Affiliated Managers Group, Inc.

Greetings and welcome to the AMG second quarter 2022 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 second quarter of 2022. 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 Lojic, Chief Financial Officer. With that, I'll turn the call over to Jay.

Thanks, Anjali, and good morning, everyone. AMG's business proved resilient in the second quarter, delivering economic earnings per share in line with the year-ago quarter, despite a significantly more challenging market and industry backdrop. Our results demonstrate the strength and efficacy of our business model. Through disciplined execution, we've evolved our business by increasing our exposures in areas of secular growth and further diversified and enhanced the resiliency of our earnings. Today, AMG is positioned to deliver differentiated business performance in all market environments, including the current one. The era of globally coordinated monetary policy has been replaced by inflationary pressures, rising rates, and increased geopolitical uncertainty, creating challenging economic conditions. Markets are reflecting these dynamics, and investors reduced risk in their portfolios in the first half of 2022. During the quarter, changes in client behavior resulted in elevated outflows in our equity strategies, particularly in global equities. However, given the impact of our capital decisions and our affiliates' investment performance, especially in liquid alternatives, our earnings per share grew in the first half of the year relative to the year-ago period. With our affiliate's strong investment results and momentum in our business, we expect continued strength in second-half earnings, which would result in annual growth on a per-share basis, highlighting our differentiated business profile and earnings power. As we've been saying for some time now, the market environment has fundamentally changed and a new paradigm has formed. For the better part of the last decades, owning passive equities in a low volatility rising market proved to be an effective strategy and allowed for complacency to set into portfolio construction. Today's increased market volatility underscores the imperative for investors to change course rather than simply betting that markets and risk assets will continue to rise. Taking an active approach will be critical to achieving clients' goals and objectives. With the unprecedented combination of losses in equity and fixed income markets, we expect a sense of urgency among investors to review exposures and diversify into uncorrelated return streams. We are seeing early signs of this shift as evidenced by a significant uptick in industry flows into liquid alternatives this year. And a number of our affiliates are benefiting. We also continue to see broad-based fundraising strength in private markets across infrastructure, real estate, and credit. And our affiliates are generating inflows into ESG strategies in sharp contrast to industry outflows. With 25% of our business in private markets, ESG and wealth management, and another 25% in liquid alternatives, our overall positioning is distinctly advantaged given the current market dynamics. In addition, after a decade of underperformance, the significant outperformance of value has benefited AMG affiliates managing value-oriented strategies. The changing environment is creating significant opportunities to deliver excellent investment performance and, in many cases, strong and recurring performance fee earnings. Today, our affiliates manage approximately $200 billion of assets under management that can generate performance fees across absolute return, private markets, and beta-sensitive strategies, reflecting significant diversity in their contribution to our earnings. As longtime shareholders know, performance fee earnings have been a steady and reliable contributor to our annual results. Given that our affiliates continue to generate strong and differentiated investment performance in these attractive areas, especially in absolute returns, relative value, and trend following strategies, our earnings power has increased as asset levels have grown. And we see a significant opportunity for earnings growth in 2022 and going forward. More broadly, our business is based on providing solutions to independent asset management firms by aligning their founders and owners with our shareholders through unique partnership structures. By actively collaborating with our affiliates to magnify their efforts, we align AMG's capital and capabilities with their growth opportunities and act as a catalyst for further growth as they execute on their respective business plans. AMG's business model is uniquely advantaged in this respect. We have the ability to shape our business and scale our earnings power through investments in new affiliates operating in areas of secular growth, direct investments in existing affiliates, including in new products and strategies, and investments in AMG capabilities to accelerate our affiliates' growth. In periods of volatility and dislocation, like the current environment, we expect to see an even greater number of high-quality investment opportunities. While these opportunities may take several quarters to fully develop, we expect that our competitive position will become even more clear. As we execute our strategy investing in areas of secular growth, including in private markets, liquid alternatives, wealth management, Asia, and ESG, our partnership approach continues to resonate with the highest quality partner-owned investment firms. The current environment is particularly favorable to us, as low conviction buyers are increasingly stepping back. In addition, through our ongoing dialogue with prospective affiliates, we are seeing a shift in the way some high-quality firms evaluate their forward paths. In today's environment, many firms are ascribing an even greater value to having an engaged, aligned strategic partner like AMG. This evolving dynamic further enhances AMG's competitive position and increases the probability of success in executing new affiliate partnerships. Alongside the expected expansion of our opportunity set, I want to underscore our commitment to a disciplined and analytical capital allocation framework. Capital decisions are fundamental to our strategy, and our allocation discipline is simple. We evaluate every opportunity on a risk-adjusted basis, factoring in the impact of the investment to our business, cash flows, and franchise. These capital decisions require judgment and we have evolved our organizational structure to ensure that our capital allocation discipline is embedded across all elements of our process and culture. As we apply this discipline, we generally expect to have excess capital that we can return to shareholders. Over the past three years, in addition to investing more than $1 billion in growth initiatives, our capital allocation framework has resulted in a 25% reduction in share count, including nearly 5% already retired this year. The combination of AMG's unique opportunity set and our discipline in allocating capital will increasingly differentiate our value creation over time. As discussed, the market environment has fundamentally changed. And given AMGs and our affiliates track record of success in periods of market dislocation, we are energized by our enhanced forward opportunity set and confident in our ability to create substantial value for our shareholders. And with that, I'll turn it over to Tom to review the details of the quarter.