Affiliated Managers Group, Inc.

Greetings and welcome to the AMG fourth quarter 2020 earnings call. At this time, all participants are in a listen-only mode. A 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. I would now like to turn the conference over to your host, Ms. Anjali Agarwal, Head of Investor Relations for AMG. Thank you. You may begin.

Good morning, and thank you for joining us today to discuss AMG's results for the fourth 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 call 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 was an extraordinary year, and the consistent execution of AMG's long-term strategy resulted in strong business performance and growth. Complex operating conditions and volatile markets accelerated transition across the investment management industry, with a number of our peers and competitors pursuing scale while others looked to divest or exit businesses altogether. Throughout this period, AMG remained committed to our fundamental principles, that investment performance is about skill, not scale, that investment alpha is best generated by differentiated active managers, and that the entrepreneurial investment-centric cultures of independent partner-owned firms offer clients the greatest opportunity for alpha. As a result, we remain focused on executing our long-term strategy with excellence and discipline. Our affiliates built on their strong long-term performance records, demonstrating their ability to distinguish themselves across market cycles, including during volatile periods like 2020. Today, approximately three-quarters of our products are outperforming their long-term benchmarks on an EBITDA basis. Our affiliates also continue to evolve and enhance their product offerings, often in collaboration with AMG, expanding their abilities to meet long-term client needs. And we welcomed four new affiliates in the past year, all of which operate in areas of strong secular growth, including sustainable and impact investing, private markets, and global equities. Overall, AMG emerged from the unprecedented events of 2020 in an even stronger position than we entered the year. And we entered 2021 with significant momentum across our business and substantial capacity and flexibility to generate meaningful additional earnings growth and shareholder value. Turning to our results. Since the second quarter of 2020, the earnings power of our business has increased considerably, driven by the strong and improving performance from the large majority of our affiliates, combined with the impact of strategic investments and actions we have taken to reposition our business over the past 18 months. These collective actions contributed to year-over-year growth in EBITDA of 27% in the fourth quarter, driven by growth in management fees and performance fees, as well as operational efficiency. We also capitalized on the market environment in 2020 to strengthen our balance sheet and improve flexibility for the benefit of our shareholders. With our enhanced capital position and substantial free cash flow, we deployed more than $800 million across a combination of growth investments and share repurchases, including new partnerships with Comvest, Jackson Square, and Boston Common, while simultaneously repurchasing 10% of our shares over the course of the year. AMG had a strong finish to 2020, but the results do not fully capture the magnitude of the earnings power heading into 2021, during which significant market, business performance, and new investment tailwinds will further contribute to our earnings growth. In the second half of 2020, business activity and client flows in private markets, wealth management, and specially fixed income were particularly strong. These areas collectively account for more than one-third of our EBITDA, and are becoming a more significant contributor to our overall growth profile. Our fundamental equity and liquid alternative strategies are better positioned today given their improved track records, increased performance via opportunity, and enhanced potential to generate organic growth. In addition to the building momentum of our existing affiliates, The incremental earnings contribution of our 2020 new investments will be fully realized in our 2021 results, given the timing of these investments over the course of the year. And finally, given our substantial liquidity and cash flow generation, we expect to continue to deploy significant capital in 2021 across both our new investment pipeline and additional share repurchases. For all of these reasons, as we enter this year, We are confident in AMG's forward prospects and our ability to generate meaningful growth in economic earnings per share. As you know, AMG is a leader in partnering with independent asset management firms. We have continued to evolve our approach to meet the ongoing needs of our affiliates as they grow their businesses over time. Today, we offer a uniquely broad set of partnership solutions for independent firms. including growth capital, distribution support, minority investments, and long-term succession planning. Our differentiated approach continues to resonate with the highest quality independent firms, as evidenced by our new investments over the course of 2020, which included Comvest Partners, a premier middle market private equity and private credit firm, which is an area of high client demand and increasing allocations. Jackson Square Partners, a leader in global equities with an outstanding reputation and track record for managing high-conviction portfolios. And Boston Common Asset Management, a woman-owned innovator in global sustainable and impact investing, which has significant organic growth prospects given their long record of success in ESG investing. Together, these new investments evidence the power and breadth of AMG's solution set, and all three firms have joined our global distribution platform to expand their client reach across channels and geographies. Individually, each new partnership underscores AMG's focus on investing in high-quality, growing businesses at disciplined valuations through customized structures designed to deliver returns across a range of outcomes. With our unique competitive position and proprietary relationships, our new investment activity remains high. Across a broader universe of firms around the world, prospective affiliates are increasingly engaging with us. Notably, Boston Common is our second partnership with a specialist in sustainable investing, following Inclusive Capital last year. Client appetite for responsible and impact investing is steadily increasing, and this is an important moment in time for the asset management industry to address long-term sustainability through capital allocation. We and our affiliates are increasingly focused on this imperative. We are closely collaborating to support affiliates' increased engagement and participation in responsible capitalism, particularly with respect to their product offerings. For example, We are providing capital resources to Artemis as they launch a dedicated sustainable global equity strategy. And similarly, we supported GW&K in building out a suite of sustainable fixed income strategies, which AMG is now distributing. More broadly, our global sales teams are bringing client insight to other affiliates with respect to integrating ESG into investment processes. Ultimately, we believe that independent active managers are best positioned to generate investment alpha as clients grow their allocations to ESG investing, and our affiliates are increasingly participating in this growth area. In its most fundamental way, sustainability, from the perspective of long-termism and the preservation of a firm's ability to build and create value over time, has been at the very heart of AMG's business purpose since our inception in 1993. AMG's foundational principles support and enhance the long-term duration of independent firms through succession planning. We help partner-owned firms to manage their greatest asset and their greatest risk, human capital, and to preserve and enhance partner alignment with their most important stakeholder, their clients. In addition to human capital, AMG also offers capabilities to assist affiliates in addressing other long-term risks, including operational regulatory and reputational support. In helping our affiliates to manage long-term risks and enhance their ability to grow over time, AMG has focused on sustainability of independent partner-owned firms for nearly 30 years. And as we build upon our three decades of successful partnerships and position ourselves for the future, the impact of the strategic and growth investments that we have made over the past two years are beginning to materialize in our results, as they did in the fourth quarter and will more fully manifest in the years ahead. Over this period, we have invested in four new affiliates. We have invested in the growth of our existing affiliates. We broadened our partnership solution offering. We enhanced our strategic capabilities. We realigned our distribution platforms with the greatest opportunities, and we significantly enhanced our capital position. We have achieved all of this while reinvigorating AMG's entrepreneurial culture and reestablishing an ownership mindset across the entire organization. Looking ahead to 2021, we have significant momentum in our business and heightened conviction in our strategy. As we continue to generate increasing levels of free cash flow and we invest that capital into our growth initiatives while returning excess capital through share repurchases, AMG's long-term opportunity to compound earnings is clear and positions us to deliver significant shareholder value over time. With that, I'll turn it over to Tom to review the details of the quarter.