Affiliated Managers Group, Inc.

Greetings and welcome to the AMG third quarter 2021 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, 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 third quarter of 2021. 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, Angeline. Good morning, everyone. Growth continues to be a theme at AMG in 2021, and we are pleased with our excellent results. Our strong third quarter again reflects the consistent execution of our strategy, which includes partnering with new affiliates operating in attractive growth areas and supporting the continued growth of our existing affiliates. Against the backdrop of improving flows, AMG generated year-over-year growth of 26% in EBITDA, and economic earnings per share of $4, representing the strongest third quarter in our history. Our affiliates' excellent year-to-date investment performance has resulted in higher asset levels, an improving organic growth profile, and an increasing opportunity for performance fee generation. We believe today's environment requires an active approach. We are seeing clients increase allocations to the highest quality active managers as they position their portfolios to address the prospect of rising inflation, shifts in government behavior, and the desire to achieve impact through sustainable investing. These behavioral changes have contributed to AMG's improving profile and strong financial results this year. Further, our strategy is focused on investing in areas of secular growth. where client demand is high, including in private markets, specially fixed income, wealth management, Asia, and ESG. As we execute on this strategy, not only are we growing earnings, we are simultaneously evolving our business composition toward in-demand strategies. And over time, this ongoing shift will have an increasing impact on our long-term growth prospects. Executing across all elements of our strategy has had and will have a significant impact on reshaping our business towards fast-growing segments of the industry. This year alone, we have partnered with four new affiliates, including two in private markets and two dedicated to sustainable investing. And we expect that these four affiliates will collectively contribute approximately $100 million in EBITDA in 2022. Since 2019, this management team has added eight new affiliates operating in areas of strong secular demand, and we completed strategic repositioning work both at AMG and alongside our affiliates, further changing our composition and freeing up capital and resources to redeploy into our growth strategy. The collective impact of these actions is manifesting in our flows and our overall growth profile. Turning to new investments. AMG has been one of the most active investors and independent asset managers over the past 24 months. Our partnership approach is resonating with the highest quality partner-owned investment firms. And looking ahead, we are confident in our ability to execute on our new investment opportunity set, given the favorable transaction environment, AMG's strong competitive position, and increasing demand for our unique partnership solutions. During the quarter, we were pleased to partner with our newest affiliate, Abacus Capital Group, and welcome Ben Friedman, Kyle Ellis, and their partners, and look forward to working with them on their strategic objectives. With strong structural demand for multifamily real estate, Abacus is a fast-growing, high-quality business with excellent forward prospects in an attractive segment of the real estate industry. Ben and his team were seeking a permanent strategic partner and were attracted to AMG's partnership approach, which preserves their operational autonomy and entrepreneurial culture and enables them to continue to build an enduring multi-generational independent real estate business. Notably, we are now seeing opportunities to invest in illiquid managers seeking partnership solutions oriented towards incentive alignment and succession planning. Many founder-led and private market businesses are reaching a stage in their life cycle where demographically driven leadership transactions may take place, and AMG's proven approach is uniquely attractive. Succession planning has been and continues to be a core component of AMG's partnership approach, and together with our ability to offer growth capital and strategic capabilities, our solutions will continue to differentiate AMG as a leading institutional partner to independent firms. In addition to evolving our business through investing in new affiliates, we are also collaborating with existing affiliates on distribution and product development within many of the same secular growth opportunities. For example, in distribution in the second quarter, we completed the evolution of our US wealth platform, AMG Funds, with an overall focus on repositioning the product offering towards areas of growing demand. As a result of this strategic evolution, we now offer an enhanced product lineup, including ESG equities, specially fixed income, and Asian equities not previously available in the U.S. market. And we are adding resources and capital to our distribution efforts in support of this evolving product mix and the forward opportunity. We continue to expand our suite of in-demand strategies, especially in alternatives, including both liquid and illiquid alternatives, which will further differentiate AMG and our affiliates going forward. Recently, on the product development side, we supported Pantheon, PFM, and Artemis in developing, seeding, and launching additional private markets and ESG strategies, again, consistent with our overall focus in these secular growth areas. Pantheon has recently filed for a listed infrastructure vehicle, which will further expand their investor base as they continue to build on their position as a leading provider of private market solutions. PFM has introduced a growth equity fund dedicated to healthcare innovation, leveraging their strong long-term track record of late-stage private markets investing within their flagship fund. Additionally, Artemis launched its Positive Future Fund following the recent lift out of its global sustainable equities team. These are all great examples of how AMG's central strategic capabilities and seed capital can meaningfully support our affiliates in areas of increasing client demand. A consistent theme across all of our client conversations today is the desire for an increasing focus on sustainable and active stewardship. As I've said before, sustainable investing requires an active approach. and our affiliates are benefiting as clients increasingly engage high-quality active managers to generate positive impact in communities worldwide. Simultaneously, investors are also managing through an environment that has become increasingly complex and difficult to forecast, and we believe that active managers, especially independent firms, are best positioned to deliver client outcomes not replicable through passive investing. AMG affiliates are among the highest quality independent active managers in the world, and given their excellent performance across a number of highly differentiated in-demand strategies, AMG is well positioned to benefit from the evolving environment. Finally, the strength and momentum in our business that I've been describing over the past several quarters continues to build. Looking forward, we see significant opportunity for continued growth, as we execute our strategy and increase our exposure to secular growth areas. We will do this by continuing to invest in new and existing affiliates, as well as leveraging AMG's strategic capabilities. And through the consistent execution of this strategy, together with share repurchases, we will further compound our earnings and create significant shareholder value over time. And with that, I'll turn it over to Tom to review the details of the quarter.