Affiliated Managers Group, Inc.

Greetings and welcome to the AMG third 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, Patricia Figueroa, 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 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 in 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, Patricia, and good morning, everyone. This has been a remarkable last 12 months. We have seen the combination of higher inflation, rising rates, and geopolitical risk drive simultaneous declines in both equities and fixed income, resulting in unprecedented disruption in client portfolios. At the same time, it has also been a remarkable period for AMG, having delivered 5% year-over-year growth in economic earnings per share in both the third quarter and the year-to-date period, as the overall diversity and strong performance of our business together with capital allocated to new investments and share repurchases, more than offset the impact of double-digit market declines. And given our strong year-to-date performance, we expect earnings per share to grow approximately 10% in 2022, on top of the 37% earnings growth we delivered in 2021. Notably, Our results in these two years have been generated in dramatically different markets. In 2021, world markets grew significantly against the backdrop of low rates and easing monetary policies, in stark contrast to the severe drawdown in 2022 amid tightening monetary policies and geopolitical risks. AMG's strong performance across disparate market environments highlights the efficacy of our model and the diversification of our business. And as we'll discuss today, we believe AMG is uniquely positioned for success and continued growth in the new environment. Our business profile is intentional and unique. We have strategically evolved AMG over the past decade by deliberately investing in a of leading independent managers across a broad array of asset classes. Our high-quality partner-owned firms have collectively provided us even greater ballast against the changing environment by strengthening AMG's overall earnings power and stability, enabling us to participate in upward-trending markets, and simultaneously providing us a buffer against volatility and dislocation. Our affiliates have distinguished themselves through their investment performance and enhanced their potential to generate organic growth. We believe there are several factors that will drive client behavior going forward and that AMG and our affiliates are positioned to benefit from these trends. First, portfolio construction is going to take center stage. After a decade of highly correlated increases in risk assets, this year investors received a reminder, in many cases a painful one, of the value of portfolio construction and diversification. As the lessons of the global financial crisis waned over time and markets continued to rise Investor focus on the risk and return considerations that are so critical in building a balanced portfolio over market cycles slowly eroded. As a result, portfolios became far too heavily weighted towards growth at inflated valuations in both the public and private markets. Investors either chose to chase growth or unknowingly participated in that chase. Going forward, clients will need to construct portfolios to address the longer term emerging risks and trends that this new market environment will bring. Second, the diversification and capital protection provided by liquid alternatives will be critical in building more resilient portfolios. Excellent performance generated by AMG's affiliates in the current environment provides ample evidence that investors who had previously chosen to underweight these strategies can no longer ignore the meaningful advantages of integrating them into their portfolios. The performance of liquid alternatives, particularly in times of market disruption, remind us of the foundational lessons of portfolio construction. And we strongly believe that these strategies and our affiliates, including Systematica, Capula, Guarda, Winton, and AQR, are all well positioned to benefit from future allocations to uncorrelated return streams. Finally, we believe that thoughtful portfolio construction will require even greater valuation sensitivity and risk awareness. Outlook for risk assets has shifted given changes in long-term assumptions on risk-free rates and terminal value. As investors recalibrate their portfolios, we expect a return to a more fundamental, value-sensitive approach to investing, and our affiliates are well-positioned for future allocations given their focus on quality and value strategies. We believe that taking an active approach will be critical to achieving clients' risk and return objectives across both public and private markets. Given their entrepreneurial, independent models and alignment with clients, our affiliates are well positioned in volatile markets to deliver differentiated long-term returns. Critically, alpha generation is driven by skill, not scale. We believe that knowledge, experience, and dynamic decision-making are going to be essential for navigating the new environment. And while we're still in the early innings of this evolution, our affiliates are positioned to benefit from the increasing need for active management in portfolios across both liquid and illiquid strategies. As I said earlier, AMG's business model is uniquely advantaged by our ability to shape our business and scale our earnings power through investments in new and existing affiliates. As we execute on our strategy of investing in areas of secular growth, our partnership approach continues to resonate with the highest quality independent firms. In October, we made a minority investment in a new affiliate, Pepper Tree Capital Management. a leading $4 billion communications infrastructure firm that is well-positioned to benefit from the ongoing tailwind surrounding the demand for data. This new partnership enhances our participation in real assets and is our first affiliate wholly dedicated to infrastructure, bringing further diversification to our business profile. The Peppertree team was attracted to AMG's partnership approach, which preserves their operational autonomy and investment independence while providing access to our strategic capabilities. As we add more affiliates in areas of secular growth, we continue to evolve our business composition towards in-demand strategies, driving long-term organic and earnings growth. Going forward, we expect to see a number of high-quality investment opportunities emerge in the new environment. And with our strong capital position further enhanced with the proceeds from the sale of our minority stake and bearing, we have increased flexibility to allocate capital across AMG's unique opportunity set to the areas of highest growth and return. I want to underscore again our commitment to a disciplined capital allocation framework. Capital decisions are fundamental to our strategy. and we evaluate every opportunity on a risk-adjusted basis, factoring in the impact of the investment to our business, cash flows, and franchise. Capital decisions require judgment and our allocation discipline is embedded across all elements of our process and culture. While we believe that growth investments in new and existing affiliates will drive long-term shareholder value, given our discipline allocation framework, We have also returned significant capital to shareholders by retiring more than 25% of our shares over the past three years. Finally, we are pleased with our results and our business momentum. Our positive forward outlook reflects our confidence in our strategy and our affiliates positioning in this new environment. Our results once again demonstrate that AMG and our high-quality affiliates represent the best of active management in both public and private markets. As clients reallocate portfolios, we are confident that AMG's affiliates and our shareholders will benefit from the growth and value creation that will follow. And with that, I'll turn it over to Tom to review the details of the quarter.