⁶² for 2025, $16.785 million ¹⁶³ for 2024, and $14.935 million ¹⁶⁴ for 2023. Sales and marketing expenses were $8.202 million ¹⁶⁵ for 2025, $7.510 million ¹⁶⁶ for 2024, and $6.684 million ¹⁶⁷ for 2023. Fund administration expenses were $3.927 million ¹⁶⁸ for 2025, $3.543 million ¹⁶⁹ for 2024, and $3.262 million ¹⁷⁰ for 2023.

The company's revenues are highly concentrated in a limited number of strategies, with the Diamond Hill Large Cap strategy representing approximately 50% ¹⁰⁴ of total revenues and 49% of AUM and 52% of advisory fee revenues as of December 31, 2025 ¹⁰⁵. The Large Cap strategy experienced net outflows of $4.1 billion ¹⁰⁶ in 2025, marking the fourth consecutive year of outflows, and continued underperformance or elevated redemptions could materially reduce advisory fee revenue. The company generated approximately 70% ¹⁰⁷ of its 2025 revenues from advisory and administration agreements with the Proprietary Funds, which are generally terminable by either party upon 60 days' ¹⁰⁸ prior written notice without penalty and are subject to annual approval by the applicable board of trustees. The pending merger with First Eagle introduces significant execution risk, as the company must obtain client consent from clients generating an aggregate revenue run-rate of at least 78% ¹⁰⁹ of the company's aggregate revenue run-rate as of November 30, 2025 ¹¹⁰, and failure to obtain required consents could prevent completion of the Merger or result in a reduction of AUM. If the Merger Agreement is terminated under certain circumstances, DHIL may be required to pay a termination fee of $18.0 million ¹¹¹. The company faces intense competition from firms with greater resources and lower-fee passive investment offerings, and industry trends toward lower fee products and model portfolio arrangements could adversely impact revenues, as the average advisory fee rate declined from 0.47% ¹¹² in 2023 to 0.44% ¹¹³ in 2025.