Affiliated Managers Group, Inc.

Greetings, and welcome to the AMG Q3 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Ms. Anjali Agarwal, Head of Investor Relations for AMG. Ms. Agarwal, please go ahead.

Good morning, and thank you for joining us today to discuss AMG's results for the third quarter of 2020. Before we begin, I'd like to remind you that during this call, we may make a number of forward-looking statements, which could differ from our actual results materially, and AMG assumes no obligation to update these statements. A replay of today's calls will be available on the Investor Relations section of our website, along with a copy of our earnings release, and a reconciliation of any non-GAAP financial measures, including any earnings guidance announced on this call. In addition, we posted an updated investor presentation to our website this morning and encourage investors to consult our site regularly for updated information. With us today 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. 2020 has been an extraordinary year in many ways. In addition to the significant impact it has had on our daily lives, the global health crisis has caused disruption and structural changes in the economy, including a dramatic drawdown in recovery in markets fueled by unprecedented monetary and fiscal actions that will have a lasting impact for decades. For asset managers, these events have brought about a fundamentally different environment. We have moved from a decade-long bull market with record high asset correlations to a period of increased market volatility, lower correlations, and greater uncertainty. This new environment, characterized by significant asset dispersion, provides enhanced opportunity for the highest quality active managers to distinguish themselves and generate superior outcomes for their clients. In addition to the changing backdrop for active management, a meaningful shift in the competitive landscape for investment management as a whole is occurring in real time. Asset managers are questioning the foundational elements of future success, and in some cases are making dramatic changes to their forward strategy. The stark contrast in approaches evidences the strategic confusion in the marketplace, which will ultimately impact client behavior and outcomes. Our industry has struggled to successfully execute these strategies before. Vertical integration, operational integration, and cultural integration. In fact, AMG was founded 27 years ago during a similar period of competing and contrasting strategies. And we have been steadfast in our approach and successful in our strategic execution across cycles, including during those periods when other industry participants may have lost sight of the key attributes necessary to meet client goals and objectives. We believe that investing is about skill, not scale. It is about alignment with clients, not cost synergy. It is about entrepreneurialism and specialization, not corporate structure and product proliferation. Consolidation in a human capital-intensive industry like ours inevitably creates cultural cost and disenfranchises entrepreneurial talent, prompting clients to reevaluate their choices. And undoubtedly, this disruption will lead to significant opportunities for those who have a successful strategy and remain focused on client outcomes. We believe the highest quality franchises in the industry will benefit from this disruption, including especially AMG and our independent partner-owned affiliates. We expect to see a migration of both investment talent and client assets to independent managers that have the alignment and culture necessary to generate excess returns. Active management is best delivered through independent partner-owned firms, and we believe that AMG's unique approach to investing with and alongside these firms through our proven partnership model has stood the test of time and will continue to do so. AMG's unique business model enables us to grow through new partnerships with little or no integration risk while preserving the aspects of our affiliates' businesses that are most attractive to clients, independent firms, singular cultures, and investment autonomy. Now, turning to the results for the quarter, AMG reported economic earnings per share of $3.27 and adjusted EBITDA of $181 million. We are pleased with our results and that our business continues to perform well through the COVID period as we generated 12% adjusted EBITDA growth versus the prior quarter, reflecting the diversity and stability of our model, the quality of our affiliates, and our exposure to areas of secular growth. Client outflows continue to be driven almost entirely by certain quantitative strategies, which contribute very little to our run rate EBITDA. Excluding quantitative strategies, flows were broadly stable with ongoing growth in private markets and traditional and specially fixed income, as well as in differentiated active equities and alternatives where we have seen outstanding performance. As the market has recovered in recent months, we have increased our focus on investing for growth and are executing on our opportunity set across both existing and prospective affiliates. We continue to invest in our affiliates through AMG's distribution capabilities, our seed capital program, opportunistic team lift-outs, and the ongoing development of long-term succession plans to align the next generation of partners with future growth. We also continue to build strategic partnerships that leverage the collective strength of AMG's relationships on behalf of our affiliates. Against the backdrop of the pandemic, our global distribution platform has been even more valuable to our existing affiliates. At a time when most boutiques have been unable to fully engage outside their home markets, our affiliates have leveraged AMG's local sales teams to maintain close connectivity with clients and prospects. Turning to new investments, given the strength of our existing proprietary relationships, Our dialogues with prospective affiliates have been active throughout the COVID period. We are seeing increasing levels of engagement. Our prospecting efforts are focused on partnering with outstanding independent boutiques in areas of strong secular growth and client demand, including private markets, fixed income alternatives, global equities, ESG, and multi-asset solutions. AMG's differentiated approach and our three-decade-long track record of supportive partnership strongly resonates with the highest quality independent firms and their clients, particularly in light of a shift in the competitive landscape. Today, AMG's offering to existing and prospective affiliates is highly flexible and enables us to meet the evolving objectives of independent firms as they grow their businesses over time. In addition to succession planning as a core element of our value proposition, AMG offers primary capital to affiliates to invest in their growth initiatives, as well as access to proven in-market distribution capabilities to extend our affiliates' client reach and grow assets, all of which are increasingly important to new investment prospects. Looking ahead, we are highly confident in our growth strategy and anticipate opportunities arising from ongoing economic uncertainty and structural changes in our industry. We believe that in this environment, active management, particularly when executed by independent partner-owned firms, is more important than ever. And AMG's approach to investing in these firms is increasingly differentiated. Our ability to execute on the opportunities before us is enhanced by our financial flexibility and further enabled by our strong corporate culture with its hallmarks of entrepreneurialism and a partnership orientation. And with that, I'll turn it over to Tom to review the details for the quarter.