Affiliated Managers Group, Inc.

Greetings and welcome to the AMG fourth quarter 2019 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anjali Agarwal, Vice President, Investor Relations. Thank you. You may begin.

Thank you for joining AMG to discuss our results for the fourth quarter of 2019. During this call, certain matters discussed will constitute forward-looking statements. Our actual results could differ materially from those projected due to a number of factors, including those referenced in our Form 10-K and other SEC filings. We assume no obligation to update any forward-looking statements made during this call. AMG will provide on the Investor Relations section of its website a replay of this call, a copy of our earnings release, as well as a reconciliation of any non-GAAP financial measures, including any earnings guidance, announced on this call. As a reminder, we posted an updated investor presentation on our website this morning and encourage investors to consult our site regularly for updated information. With us on the line to discuss the company's results for the quarter are Jay Horgan, President and Chief Executive Officer, and Tom Wojcik, Chief Financial Officer. With that, I'll turn the call over to Jay.

Thanks, Anjali, and good morning, everyone. 2019 was a year of change and evolution at AMG. We completed a generational transition and succession within the management team, further evolved our core strategy, and took action to position our business for future growth. Given the significant competitive advantages we have built over nearly three decades, together with the entrepreneurial spirit of a new management team, we are confident in our forward growth prospects. I'll discuss the progress we have made against our strategy in more detail, but first let me summarize our earnings for the quarter. AMG reported economic earnings per share of $4.52 for the fourth quarter, and $14.22 for the full year 2019. AMG's fourth quarter adjusted EBITDA grew 5% year-over-year, driven by higher performance fees, which offset declines in margin-based affiliates. Our outflows moderate in the quarter and continue to be driven by certain quantitative strategies coupled with seasonal client redemption. I would note that while quantitative strategies account for approximately 30% of our AUM today, they contribute less than 10% of our run rate EBITDA. A large majority of our EBITDA is generated by affiliates and strategies that have strong long-term performance track records and are aligned with secular client demand trends. For example, our illiquid alternative affiliates, which collectively manage $100 billion of AUM, are benefiting from record levels of client allocations to private markets and contribute stable and growing fee streams to AMG's earnings. Our wealth management affiliates, which collectively manage $50 billion of AUM, posted another year of consistent inflows. With their solutions orientation and a focus on innovation, these affiliates also contribute stable and growing fee streams to AMG's earnings. In addition, a number of our fundamental managers across active equities and liquid alternatives enhanced their long-term performance track records during the year, delivering excellent returns to clients and contributing to AMG's strong performance piece. Finally, as investors increasingly focus on ESG, many of our affiliates have launched ESG products that are gaining momentum. With strength across these areas, AMG is well positioned for long-term organic growth and earnings growth, and we are focused on aligning our resources with these affiliates and strategies. During the quarter, through a number of strategic initiatives, AMG freed up capital and resources to reallocate to growth areas. And certain of our margin-based affiliates address costs in order to offset revenue declines. In addition, as we discussed last quarter, we are collaborating with certain affiliates facing industry headwinds to reposition their businesses to achieve optimal outcomes for affiliate partners, their clients, and AMG shareholders. Through these collective efforts, we will realize benefits on a forward basis, and Tom will discuss the impact of these initiatives on our financial results and disclosures. At the highest level, we continue to execute on our core strategy of partnering with leading independent active managers. We are focused on allocating resources to the areas of highest growth and return. Through the successful execution of this strategy over time, we have built a global business which is well diversified across affiliates, strategies, geographies, and clients. And today, AMG operates at scale, generates substantial recurring free cash flow, which we are investing to enhance future growth across three principal areas. Investments in new affiliates, investments in existing affiliates, and investments in AMG to enhance the growth of our affiliates. Let me expand further. Through new investments, AMG gains additional exposure to the fastest growing segments of the market, which are aligned with future client demand trends and will generate long-term organic growth. Our unique ability to evolve and scale our business through new investments without the risk or cost of integration is a distinct competitive advantage. We are dedicating significant resources to this effort, further increasing momentum, and our transaction pipeline includes a diverse array of high-quality, growing firms that are self-selecting into AMG's unique partnership approach. we remain highly selective and have focused on further refining our discipline in structuring new partnerships to generate attractive shareholder returns. And while the timing of individual new investments is inherently uncertain, we expect to generate incremental earnings growth from our creative investments in 2020. Through investments in existing affiliates with attractive growth prospects, we have an opportunity to accelerate their ability to meet evolving client needs. For example, in the fourth quarter, we expanded our seed capital program and supported the launch of new products at Artemis, Pantheon, and GWK. And we continue to identify additional ways to leverage our scale and expertise to create value for affiliates, including partnering on opportunities for differentiated distribution and working together to evaluate lift-out opportunities. And finally, we are reallocating AMG's resources to further invest in capabilities in support of our affiliates' strategic objectives. For example, we recently repositioned our global distribution effort to focus on clients that represent the largest growth opportunities for our affiliates. We've also added resources to enhance AMG's distribution of illiquid products to LPs globally, and we have seen early success with Bearing Asia. And we continue to explore strategic partnerships that leverage the collective strength of AMG's relationships on behalf of our affiliates. Taken together, we are focusing on leveraging AMG's unique competitive advantages and allocating capital across investments in new and existing affiliates, as well as high-value centralized resources that enhance our affiliates' growth potential. Our highest priority is to invest in these growth opportunities to create shareholder value, and then to continue to return capital to shareholders through repurchases and dividends. Over the past year, given our focus on management transition and repositioning our business for the future, we invested approximately one-third of our annual cash flow into growth initiatives. The remaining two-thirds was returned to shareholders. As we continue to execute on our strategy over the next several years, we see a shift in that mix towards growth investments, but at all times we'll maintain our discipline in allocating our capital to maximize shareholder returns over the long term. Stepping back, During a period of ongoing change and evolution in the asset management industry, we took further steps in 2019 to position our business for the future. We have reshaped our resources and footprint and reallocated capital to areas of growth. We have collaborated with certain affiliates to reposition their businesses while also investing alongside affiliates with growth opportunities. We completed a new investment in Guarded Capital, which has meaningfully outperformed in the first year of our partnership. and we are highly confident in our forward new investment pipeline. And finally, the next generation of AMG leadership is firmly in place and fully aligned with business performance and shareholder return. 2019 was a year of change and evolution at AMG. Moving forward, with the quality of our affiliates and the strength and diversity of our business, we are well positioned for 2020 and the opportunities ahead. With that, I'll turn it over to Tom to review the details of the quarter.