QuickLinks -- Click here to rapidly navigate through this document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q



(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2017



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-13459

Affiliated Managers Group, Inc.

(Exact name of registrant as specified in its charter)



Delaware		04-3218510
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

777 South Flagler Drive, West Palm Beach, Florida 33401

(Address of principal executive offices)

(800) 345-1100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

QuickLinks-- Click here to rapidly navigate through this document

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

~~QuickLinks-- Click here to rapidly navigate through this document~~



Large accelerated filer ý	Accelerated filer o	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

There were ~~56,602,482~~55,581,915 shares of the registrant’s common stock outstanding on ~~May 2,~~November 1, 2017.

PART I—FINANCIAL INFORMATION


Item 1.	Financial Statements

AFFILIATED MANAGERS GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share data)

(unaudited)


	For the Three Months Ended March 31,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2017			2016			2017			2016			2017
Revenue	$	545.4		$	544.3		$	544.7		$	585.7		$	1,644.2		$	1,700.9

Operating expenses:
Compensation and related expenses	226.7			242.0			244.2			238.7			702.9			722.9
Selling, general and administrative	95.9			88.7			94.2			91.9			286.7			269.7
Intangible amortization and impairments	26.6			21.9			26.9			21.2			82.2			65.1
Depreciation and other amortization	5.0			5.2			5.0			4.8			15.0			14.9
Other operating expenses (net)	12.4			9.9			3.4			10.3			25.9			32.0
Total operating expense (net)							373.7			366.9			1,112.7			1,104.6
	366.6			367.7			171.0			218.8			531.5			596.3
Income from equity method investments							67.5			70.7			200.7			231.6
Operating income	178.8			176.6			238.5			289.5			732.2			827.9
Income from equity method investments	68.0			85.9
Other non-operating (income) and expenses:

Non-operating (income) and expenses:
Investment and other income	(4.0		)	(13.5		)	(11.0		)	(15.6		)	(26.7		)	(44.7		)
Interest expense	22.3			21.9			22.4			21.5			66.4			65.8
Imputed interest expense and contingent payment arrangements	(2.0		)	0.8			0.9			0.7			(0.2		)	3.7
	16.3			9.2			12.3			6.6			39.5			24.8
Income before income taxes	230.5			253.3			226.2			282.9			692.7			803.1
Income taxes	57.0			59.7			50.3			66.1			159.7			188.2
Net income	173.5			193.6			175.9			216.8			533.0			614.9
Net income (non-controlling interests)	(69.5		)	(71.1		)	(65.7		)	(91.4		)	(210.5		)	(240.7		)
Net income (controlling interest)	$	104.0		$	122.5		$	110.2		$	125.4		$	322.5		$	374.2
Average shares outstanding (basic)	54.0			56.7			53.9			55.8			53.9			56.3
Average shares outstanding (diluted)	56.6			59.2			56.6			58.3			56.6			58.8
Earnings per share (basic)	$	1.93		$	2.16		$	2.04		$	2.25		$	5.98		$	6.65
Earnings per share (diluted)	$	1.90		$	2.13		$	2.02		$	2.22		$	5.90		$	6.57
Dividends per share	$	—		$	0.20		$	—		$	0.20		$	—		$	0.60

The accompanying notes are an integral part of the Consolidated Financial Statements.

AFFILIATED MANAGERS GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(unaudited)


	For the Three Months Ended March 31,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2017			2016			2017			2016			2017
Net income	$	173.5		$	193.6		$	175.9		$	216.8		$	533.0		$	614.9
Other comprehensive income (loss):
Controlling interest:
Foreign currency translation gain	2.9			11.3
Foreign currency translation gain (loss)							(7.4		)	47.5			(41.2		)	79.0
Change in net realized and unrealized gain (loss) on derivative securities, net of tax	(1.0		)	(0.6		)	0.1			0.2			0.0			(1.7		)
Change in net unrealized gain (loss) on investment securities, net of tax	(10.5		)	3.5			2.8			(4.4		)	(21.5		)	(5.5		)
Other comprehensive income (loss) (controlling interest)	(8.6		)	14.2			(4.5		)	43.3			(62.7		)	71.8
Non-controlling interest:
Foreign currency translation gain (loss)	(4.9		)	0.9			(9.4		)	5.5			(31.5		)	13.1
Change in net realized and unrealized gain (loss) on derivative securities, net of tax	(0.1		)	0.3			0.0			(0.1		)	(0.7		)	0.9
Change in net unrealized gain (loss) on investment securities, net of tax	(0.3		)	1.4			1.2			0.1			0.7			2.1
Other comprehensive income (loss) (non-controlling interest)	(5.3		)	2.6			(8.2		)	5.5			(31.5		)	16.1
Other comprehensive income (loss)	(13.9		)	16.8			(12.7		)	48.8			(94.2		)	87.9
Comprehensive income	159.6			210.4			163.2			265.6			438.8			702.8
Comprehensive income (non-controlling interests)	(64.2		)	(73.7		)	(57.5		)	(96.9		)	(179.0		)	(256.8		)
Comprehensive income (controlling interest)	$	95.4		$	136.7		$	105.7		$	168.7		$	259.8		$	446.0

The accompanying notes are an integral part of the Consolidated Financial Statements.

AFFILIATED MANAGERS GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in millions)

(unaudited)


	December 31, 2016			March 31, 2017			December 31, 2016			September 30, 2017
Assets
Cash and cash equivalents	$	430.8		$	293.6		$	430.8		$	374.7
Receivables	383.3			449.0			383.3			487.4
Investments in marketable securities	122.4			115.5			122.4			92.4
Other investments	147.5			148.8			147.5			160.5
Fixed assets (net)	110.1			109.1			110.1			111.7
Goodwill	2,628.1			2,633.7			2,628.1			2,661.8
Acquired client relationships (net)	1,497.4			1,482.4			1,497.4			1,467.2
Equity method investments in Affiliates	3,368.3			3,298.8			3,368.3			3,290.8
Other assets	61.2			59.2			61.2			54.9
Total assets	$	8,749.1		$	8,590.1		$	8,749.1		$	8,701.4
Liabilities and Equity
Payables and accrued liabilities	$	729.3		$	541.6		$	729.3		$	698.3
Senior bank debt	868.6			783.7			868.6			868.9
Senior notes	939.4			940.0			939.4			741.0
Convertible securities	301.6			302.3			301.6			303.7
Deferred income taxes	660.8			666.7			660.8			702.3
Other liabilities	149.4			253.3			149.4			178.3
Total liabilities	3,649.1			3,487.6			3,649.1			3,492.5
Commitments and contingencies (Note 5)
Redeemable non-controlling interests	673.5			733.5			673.5			804.6
Equity:
Common stock	0.6			0.6
Common stock ($0.01 par value, 153.0 shares authorized; 58.5 shares outstanding in 2016 and 2017)							0.6			0.6
Additional paid-in capital	1,073.5			925.2			1,073.5			849.7
Accumulated other comprehensive loss	(122.9		)	(108.7		)	(122.9		)	(51.1		)
Retained earnings	3,054.4			3,165.4			3,054.4			3,394.4
	4,005.6			3,982.5			4,005.6			4,193.6
Less: Treasury stock, at cost	(386.0		)	(397.6		)
Less: Treasury stock, at cost (1.8 shares in 2016 and 2.9 shares in 2017)							(386.0		)	(566.1		)
Total stockholders' equity	3,619.6			3,584.9			3,619.6			3,627.5
Non-controlling interests	806.9			784.1			806.9			776.8
Total equity	4,426.5			4,369.0			4,426.5			4,404.3
Total liabilities and equity	$	8,749.1		$	8,590.1		$	8,749.1		$	8,701.4

The accompanying notes are an integral part of the Consolidated Financial Statements.

AFFILIATED MANAGERS GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in millions)

(unaudited)


		Total Stockholders’ Equity																				Total Stockholders’ Equity
	Shares Outstanding	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Treasury Stock at Cost			Non- controlling Interests			Total Equity			Shares Outstanding	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Treasury Stock at Cost			Non- controlling Interests			Total Equity
December 31, 2015	55.8	$	0.6	$	694.9		$	(18.1	)	$	2,581.6	$	(421.9	)	$	932.0		$	3,769.1		55.8	$	0.6	$	694.9		$	(18.1	)	$	2,581.6	$	(421.9	)	$	932.0		$	3,769.1
Net income	—	—		—			—			104.0		—			69.5			173.5			—	—		—			—			322.5		—			210.5			533.0
Other comprehensive loss	—	—		—			(8.6		)	—		—			(5.3		)	(13.9		)	—	—		—			(62.7		)	—		—			(31.5		)	(94.2		)
Share-based compensation	—	—		9.2			—			—		—			—			9.2			—	—		30.7			—			—		—			—			30.7
Common stock issued under share-based incentive plans	—	—		(25.5		)	—			—		24.5			—			(1.0		)	—	—		(35.6		)	—			—		41.8			—			6.2
Share repurchases	—	—		—			—			—		(33.4		)	—			(33.4		)	—	—		—			—			—		(33.4		)	—			(33.4		)
Issuance costs and other																					—	—		(2.3		)	—			—		—			—			(2.3		)
Common stock issued under forward equity agreement																					0.9	0.0		150.3			—			—		—			—			150.3
Affiliate equity activity:
Affiliate equity expense	—	—		1.3			—			—		—			3.9			5.2			—	—		7.7			—			—		—			27.2			34.9
Issuances	—	—		(3.5		)	—			—		—			6.7			3.2			—	—		(2.5		)	—			—		—			14.2			11.7
Repurchases	—	—		8.5			—			—		—			—			8.5			—	—		14.0			—			—		—			0.4			14.4
Changes in redemption value of Redeemable non-controlling interests	—	—		(45.3		)	—			—		—			—			(45.3		)	—	—		(84.9		)	—			—		—			—			(84.9		)
Transfers to Redeemable non-controlling interests	—	—		—			—			—		—			(5.7		)	(5.7		)	—	—		—			—			—		—			(38.3		)	(38.3		)
Capital contributions by Affiliate equity holders	—	—		—			—			—		—			4.6			4.6			—	—		—			—			—		—			2.7			2.7
Distributions to non-controlling interests	—	—		—			—			—		—			(101.6		)	(101.6		)	—	—		—			—			—		—			(270.1		)	(270.1		)
March 31, 2016	55.8	$	0.6	$	639.6		$	(26.7	)	$	2,685.6	$	(430.8	)	$	904.1		$	3,772.4
September 30, 2016																					56.7	$	0.6	$	772.3		$	(80.8	)	$	2,904.1	$	(413.5	)	$	847.1		$	4,029.8

AFFILIATED MANAGERS GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

(in millions)

(unaudited)


		Total Stockholders’ Equity																					Total Stockholders’ Equity
	Shares Outstanding	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock at Cost			Non- controlling Interests			Total Equity			Shares Outstanding	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Treasury Stock at Cost			Non- controlling Interests			Total Equity
December 31, 2016	58.5	$	0.6	$	1,073.5		$	(122.9	)	$	3,054.4		$	(386.0	)	$	806.9		$	4,426.5		58.5	$	0.6	$	1,073.5		$	(122.9	)	$	3,054.4		$	(386.0	)	$	806.9		$	4,426.5
Net income	—	—		—			—			122.5			—			71.1			193.6			—	—		—			—			374.2			—			240.7			614.9
Other comprehensive income	—	—		—			14.2			—			—			2.6			16.8			—	—		—			71.8			—			—			16.1			87.9
Share-based compensation	—	—		9.4			—			—			—			—			9.4			—	—		30.0			—			—			—			—			30.0
Common stock issued under share-based incentive plans	—	—		(63.3		)	—			—			68.4			—			5.1			—	—		(81.8		)	—			—			96.3			—			14.5
Share repurchases	—	—		—			—			—			(80.0		)	—			(80.0		)	—	—		—			—			—			(276.4		)	—			(276.4		)
Dividends	—	—		—			—			(11.5		)	—			—			(11.5		)	—	—		—			—			(34.2		)	—			—			(34.2		)
Issuance costs and other	—	—		0.1			—			—			—			—			0.1			—	—		0.6			—			—			—			—			0.6
Affiliate equity activity:
Affiliate equity expense	—	—		4.0			—			—			—			12.6			16.6			—	—		9.4			—			—			—			29.2			38.6
Issuances	—	—		(1.2		)	—			—			—			2.0			0.8			—	—		(0.2		)	—			—			—			3.0			2.8
Repurchases	—	—		34.2			—			—			—			—			34.2			—	—		34.6			—			—			—			—			34.6
Changes in redemption value of Redeemable non-controlling interests	—	—		(131.5		)	—			—			—			—			(131.5		)	—	—		(216.4		)	—			—			—			—			(216.4		)
Transfers to Redeemable non-controlling interests	—	—		—			—			—			—			(25.7		)	(25.7		)	—	—		—			—			—			—			(56.8		)	(56.8		)
Capital contributions	—	—		—			—			—			—			6.6			6.6
Capital contributions by Affiliate equity holders																						—	—		—			—			—			—			4.5			4.5
Distributions to non-controlling interests	—	—		—			—			—			—			(92.0		)	(92.0		)	—	—		—			—			—			—			(266.8		)	(266.8		)
March 31, 2017	58.5	$	0.6	$	925.2		$	(108.7	)	$	3,165.4		$	(397.6	)	$	784.1		$	4,369.0
September 30, 2017																						58.5	$	0.6	$	849.7		$	(51.1	)	$	3,394.4		$	(566.1	)	$	776.8		$	4,404.3

The accompanying notes are an integral part of the Consolidated Financial Statements.

AFFILIATED MANAGERS GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	For the Three Months Ended March 31,						For the Nine Months Ended September 30,
	2016			2017			2016			2017
Cash flow from (used in) operating activities:
Net income	$	173.5		$	193.6		$	533.0		$	614.9
Adjustments to reconcile Net income to net Cash flow from operating activities:
Intangible amortization and impairments	26.6			21.9			82.2			65.1
Depreciation and other amortization	5.0			5.2			15.0			14.9
Deferred income tax provision	27.5			35.3			69.8			80.3
Imputed interest expense and contingent payment arrangements	(2.0		)	0.8
Income from equity method investments, net of amortization	(68.0		)	(85.9		)	(200.7		)	(231.6		)
Distributions received from equity method investments	124.3			189.9
Distributions of earnings received from equity method investments							287.0			368.0
Amortization of issuance costs	1.2			1.1			3.6			3.3
Share-based compensation and Affiliate equity expense	15.2			26.0			65.6			68.6
Other non-cash items	(0.1		)	(7.6		)	(14.3		)	(30.7		)
Changes in assets and liabilities:
Purchases of trading securities by Affiliate sponsored consolidated products	(17.1		)	(9.1		)	(62.5		)	(24.1		)
Sales of trading securities by Affiliate sponsored consolidated products	16.6			7.1			59.1			23.2
Increase in receivables	(94.2		)	(75.1		)
(Increase) decrease in receivables							37.7			(131.7		)
Increase in other assets	(2.2		)	(0.7		)	(3.9		)	(3.6		)
Decrease in payables, accrued liabilities and other liabilities	(180.7		)	(180.4		)	(187.1		)	(16.1		)
Cash flow from operating activities	25.6			122.1			684.5			800.5
Cash flow from (used in) investing activities:
Investments in Affiliates	(551.3		)	(4.7		)	(884.9		)	(30.3		)
Purchase of fixed assets	(4.1		)	(4.1		)	(15.1		)	(13.9		)
Purchase of investment securities	(2.7		)	(6.2		)	(10.2		)	(22.2		)
Sale of investment securities	7.2			31.3			41.5			71.3
Cash flow from (used in) investing activities	(550.9		)	16.3			(868.7		)	4.9
Cash flow from (used in) financing activities:
Borrowings of senior debt	515.0			75.0			900.0			445.0
Repayments of senior debt and convertible securities	(95.0		)	(160.0		)
Repayments of senior debt							(670.0		)	(645.0		)
Issuance of common stock	4.5			20.3			163.2			33.7
Dividends paid on common stock	—			(11.3		)	—			(33.8		)
Repurchase of common stock	(16.9		)	(80.0		)	(33.4		)	(276.4		)
Note and contingent payments	2.2			1.8
Distributions to non-controlling interests	(101.6		)	(92.0		)	(270.1		)	(266.8		)
Affiliate equity issuances and repurchases	(54.1		)	(17.6		)	(70.3		)	(112.5		)
Settlement of forward equity sale agreement	—			5.2			—			5.2
Other financing items	5.7			(18.8		)	17.2			(20.9		)
Cash flow from (used in) financing activities	259.8			(277.4		)	36.6			(871.5		)
Effect of foreign exchange rate changes on cash and cash equivalents	(4.3		)	1.8			(19.7		)	10.0
Net decrease in cash and cash equivalents	(269.8		)	(137.2		)	(167.3		)	(56.1		)
Cash and cash equivalents at beginning of period	563.8			430.8			563.8			430.8
Net cash inflows upon the consolidation and deconsolidation of Affiliate sponsored products	3.6			—			25.5			—
Cash and cash equivalents at end of period	$	297.6		$	293.6		$	422.0		$	374.7

The accompanying notes are an integral part of the Consolidated Financial Statements.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


1.	Basis of Presentation and Use of Estimates

The Consolidated Financial Statements of Affiliated Managers Group, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for ~~complete~~full year financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair ~~statement~~presentation of the Company’s financial position and results of operations have been ~~included. All~~included and all intercompany balances and transactions have been eliminated. ~~Certain~~During the second quarter of 2017, the Company changed its Consolidated Statement of Income presentation to include Income from equity method investments in Operating income, as its equity method Affiliates are integral to the Company’s operations. This change, along with other reclassifications, ~~have~~has been made to the prior period’s financial statements to conform to the current period’s presentation. Operating results for interim periods are not necessarily indicative of the results that may be expected for any other period or for the full year. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 includes additional information about its operations, financial position and accounting policies, and should be read in conjunction with this Quarterly Report on Form 10-Q.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

All amounts in these notes, except per share data in the text and tables herein, are stated in millions unless otherwise indicated.


2.	Recent Accounting Developments

Effective January 1, 2017, the Company adopted ~~the following updates to GAAP:~~

~~ASU~~Accounting Standard Update (“ASU”) 2016-07, Investments - Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting,

and ASU 2016-06, Derivatives, and Hedging: Contingent Put and Call Options in Debt ~~Instruments~~

Instruments. The adoption of these updates did not have a significant impact on the Company’s Consolidated Financial Statements.

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, and subsequently issued several related amendments. The ~~new~~ standard provides a comprehensive model for revenue recognition and is effective for the Company and its consolidated Affiliates for interim and ~~fiscal~~annual periods beginning after December 15, ~~2017.~~2017 and for interim and annual periods beginning after December 15, 2018 for the Company’s equity method Affiliates. The standard may be adopted using either the full or modified retrospective ~~methods.~~method. The Company has not yet selected its transition method and continues to evaluate the impact of this standard on its Consolidated Financial Statements, but it does not expect the adoption to significantly impact the timing of the recognition of ~~a majority of~~ its Revenue. The Company is evaluating whether certain costs currently expensed as incurred meet the criteria for capitalization and whether certain revenue-related costs will be presented on a gross or net basis.

In January 2016, the FASB issued ASU 2016-01, Fair Value: Recognition and Measurement of Financial Assets and Liabilities. Under the new standard, all equity investments in unconsolidated entities (other than those accounted for using the equity method of accounting) will generally be measured at fair value with any changes recognized through earnings. The standard is effective for interim and ~~fiscal~~annual periods beginning after December 15, 2017 and must be adopted using a modified retrospective method. The impact of this standard on the Company’s Consolidated Financial Statements will depend on the equity investments held by the Company at the time of adoption.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize assets and liabilities arising from most operating leases on the statement of financial position. The standard is effective for interim and ~~fiscal~~annual periods beginning after December 15, 2018 for the Company and its consolidated Affiliates and for interim and annual periods beginning after December 15, 2019 for the Company’s equity method Affiliates. The standard must be adopted using a modified retrospective method. The Company is evaluating the impact of this standard on its Consolidated Financial Statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which clarifies how cash receipts and cash payments are classified in the statement of cash flows. The standard is effective for interim and ~~fiscal~~annual periods beginning after December 15, 2017 and must be adopted using a ~~modified~~full retrospective

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

method. The Company ~~is evaluating~~does not expect the ~~impact~~adoption of this standard to have a significant impact on its Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which provides guidance on evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard is effective for interim and ~~fiscal~~annual periods beginning after December 15, ~~2017 and must be adopted using a modified retrospective method.~~2017. The Company ~~is evaluating~~will apply the standard prospectively upon adoption. The impact of this standard on ~~its~~the Company’s Consolidated Financial ~~Statements.~~

~~AFFILIATED MANAGERS GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

Statements will depend on acquisitions (or disposals) of assets or businesses by the Company in periods following adoption.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Accounting for Goodwill Impairment. AUnder the new standard, a goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair ~~value, not to exceed the carrying amount of goodwill.~~value. The standard is effective for interim and ~~fiscal~~annual periods beginning after December 15, ~~2019 and must be adopted using a modified retrospective method.~~2019. The Company will apply the standard prospectively upon adoption. The Company is evaluating the impact of this standard on its Consolidated Financial Statements.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation, which simplifies modification accounting related to share-based arrangements. Under the new standard, modification assessments will not be required if fair value, vesting conditions and classification would be unaffected by a modification. The standard is effective for interim and annual periods beginning after December 15, 2017. The Company will apply the standard prospectively upon adoption. The Company does not expect the adoption of this standard to have a significant impact on its Consolidated Financial Statements.


3.	Investments in Marketable Securities

Investments in marketable securities at December 31, 2016 and ~~March 31,~~September 30, 2017 were $122.4 million and $~~115.5~~92.4 million, respectively. The following is a summary of the cost, gross unrealized gains and losses and fair value of investments classified as available-for-sale and trading:


	Available-for-Sale					Trading						Available-for-Sale					Trading
	December 31, 2016			March 31, 2017		December 31, 2016			March 31, 2017			December 31, 2016			September 30, 2017		December 31, 2016			September 30, 2017
Cost	$	66.1		$	42.2	$	34.4		$	41.0		$	66.1		$	30.5	$	34.4		$	44.2
Unrealized gains	17.6			24.6		6.6			8.3			17.6			10.8		6.6			8.5
Unrealized losses	(1.8		)	—		(0.5		)	(0.6		)	(1.8		)	—		(0.5		)	(1.6		)
Fair Value	$	81.9		$	66.8	$	40.5		$	48.7		$	81.9		$	41.3	$	40.5		$	51.1

~~For~~In the three and nine months ended ~~March 31,~~September 30, 2016, ~~and 2017,~~ the Company received proceeds of ~~$5.8~~$12.6 million and ~~$30.2~~$47.0 million, respectively, from the sale of investments classified as available-for-sale and recorded gains of ~~$1.7~~$6.2 million and ~~$5.8~~$15.4 million, respectively. ~~These~~In the three and nine months ended September 30, 2017, the Company received proceeds of $15.4 million and $58.7 million, respectively, from the sale of investments classified as available-for-sale and recorded gains of $7.4 million and ~~losses were recorded in Investment and other income.~~$19.2 million, respectively. There were no significant realized gains or losses on investments classified as trading in the three and nine months ended ~~March 31, 2016~~September 30, 2016. In the three and ~~2017.~~nine months ended September 30, 2017, the Company received proceeds of $8.2 million and $23.2 million, respectively, from the sale of investments classified as trading and recorded net gains of $1.7 million and $5.0 million, respectively. The realized gains and losses on securities held in Affiliate sponsored consolidated products were recorded in Other operating expenses (net), other realized gains and losses were recorded in Investment and other income.


4.	Investments in Affiliates and Affiliate Sponsored Investment Products

~~In evaluating whether an investment must be~~Investments in Affiliates

The Company’s Affiliates are consolidated or accounted for under the ~~Company evaluates~~equity method, depending upon the ~~risk, rewards,~~underlying structure of and ~~significant terms~~relationship with each Affiliate.

A limited number of ~~each of its Affiliate and other investments to determine if an investment is~~the Company’s Affiliates are considered a voting rights ~~entity~~entities (“~~VRE”~~VREs”) ~~or a variable interest entity (“VIE”). An entity is a VRE when~~because the ~~entity’s~~ total equity investment at risk is sufficient to enable the ~~entity~~entities to finance ~~its~~their respective activities independently and ~~when the~~each entity’s equity holders have ~~the obligation to absorb losses,~~ the right to receive residual returns, the obligation to absorb losses and the right to direct the activities of the entity

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

that most significantly impact its economic performance. ~~An entity~~Most of the Company’s Affiliates considered VREs are accounted for under the equity method because the Company lacks control, but is deemed to have significant influence.

Substantially all of the Company’s Affiliates are considered variable interest entities (“VIEs”) because they are structured as partnerships (or similar entities) and the limited partners lack substantive kick-out or substantive participation rights over the general partner. The Company consolidates a VIE when it ~~lacks one or more~~is the primary beneficiary of the ~~characteristics of a VRE. Assessing whether an~~ entity, ~~is a VRE or VIE involves judgment. Upon the occurrence of certain events, management reviews and reconsiders its previous conclusion regarding the status of an entity as a VRE or a VIE.~~

The Company consolidates VREs when it has control over significant operating, financial and investing decisions of the VRE or holds the majority voting interest. The Company consolidates VIEs when it has a controlling financial interest, which is defined as having the power to direct the activities that most significantly impact the VIE’s economic performance and the right to receive benefits from or the obligation to absorb losses of ~~or the right to receive benefits from~~ the entity that could potentially be significant to the VIE. The Company applies the equity method of accounting to a VIE when it is not the primary beneficiary, but is deemed to have significant influence.

~~Investments in Affiliates~~

~~Substantially all of the Company’s Affiliates are considered VIEs.~~ The unconsolidated assets, net of liabilities and non-controlling interests of equity method Affiliates considered VIEs, and ~~accounted for under~~ the ~~equity method~~Company’s maximum risk of ~~accounting, was $1.0 billion~~loss were as ~~of both December 31, 2016 and March 31, 2017. The Company’s carrying value and maximum exposure to loss for these Affiliates was $2.8 billion as of both December 31, 2016 and March 31, 2017.~~follows:



	December 31, 2016				September 30, 2017
	Unconsolidated VIE Net Assets		Carrying Value and Maximum Exposure to Loss		Unconsolidated VIE Net Assets		Carrying Value and Maximum Exposure to Loss
Affiliates accounted for under the equity method	$	1,047.6	$	2,846.8	$	1,019.4	$	2,749.7

Affiliate Sponsored Investment Products

The Company’s consolidated Affiliates sponsor various investment products for which they also act as the investment ~~advisor, and, in some cases, these products are considered VIEs.~~advisor. These investment products are ~~typically~~primarily owned ~~primarily~~ by third-party investors; however, certain products are ~~capitalized~~funded with general partner and seed capital investments from the Company and its Affiliates. Third-party investors are generally entitled to substantially all of the economics of these ~~VIEs, except for the management and performance fees earned by Affiliates or any gains or losses attributable to Affiliates’ investments in these~~ products. ~~As a result, Affiliates do not generally consolidate these VIEs unless the Affiliate’s interest in the product is considered substantial. When consolidating~~

~~AFFILIATED MANAGERS GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

~~these VIEs, the Company retains the specialized investment company accounting principles~~Certain of the underlying products, and all of the underlying investments are carried at fair value in Investments in marketable securities with corresponding changes in the investments’ fair values reflected in Other operating expenses (net). Purchases and sales of securities are presented within purchases and sales byCompany’s Affiliate sponsored ~~consolidated products in the Consolidated Statements of Cash Flows. When Affiliates no longer control these products, due to a reduction in ownership or other reasons, the~~investment products are ~~deconsolidated.~~

considered VIEs because they are structured as partnerships (or similar entities) and the limited partners lack substantive kick-out or substantive participation rights over the general partner. The Company's Affiliates’ involvement with ~~unconsolidated VIEs~~sponsored investment products is generally limited to that of a service provider, and their ~~investment,~~seed capital investments, if any, ~~represents~~represent an insignificant interest in the relevant investment ~~entities’~~products’ net ~~assets under management.~~assets. The ~~Company's~~Company’s and its consolidated Affiliates’ exposure to risk in these entities is generally limited to any capital contribution ~~it has~~ made or is required to ~~make~~be made and any earned but uncollected management and performance fees. ~~The~~As a result, in most cases these VIEs are not consolidated and are accounted for under the equity method because neither the Company ~~and~~nor its Affiliates ~~have not issued any investment performance guarantees~~are deemed to ~~these VIEs or their investors.~~be the primary beneficiary.

The net assets ~~and liabilities~~ of ~~unconsolidated~~Affiliate sponsored investment products that were considered VIEs accounted for under the equity method and the Company’s maximum risk of loss were as follows:

December 31, 2016 March 31, 2017

Unconsolidated
VIE Net Assets

Carrying Value and
Maximum Exposure
to Loss

Unconsolidated
VIE Net Assets

Carrying Value and
Maximum Exposure
to Loss
Affiliate sponsored investment products $ 1,756.6
$ 9.4
$ 1,818.5
$ 9.7



	December 31, 2016				September 30, 2017
	Unconsolidated VIE Net Assets		Carrying Value and Maximum Exposure to Loss		Unconsolidated VIE Net Assets		Carrying Value and Maximum Exposure to Loss
Affiliate sponsored investment products	$	1,756.6	$	9.4	$	1,961.5	$	9.9


5.	Commitments and Contingencies

From time to time, the Company and its Affiliates may be subject to claims, legal proceedings and other contingencies in the ordinary course of their business activities. Any such matters are subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company or its Affiliates. The Company and its Affiliates establish accruals, as necessary, for matters for which the outcome is probable and the amount of the liability can be reasonably estimated.

Third Avenue Management LLC (“Third Avenue”), one of the Company’s consolidated Affiliates, ~~has been~~was named as a defendant in various legal actions relating to the liquidation and closure of the Third Avenue Focused Credit Fund. The Company ~~has been~~was named as a co-defendant in one of these actions, as a purported control person. In ~~the fourth quarter of~~ 2016, Third Avenue recorded

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

a reserve of $15.0 million in connection with the proposed resolution of all claims ~~including against the Company,~~ related to the Focused Credit ~~Fund, which is subject to court approvals. The entire amount of~~Fund. These claims, including those against the ~~reserve would be funded by~~Company, were subsequently resolved in a court-approved settlement, and Third Avenue and ~~therefore,~~its insurers paid amounts due under the ~~recording of~~settlement during the ~~reserve had~~quarter and no ~~impact on Net income (controlling interest).~~additional expense was recognized.

The Company has committed to co-invest in certain Affiliate sponsored investment products. As of ~~March 31,~~September 30, 2017, these unfunded commitments were $~~97.1~~94.9 million and may be called in future periods. ~~In connection with a past acquisition agreement, the Company is contractually entitled to reimbursement from a prior owner of one of the Company’s Affiliates for~~ ~~$11.0 million~~ ~~of these commitments if they are called.~~

As of ~~March 31,~~September 30, 2017, the Company was contingently liable, upon the achievement by certain Affiliates of specified financial targets, to make payments related to the Company’s investments in these Affiliates through 2019. For its consolidated Affiliates, the Company was contingently liable for up to ~~$84.9~~$21.7 million, ~~$57.5 million of which expire during the three months ending June 30, 2017,~~ and ~~expects~~expected to make payments of $~~10.3~~8.9 million ($~~3.0~~1.6 million in 2017). The present value of these expected payments was ~~$8.9 million as of March 31, 2017.~~$8.1 million. For its equity method Affiliates, the Company was contingently liable for up to $170.0 million, and ~~expects~~expected to make no ~~payments in 2017.~~payments.

Affiliate equity interests provide holders with a conditional right to put their interests to the Company over time. See Note ~~12.~~13. In addition, in connection with an investment in an Affiliate accounted for under the equity method, the Company entered into an arrangement with a minority owner of the Affiliate that gives such owner the right to sell a portion of its ownership interest in the Affiliate to the Company annually beginning in the fourth quarter of 2018. The purchase price of these conditional purchases will be at fair market value on the date of the transaction.

The Company and certain consolidated Affiliates operate under regulatory authorities that require that they maintain minimum financial or capital requirements. Management is not aware of any significant violations of such requirements.


6.	Senior Notes

In the three months ended September 30, 2017, the Company redeemed all $200.0 million principal amount outstanding of its 6.375% senior unsecured notes due 2042 at a redemption price equal to 100% of the principal amount. The notes were subsequently canceled and retired.


7.	Fair Value Measurements

~~AFFILIATED MANAGERS GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

The following tables summarize the Company’s financial assets and liabilities that are measured at fair value on a recurring basis:



			Fair Value Measurements
	December 31, 2016		Fair Value Measurements
	December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Financial Assets
Cash equivalents	$	64.1	$	64.1	$	—	$	—
Investments in marketable securities⁽¹⁾
Trading securities	40.5		40.5		—		—
Available-for-sale securities	81.9		81.9		—		—
Other investments	3.4		3.4		—		—
Foreign currency forward contracts⁽²⁾	0.6		—		0.6		—
Financial Liabilities⁽²⁾
Contingent payment arrangements	$	8.6	$	—	$	—	$	8.6
Affiliate equity obligations	12.1		—		—		12.1
Foreign currency forward contracts	0.5		—		0.5		—

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Fair Value Measurements
March 31,
2017
Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3)
Financial Assets
Cash equivalents $ 26.3
$ 26.3
$ —
$ —
Investments in marketable securities⁽¹⁾

Trading securities 48.7
48.7
—
—
Available-for-sale securities 66.8
66.8
—
—
Foreign currency forward contracts⁽²⁾
0.3
—
0.3
—
Financial Liabilities⁽²⁾

Contingent payment arrangements $ 8.9
$ —
$ —
$ 8.9
Affiliate equity obligations 91.5
—
—
91.5
Foreign currency forward contracts 0.1
—
0.1
—



			Fair Value Measurements
	September 30, 2017		Fair Value Measurements
	September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Financial Assets
Cash equivalents	$	35.1	$	35.1	$	—	$	—
Investments in marketable securities⁽¹⁾
Trading securities	51.1		51.1		—		—
Available-for-sale securities	41.3		41.3		—		—
Foreign currency forward contracts⁽²⁾	0.7		—		0.7		—
Financial Liabilities⁽²⁾
Contingent payment arrangements	$	8.1	$	—	$	—	$	8.1
Affiliate equity obligations	45.7		—		—		45.7
Foreign currency forward contracts	1.0		—		1.0		—

__________________________


⁽¹⁾	Principally investments in equity securities.


⁽²⁾	Amounts are presented within Other assets or Other liabilities.

The following are descriptions of the significant financial assets and liabilities measured at fair value and the fair value methodologies used.

Cash equivalents consist primarily of highly liquid investments in daily redeeming money market funds, without enacted liquidity fees or redemption ~~gates.~~gates that are valued at net asset value (“NAV”).

Investments in marketable securities consist primarily of investments in publicly traded securities and in funds advised by Affiliates that are valued at NAV. Publicly traded securities ~~and funds advised by Affiliates are~~ valued using unadjusted quoted market prices for identical instruments in active markets ~~and~~ are classified as level 1. Publicly traded securities valued using

~~AFFILIATED MANAGERS GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active ~~and~~ are classified as level 2. Investments in funds advised by Affiliates that are valued at NAV are classified as level 1.

Contingent payment arrangements represent the present value of the expected future settlement of contingent payment arrangements related to the Company’s investments in consolidated Affiliates. The significant unobservable inputs that are used in the fair value measurement of these obligations are growth and discount rates. Increases in the growth rate result in a higher obligation while increases in the discount rate result in a lower obligation.

Affiliate equity obligations include agreements to repurchase Affiliate equity. The significant unobservable inputs that are used in the fair value measurement of the agreements to repurchase Affiliate equity are growth and discount rates. Increases in the growth rate result in a higher obligation while increases in the discount rate result in a lower obligation.

Foreign currency forward contracts use model-derived valuations in which all significant inputs are observable in active markets to determine fair ~~value and are classified as level 2.~~value.

It is the Company’s policy to value financial assets or liabilities transferred as of the beginning of the period in which the transfer occurs. There were no significant transfers of financial assets or liabilities between level 1 and level 2 in the three and nine months ended ~~March 31,~~September 30, 2016 and 2017.

Level 3 Financial Assets and Liabilities

The following tables present the changes in level 3 liabilities:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three Months Ended March 31,
2016 2017
Contingent Payment Arrangements Affiliate Equity Obligations Contingent Payment Arrangements Affiliate Equity Obligations
Balance, beginning of period $ 10.2
$ 62.3
$ 8.6
$ 12.1
Net (gains) losses (2.4 )
⁽¹⁾
—
0.3
⁽¹⁾
—
Purchases and issuances —
30.1
—
99.6
Settlements and reductions —
(56.8 ) —
(20.2 )
Balance, end of period $ 7.8
$ 35.6
$ 8.9
$ 91.5

Net change in unrealized (gains) losses relating to instruments still held at the reporting date $ (2.4 )
⁽¹⁾
$ —
$ 0.3
⁽¹⁾
$ —



	For the Three Months Ended September 30,
	2016						2017
	Contingent Payment Arrangements			Affiliate Equity Obligations			Contingent Payment Arrangements			Affiliate Equity Obligations
Balance, beginning of period	$	8.0		$	27.0		$	7.8		$	70.7
Net realized and unrealized (gains) losses	0.2		⁽¹⁾	0.1			0.3		⁽¹⁾	(0.2		)
Purchases and issuances	—			8.4			—			11.1
Settlements and reductions	—			(8.8		)	—			(35.9		)
Balance, end of period	$	8.2		$	26.7		$	8.1		$	45.7

Net change in unrealized (gains) losses relating to instruments still held at the reporting date	$	0.2	⁽¹⁾	$	—		$	0.3	⁽¹⁾	$	—



	For the Nine Months Ended September 30,
	2016							2017
	Contingent Payment Arrangements				Affiliate Equity Obligations			Contingent Payment Arrangements				Affiliate Equity Obligations
Balance, beginning of period	$	10.2			$	62.3		$	8.6			$	12.1
Net realized and unrealized (gains) losses	(2.0		)	⁽¹⁾	0.1			2.3			⁽¹⁾	(0.2		)
Purchases and issuances	—				48.2			—				161.5
Settlements and reductions	—				(83.9		)	(2.8		)		(127.7		)
Balance, end of period	$	8.2			$	26.7		$	8.1			$	45.7

Net change in unrealized (gains) losses relating to instruments still held at the reporting date	$	(2.0	)	⁽¹⁾	$	—		2.3			⁽¹⁾	$	—

___________________________


⁽¹⁾	Accretion and changes in the expected value of the Company’s contingent payment arrangements are recorded in Imputed interest expense and contingent payment arrangements.

The following table presents certain quantitative information about the significant unobservable inputs used in valuing the Company’s level 3 financial liabilities:


	Quantitative Information About Level 3 Fair Value Measurements								Quantitative Information About Level 3 Fair Value Measurements
	Valuation Techniques	Unobservable Input	Fair Value at December 31, 2016		Range at December 31, 2016	Fair Value at March 31, 2017		Range at March 31, 2017	Valuation Techniques	Unobservable Input	Fair Value at December 31, 2016		Range at December 31, 2016	Fair Value at September 30, 2017		Range at September 30, 2017
Contingent payment arrangements	Discounted cash flow	Growth rates	$	8.6	3% - 8%	$	8.9	3% - 8%	Discounted cash flow	Growth rates	$	8.6	3% - 8%	$	8.1	8% - 9%
		Discount rates			14% - 15%			14% - 16%		Discount rates			14% - 15%			14% - 15%
Affiliate equity obligations	Discounted cash flow	Growth rates	12.1		4% - 10%	91.5		4% - 10%	Discounted cash flow	Growth rates	12.1		4% - 10%	45.7		5% - 9%
		Discount rates			15% - 16%			12% - 17%		Discount rates			15% - 16%			12% - 16%

Investments Measured at NAV as a Practical Expedient

The Company’s Affiliates sponsor investment products in ~~Certain Entities that Calculate Net Asset Value~~

which the Company and Affiliates may make general partner and seed capital investments. The Company uses the NAV of ~~certain~~these investments as a practical expedient for their fair value. ~~The NAVs provided by the investees have been derived from the fair values of the underlying assets and liabilities as of the measurement dates.~~ The following table summarizes the nature of ~~these~~the Company’s investments, unfunded commitments and any related liquidity restrictions or other factors that may impact the ultimate value realized:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


	December 31, 2016				March 31, 2017				December 31, 2016				September 30, 2017
Category of Investment	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Private equity funds⁽¹⁾	$	137.8	$	92.2	$	141.9	$	97.1	$	137.8	$	92.2	$	151.9	$	94.9
Other funds⁽²⁾	9.7		—		6.9		—		9.7		—		8.6		—
Other investments(3)	147.5		92.2		148.8		97.1		$	147.5	$	92.2	$	160.5	$	94.9
Marketable securities	27.1		—		36.1		—
Total	$	174.6	$	92.2	$	184.9	$	97.1

___________________________

⁽¹⁾

~~To determine the fair value, the~~The Company uses NAV as a practical expedient one quarter in arrears (adjusted for current period calls and distributions). to determine the fair value. These funds primarily invest in a broad range of private equity funds, as well as making direct investments. Distributions will be received as the underlying assets are liquidated over the life of the funds, which is generally up to 15 years.


⁽²⁾	~~To determine the fair value, the Company uses NAV as a practical expedient.~~ These are multi-disciplinary funds that invest across various asset classes and strategies, including long/short equity, credit and real estate. Investments are generally redeemable on a daily, monthly or quarterly basis.


⁽³⁾	Fair value attributable to the controlling interest was $59.9 million and $72.8 million as of December 31, 2016 and September 30, 2017, respectively.

Other Financial Assets and Liabilities Not Carried at Fair Value

The carrying amount of Receivables and Payables and accrued liabilities approximates fair value because of the short-term nature of these instruments. The carrying value of notes receivable, which is reported in Other assets, approximates fair value because interest rates and other terms are at market rates. The carrying value of the credit facilities, which is reported in Senior bank debt, approximates fair value because the debt has variable interest based on selected short-term rates. The following table summarizes the Company’s other financial liabilities not carried at fair value:


	December 31, 2016				March 31, 2017					December 31, 2016				September 30, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value		Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value		Fair Value Hierarchy
Senior notes	$	945.1	$	936.0	$	945.3	$	962.2	Level 2	$	945.1	$	936.0	$	745.5	$	779.6	Level 2
Convertible securities	307.5		466.9		308.0		489.5		Level 2	307.5		466.9		309.3		527.8		Level 2


7.8.	Goodwill and Acquired Client Relationships

The following tables present the changes in the Company’s consolidated Affiliates’ Goodwill and components of Acquired client relationships (net):


	Goodwill		Goodwill
	Total		Total
Balance, as of December 31, 2016	$	2,628.1	$	2,628.1
Foreign currency translation	5.6		33.7
Balance, as of March 31, 2017	$	2,633.7
Balance, as of September 30, 2017			$	2,661.8

As of September 30, 2017, the Company completed its impairment assessments on its goodwill and no impairments were indicated.

Acquired Client Relationships
Definite-lived Indefinite-lived Total

Gross Book
Value

Accumulated
Amortization

Net Book
Value

Net Book
Value

Net Book
Value
Balance, as of December 31, 2016 $ 1,290.0
$ (788.1 ) $ 501.9
$ 995.5
$ 1,497.4
Intangible amortization and impairments —
(21.9 ) (21.9 ) —
(21.9 )
Foreign currency translation 1.0
—
1.0
5.9
6.9
Balance, as of March 31, 2017 $ 1,291.0
$ (810.0 ) $ 481.0
$ 1,001.4
$ 1,482.4

~~Definite-lived acquired client relationships are amortized over their expected useful lives. As of~~ ~~March 31, 2017, these relationships were being amortized over a weighted average life of approximately~~ ~~twelve~~ ~~years. The Company recorded~~



	Acquired Client Relationships
	Definite-lived								Indefinite-lived		Total
	Gross Book Value		Accumulated Amortization			Net Book Value			Net Book Value		Net Book Value
Balance, as of December 31, 2016	$	1,290.0	$	(788.1	)	$	501.9		$	995.5	$	1,497.4
Intangible amortization and impairments	—		(65.1		)	(65.1		)	—		(65.1		)
Foreign currency translation	5.0		—			5.0			29.9		34.9
Balance, as of September 30, 2017	$	1,295.0	$	(853.2	)	$	441.8		$	1,025.4	$	1,467.2

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Definite-lived acquired client relationships are amortized over their expected useful lives. As of September 30, 2017, these relationships were being amortized over a weighted average life of approximately 12 years. The Company recorded amortization expense, in Intangible amortization and impairments, for these relationships of $~~26.6~~26.9 million and ~~$21.9~~$82.2 million for the three and nine months ended ~~March 31,~~September 30, 2016, respectively, and $21.2 million and $65.1 million for the three and nine months ended September 30, 2017, respectively. Based on relationships existing as of ~~March 31,~~September 30, 2017, the Company estimates that its consolidated annual amortization expense will be approximately $85 million in each of 2017, 2018 and 2019, $50 million in 2020 and $30 million in 2021.


8.9.	Equity Method Investments in Affiliates

~~The following table presents~~In 2016, the ~~change in Equity method~~Company completed investments in ~~Affiliates:~~

Total
Balance, as of December 31, 2016 $ 3,368.3
Equity method earnings 107.6
Equity method intangible amortization (21.7 )
Distributions from equity method investments (189.9 )
Investments 29.9
Foreign currency translation 2.6
Other 2.0
Balance, as of March 31, 2017 $ 3,298.8

Systematica Investments L.P. and Baring Private Equity Asia, both of which closed on January 4, 2016, Capula Investment Management, LLP, Mount Lucas Management LP and Capeview Capital LLP, all of which closed on July 1, 2016, Partner Fund Management, L.P., which closed on September 30, 2016, and Winton Group Ltd., which closed on October 4, 2016. The ~~intangible assets associated with~~purchase price allocations were completed using financial models that included assumptions of expected market performance, net client cash flows and discount rates. The majority of the Company’s equity method investments in Affiliates consist of definite-lived and indefinite-lived acquired client relationships and goodwill. As of March 31, 2017, the definite-lived relationships were being amortizedconsideration paid is deductible for U.S. tax purposes over a weighted average life of approximately 13 years. The Company recorded amortization expense in Income from equity method investments for these relationships of $14.2 million and $21.7 million for the three months ended March 31, 2016 and 2017, respectively. Based on relationships existing as of March 31, 2017, the Company estimates the annual amortization expense attributable to its current equity-method Affiliates to be approximately $80 million for each of the next five years.

15-year life. The financial results of certain equity method Affiliates are recognized in the Consolidated Financial Statements one quarter in arrears.

The aggregate purchase price allocation for the 2016 investments was as follows:



	Total
Consideration paid	$	1,362.3

Definite-lived acquired client relationships	$	560.8
Indefinite-lived acquired client relationships	36.9
Tangible assets	2.0
Deferred tax liability	(91.8		)
Goodwill	854.4
	$	1,362.3

For these new investments, the Company recorded amortization expense on the definite-lived acquired client relationships of $3.7 million and $11.2 million in the three and nine months ended ~~March 31,~~September 30, 2016, respectively, and $15.5 million and $33.9 million in the three and nine months ended September 30, 2017, ~~one~~respectively.

The following table presents the change in Equity method investments in Affiliates:



	Total
Balance, as of December 31, 2016	$	3,368.3
Equity method earnings	303.3
Equity method intangible amortization	(71.7		)
Distributions of earnings from equity method investments	(368.0		)
Investments	29.8
Foreign currency translation	32.1
Other	(3.0		)
Balance, as of September 30, 2017	$	3,290.8

As of September 30, 2017, the definite-lived relationships at all of the Company’s equity method Affiliates were being amortized over a weighted average life of approximately 10 years. The Company recognized amortization expense for these relationships of $14.0 million and $43.0 million for the three and nine months ended September 30, 2016, respectively, and $25.9 million and $71.7 million for the three and nine months ended September 30, 2017, respectively. Based on relationships existing as of September 30, 2017, the Company estimates the annual amortization expense attributable to its current equity method Affiliates will be approximately $100 million in each of 2017 and 2018 and $80 million in each of 2019, 2020 and 2021.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company has determined that one of its equity method Affiliates is significant under Rule 10-01(b)(1) of Regulation S-X. For the three and nine months ended September 30, 2016, this equity method Affiliate recognized revenue of ~~$206.1~~$230.2 million and ~~$265.6~~$658.6 million, respectively, and net income of ~~$111.6~~$126.4 million and ~~$148.6~~$361.0 million, respectively. For the three and nine months ended September 30, 2017, this equity method Affiliate recognized revenue of $301.8 million and $826.6 million, respectively, and net income of $178.3 million and $471.3 million, respectively.


9.10.	Related Party Transactions

A prior owner of one of the Company’s Affiliates retained an interest in certain of the Affiliate’s private equity investment partnerships. The prior owner’s interest is presented in the Company’s Consolidated Balance Sheets as either a liability in Other liabilities or as Non-controlling interests, depending on the structure of the prior owner’s investments in the partnerships. The total liability was $67.8 million and ~~$66.9~~$64.1 million at December 31, 2016 and ~~March 31,~~September 30, 2017, respectively. The total non-controlling interest was $2.5 million and ~~$2.1~~$0.8 million at December 31, 2016 and ~~March 31,~~September 30, 2017, respectively.

The Company and its Affiliates earn asset based revenue, performance fees, distribution and servicing and other fees and incur distribution and servicing and other expenses for services provided to Affiliate sponsored investment products. In ~~certain cases,~~addition, Affiliate management owners and Company officers may serve as trustees or directors of certain investment vehicles from which an Affiliate earns ~~advisory fee~~ revenue.

The Company has liabilities to related parties for contingent payment arrangements in connection with certain business combinations. The net present value of the total amounts payable were $8.6 million and ~~$8.9~~$8.1 million as of December 31, 2016 and ~~March 31,~~September 30, 2017, respectively, and were included in Other liabilities.

The Company has related party transactions in association with its Affiliate equity transactions, as more fully described in Notes 1112 and ~~12.~~13.


~~10.~~11.	Share-Based Compensation

~~AFFILIATED MANAGERS GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~

The following is a summary of share-based compensation expense:


	For the Three Months Ended March 31,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2016		2017		2016		2017		2016		2017
Share-based compensation	$	9.2	$	9.4	$	10.7	$	10.3	$	30.7	$	30.0
Tax benefit	3.6		3.6		4.1		4.0		11.8		11.5

The Company ~~has~~had $66.4 million and $~~93.7~~73.8 million of unrecognized share-based compensation as of December 31, 2016 and ~~March 31,~~September 30, 2017, respectively, which will be recognized over a weighted average period of approximately three years (assuming no forfeitures).

Stock Options

The following table summarizes transactions in the Company’s stock options:


	Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)
Unexercised options outstanding - December 31, 2016	1.4		$	108.53		1.4		$	108.53
Options granted	0.0		152.36			0.0		168.60
Options exercised	(0.4	)	96.70			(0.6	)	96.86
Options forfeited	0.0		142.19			(0.1	)	140.26
Unexercised options outstanding - March 31, 2017	1.0		112.38		3.1
Exercisable at March 31, 2017	0.6		104.20		1.5
Unexercised options outstanding - September 30, 2017						0.7		118.35		3.5
Exercisable at September 30, 2017						0.3		108.55		1.5

~~As of March 31, 2017, 0.2 million options outstanding have expiration dates prior to the end of 2017.~~

For the ~~three~~nine months ended ~~March 31,~~September 30, 2016 and 2017, the Company granted stock options with fair values of ~~$16.0~~$16.4 million and ~~$0.4~~$0.8 million, respectively. Stock options generally vest over a period of three to four years and expire seven years after the grant date. All options have been granted with exercise prices equal to the closing price of the Company’s common

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

stock on the grant date. In certain circumstances, option awards also require certain performance conditions to be satisfied in order for the options to be exercised.

The fair value of options granted was estimated using the Black-Scholes option pricing model. For the ~~three~~nine months ended ~~March 31,~~September 30, 2016 and 2017, the weighted average fair ~~value~~values of options granted ~~was $38.90~~were $39.02 and ~~$46.49,~~$48.05, per option, respectively, based on the weighted-average grant date assumptions stated below.


	For the Three Months Ended March 31,				For the Nine Months Ended September 30,
	2016		2017		2016		2017
Dividend yield	—	%	0.5	%	—		0.5	%
Expected volatility	30.6	%	30.1	%	30.7	%	28.0	%
Risk-free interest rate	1.6	%	2.2	%	1.6	%	2.1	%
Expected life of options (in years)	5.7		5.7		5.7		5.7
Forfeiture rate	—	%	—	%	—		—

Restricted Stock

The following table summarizes transactions in the Company’s restricted stock units:

~~AFFILIATED MANAGERS GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~


	Restricted Stock Units		Weighted Average Grant Date Value		Restricted Stock Units		Weighted Average Grant Date Value
Unvested units - December 31, 2016	0.6		$	168.84	0.6		$	168.84
Units granted	0.2		152.88		0.2		153.09
Units vested	(0.2	)	167.14		(0.2	)	167.72
Units forfeited	(0.0	)	170.73		(0.0	)	170.52
Unvested units - March 31, 2017	0.6		163.14
Unvested units - September 30, 2017					0.6		162.97

For the ~~three~~nine months ended ~~March 31,~~September 30, 2016 and 2017, the Company granted awards with fair values of ~~$27.7~~$28.0 million and ~~$36.4~~$36.7 million, respectively. These awards were valued based on the closing price of the Company’s common stock on the grant date and contain vesting conditions requiring service over a period of three to four years. In certain circumstances, awards also require certain performance conditions to be satisfied. ~~The Company may elect to settle the awards in shares of the Company’s common stock or cash.~~


~~11.~~12.	Redeemable Non-Controlling Interests

Affiliate equity interests provide holders with a ratable portion of ownership in one of the Company’s consolidated ~~Affiliates.~~Affiliates, consistent with the structured partnership interests in place at the respective Affiliate. Affiliate equity holders generally have a conditional right to put their interests to the Company at certain intervals (between five and 15 years from the date the equity interest is received or on an annual basis following an Affiliate equity holder’s departure). The current redemption value of the Company’s Affiliate equity interests is presented as Redeemable non-controlling interests. Changes in the current redemption value are recorded to Additional paid-in capital. The following table presents the changes in Redeemable non-controlling interests:


	Redeemable Non-controlling Interests			Redeemable Non-controlling interests
Balance, as of December 31, 2016	$	673.5		$	673.5
Changes attributable to consolidated products	2.4			9.5
Repurchases of redeemable Affiliate equity	(99.6		)	(151.6		)
Transfers from non-controlling interests	25.7			56.8
Changes in redemption value	131.5			216.4
Balance, as of March 31, 2017	$	733.5
Balance, as of September 30, 2017				$	804.6

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


~~12.~~13.	Affiliate Equity

Affiliate equity interests are allocated income in a manner that is consistent with the structured partnership interests in place at the respective Affiliate. The Company’s Affiliates generally pay quarterly distributions to Affiliate equity holders. For the ~~three~~nine months ended ~~March 31,~~September 30, 2016 and 2017, distributions paid to Affiliate equity holders were ~~$101.6~~$270.1 million and ~~$92.0~~$266.8 million, respectively.

The Company periodically repurchases Affiliate equity interests from and issues Affiliate equity interests to its Affiliate equity holders. For the ~~three~~nine months ended ~~March 31,~~September 30, 2016 and 2017, the amount of cash paid for repurchases was ~~$57.0~~$82.1 million and ~~$23.6~~$121.3 million, respectively. For the ~~three~~nine months ended ~~March 31,~~September 30, 2016 and 2017, the total amount of cash received for issuances was ~~$2.9~~$11.8 million and ~~$6.0~~$8.8 million, respectively.

Sales and repurchases of Affiliate equity generally occur at fair value; however, the Company also grants Affiliate equity to its Affiliate partners, employees and officers as a form of compensation. If the equity is issued for consideration below the fair value of the equity or repurchased for consideration above the fair value of the equity, then such difference is recorded as compensation expense over the requisite service period.

The following is a summary of Affiliate equity expense:

~~AFFILIATED MANAGERS GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~


	For the Three Months Ended March 31,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2016		2017		2016		2017		2016		2017
Controlling interest	$	2.1	$	4.0	$	3.2	$	2.3	$	7.7	$	9.4
Non-controlling interests	3.9		12.6		18.5		7.7		27.2		29.2
Total	$	6.0	$	16.6	$	21.7	$	10.0	$	34.9	$	38.6

The following is a summary of unrecognized Affiliate equity expense:

Controlling Interest

Remaining Life

Non-controlling Interests

Remaining Life

Controlling Interest

Remaining Life

Non-controlling Interests

Remaining Life

December 31, 2016

31.3

4 years

70.7

5 years

31.3

4 years

70.7

5 years

March 31, 2017

33.3

4 years

84.6

5 years

September 30, 2017

33.0

4 years

82.5

5 years

The Company records amounts receivable from and payable to Affiliate equity holders in connection with the transfer of Affiliate equity interests that have not settled at the end of the period. The total amount receivable was $22.9 million and ~~$23.1~~$10.9 million at December 31, 2016 and ~~March 31,~~September 30, 2017, respectively, and was included in Other assets. The total amount payable was $12.1 million and ~~$91.5~~$45.7 million as of December 31, 2016 and ~~March 31,~~September 30, 2017, respectively, and was included in Other liabilities.

Effects of Changes in the Company’s Ownership in Affiliates

The Company periodically acquires interests from, and transfers interests to, Affiliate equity holders. Because these transactions do not result in a change of control, any gain or loss related to these transactions is recorded to Additional paid-in capital, which increases or decreases the controlling interest’s equity. No gain or loss related to these transactions is recognized in the Consolidated Statements of Income or Comprehensive Income.

While the Company presents the current redemption value of Affiliate equity within Redeemable non-controlling interests with changes in the current redemption value increasing or decreasing the controlling interest’s equity over time, the following table discloses the cumulative effect that ownership changes had on the controlling interest’s equity related only to Affiliate equity transactions that settled during the periods:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three Months Ended March 31,
2016 2017
Net income (controlling interest) $ 104.0
$ 122.5
Decrease in controlling interest paid-in capital from purchases and sales of Affiliate equity issuances (0.9 ) (1.2 )
Decrease in controlling interest paid-in capital related to Affiliate equity repurchases (17.5 ) (52.6 )
Net income attributable to controlling interest and transfers from Non-controlling interests $ 85.6
$ 68.7



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2017			2016			2017
Net income (controlling interest)	$	110.2		$	125.4		$	322.5		$	374.2
Increase / (decrease) in controlling interest paid-in capital from purchases and sales of Affiliate equity issuances	5.3			(0.3		)	1.9			(0.6		)
Decrease in controlling interest paid-in capital related to Affiliate equity repurchases	(2.1		)	(12.7		)	(23.4		)	(81.8		)
Net income attributable to controlling interest and transfers from Non-controlling interests	$	113.4		$	112.4		$	301.0		$	291.8


~~13.~~14.	Income Taxes

The consolidated income tax provision includes taxes attributable to the controlling interest and, to a lesser extent, taxes attributable to the non-controlling interests as follows:

~~AFFILIATED MANAGERS GROUP, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~


	For the Three Months Ended March 31,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2017			2016			2017			2016			2017
Controlling interest:
Current tax	$	27.4		$	22.4		$	29.5		$	39.6		$	84.2		$	102.0
Intangible-related deferred taxes	22.1			19.8			19.5			22.9			63.0			61.8
Other deferred taxes	5.6			15.6			1.1			1.6			8.4			18.7
Total controlling interest	55.1			57.8			50.1			64.1			155.6			182.5
Non-controlling interests:
Current tax	$	2.1		$	2.0		$	1.5		$	2.1		$	5.7		$	5.9
Deferred taxes	(0.2		)	(0.1		)	(1.3		)	(0.1		)	(1.6		)	(0.2		)
Total non-controlling interests	1.9			1.9			0.2			2.0			4.1			5.7
Provision for income taxes	$	57.0		$	59.7		$	50.3		$	66.1		$	159.7		$	188.2
Income before income taxes (controlling interest)	$	159.1		$	180.3		$	160.3		$	189.5		$	478.1		$	556.7
Effective tax rate attributable to controlling interest⁽¹⁾	34.6		%	32.1		%	31.3		%	33.8		%	32.5		%	32.8		%

__________________________


⁽¹⁾	Taxes attributable to the controlling interest divided by Income before income taxes (controlling interest).

The Effective tax rate attributable to the controlling interest was 34.6% and 32.1% for the three months ended March 31, 2016 and 2017, respectively. The decrease resulted primarily from stock compensation-related windfall tax benefits, as well as an increase in the indefinite reinvestment of certain foreign earnings.


~~14.~~15.	Earnings Per Share

The calculation of basic earnings per share is based on the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted earnings per share is similar to basic earnings per share, but adjusts for the dilutive effect of the potential issuance of incremental shares of the Company’s common stock. The following is a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per share available to common stockholders.

For the Three Months Ended March 31,
2016 2017
Numerator
Net income (controlling interest) $ 104.0
$ 122.5
Interest expense on convertible securities, net of taxes 3.8
3.8
Net income (controlling interest), as adjusted $ 107.8
$ 126.3
Denominator
Average shares outstanding (basic) 54.0
56.7
Effect of dilutive instruments:
Stock options and restricted stock 0.4
0.3
Junior convertible securities 2.2
2.2
Average shares outstanding (diluted) 56.6
59.2

~~Average shares outstanding (diluted) in the table above exclude the anti-dilutive effect of the following shares:~~

For the Three Months Ended March 31,
2016 2017
Stock options and restricted stock units 0.7
0.2

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

~~As discussed~~



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2016		2017		2016		2017
Numerator
Net income (controlling interest)	$	110.2	$	125.4	$	322.5	$	374.2
Interest expense on convertible securities, net of taxes	3.9		3.9		11.6		11.6
Net income (controlling interest), as adjusted	$	114.1	$	129.3	$	334.1	$	385.8
Denominator
Average shares outstanding (basic)	53.9		55.8		53.9		56.3
Effect of dilutive instruments:
Stock options and restricted stock units	0.5		0.3		0.5		0.3
Junior convertible securities	2.2		2.2		2.2		2.2
Average shares outstanding (diluted)	56.6		58.3		56.6		58.8

Average shares outstanding (diluted) in ~~Note 12,~~ the table above exclude share awards that have not satisfied performance conditions and the anti-dilutive effect of the following shares:



	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2016	2017	2016	2017
Stock options and restricted stock units	0.5	0.0	0.7	0.1
Shares subject to forward sale agreement	2.0	—	2.0	—

The Company may settle portions of its Affiliate equity purchases in shares of its common stock. Because it is the Company’s intent to settle these potential purchases in cash, the calculation of diluted earnings per share excludes any potential dilutive effect from possible share settlements of Affiliate equity purchases.

In the three and nine months ended September 30, 2017, the Company repurchased 0.4 million and 1.7 million shares, respectively, at an average price per share of $175.68 and $164.00, respectively.


~~15.~~16.	Comprehensive Income

The following tables show the tax effects allocated to each component of Other comprehensive ~~income:~~income (loss):


	For the Three Months Ended March 31,																		For the Three Months Ended September 30,
	2016									2017									2016									2017
	Pre-Tax			Tax Benefit (Expense)			Net of Tax			Pre-Tax			Tax Benefit (Expense)			Net of Tax			Pre-Tax			Tax Benefit (Expense)			Net of Tax			Pre-Tax			Tax Benefit (Expense)			Net of Tax
Foreign currency translation adjustment	$	(2.0	)	$	—		$	(2.0	)	$	12.2		$	—		$	12.2		$	(16.8	)	$	—		$	(16.8	)	$	53.0		$	—		$	53.0
Change in net realized and unrealized gain (loss) on derivative securities	(1.1		)	(0.0		)	(1.1		)	(0.3		)	0.0			(0.3		)	0.1			(0.0		)	0.1			0.2			(0.1		)	0.1
Change in net unrealized gain (loss) on investment securities	(17.4		)	6.6			(10.8		)	7.3			(2.4		)	4.9			5.8			(1.8		)	4.0			(6.8		)	2.5			(4.3		)
Other comprehensive income (loss)	$	(20.5	)	$	6.6		$	(13.9	)	$	19.2		$	(2.4	)	$	16.8		$	(10.9	)	$	(1.8	)	$	(12.7	)	$	46.4		$	2.4		$	48.8

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



	For the Nine Months Ended September 30,
	2016									2017
	Pre-Tax			Tax Benefit (Expense)			Net of Tax			Pre-Tax			Tax Benefit (Expense)			Net of Tax
Foreign currency translation adjustment	$	(72.7	)	$	—		$	(72.7	)	$	92.1		$	—		$	92.1
Change in net realized and unrealized gain (loss) on derivative securities	(0.6		)	(0.1		)	(0.7		)	(0.7		)	(0.1		)	(0.8		)
Change in net unrealized gain (loss) on investment securities	(34.6		)	13.8			(20.8		)	(6.6		)	3.2			(3.4		)
Other comprehensive income (loss)	$	(107.9	)	$	13.7		$	(94.2	)	$	84.8		$	3.1		$	87.9

The components of accumulated other comprehensive income (loss), net of taxes, were as follows:


	Foreign Currency Translation Adjustment			Realized and Unrealized Gains (Losses) on Derivative Securities			Unrealized Gains (Losses) on Investment Securities ⁽¹⁾			Total			Foreign Currency Translation Adjustment			Realized and Unrealized Gains (Losses) on Derivative Securities			Unrealized Gains (Losses) on Investment Securities ⁽¹⁾			Total
Balance, as of December 31, 2016	$	(213.9	)	$	0.4		$	9.8		$	(203.7	)	$	(213.9	)	$	0.4		$	9.8		$	(203.7	)
Other comprehensive gain (loss) before reclassifications	12.2			(0.3		)	8.7			20.6			92.1			(0.4		)	13.8			105.5
Amounts reclassified	—			0.0			(3.8		)	(3.8		)	—			(0.4		)	(17.2		)	(17.6		)
Net other comprehensive gain (loss)	12.2			(0.3		)	4.9			16.8			92.1			(0.8		)	(3.4		)	87.9
Balance, as of March 31, 2017	$	(201.7	)	$	0.1		$	14.7		$	(186.9	)
Balance, as of September 30, 2017													$	(121.8	)	$	(0.4	)	$	6.4		$	(115.8	)

__________________________


⁽¹⁾	See Note 3 for amounts reclassified from Other comprehensive ~~income.~~income (loss).


~~16.~~17.	Segment Information

In the first quarter of 2017, the Company’s Chief Operating Decision Maker (the “CODM”) changed the manner in which he assesses the Company’s ~~performance and, as a result, management changed the information provided to the CODM.~~performance. In ~~prior periods,~~2016, the CODM assessed the performance of the Company in three business segments representing ~~the Company’s~~ three distribution channels. Given an increase in the number of the Company’s Affiliates accounted for under the equity method of accounting and changes in the way asset management services are delivered, during the first quarter of 2017, the CODM began to assess the performance of the Company as a single global active asset management company. As a result, the CODM now reviews information organized around one operating segment to evaluate and manage the Company’s business operations. Therefore, the Company has determined that it has one reportable segment. ~~Prior period segment disclosures have been updated accordingly.~~ In connection with this change, the Company completed impairment assessments based on its former three distribution channels, as well as its single global active asset management reporting unit, and determined that there were no impairments under either approach.


~~17.~~	~~Subsequent Events~~

On May 1, 2017, the Company announced a second-quarter cash dividend of $0.20 per common share, payable May 25, 2017 to stockholders of record of the Company’s common stock as of the close of business on May 11, 2017.

~~As of May 4, 2017, the Company had repurchased 0.2 million shares of common stock, at an average share price of $154.83 since the end of the first quarter of 2017.~~


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q, in our other filings with the Securities and Exchange Commission, in our press releases and in oral statements made with the approval of an executive officer may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources and other non-historical statements, and may be prefaced with words such as “outlook,” “guidance,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “projects,” “intends,” “plans,” “estimates,” “pending investments,” “anticipates” or the negative version of these words or other comparable words. Such statements are subject to certain risks and uncertainties, including, among others, the factors discussed under the caption “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.

These factors (among others) could affect our financial performance and cause actual results to differ materially from historical earnings and those presently anticipated and projected. Forward-looking statements speak only as of the date they are made, and we will not undertake and we specifically disclaim any obligation to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of events, whether or not anticipated. In that respect, we caution readers not to place undue reliance on any such forward-looking statements.

Management’s Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q.

Executive Overview

We are a global ~~active~~ asset management company with equity investments in leading boutique investment management firms, which we refer to as our “Affiliates.” Our innovative partnership approach allows each Affiliate’s management team to own significant equity in their firm and maintain operational autonomy. Our strategy is to generate shareholder value through the ~~internal~~ growth of existing Affiliates, as well as through investments in new Affiliates and additional investments in existing Affiliates. In addition, we provide centralized assistance to our Affiliates in strategic matters, marketing, distribution, product development and operations. As of ~~March 31,~~September 30, 2017, our aggregate assets under management were ~~$753.5~~$803.7 billion, in ~~over~~more than 550 investment products across a broad range of active, return-oriented strategies.

We hold meaningful equity interests in each of our Affiliates. In certain cases, we consolidate the Affiliate’s financial results in our Revenue, Operating expenses and ~~Other non-operating~~Non-operating (income) and expenses. In other cases, we use the equity method of accounting and our share of the Affiliate’s financial results is reported (net of intangible amortization) in Income from equity method investments.

While we account for a majority of our Affiliates on a consolidated basis of accounting, a growing number of our Affiliates are accounted for on an equity method basis ~~including all of~~and are integral to our ~~2016 investments in new Affiliates. As a result, equity method Affiliates represent a growing proportion of Net income (controlling interest), as evidenced by the increase in~~operations. Accordingly, Income from equity method investments ~~as compared to our consolidated Affiliates, which represent a decreasing proportion of Net income (controlling interest).~~is included in Operating income.

Whether we account for an Affiliate on a consolidated or equity method basis of accounting, we generally maintain the same partnership approach and provide support and assistance in substantially the same manner, and our operating model is generally the same. Furthermore, our Affiliates are impacted by similar marketplace factors and operational trends, which may not be observable when analyzing the financial results of our consolidated and equity method Affiliates separately. Therefore, we believe our aggregate operating measures of assets under management, average assets under management and aggregate revenue, which incorporate the assets under management and revenues of all of our Affiliates, regardless of the accounting treatment, have become increasingly important in providing management and investors with a more comprehensive view of the operating performance and material trends across our entire business. Aggregate revenue is calculated by combining the Revenue of our consolidated Affiliates with equity method revenue. We discuss both Revenue at our consolidated Affiliates and equity method revenue in our Results of Operations. Equity method revenue and aggregate revenue are provided in addition to, but not as substitutes for, Revenue at our consolidated Affiliates.

The following table presents our key operating performance measures:


	As of and for the Three Months Ended March 31,						As of and for the Three Months Ended September 30,						As of and for the Nine Months Ended September 30,
(in billions, except as noted)	2016		2017		% Change		2016		2017		% Change		2016		2017		% Change
Assets under management⁽¹⁾	$	642.0	$	753.5	17	%
Consolidated Affiliate assets under management							$	378.8	$	416.3	10	%	$	378.8	$	416.3	10	%
Equity method Affiliate assets under management							293.6		387.4		32	%	293.6		387.4		32	%
Total							$	672.4	$	803.7	20	%	$	672.4	$	803.7	20	%

Average assets under management⁽¹⁾	626.6		744.5		19	%

Consolidated Affiliate average assets under management	$	364.1	$	386.9	6	%	$	378.0	$	414.5	10	%	$	371.9	$	400.9	8	%
Equity method Affiliate average assets under management	262.5		357.6		36	%	285.5		376.1		32	%	273.6		365.6		34	%
Total							$	663.5	$	790.6	19	%	$	645.5	$	766.5	19	%

Revenue (in millions)	$	545.4	$	544.3	(0	)%	$	544.7	$	585.7	8	%	$	1,644.2	$	1,700.9	3	%
Equity method revenue (in millions)⁽²⁾	450.7		819.7		82	%	456.4		686.6		50	%	1,350.5		2,159.8		60	%

__________________________

⁽¹⁾

Assets under management is presented on a current basis without regard to the timing of the inclusion of an Affiliate’s financial results in our Consolidated Financial Statements. Average assets under management provides a more meaningful relationship to our financial and operating results as it reflects both the particular billing patterns of Affiliate sponsored products and client accounts and corresponds with the timing of the inclusion of an Affiliate's financial results in our Consolidated Financial Statements.


⁽²⁾	Equity method revenue consists of asset based revenue and performance fees earned by our equity method Affiliates.

Assets Under Management

Through our Affiliates, we ~~predominantly~~ manage active return-oriented strategies rather than passive or indexing strategies, ~~exchange-traded funds,~~ fixed income or money market products, which typically carry lower fee rates. ~~Notwithstanding the recent growth in passively managed products industrywide, we~~We continue to see meaningful client demand for active return-oriented strategies, particularly in alternative and multi-asset strategies, reflecting continued investor demand for returns that are less correlated to traditional equity and fixed income markets. Investor demand for passively managed and indexing strategies has continued, particularly for the large cap U.S. equity portion of client portfolios, and we have experienced outflows in U.S. equity strategies consistent with this industry-wide trend. We expect client demand for alternative and multi-asset strategies to continue, and believe the best-performing active equity managers (whether global-, regional- or country-specific) will continue to have significant opportunities to grow from net client cash inflows. We believe we are well positioned to benefit ~~further~~ from these trends.

The following charts and tables provide information regarding the composition of and changes in our assets under management on a current basis by active return-oriented strategy and client type:

~~Assets under Management (in billions) at March 31, 2017~~



~~By Strategy~~		~~By Client Type~~

__________________

⁽¹⁾

Alternatives primarily include assets under management in long and short public equity, control equity, managed futures, multi-strategy, and other alternative and hedge fund strategies, as well as energy and infrastructure investments and primary and secondary private equity strategies. Alternative strategies generate earnings from (i) management fees from products subject to lock-ups or similar restrictions, (ii) management fees from products not subject to such restrictions and/or (iii) performance fees and carried interest.

~~products subject to lock-ups or similar restrictions, (ii) management fees from products not subject to such restrictions and/or (iii) performance fees and carried interest.~~


⁽²⁾	Global equities include emerging markets strategies, which accounted for 9%10% of our ~~overall~~aggregate assets under management as of ~~March 31,~~September 30, 2017.

(in billions) Alternatives Global Equities U.S. Equities Multi-asset & Other Total
December 31, 2016 $ 252.4
$ 233.9
$ 110.1
$ 92.3
$ 688.7
   Client cash inflows and commitments 12.2
7.8
3.4
4.5
27.9
   Client cash outflows and realizations (8.0 ) (8.9 ) (8.0 ) (4.3 ) (29.2 )
        Net client cash flows 4.2
(1.1 ) (4.6 ) 0.2
(1.3 )
   New investments 30.6
1.5
—
3.3
35.4
   Market changes 3.5
17.4
5.4
3.4
29.7
   Foreign exchange⁽¹⁾
0.9
1.1
—
0.2
2.2
   Other (1.0 ) (0.2 ) (0.0 ) —
(1.2 )
March 31, 2017 $ 290.6
$ 252.6
$ 110.9
$ 99.4
$ 753.5
By Strategy - Quarter to Date


(in billions)	Institutional			Retail			High Net Worth			Total			Alternatives			Global Equities			U.S. Equities			Multi-asset & Other			Total
December 31, 2016	$	401.2		$	188.3		$	99.2		$	688.7
June 30, 2017													$	296.3		$	267.9		$	110.7		$	97.2		$	772.1
Client cash inflows and commitments	11.5			12.3			4.1			27.9			20.7			7.3			3.8			3.9			35.7
Client cash outflows and realizations	(15.5		)	(10.2		)	(3.5		)	(29.2		)	(10.4		)	(11.9		)	(7.0		)	(3.3		)	(32.6		)
Net client cash flows	(4.0		)	2.1			0.6			(1.3		)	10.3			(4.6		)	(3.2		)	0.6			3.1
New investments	31.0			1.2			3.2			35.4
Market changes	16.2			9.3			4.2			29.7			5.6			13.6			4.1			0.9			24.2
Foreign exchange⁽¹⁾	1.4			0.7			0.1			2.2			1.4			2.4			0.2			0.5			4.5
Other	(1.0		)	(0.0		)	(0.2		)	(1.2		)	(0.2		)	—			—			—			(0.2		)
March 31, 2017	$	444.8		$	201.6		$	107.1		$	753.5
September 30, 2017													$	313.4		$	279.3		$	111.8		$	99.2		$	803.7

~~__________________________~~By Client Type - Quarter to Date



(in billions)	Institutional			Retail			High Net Worth			Total
June 30, 2017	$	457.4		$	207.1		$	107.6		$	772.1
Client cash inflows and commitments	16.3			15.5			3.9			35.7
Client cash outflows and realizations	(20.1		)	(9.3		)	(3.2		)	(32.6		)
Net client cash flows	(3.8		)	6.2			0.7			3.1
Market changes	14.8			7.0			2.4			24.2
Foreign exchange⁽¹⁾	2.7			1.4			0.4			4.5
Other	(0.2		)	—			—			(0.2		)
September 30, 2017	$	470.9		$	221.7		$	111.1		$	803.7

By Strategy - Year to Date



(in billions)	Alternatives			Global Equities			U.S. Equities			Multi-asset & Other			Total
December 31, 2016	$	252.4		$	233.9		$	110.1		$	92.3		$	688.7
Client cash inflows and commitments	47.3			25.1			10.6			12.8			95.8
Client cash outflows and realizations	(27.9		)	(30.6		)	(21.6		)	(12.0		)	(92.1		)
Net client cash flows	19.4			(5.5		)	(11.0		)	0.8			3.7
New investments	30.6			1.5			—			3.3			35.4
Market changes	8.3			43.8			12.5			5.0			69.6
Foreign exchange⁽¹⁾	4.0			6.0			0.3			1.4			11.7
Other	(1.3		)	(0.4		)	(0.1		)	(3.6		)	(5.4		)
September 30, 2017	$	313.4		$	279.3		$	111.8		$	99.2		$	803.7

By Client Type - Year to Date



(in billions)	Institutional			Retail			High Net Worth			Total
December 31, 2016	$	401.2		$	188.3		$	99.2		$	688.7
Client cash inflows and commitments	44.2			39.3			12.3			95.8
Client cash outflows and realizations	(50.5		)	(31.4		)	(10.2		)	(92.1		)
Net client cash flows	(6.3		)	7.9			2.1			3.7
New Investments	31.0			1.2			3.2			35.4
Market changes	39.6			20.5			9.5			69.6
Foreign exchange⁽¹⁾	7.0			4.0			0.7			11.7
Other	(1.6		)	(0.2		)	(3.6		)	(5.4		)
September 30, 2017	$	470.9		$	221.7		$	111.1		$	803.7

_________________________


⁽¹⁾	Foreign exchange reflects the impact of translating non-U.S. dollar denominated assets under management into U.S. dollars for reporting purposes.

In addition to assets under management, we also report average assets under management. Average assets under management provides a more meaningful relationship to our financial and operating results as it reflects both the particular billing patterns of Affiliate sponsored products and client accounts and corresponds with the timing of the inclusion of an Affiliate’s financial results in our Consolidated Financial Statements.

Average assets under management increased ~~by $117.9~~$127.1 billion or 19% ~~for~~in the three months ended ~~March 31,~~September 30, 2017 compared to the corresponding period in the prior ~~year. The increase in average assets under management was primarily~~year, due to a ~~36%~~32% increase in average assets under management at equity method Affiliates ~~which primarily offer alternative strategies. In the last twelve months, equity method Affiliates assets under management have increased $55.5 billion as~~and a result of our 2016 investments in new Affiliates, $21.1 billion from positive market changes and $16.9 billion from net client cash inflows. The increase in average assets under management was also due to a 6%10% increase in average assets under management at consolidated ~~Affiliates where in the last twelve months we had positive market changes of $42.6 billion. This increase in~~Affiliates. Average assets under management ~~from market changes was partially offset by net client cash outflows of $15.9~~increased $121.0 billion ~~primarily~~or 19% in ~~U.S.~~the nine months ended September 30, 2017 compared to the corresponding period in the prior year, due to a 34% increase in average assets under management at equity ~~strategies,~~method Affiliates and a ~~reduction from foreign exchange of $6.5 billion.~~8% increase in average assets under management at consolidated Affiliates.

Aggregate Revenue

Aggregate revenue is calculated by combining the Revenue of our consolidated Affiliates with equity method revenue. Aggregate revenue and equity method revenue are provided in addition to, but not as substitutes for, Revenue at our consolidated Affiliates. We derive our aggregate revenue primarily from asset based revenue and performance fees from investment management services. Asset based revenue includes advisory and other fees earned by our Affiliates for services provided to their clients and are typically determined as a percentage of the value of a client’s assets under management. Performance fees are billed based upon investment performance, typically on an absolute basis or relative to a benchmark.

Our ratio of asset based revenue to average assets under management (“asset based revenue ratio”), either in the aggregate or separately for consolidated Affiliates or equity method Affiliates, is calculated as asset based revenue divided by average assets under management for the respective Affiliates. Our asset based revenue ratios may change as a result of new investments, client cash flows, market changes, foreign exchange or changes in contractual fees.

The following table presents the Revenue of our consolidated Affiliates and equity method revenue, and when combined, aggregate revenue:



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions)	2016		2017		% Change		2016		2017		% Change
Revenue	$	544.7	$	585.7	8	%	$	1,644.2	$	1,700.9	3	%
Equity method revenue	456.4		686.6		50	%	1,350.5		2,159.8		60	%

Aggregate revenue increased ~~37%~~27% in the three months ended ~~March 31,~~September 30, 2017. This increase was due to a $230.2 million or 50% increase in equity method revenue and a $41.0 million or 8% increase in Revenue at our consolidated Affiliates. The increase in equity method revenue was due to an increase of $166.8 million or 36% from asset based revenue and an

increase of $63.4 million or 14% from performance fees. The increase in Revenue at our consolidated Affiliates was due to an increase of $38.2 million or 7% from asset based revenue and a $2.8 million or 1% increase from performance fees.

Aggregate revenue increased 29% in the nine months ended September 30, 2017, due to an increase in equity method revenue of ~~$369.0~~$809.3 million or ~~82%.~~60% and a $56.7 million or 3% increase in Revenue at our consolidated Affiliates. The increase in equity method revenue was ~~primarily~~ due to ~~a $334.9~~an increase of $532.9 million or ~~74%~~40% from asset based revenue and an increase ~~from our 2016 investments in new Affiliates and a $34.1~~of $276.4 million or ~~8% increase in equity method revenue at existing Affiliates.~~20% from performance fees. The increase ~~in aggregate revenue from equity method revenue was partially offset by a $1.1 million decline in Revenue at our~~

~~consolidated Affiliates. The decline~~ in Revenue at our consolidated Affiliates was ~~primarily~~ due to a ~~$10.4~~$70.1 million or 4% increase from asset based revenue, partially offset by a $13.4 million or 1% decrease infrom performance ~~fees partially offset by a $7.8 million or 1% increase in other fees and a $1.5 million increase in advisory~~ fees.

See Results of Operations for a further discussion of the changes in ~~equity method revenue and~~ Revenue at our consolidated ~~Affiliates.~~Affiliates and equity method revenue.

Financial and Supplemental Financial Performance Measures

The following table presents our key financial and supplemental financial performance measures:


	For the Three Months Ended March 31,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions)	2016		2017		% Change		2016		2017		% Change		2016		2017		% Change
Net income (controlling interest)	$	104.0	$	122.5	18	%	$	110.2	$	125.4	14	%	$	322.5	$	374.2	16	%
Adjusted EBITDA (controlling interest)⁽¹⁾	215.7		243.8		13	%	219.8		256.3		17	%	655.8		754.8		15	%
Economic net income (controlling interest)⁽¹⁾	159.3		183.2		15	%	165.5		191.3		16	%	492.3		563.2		14	%

__________________________


⁽¹⁾	Adjusted EBITDA (controlling interest) and Economic net income (controlling interest) are non-GAAP performance measures and are discussed in “Supplemental Financial Performance Measures.”

We believe Adjusted EBITDA (controlling interest) is an important supplemental financial performance measure for our management and investors. Adjusted EBITDA (controlling interest) provides a comprehensive view of our share of the financial performance of our entire business before interest, taxes, depreciation, amortization, impairments and adjustments to our contingent payment ~~obligations, regardless of the accounting treatment of our Affiliates.~~obligations. Conversely, our GAAP financial performance ~~measure, operating~~measures, Operating income ~~includes the non-controlling interests’ share of financial performance~~ and ~~does not include our share of earnings from equity method Affiliates. Similarly, our other GAAP financial performance measure,~~ Income before income taxes, ~~includes~~include the non-controlling ~~interests’~~interest’s share of financial performance.

Our ownership level of consolidated Affiliates is higher than our ownership level of our equity method Affiliates and, as a result, we experience a greater proportion of an increase or decrease in Revenue from our consolidated Affiliates than an increase or decrease in our equity method revenue. While our equity method revenue increased ~~82%~~50% in the three months ended ~~March 31,~~September 30, 2017, our ~~revenue~~Revenue from consolidated Affiliates ~~remained relatively flat,~~increased 8%, resulting in a ~~$28.1~~$36.5 million or ~~13%~~17% increase in Adjusted EBITDA (controlling ~~interests)~~interest).

~~While~~ In the nine months ended September 30, 2017, our equity method revenue increased 60%, while our Revenue from consolidated Affiliates increased 3%, resulting in a $99.0 million or 15% increase in Adjusted EBITDA (controlling interest) ~~increased $28.1 million in the three months ended March 31, 2017, our~~.

Our Net income (controlling interest) increased ~~by $18.5~~$15.2 million ~~primarily due to an increase~~or 14% and $51.7 million or 16% in ~~Equity method intangible amortization of $7.5 million from our 2016 investments~~the three and nine months ended September 30, 2017, respectively, which was consistent with the 17% and 15% increases in ~~new Affiliates.~~Adjusted EBITDA (controlling interest) during the respective periods.

We consider Economic net income (controlling interest) to be an important measure of our financial performance, as we believe it best represents our performance after tax and before our share of non-cash expenses relating to our acquisition of interests in our Affiliates. Our Economic net income (controlling interest) increased ~~$23.9~~$25.8 million or ~~15%~~16% and $70.9 million or 14% in the three and nine months ended ~~March 31,~~September 30, 2017, respectively, which ~~is more on a percentage basis than~~was consistent with the ~~increase~~17% and 15% increases in Adjusted EBITDA (controlling interest)~~, primarily due to changes in Other economic items and a reduction in interest expense.~~ during the respective periods.

Results of Operations

The following discussion includes the financial results of our consolidated and equity method Affiliates. Our consolidated Affiliates’ financial results are included in our Revenue, Operating expenses and ~~Other non-operating~~Non-operating (income) and expenses, and our share of our equity method Affiliates’ financial results is reported (net of intangible amortization) in Income from equity method ~~investments.~~investments in Operating income.

Revenue

The following table summarizes our consolidated Affiliate average assets under management and ~~Revenue.~~Revenue:


	For the Three Months Ended March 31,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions, except as noted)	2016		2017		% Change		2016		2017		% Change		2016		2017		% Change
Consolidated Affiliates average assets under management (in billions)	$	364.1	$	386.9	6	%	$	378.0	$	414.5	10	%	$	371.9	$	400.9	8	%
Revenue	$	545.4	$	544.3	(0	)%	$	544.7	$	585.7	8	%	$	1,644.2	$	1,700.9	3	%

Our Revenue ~~decreased $1.1~~increased $41.0 million or 8% in the three months ended ~~March 31,~~September 30, 2017, ~~primarily~~ due to a ~~$10.4~~$38.2 million or ~~1% decrease in performance fees, partially offset by~~7% increase from asset based revenue, and a ~~$7.8~~$2.8 million or 1% increase ~~in other fees and a $1.5 million increase in advisory~~from performance fees. The change in ~~advisory fee~~asset based revenue was ~~primarily~~ due to ana 10% increase in average assets under management, ~~of 6% and~~partially offset by a 2% decline in our ~~ratio of average fee rates of 3%.~~asset based revenue ratio. The decline in our asset based revenue ratio ~~of average fees~~ was primarily due to changes in the ~~restructuring~~composition of ~~fee arrangements for certain mutual funds.~~our average assets under management.

Our Revenue increased $56.7 million or 3% in the nine months ended September 30, 2017, due to a $70.1 million or 4% increase from asset based revenue, partially offset by a $13.4 million or 1% decrease from performance fees. The ~~restructuring of the fee arrangements did not have a significant impact on Revenue as the reduction~~change in asset based ~~fees~~revenue was ~~partially offset by~~due to an 8% increase in ~~other fees.~~average assets under management and a 3% decline in our asset based revenue ratio. The decline in our asset based revenue ratio ~~of average fees~~ was ~~also~~ due to a decrease in asset based ~~fees~~revenue related to renewal commissions at one of our Affiliates in the United Kingdom as a result of a regulatory ~~change. The decrease in asset based fees related to renewal commissions~~change which was offset by a reduction in distribution expenses at the Affiliate which ~~are~~were reported in Selling, general and administrative expenses. The decline in our asset based revenue ratio was also due to changes in the composition of our average assets under management.

Operating Expenses

The following table summarizes our consolidated operating expenses:



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	For the Three Months Ended September 30,				% Change		For the Nine Months Ended September 30,				% Change
(in millions)	2016		2017		% Change		2016		2017		% Change
Compensation and related expenses	$	244.2	$	238.7	(2	)%	$	702.9	$	722.9	3%
Selling, general and administrative	94.2		91.9		(2	)%	286.7		269.7		(6)%
Intangible amortization and impairments	26.9		21.2		(21	)%	82.2		65.1		(21)%
Depreciation and other amortization	5.0		4.8		(4	)%	15.0		14.9		(1)%
Other operating expenses (net)	3.4		10.3		N.M.⁽¹⁾		25.9		32.0		24%
Total operating expenses	$	373.7	$	366.9	(2	)%	$	1,112.7	$	1,104.6	(1)%

___________________________

For the Three Months Ended March 31,
% Change
(in millions) 2016 2017
Compensation and related expenses $ 226.7
$ 242.0
7 %
Selling, general and administrative 95.9
88.7
(8 )%
Intangible amortization and impairments 26.6
21.9
(18 )%
Depreciation and other amortization 5.0
5.2
4 %
Other operating expenses (net) 12.4
9.9
(20 )%
Total operating expenses $ 366.6
$ 367.7
0 %


⁽¹⁾	Percentage change is not meaningful.

Our operating expenses are primarily attributable to the non-controlling interests because the substantial majority of these expenses are incurred by consolidated Affiliates ~~through~~with which we share in revenue without regard to expenses. For these Affiliates, the ~~Affiliate’s Operating Allocation~~amount of their operating expenses, including compensation, is generally determined by the percentage ~~generally determines~~of revenue allocated to operating expenses as part of the ~~Affiliate’s operating expenses.~~structured partnership interests in place at the respective Affiliate. Accordingly, our operating expenses are impacted by increases or decreases in ~~each~~a consolidated Affiliate’s revenue and corresponding increases or decreases in ~~its respective Operating Allocation.~~a consolidated Affiliate’s operating expenses.

Compensation and related expenses ~~increased $15.3~~decreased $5.5 million or ~~7%,~~2% in the three months ended ~~March 31,~~September 30, 2017, primarily asdue to a ~~result of increases in~~$11.9 million or 5% decrease from compensation expenses associated with Affiliate equity transactions, ~~of $10.4~~partially offset by an $8.0 million or ~~5% and~~3% increase from compensation expenses at ~~Affiliates of $2.7 million and 1%.~~Affiliates. These changes primarily relate to the non-controlling interests.

Compensation and related expenses increased $20.0 million or 3% in the nine months ended September 30, 2017, primarily due to a $17.0 million or 2% increase from compensation expenses at Affiliates and a $3.6 million or 1% increase from compensation expenses associated with Affiliate equity transactions. These changes primarily relate to the non-controlling interests.

There was no significant change in Selling, general and administrative expenses in the three months ended September 30, 2017. Selling, general and administrative expenses decreased ~~$7.2~~$17.0 million or 8%6% in the ~~three~~nine months ended ~~March 31,~~September 30, 2017, primarily due to a $8.8 million or 3% decrease from ~~decreases~~a reduction in ~~sub-advisory and~~ distribution expenses, ~~including renewal~~related to commissions at certain of our Affiliates in the United Kingdom and a $5.8 million or ~~6% at our Affiliates sponsoring retail products and acquisition-related professional fees~~2% decrease from a reduction of ~~$1.0 million or 1%.~~expenses in wealth management initiatives.

Intangible amortization and impairments decreased ~~$4.7~~$5.7 million or ~~18%~~21% in the three months ended ~~March 31,~~September 30, 2017, asdue to a ~~result of a $3.2~~$3.3 million or 12% decrease ~~related to~~from a change in the pattern of economic benefit for certain assets and a ~~$1.5~~$2.4 million or 6%9% decrease ~~related~~from certain assets being fully amortized.

Intangible amortization and impairments decreased $17.1 million or 21% in the nine months ended September 30, 2017, due to a $11.6 million or 14% decrease from a change in the pattern of economic benefit for certain assets and a $5.5 million or 7% decrease from certain assets being fully amortized.

There were no significant changes in Depreciation and other amortization in the three and nine months ended ~~March 31,~~September 30, 2017.

Other operating expenses (net) ~~decreased $2.5~~increased $6.9 million ~~or 20%~~ in the three months ended ~~March 31,~~September 30, 2017, primarily from ~~an increase~~decreases in net gains on Affiliate sponsored consolidated investment products of ~~$2.2~~$6.2 million. This change primarily relates to the non-controlling interests.

Other operating expenses (net) increased $6.1 million or ~~18%~~24% in the nine months ended September 30, 2017, primarily from decreases in net gains on Affiliate sponsored consolidated investment products of $4.8 million or 19%. This change primarily relates to the non-controlling interests.

Income from Equity Method Investments

~~When we own a non-controlling interest in an Affiliate, we generally use the~~For equity method ~~of accounting. Under the equity method of accounting, we only recognize~~Affiliates, our share of ~~the~~an Affiliate’s earnings or losses is contractually calculated using a formula, which is based either on a fixed percentage of such Affiliate’s revenue without regard to expenses or by reference to such Affiliate’s revenue less certain agreed-upon ~~expenses, net~~expenses. Our share of an equity method Affiliate’s earnings or losses is reported (net of intangible amortization attributable to our investment in an Affiliate) in Income from equity method ~~investments. When we share~~investments in the Affiliate’s revenue without regard to expenses, we are allocated a set percentage of revenue, with the remaining revenue available to the Affiliate to fund its operating expenses and distributions to Affiliate management. When we share in the Affiliate’s revenue less certain agreed-upon expenses, our distributions are calculated by reference to the Affiliate’s revenue less certain agreed-upon expenses.

Operating income.

Additional investments in existing or new Affiliates will generally impact our financial results in the year of investment and, depending upon the timing, in the following year when the full-year financial results of the Affiliate investment are reflected in our ~~financial statements.~~Consolidated Financial Statements.

The following table summarizes equity method earnings and equity method intangible amortization, which together comprise Income from equity method investments, as well as equity method Affiliate average assets under management and equity method ~~revenue:~~revenue. Equity method revenue is provided in addition to, but not as a substitute for, Revenue at our consolidated Affiliates.


	For the Three Months Ended March 31,								For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(in millions, except as noted)	2016			2017			% Change		2016			2017			% Change		2016			2017			% Change
Equity method earnings	$	82.2		$	107.6		31	%	$	81.5		$	96.6		19	%	$	243.7		$	303.3		24	%
Equity method intangible amortization	(14.2		)	(21.7		)	53	%	(14.0		)	(25.9		)	85	%	(43.0		)	(71.7		)	67	%
Income from equity method investments	$	68.0		$	85.9		26	%	$	67.5		$	70.7		5	%	$	200.7		$	231.6		15	%

Operating Measures
Equity method Affiliates average assets under management (in billions)	$	262.5		$	357.6		36	%	$	285.5		$	376.1		32	%	$	273.6		$	365.6		34	%
Equity method revenue	$	450.7		$	819.7		82	%	$	456.4		$	686.6		50	%	$	1,350.5		$	2,159.8		60	%

Our equity method revenue increased ~~$369.0~~$230.2 million or ~~82%~~50% in the three months ended ~~March 31,~~September 30 2017, ~~primarily~~ due to a ~~$334.9~~$166.8 million or ~~74%~~36% increase from asset based revenue and a $63.4 million or 14% increase from performance fees. The increase in asset based revenue was due to increases of $125.4 million or 27% from our 2016 investments in new Affiliates and ~~an increase in asset based fees at existing Affiliates of $50.1~~$41.4 million or ~~11%. These increases were partially offset by a decrease~~9% from existing Affiliates. The increase in performance fees at existing Affiliates of $16.0 million or 3%. The change in asset based fees at existing equity method Affiliates was primarily due to an increase in average assets under management of 15% and a decline in our ratio of average fees of 2%. The decline in our ratio of average fee rates was due to ~~changes~~a $57.8 million or 13% increase from existing Affiliates and a $5.6 million or 1% increase from our 2016 investments in ~~the composition of our assets under management between products that realize comparatively higher fee rates and products that realize comparatively lower fee rates.~~new Affiliates.

While equity method revenue increased ~~82%~~50% in the three months ended ~~March 31,~~September 30, 2017, equity method earnings increased ~~$25.4~~$15.1 million or ~~31%~~19%, primarily due to our 2016 investments in new Affiliates, in which we own less of the equity interests than in our existing equity method Affiliates.

Equity method intangible amortization increased ~~$7.5~~$11.9 million or ~~53%~~85% in the three months ended ~~March 31,~~September 30, 2017, ~~primarily due to a $6.3 million or 44% increase~~ due to our 2016 investments in new Affiliates.

~~Other~~ Our equity method revenue increased $809.3 million or 60% in the nine months ended September 30, 2017, due to a $532.9 million or 40% increase from asset based revenue and a $276.4 million or 20% increase from performance fees. The increase in asset based revenue was due to increases of $395.4 million or 29% from our 2016 investments in new Affiliates and $137.5 million or 10% from existing Affiliates. The increase in performance fees was due to a $238.2 million or 18% increase from performance fees from our 2016 investments in new Affiliates and a $38.1 million or 3% increase from existing Affiliates.

While equity method revenue increased 60% in the nine months ended September 30, 2017, equity method earnings increased $59.6 million or 24%, primarily due to our 2016 investments in new Affiliates, in which we own less of the equity interests than in our existing equity method Affiliates.

Equity method intangible amortization increased $28.7 million or 67% in the nine months ended September 30, 2017, due to a $22.9 million or 53% increase from our 2016 investments in new Affiliates and a $5.8 million or 14% increase from a change in the pattern of economic benefit related to assets at certain existing Affiliates.

Non-Operating (Income) and Expenses

The following table summarizes non-operating income and expense data:


	For the Three Months Ended March 31,								For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(in millions)	2016			2017			% Change		2016			2017			% Change		2016			2017			% Change
Investment and other income	$	(4.0	)	$	(13.5	)	N.M. ⁽¹⁾		$	(11.0	)	$	(15.6	)	42	%	$	(26.7	)	$	(44.7	)	67	%
Interest expense	22.3			21.9			(2	)%	22.4			21.5			(4	)%	66.4			65.8			(1	)%
Imputed interest expense and contingent payment arrangements	(2.0		)	0.8			N.M. ⁽¹⁾		0.9			0.7			(22	)%	(0.2		)	3.7			N.M.⁽¹⁾
Income taxes	57.0			59.7			5	%	50.3			66.1			31	%	159.7			188.2			18	%

___________________________


⁽¹⁾	Percentage change is not meaningful.

Investment and other income increased ~~$9.5~~$4.6 million or 42% in the three months ended ~~March 31,~~September 30, 2017, primarily due to ana $2.9 million or 26% increase from changes in the fair value of investments and a $1.4 million or 13% increase from realized gains on the sale of ~~available-for-sale securities of $4.5~~investment securities.

Investment and other income increased $18.0 million ~~and increases~~or 67% in the nine months ended September 30, 2017, primarily due to a $14.2 million or 53% increase from changes in the fair value of investments and a $5.7 million or 21% increase from realized gains on the sale of ~~$4.1 million.~~investment securities, partially offset by a $1.7 million or 6% decrease from lower dividend income.

There were no significant changes in Interest expense in the three and nine months ended ~~March 31,~~September 30, 2017.

There was no significant change in Imputed interest expense and contingent payment arrangements ~~increased $2.8 million~~ in the three months ended ~~March 31,~~September 30, 2017. ~~This increase was~~Imputed interest and contingent payment arrangements increased $3.9 million in the ~~result of~~nine months ended September 30, 2017, primarily due to a $2.8 million gain on the revaluation of a contingent payment arrangement in the ~~three~~nine months ended ~~March 31,~~September 30, 2016, which did not ~~reoccur.~~recur, and a $1.4 million expense on the revaluation of a contingent payment arrangement in the nine months ended September 30, 2017.

Income taxes increased ~~$2.7~~$15.8 million or 5%31% and $28.5 million or 18% in the three and nine months ended ~~March 31,~~September 30, 2017, ~~principally from~~respectively, primarily due to an increase in Income before income taxes attributable to the controlling interest, partially offset by stock ~~compensation-related windfall~~compensation tax ~~benefits, as well as an increase~~benefits. In the three months ended September 30, 2016, we also recognized a benefit due to the reduction in corporate tax rates in the ~~indefinite reinvestment of certain foreign earnings.~~United Kingdom, which did not recur in 2017.

Net Income

The previously discussed changes in Revenue, expenses and Income from equity method investments had the following effect on Net income:


	For the Three Months Ended March 31,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions)	2016		2017		% Change		2016		2017		% Change		2016		2017		% Change
Net income	$	173.5	$	193.6	12	%	$	175.9	$	216.8	23	%	$	533.0	$	614.9	15	%
Net income (non-controlling interests)	69.5		71.1		2	%	65.7		91.4		39	%	210.5		240.7		14	%
Net income (controlling interest)	104.0		122.5		18	%	110.2		125.4		14	%	322.5		374.2		16	%

Supplemental Financial Performance Measures

Adjusted EBITDA (controlling interest)

As supplemental information, we provide a non-GAAP measure that we refer to as Adjusted EBITDA (controlling interest). Adjusted EBITDA (controlling interest) represents our earnings before our share of interest expense, income taxes, depreciation, amortization, impairments and adjustments to our contingent payment obligations. We believe that many investors use this information when assessing the financial performance of companies in the investment management industry. This non-GAAP ~~performance~~ measure is provided in addition to, but not as a substitute for, Net income (controlling interest) or any other GAAP measures of financial performance.

The following table provides a reconciliation of Net income (controlling interest) to Adjusted EBITDA (controlling interest):


	For the Three Months Ended March 31,					For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions)	2016			2017		2016		2017		2016			2017
Net income (controlling interest)	$	104.0		$	122.5	$	110.2	$	125.4	$	322.5		$	374.2
Interest expense	22.3			21.9		22.4		21.5		66.4			65.8
Imputed interest expense and contingent payment arrangements⁽¹⁾	(2.0		)	0.8		0.9		0.7		(0.2		)	3.7
Income taxes	55.1			57.8		50.1		64.1		155.6			182.5
Depreciation and other amortization	1.9			2.3		2.0		2.4		5.9			7.1
Intangible amortization and impairments⁽²⁾	34.4			38.5		34.2		42.2		105.6			121.5
Adjusted EBITDA (controlling interest)	$	215.7		$	243.8	$	219.8	$	256.3	$	655.8		$	754.8

___________________________

⁽¹⁾

InFor the ~~first quarter of~~nine months ended September 30, 2016 ~~we adjusted our estimate of a contingent payment obligation~~ and ~~accordingly, recorded a gain attributable to the controlling interest of $2.8 million. This gain is included in~~2017, Imputed interest expense and contingent payment ~~arrangements.~~arrangements include gains from adjustments to our contingent payment obligations of $2.8 million ($1.7 million net of tax) and expenses from adjustments to our contingent payment obligations of $1.4 million ($0.9 million net of tax), respectively. There were no contingent payment adjustments in the three months ended September 30, 2016 and 2017.


⁽²⁾	Our reported intangible amortization includes amortization attributable to our non-controlling interests. For our equity method Affiliates, we do not separately report intangible amortization in our Consolidated Statements of Income. Our share of these Affiliates’ amortization is reported in Income from equity method investments.

The following table summarizes the Intangible amortization and impairments shown above:



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions)	2016			2017			2016			2017
Reported Intangible amortization and impairments	$	26.9		$	21.2		$	82.2		$	65.1
Intangible amortization (non-controlling interests)	(6.7		)	(4.9		)	(19.6		)	(15.3		)
Equity method intangible amortization	14.0			25.9			43.0			71.7
Total	$	34.2		$	42.2		$	105.6		$	121.5

For the Three Months Ended March 31,
(in millions) 2016 2017
Reported Intangible amortization and impairments $ 26.6
$ 21.9
Intangible amortization (non-controlling interests) (6.4 ) (5.1 )
Equity method intangible amortization 14.2
21.7
Total $ 34.4
$ 38.5

Economic Net Income (controlling interest) and Economic Earnings Per Share

As supplemental information, we also provide non-GAAP ~~performance~~ measures that we refer to as Economic net income (controlling interest) and Economic earnings per share. We consider Economic net income (controlling interest) and Economic earnings per share to be important measures of our financial performance, as we believe they best represent our performance before our share of non-cash expenses relating to our acquisition of interests in our Affiliates, and ~~it is~~they are, therefore, employed as our principal financial performance ~~measure.~~measures. Economic net income (controlling interest) and Economic earnings per share are used by our management and Board of Directors as our principal performance benchmarks, including as one of the measures for aligning executive compensation with stockholder value. These measures are provided in addition to, but not as substitutes for, other GAAP measures of financial performance, such as Net income (controlling interest) and Earnings per share (diluted).

Under our Economic net income (controlling interest) definition, we add to Net income (controlling interest) our share of pre-tax intangible amortization and impairments (including the portion attributable to equity method Affiliates), deferred taxes related to intangible assets, and other economic items, which include non-cash imputed interest (principally related to the accounting for convertible securities and contingent payment arrangements) and certain Affiliate equity expenses. We add back intangible amortization and impairments attributable to acquired client relationships because these expenses do not correspond to the changes in value of these assets, which do not diminish predictably over time. The portion of deferred taxes generally attributable to intangible assets (including goodwill) is added back because we believe it is unlikely these accruals will be used to settle material tax obligations. We add back non-cash imputed interest and reductions or increases in contingent payment arrangements to better reflect our contractual interest obligations. We add back non-cash expenses relating to certain transfers of equity between Affiliate partners when these transfers have no dilutive effect to shareholders.

Economic earnings per share represents Economic net income (controlling interest) divided by the Average shares outstanding (adjusted diluted). In this calculation, the potential share issuance in connection with our convertible securities is measured using a “treasury stock” method. Under this method, only the net number of shares of common stock equal to the value of these convertible securities in excess of par, if any, is deemed to be outstanding. We believe the inclusion of net shares under a treasury stock method best reflects the benefit of the increase in available capital resources (which could be used to repurchase shares of common stock) that occurs when these securities are converted and we are relieved of our debt obligation. This method does not take into account any increase or decrease in our cost of capital in an assumed conversion.

The following table provides a reconciliation of Net income (controlling interest) to Economic net income (controlling interest):


	For the Three Months Ended March 31,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions, except per share data)	2016			2017			2016			2017			2016			2017
Net income (controlling interest)	$	104.0		$	122.5		$	110.2		$	125.4		$	322.5		$	374.2
Intangible amortization and impairments⁽¹⁾	34.4			38.5			34.2			42.2			105.6			121.5
Intangible-related deferred taxes	22.1			19.8			19.5			22.9			63.0			61.8
Other economic items⁽²⁾⁽³⁾	(1.2		)	2.4			1.6			0.8			1.2			5.7
Economic net income (controlling interest)	$	159.3		$	183.2		$	165.5		$	191.3		$	492.3		$	563.2
Average shares outstanding (diluted)	56.6			59.2			56.6			58.3			56.6			58.8
Assumed issuance of junior convertible securities shares	(2.2		)	(2.2		)	(2.2		)	(2.2		)	(2.2		)	(2.2		)
Average shares outstanding (adjusted diluted)	54.4			57.0			54.4			56.1			54.4			56.6
Economic earnings per share	$	2.92		$	3.21		$	3.04		$	3.41		$	9.04		$	9.95

____________________________


⁽¹⁾	See note (2) to the table in “Adjusted EBITDA (controlling interest).”


⁽²⁾	See note (1) to the table in “Adjusted EBITDA (controlling interest).”

⁽³⁾

For the three months ended ~~March 31,~~September 30, 2016 and 2017, Other economic items were net of income tax expense of $0.1 million and $0.3 million, respectively. For the nine months ended September 30, 2016 and 2017, Other economic items were net of an income tax benefit of ~~$0.7 million. For the three months ended March 31, 2017, Other economic items were net of~~$0.1 million and income tax expense of ~~$0.3 million.~~


⁽³⁾	~~In the first quarter of 2016, we adjusted our estimate of a contingent payment obligation and, accordingly, recorded a gain attributable to the controlling interest of $2.8~~$1.4 million, ~~($1.7 million net of tax). This gain is included in Imputed interest expense and contingent payment arrangements.~~respectively.

Liquidity and Capital Resources

During the ~~three~~nine months ended ~~March 31,~~September 30, 2017, we met our cash requirements primarily through cash generated by operating activities. Our principal uses of cash during the quarter were, and for the foreseeable future are expected to be, for

repayments of senior debt, distributions to Affiliate equity holders, repurchases of common stock, Affiliate equity repurchases, the payment of cash dividends on our common stock, and general working capital purposes. We also expect that a principal use of cash will be for investments in new and existing Affiliates. We anticipate that cash flows from operations, together with borrowings under our revolver and proceeds from our equity distribution program, will be sufficient to support our cash flow needs for the foreseeable future.

Cash and cash equivalents at December 31, 2016 and ~~March 31,~~September 30, 2017 were $430.8 million and ~~$293.6~~$374.7 million, respectively, including $18.9 million and ~~$23.8~~$24.9 million, respectively, in our ~~wholly owned~~wholly-owned foreign subsidiaries, which could be repatriated without accruing or paying any significant additional U.S. taxes.

The following table summarizes our cash flow activities:


	For the Three Months Ended March 31,						For the Nine Months Ended September 30,
(in millions)	2016			2017			2016			2017
Operating cash flow	$	25.6		$	122.1		$	684.5		$	800.5
Investing cash flow	(550.9		)	16.3			(868.7		)	4.9
Financing cash flow	259.8			(277.4		)	36.6			(871.5		)

Operating Cash Flow

In the ~~three~~nine months ended ~~March 31,~~September 30, 2017, Cash flow from operating activities increased ~~$96.5~~$116.0 million, of which approximately 70% was attributable to the controlling interest. Cash flow from operating activities attributable to the controlling interest increased primarily from the receipt of cash distributions of our share of equity method earnings from our 2016 investments in new ~~investments.~~Affiliates.

Investing Cash Flow

~~Net cash flow~~In the nine months ended September 30, 2017, Cash flows from investing activities, which is primarily attributable to the controlling interest, increased ~~$567.2~~$873.6 million, ~~in the three months ended March 31, 2017,~~ primarily due to a decrease in Investments in Affiliates of ~~$546.6 million and an increase in Sale of investment securities of $24.1~~$854.6 million.

Financing Cash Flow

~~Net cash flow~~In the nine months ended September 30, 2017, Cash flows used in financing activities, which is primarily attributable to the controlling interest, increased ~~$537.2 million in the three months ended March 31, 2017.~~$908.1 million. This increase was primarily due to a change in ~~the~~ senior debt activity from net borrowings of ~~$420.0~~$230.0 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2016 to net repayments of ~~$85.0~~$200.0 million in the ~~three~~nine months ended ~~March 31, 2017, and~~September 30, 2017. This increase was also due to an increase in repurchases of common stock of ~~$63.1 million. These increases were partially offset by~~$243.0 million and a decrease in ~~Affiliate equity repurchases~~cash received for the issuance of ~~$36.5~~common stock of $129.5 million.

The following table summarizes the carrying value of our outstanding indebtedness:


(in millions)	December 31, 2016		March 31, 2017		December 31, 2016		September 30, 2017
Senior bank debt	$	870.0	$	785.0	$	870.0	$	870.0
Senior notes	945.1		945.3		945.1		745.5
Convertible securities	307.5		308.0		307.5		309.3

Senior Bank Debt and Senior Notes

We have a $1.45 billion senior unsecured multicurrency revolving credit facility (the “revolver”) and a $385.0 million senior unsecured term loan facility (the “term loan” and, together with the revolver, the “credit facilities”). The credit facilities both mature on September 30, 2020.

The credit facilities contain financial covenants with respect to leverage and interest coverage, as well as customary affirmative and negative covenants, including limitations on priority indebtedness, asset dispositions and fundamental corporate changes, and certain customary events of default. As of ~~March 31,~~September 30, 2017, we were in compliance with all terms of our credit facilities and had approximately ~~$1.1~~$1 billion of remaining capacity under our revolver, all of which we could borrow and remain in compliance with our credit facilities.

In the three months ended September 30, 2017, we redeemed all $200.0 million principal amount outstanding of our 6.375% senior unsecured notes due 2042 at a redemption price equal to 100% of the principal amount. The notes were subsequently canceled and retired.

We are currently rated A3 by Moody’s Investors Service and ~~BBB+ with a positive outlook~~A- by S&P Global Ratings. A downgrade of our credit rating, including a downgrade to below investment grade, would not trigger a default or have any other significant impact on the terms of our existing credit facilities. A reduction in our credit rating could, however, increase our borrowing costs. Additionally, a downgrade of our credit rating below investment grade in connection with a change in control would require us to make a repurchase offer on ~~certain of~~ our senior notes.

Equity Distribution Program

In 2016, we entered into equity distribution and forward equity agreements with several major securities firms under which we, from time to time, may issue and sell shares of our common stock (immediately or on a forward basis) having an aggregate sales price of up to $500.0 million (the “equity distribution program”). As of ~~March 31,~~September 30, 2017, no sales have occurred under the equity distribution program.

Affiliate Equity

Many of our Affiliate agreements provide us with a conditional right to call and Affiliate equity holders with the conditional right to put their Affiliate equity interests to us at certain intervals. For equity method Affiliates, we do not typically have such put and call arrangements. The purchase price of these conditional purchases is generally calculated based upon a multiple of the Affiliate’s cash flow distributions, which is intended to represent fair value. Affiliate equity holders are also permitted to sell their equity interests to other individuals or entities in certain cases, subject to our approval or other restrictions.

As of ~~March 31,~~September 30, 2017, our current redemption value of ~~$733.5~~$804.6 million for these interests has been presented as Redeemable non-controlling interests. Although the timing and amounts of these purchases are difficult to predict, we repurchased ~~$99.6~~$161.5 million of Affiliate equity during the ~~three~~nine months ended ~~March 31,~~September 30, 2017, and expect to repurchase ~~a total of~~ approximately ~~$125~~$10 million in the fourth quarter of 2017. In the event of a repurchase, we ~~would~~ become the owner of the cash flow associated with the repurchased equity.

Commitments

We have committed to co-invest in certain investment partnerships. As of ~~March 31,~~September 30, 2017, these unfunded commitments totaled $~~97.1~~94.9 million and may be called in future periods. ~~In connection with a past acquisition agreement, we are contractually entitled to reimbursement from a prior owner of one of the Company’s Affiliates for~~ ~~$11.0 million~~ ~~of these commitments if they are called.~~

As of ~~March 31,~~September 30, 2017, we were contingently liable, upon achievement by certain Affiliates of specified financial targets, to make payments related to our investments in Affiliates through 2019. For our consolidated Affiliates, we were contingently liable for up to ~~$84.9~~$21.7 million, ~~$57.5 million of which expire during the three months ending June 30, 2017,~~ and ~~expect~~expected to make payments of ~~$10.3~~$8.9 million ($~~3.0~~1.6 million in 2017). The present value of these expected payments was ~~$8.9 million as of March 31, 2017.~~$8.1 million. For our equity method Affiliates, we were contingently liable for up to $170.0 million, and ~~expect~~expected to make no ~~payments in 2017.~~payments.

Affiliate equity interests provide holders with a conditional right to put their interests to us over time. In addition, in connection with an investment in an Affiliate accounted for under the equity method, we entered into an arrangement with a minority owner of the Affiliate that gives such owner the right to sell a portion of its ownership interest in the Affiliate to us annually beginning in the fourth quarter of 2018. The purchase price of these conditional purchases will be at fair market value on the date of the transaction.

We and certain of our Affiliates operate under regulatory authorities, which require that we and they maintain minimum financial or capital requirements.

Share Repurchases

Our Board of Directors authorized share repurchase programs in May 2015 and January 2017, authorizing us to repurchase up to 3.0 million and 1.9 million shares of our common stock, respectively, for a total of 4.9 million shares, which do not expire. As of ~~March 31,~~September 30, 2017, we had repurchased ~~1.4~~2.6 million shares of this total authorized ~~amount, inclusive of 0.5~~amount. In the three and nine months ended September 30, 2017, we repurchased 0.4 million and 1.7 million shares, ~~repurchased~~respectively, at an average price per share of ~~$161.87 during the first quarter of 2017.~~$175.68 and $164.00, respectively.

Contractual Obligations

The following table summarizes our contractual obligations as of ~~March 31,~~September 30, 2017. Contractual debt obligations include the cash payment of fixed interest.


			Payments Due										Payments Due
(in millions)	Total		Remainder of 2017		2018-2019		2020-2021		Thereafter		Total		Remainder of 2017		2018-2019		2020-2021		Thereafter
Contractual Obligations⁽¹⁾
Senior bank debt	$	785.0	$	—	$	—	$	785.0	$	—	$	870.0	$	—	$	—	$	870.0	$	—
Senior notes	1,498.2		24.2		84.0		84.0		1,306.0		958.5		—		58.5		58.5		841.5
Junior convertible securities	891.2		16.6		44.4		44.4		785.8		880.1		5.5		44.4		44.4		785.8
Leases⁽²⁾	211.1		28.2		66.6		57.5		58.8		199.4		9.6		67.9		59.2		62.7
Affiliate equity	91.5		90.8		0.7		—		—		45.7		44.3		1.4		—		—
Total contractual obligations	$	3,477.0	$	159.8	$	195.7	$	970.9	$	2,150.6	$	2,953.7	$	59.4	$	172.2	$	1,032.1	$	1,690.0
Contingent Obligations
Contingent payment obligations⁽³⁾	$	10.3	$	3.0	$	7.3	$	—	$	—	$	8.9	$	1.6	$	7.3	$	—	$	—

___________________________


⁽¹⁾	This table does not include liabilities for commitments to co-invest in certain investment partnerships or uncertain tax positions of $~~97.1~~94.9 million and ~~$26.6~~$26.4 million, respectively, as of ~~March 31,~~September 30, 2017, as we cannot predict when such obligations will be paid.


⁽²⁾	The controlling interest portion is ~~$8.4~~$3.0 million through 2017, ~~$22.3~~$22.8 million in 2018-2019, ~~$19.4~~$19.8 million in 2020-2021 and $29.4 million thereafter.


⁽³⁾	The contingent payment obligations disclosed in the table represent our expected settlement amounts associated with our investments in new Affiliates. The maximum settlement amount through 2017 is ~~$67.9~~$4.7 million, $187.0 million in 2018-2019 and none thereafter.

Recent Accounting Developments

See Note 2 of the Consolidated Financial Statements.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our Quantitative and Qualitative Disclosures About Market Risk in the three months ended ~~March 31, 2017, except as noted below.~~September 30, 2017. Please refer to the below as well as the additional disclosures in Item 7A inof our 2016 Annual Report on Form 10-K.

Foreign Currency Exchange Risk

To illustrate the effect of possible changes in currency exchange rates, ~~as of March 31, 2017,~~ we estimate a 1% change in the pound sterling and Canadian dollar to U.S. dollar exchange rates would have resulted in changes to stockholders’ equity of approximately ~~$12.3~~$13 million and ~~$2.0~~$2 million, respectively, as of September 30, 2017, and annual changes to Income before income taxes of ~~$1.3~~$1.1 million and $0.3 million, respectively.


Item 4.	Controls and Procedures

We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures during the quarter covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the quarter covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures are effective in ensuring that (i) the information required to be disclosed by us in the

reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management

necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance of achieving their stated objectives, and our principal executive officer and principal financial officers concluded that our disclosure controls and procedures were effective at the reasonable assurance level. We review on an ongoing basis and document our disclosure controls and procedures, and our internal control over financial reporting, and we may from time to time make changes in an effort to enhance their effectiveness and ensure that our systems evolve with our business.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds


(a)	None.


(b)	None.


(c)	Purchases of Equity Securities by the Issuer.

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number of Shares that May Yet Be Purchased Under Outstanding Plans or Programs⁽¹⁾
January 1-31, 2017 —
$ —
—
3,982,860
February 1-28, 2017 419,546
161.10
419,546
3,563,314
March 1-31, 2017 74,536
166.16
74,536
3,488,778
Total 494,082
161.87
494,082



Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Average Price Paid Per Share		Maximum Number of Shares that May Yet Be Purchased Under Outstanding Plans or Programs⁽²⁾
July 1-31, 2017⁽³⁾	1,838	$	175.14	1,838	$	175.14	2,718,174
August 1-31, 2017	339,128	176.91		339,128	176.91		2,379,046
September 1-30, 2017	81,774	174.56		81,774	174.56		2,297,272
Total	422,740	175.68		422,740	175.68

____________________________


⁽¹⁾	Includes shares surrendered, if any, to the Company to satisfy tax withholding and/or option exercise price obligations in connection with stock swap option exercise transactions.


⁽²⁾	Our Board of Directors authorized share repurchase programs in May 2015 and January 2017, authorizing us to repurchase up to 3.0 million and 1.9 million shares of our common stock, respectively, for a total of 4.9 million shares, which do not expire. As of ~~March 31,~~September 30, 2017, we had repurchased ~~1.4~~2.6 million shares of this total authorized ~~amount, inclusive~~amount.

⁽³⁾

Includes 1,838 shares delivered upon the completion of ~~0.5~~a $32.0 million accelerated share repurchase program entered into in June 2017 and completed in July 2017, resulting in delivery of a total of 182,713 shares ~~repurchased~~ at an average share price of $175.14 per share. This average share price has been used for the shares delivered upon completion of ~~$161.87 during~~ the ~~first quarter of 2017.~~program in July 2017 included in this table.


Item 6.	Exhibits

The exhibits are listed on the Exhibit Index and are included elsewhere in this Quarterly Report on Form 10-Q.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	AFFILIATED MANAGERS GROUP, INC. (Registrant)
~~May 5,~~November 2, 2017	/s/ JAY C. HORGEN
	Jay C. Horgen on behalf of the Registrant as Chief Financial Officer and Treasurer (and also as Principal Financial and Principal Accounting Officer)

EXHIBIT INDEX




Exhibit No.			Description
31.1			Certification of Registrant’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Registrant’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification of Registrant’s Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			Certification of Registrant’s Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101			The following financial statements from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2017 are filed herewith, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income for the ~~three-month~~three-and nine-month periods ended ~~March 31,~~September 30, 2017 and 2016, (ii) the Consolidated Balance Sheets at ~~March 31,~~September 30, 2017 and December 31, 2016, (iii) the Consolidated Statements of Equity for the ~~three-month~~nine-month periods ended ~~March 31,~~September 30, 2017 and 2016, (iv) the Consolidated Statements of Cash Flows for the ~~three-month~~nine-month periods ended ~~March 31,~~September 30, 2017 and 2016, and (v) the Notes to the Consolidated Financial Statements.

QuickLinks

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

AFFILIATED MANAGERS GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share data) (unaudited)

AFFILIATED MANAGERS GROUP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) (unaudited)

AFFILIATED MANAGERS GROUP, INC. CONSOLIDATED BALANCE SHEETS (in millions) (unaudited)

AFFILIATED MANAGERS GROUP, INC. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (in millions) (unaudited)

AFFILIATED MANAGERS GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited)

AFFILIATED MANAGERS GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

PART II—OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 6. Exhibits

SIGNATURES

EXHIBIT INDEX



Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under Outstanding Plans or Programs⁽¹⁾
January 1-31, 2017	—	$	—	—	3,982,860
February 1-28, 2017	419,546	161.10		419,546	3,563,314
March 1-31, 2017	74,536	166.16		74,536	3,488,778
Total	494,082	161.87		494,082