Affiliated Managers Group, Inc.

Greetings and welcome to the AMG fourth quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow this 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. 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 fourth quarter and full year 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. AMG achieved outstanding results in 2022, delivering 10% growth in economic earnings per share over the past year and 50% growth over two years. Notably, we generated these results across dramatically different market environments. In 2021, world markets rose significantly against the backdrop of low rates and easy monetary policies, while in 2022, global tightening and geopolitical risks drove double digit declines across both equities and fixed income. Over that period, AMG delivered record earnings per share, driven by excellent performance from our affiliates, new investments in secular growth areas, and share repurchases. Our industry-leading results in an otherwise challenging environment for asset management highlight the efficacy of our model, the quality of our affiliates, and the positive impact of our capital allocation strategy. And, as we will discuss today, We believe AMG is uniquely positioned for success and continued growth going forward. Stepping back over the last few years, we have strategically evolved AMG by aligning our capital and resources with long-term demand trends. Since 2019, we have invested $1.3 billion for growth in new and existing affiliates that contributed more than $200 million in EBITDA to AMG in 2022. Alternatives, including both liquid alternatives and private markets, accounted for approximately two-thirds of these investments, with the remaining one-third primarily in sustainable strategies. The decisions we made in 2022 were representative of our growth strategy. We began the year with an incremental investment in Systematica, one of the industry's leading technology-driven liquid alternatives managers, and we ended the year with an investment in Peppertree Capital, a high-quality private markets manager in the fast-growing communications infrastructure segment. Today, more than half of our earnings are generated by affiliates in areas of secular growth, nearly doubling our exposure since 2019. And as we continue to evolve our business mix, we expect that contribution to increase, driving future growth and further differentiating AMG from our peers. In addition to our successful new investments, we have enhanced our strategic engagement with affiliates, working with our partners to magnify their efforts and improve their competitive positioning, thereby creating value for all stakeholders. For example, in 2022, our engagement and collaboration resulted in the successful combination of First Quadrant with Systematica. The combination further diversified Systematica's product offering, extends their client reach, and supports the growing scale of a business that more than doubled since our initial investment. In addition, in 2022, strong business momentum at Bearing, supported by our strategic engagement, enabled them to realize the benefits of a combination with EQT. As a result, AMG received more than $800 million in consideration for our interest in Bearing. We have already deployed a majority of that capital for the benefit of AMG shareholders, including through our investment in Peppertree and an increased level of share repurchases. More broadly, we have used our capital and resources to further our affiliates' long-term objectives, including through product development, capital formation, and other business development initiatives. Through our engagement over time, we expect to identify additional opportunities to build on our affiliates' long-term growth prospects and their strategic goals. Looking ahead, we entered 2023 in a position of strength, with a strong balance sheet, a diversified array of high-quality affiliates, and a strategy focused on areas of secular demand. AMG's overall momentum should enable us to capitalize on opportunities that will emerge in the new market environment. Importantly, we believe portfolio allocations need to change, and taking an intentional approach to rebuilding portfolios for this new environment will be essential to achieving client outcomes in the future. Portfolios that were designed around antiquated asset allocation models underperformed materially in 2022, causing a renewed focus on the fundamentals of portfolio construction, including liquidity, reduced correlations, and differentiated return streams. We have always believed that partner-owned firms with entrepreneurial cultures are best positioned to deliver differentiated returns across market cycles. And we expect our affiliates to be well-positioned to benefit as clients recalibrate their portfolio allocations. This new environment also brings opportunities for attractive new investments, as most buyers retrench and the appeal of AMG's partnership approach becomes even more apparent. Having remained disciplined and selective through a period of high valuations and optimistic business plans, especially in private markets, we are seeing both expectations and valuations moderate. In addition, in times of uncertainty, an engaged, proven partner becomes even more valuable. Our unwavering commitment to provide partnership solutions to independent firms and our reputation as a collaborative and supportive partner uniquely positions AMG during a time when other buyers are rethinking their approach. And given our competitive advantages, we expect to execute on attractive new investment opportunities that this environment will likely produce. Finally, I want to underscore 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 mix, cash flows, and franchise. These decisions require judgment, and our allocation discipline is embedded across all elements of our process and culture. In executing growth investments in new and existing affiliates, we ensure proper alignment with our affiliate partners and structures that benefit all stakeholders. While we believe that these investments will drive long-term shareholder value over time, we also have a track record of returning significant excess capital to shareholders as part of our discipline strategy. Since 2019, in addition to deploying more than $1.3 billion into growth investments, we have also returned $1.9 billion of excess capital primarily through share repurchases. Looking ahead, given our opportunity set, we expect that the mix of our investments will skew more toward growth, but the outcome will always be governed by our capital allocation framework. In 2023, we celebrate 30 years of successfully partnering with independent firms. While our business and the asset management landscape have certainly evolved, we remain true to our fundamental objective of providing solutions to independent partner-owned firms and acting as a catalyst to support their success over time. Today, we are well positioned to deliver consistent earnings growth given our unique competitive advantages. And through the execution of our growth strategy and our robust capital allocation framework, we expect to create significant shareholder value going forward. And with that, I'll turn it over to Tom to review the details of the quarter.