Affiliated Managers Group, Inc.

Greetings and welcome to the AMG fourth quarter 2023 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. 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 2023. 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, this morning we posted an updated investor presentation to our website 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's full year results reflect the positive impact of our strategy and our capital allocation discipline across both growth investments and share repurchases. In 2023, we further diversified our business by investing in secular growth areas, welcoming two new affiliates operating in distinct, fast-growing areas of private markets, Forbian and Ara Partners. We also collaborated with our existing affiliates in expanding their reach into new geographies and channels, including the development of several new and innovative products. Finally, We meaningfully enhanced our liquidity position and further strengthened our balance sheet, while also returning significant excess capital to shareholders. AMG's business composition is changing, and as we enter 2024, I wanted to reflect on this strategic evolution. Over the past several years, we have deliberately diversified our business by investing in high-quality, independent new affiliates operating in secular growth areas. and by investing in and alongside our existing affiliates to capitalize on their growth opportunities. These growth investments have reshaped AMG's business profile from one that was characterized largely by differentiated long-only strategies to one that has a majority contribution from alternatives. Today, half of our earnings come from alternative strategies. balance between private markets and liquid alternatives, with the other half of our earnings coming from differentiated long-only strategies. With substantial contributions from each of private markets, liquid alternatives, and long-only strategies, AMG's business profile is unique in our industry. And looking ahead, we are well positioned for long-term success across all three areas, as I'll discuss further. In private markets, our affiliates offer differentiated return streams in sectors aligned with durable client demand trends. Over the course of 2023, amid a challenging fundraising environment, our private markets affiliates raised approximately $16 billion, highlighting the appeal of their specialized strategies and providing them with additional dry powder to capitalize on forward opportunities. AMG's private markets affiliates operate in a number of fast-growing areas with long-term structural tailwinds, including infrastructure, private credit, private market secondaries, and specialty strategies within private equity, venture capital, and real estate. Looking ahead, we expect the contribution from private markets to accelerate through a combination of organic growth, new product launches, and new partnerships with independent firms. Turning to liquid alternatives. Our affiliates delivered outstanding performance and differentiated returns for their clients in 2023. In addition to beta-sensitive strategies, our affiliates manage absolute return strategies, including global macro, relative value fixed income, and trend following, all of which generate returns that have low or no correlation to broader markets. We believe liquid alternative strategies are underrepresented in client portfolios and expect this to change as these strategies have proven their value in choppy or down markets. As clients continue to focus on portfolio construction to address the changing market environment and more fully recognize the value of these strategies in their portfolios, we expect increasing allocations into liquid alternatives. In addition to their potential for significant organic growth, these strategies can generate sizable performance fee earnings for AMG. In fact, over the last three years, across vastly different market environments, our liquid alternative strategies have delivered nearly $600 million in pre-tax performance fee earnings. Liquid alternatives are an essential feature of our unique business profile. because they are complementary to both our private markets and long-only strategies. This area is often underappreciated, given that performance fee earnings have proven to be consistent and significant, especially when private markets and long-only strategies are facing headwinds. Taken together, this dynamic is a great differentiator and source of stabilization for AMG. Turning to differentiated long-only strategies. As you know, since AMG's inception, we have partnered with a number of the highest quality independent partner-owned firms managing differentiated long-only strategies. Our affiliates represent the best of active investing and include a number of the most renowned brands in our industry, including Harding-Lubner, Parnassus, Tweedy Brown, and Yachman. Our affiliates have built enduring franchises with specialized investment expertise and long-term track records across market cycles. More broadly, the current market environment characterized by higher volatility and more asset dispersion is generally constructive for active managers. Given their entrepreneurial orientation, investment-centric cultures, and alignment with clients, Independent partner-owned firms have competitive advantages in managing risk and offering differentiated return streams, especially during periods of heightened uncertainty. Overall, our diversified portfolio of high-quality independent partner-owned firms operating across private markets, liquid alternatives, and differentiated long-lease strategies is a competitive advantage that both enhances our earnings stability and supports our capacity to continue investing in areas of the highest growth and return to benefit our shareholders. Looking ahead, we will continue to strategically evolve AMG through growth investments in new and existing affiliates supported by our unmatched three-decade track record of successful partnerships, our new investment origination capabilities, and our significant financial flexibility. We will remain disciplined in our capital allocation decisions as we invest in new growth opportunities while also returning excess capital to shareholders. Our discipline is evidenced by our actions. In 2023, AMG invested in two new affiliates, seeded three new products, and returned a significant amount of capital to shareholders by repurchasing 10% of our shares outstanding. Before I turn the call over to Tom, I wanted to take a moment to acknowledge an important milestone in AMG's history. Last year, we celebrated 30 years of successfully partnering with independent firms to magnify their advantages and actively preserve their independence. While the investment industry and AMG have evolved significantly over the past three decades, our steadfast commitment to further our affiliate success while ensuring their independence remains unchanged. Looking ahead, we will continue to leverage our decades of experience in offering strategic insights and capabilities to our affiliates to create exceptional value for their clients and our shareholders. Our proven approach and our reputation as a collaborative engaged partner attracts the highest quality firms globally. And as we enter our next decade, we are seeing increasing opportunities to invest for growth and drive shareholder value. And with that, I'll turn it over to Tom.