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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 September 30, 20172020
OR
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
amg-20200930_g1.jpg
Affiliated Managers Group, Inc.AFFILIATED MANAGERS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware04-3218510
(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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock ($0.01 par value)AMGNew York Stock Exchange
5.875% Junior Subordinated Notes due 2059MGRNew York Stock Exchange
4.750% Junior Subordinated Notes due 2060MGRBNew York Stock Exchange



Table of Contents
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

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☐
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.
Large accelerated filerý
☒
Accelerated filer o☐
Non-accelerated filer o☐
(Do not check if a smaller
reporting company)
Smaller reporting companyo
☐
Emerging growth companyo☐
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 55,581,91545,361,059 shares of the registrant’s common stock outstanding on November 1, 2017.
October 28, 2020.

Table of Contents
FORM 10-Q
TABLE OF CONTENTS
PART I
Item 1.
2
3
4
5
7
8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
25
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
39
Item 4.
Controls and Procedures
39
PART II
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
39
Item 6.
Exhibits
40



Table of Contents


PART I—FINANCIAL INFORMATION
Item 1.Financial Statements
Item 1.Financial Statements
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
(unaudited)
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2019202020192020
Consolidated revenue$549.0 $494.8 $1,684.0 $1,473.2 
Consolidated expenses:
Compensation and related expenses222.0 212.5 708.2 636.9 
Selling, general and administrative91.5 74.1 283.3 237.9 
Intangible amortization and impairments21.1 31.9 72.0 133.4 
Interest expense19.5 23.8 57.4 65.6 
Depreciation and other amortization6.2 4.6 16.7 14.7 
Other expenses (net)13.1 12.3 36.2 34.6 
Total consolidated expenses373.4 359.2 1,173.8 1,123.1 
Equity method income (loss) (net)10.3 17.0 (318.5)(78.8)
Investment and other income6.7 12.7 22.0 2.9 
Income before income taxes192.6 165.3 213.7 274.2 
Income tax expense30.5 37.5 4.4 43.0 
Net income162.1 127.8 209.3 231.2 
Net income (non-controlling interests)(75.8)(56.5)(216.1)(144.9)
Net income (loss) (controlling interest)$86.3 $71.3 $(6.8)$86.3 
Average shares outstanding (basic)50.4 46.3 51.1 47.1 
Average shares outstanding (diluted)50.4 46.5 51.1 47.2 
Earnings (loss) per share (basic)$1.71 $1.54 $(0.13)$1.83 
Earnings (loss) per share (diluted)$1.71 $1.53 $(0.13)$1.83 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2017 2016 2017
Revenue$544.7
 $585.7
 $1,644.2
 $1,700.9
        
Operating expenses:       
Compensation and related expenses244.2
 238.7
 702.9
 722.9
Selling, general and administrative94.2
 91.9
 286.7
 269.7
Intangible amortization and impairments26.9
 21.2
 82.2
 65.1
Depreciation and other amortization5.0
 4.8
 15.0
 14.9
Other operating expenses (net)3.4
 10.3
 25.9
 32.0
Total operating expense (net)373.7
 366.9
 1,112.7
 1,104.6
 171.0
 218.8
 531.5
 596.3
Income from equity method investments67.5
 70.7
 200.7
 231.6
Operating income238.5
 289.5
 732.2
 827.9
        
Non-operating (income) and expenses:       
Investment and other income(11.0) (15.6) (26.7) (44.7)
Interest expense22.4
 21.5
 66.4
 65.8
Imputed interest expense and contingent payment arrangements0.9
 0.7
 (0.2) 3.7
 12.3
 6.6
 39.5
 24.8
Income before income taxes226.2
 282.9
 692.7
 803.1
Income taxes50.3
 66.1
 159.7
 188.2
Net income175.9
 216.8
 533.0
 614.9
Net income (non-controlling interests)(65.7) (91.4) (210.5) (240.7)
Net income (controlling interest)$110.2
 $125.4
 $322.5
 $374.2
Average shares outstanding (basic)53.9
 55.8
 53.9
 56.3
Average shares outstanding (diluted)56.6
 58.3
 56.6
 58.8
Earnings per share (basic)$2.04
 $2.25
 $5.98
 $6.65
Earnings per share (diluted)$2.02
 $2.22
 $5.90
 $6.57
Dividends per share$—
 $0.20
 $—
 $0.60

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

2

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AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2019202020192020
Net income$162.1 $127.8 $209.3 $231.2 
Other comprehensive income (loss), net of tax:  
Foreign currency translation gain (loss)(37.6)24.7 (24.9)(51.4)
Change in net realized and unrealized gain (loss) on derivative financial instruments0.5 0.2 1.0 (2.1)
Other comprehensive income (loss), net of tax(37.1)24.9 (23.9)(53.5)
Comprehensive income125.0 152.7 185.4 177.7 
Comprehensive income (non-controlling interests)(68.6)(65.9)(208.2)(137.5)
Comprehensive income (loss) (controlling interest)$56.4 $86.8 $(22.8)$40.2 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2017 2016 2017
Net income$175.9
 $216.8
 $533.0
 $614.9
Other comprehensive income (loss):       
Controlling interest:       
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 tax0.1
 0.2
 0.0
 (1.7)
Change in net unrealized gain (loss) on investment securities, net of tax2.8
 (4.4) (21.5) (5.5)
Other comprehensive income (loss) (controlling interest)(4.5) 43.3
 (62.7) 71.8
Non-controlling interest:       
Foreign currency translation gain (loss)(9.4) 5.5
 (31.5) 13.1
Change in net realized and unrealized gain (loss) on derivative securities, net of tax0.0
 (0.1) (0.7) 0.9
Change in net unrealized gain (loss) on investment securities, net of tax1.2
 0.1
 0.7
 2.1
Other comprehensive income (loss) (non-controlling interest)(8.2) 5.5
 (31.5) 16.1
Other comprehensive income (loss)(12.7) 48.8
 (94.2) 87.9
Comprehensive income163.2
 265.6
 438.8
 702.8
Comprehensive income (non-controlling interests)(57.5) (96.9) (179.0) (256.8)
Comprehensive income (controlling interest)$105.7
 $168.7
 $259.8
 $446.0

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

3

Table of Contents
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
December 31,
2019		September 30,
2020
Assets  
Cash and cash equivalents$539.6 $929.4 
Receivables417.1 404.8 
Investments in marketable securities59.4 68.2 
Goodwill2,651.7 2,638.8 
Acquired client relationships (net)1,182.0 1,035.2 
Equity method investments in Affiliates (net)2,195.6 1,974.7 
Fixed assets (net)92.3 81.6 
Other investments211.8 223.5 
Other assets304.0 313.3 
Total assets$7,653.5 $7,669.5 
Liabilities and Equity 
Payables and accrued liabilities$634.6 $514.8 
Debt1,793.8 2,310.8 
Deferred income tax liability (net)450.2 400.4 
Other liabilities359.1 463.1 
Total liabilities3,237.7 3,689.1 
Commitments and contingencies (Note 7)
Redeemable non-controlling interests916.7 652.0 
Equity: 
Common stock ($0.01 par value, 153.0 shares authorized; 58.5 shares outstanding in 2019 and 2020)0.6 0.6 
Additional paid-in capital707.2 764.1 
Accumulated other comprehensive loss(108.8)(154.9)
Retained earnings3,819.8 3,890.1 
4,418.8 4,499.9 
Less: Treasury stock, at cost (10.4 shares in 2019 and 13.1 shares in 2020)(1,481.3)(1,651.0)
Total stockholders' equity2,937.5 2,848.9 
Non-controlling interests561.6 479.5 
Total equity3,499.1 3,328.4 
Total liabilities and equity$7,653.5 $7,669.5 
 December 31,
2016		 September 30,
2017
Assets   
Cash and cash equivalents$430.8
 $374.7
Receivables383.3
 487.4
Investments in marketable securities122.4
 92.4
Other investments147.5
 160.5
Fixed assets (net)110.1
 111.7
Goodwill2,628.1
 2,661.8
Acquired client relationships (net)1,497.4
 1,467.2
Equity method investments in Affiliates3,368.3
 3,290.8
Other assets61.2
 54.9
Total assets$8,749.1
 $8,701.4
Liabilities and Equity   
Payables and accrued liabilities$729.3
 $698.3
Senior bank debt868.6
 868.9
Senior notes939.4
 741.0
Convertible securities301.6
 303.7
Deferred income taxes660.8
 702.3
Other liabilities149.4
 178.3
Total liabilities3,649.1
 3,492.5
Commitments and contingencies (Note 5)

 

Redeemable non-controlling interests673.5
 804.6
Equity:   
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 capital1,073.5
 849.7
Accumulated other comprehensive loss(122.9) (51.1)
Retained earnings3,054.4
 3,394.4
 4,005.6
 4,193.6
Less: Treasury stock, at cost (1.8 shares in 2016 and 2.9 shares in 2017)(386.0) (566.1)
Total stockholders' equity3,619.6
 3,627.5
Non-controlling interests806.9
 776.8
Total equity4,426.5
 4,404.3
Total liabilities and equity$8,749.1
 $8,701.4

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

4

Table of Contents
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
(unaudited)
Three Months Ended September 30, 2019Total Stockholders’ Equity  
 Common
Stock		Additional
Paid-In
Capital		Accumulated
Other
Comprehensive
Loss		Retained
Earnings		Treasury
Stock at
Cost		Non-
controlling
Interests		Total
Equity
June 30, 2019$0.6 $835.8 $(95.1)$3,743.7 $(1,259.7)$600.5 $3,825.8 
Net income— — — 86.3 — 75.8 162.1 
Other comprehensive loss— — (29.9)— — (7.2)(37.1)
Share-based compensation— 11.7 — — — — 11.7 
Common stock issued under share-based incentive plans— (0.1)— — 0.4 — 0.3 
Share repurchases— (7.5)— — (102.5)— (110.0)
Dividends ($0.32 per share)— — — (16.4)— — (16.4)
Affiliate equity activity:
Affiliate equity compensation— 2.3 — — — 6.9 9.2 
Issuances— (2.0)— — — 2.3 0.3 
Repurchases— 3.9 — — — — 3.9 
Changes in redemption value of Redeemable non-controlling interests— (101.5)— — — — (101.5)
Transfers to Redeemable non-controlling interests— — — — — (31.2)(31.2)
Distributions to non-controlling interests— — — — — (83.9)(83.9)
September 30, 2019$0.6 $742.6 $(125.0)$3,813.6 $(1,361.8)$563.2 $3,633.2 
   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
December 31, 201555.8
 $0.6
 $694.9
 $(18.1) $2,581.6
 $(421.9) $932.0
 $3,769.1
Net income—
 —
 —
 —
 322.5
 —
 210.5
 533.0
Other comprehensive loss—
 —
 —
 (62.7) —
 —
 (31.5) (94.2)
Share-based compensation—
 —
 30.7
 —
 —
 —
 —
 30.7
Common stock issued under share-based incentive plans—
 —
 (35.6) —
 —
 41.8
 —
 6.2
Share repurchases—
 —
 —
 —
 —
 (33.4) —
 (33.4)
Issuance costs and other—
 —
 (2.3) —
 —
 —
 —
 (2.3)
Common stock issued under forward equity agreement0.9
 0.0
 150.3
 —
 —
 —
 —
 150.3
Affiliate equity activity:               
Affiliate equity expense—
 —
 7.7
 —
 —
 —
 27.2
 34.9
Issuances—
 —
 (2.5) —
 —
 —
 14.2
 11.7
Repurchases—
 —
 14.0
 —
 —
 —
 0.4
 14.4
Changes in redemption value of Redeemable non-controlling interests—
 —
 (84.9) —
 —
 —
 —
 (84.9)
Transfers to Redeemable non-controlling interests—
 —
 —
 —
 —
 —
 (38.3) (38.3)
Capital contributions by Affiliate equity holders—
 —
 —
 —
 —
 —
 2.7
 2.7
Distributions to non-controlling interests—
 —
 —
 —
 —
 —
 (270.1) (270.1)
September 30, 201656.7
 $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)

Three Months Ended September 30, 2020Three Months Ended September 30, 2020Total Stockholders’ Equity  
Common
Stock		Additional
Paid-In
Capital		Accumulated
Other
Comprehensive
Loss		Retained
Earnings		Treasury
Stock at
Cost		Non-
controlling
Interests		Total
Equity
June 30, 2020June 30, 2020$0.6 $768.2 $(170.4)$3,819.3 $(1,563.0)$487.2 $3,341.9 
Net incomeNet income— — — 71.3 — 56.5 127.8 
Other comprehensive incomeOther comprehensive income— — 15.5 — — 9.4 24.9 
Share-based compensationShare-based compensation— 15.7 — — — — 15.7 
Common stock issued under share-based incentive plansCommon stock issued under share-based incentive plans— (1.1)— — 1.0 — (0.1)
Share repurchasesShare repurchases— 4.6 — — (89.0)— (84.4)
Dividends ($0.01 per share)Dividends ($0.01 per share)— — — (0.5)— — (0.5)
  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
December 31, 201658.5
 $0.6
 $1,073.5
 $(122.9) $3,054.4
 $(386.0) $806.9
 $4,426.5
Net income—
 —
 —
 —
 374.2
 —
 240.7
 614.9
Other comprehensive income—
 —
 —
 71.8
 —
 —
 16.1
 87.9
Share-based compensation—
 —
 30.0
 —
 —
 —
 —
 30.0
Common stock issued under share-based incentive plans—
 —
 (81.8) —
 —
 96.3
 —
 14.5
Share repurchases—
 —
 —
 —
 —
 (276.4) —
 (276.4)
Dividends—
 —
 —
 —
 (34.2) —
 —
 (34.2)
Issuance costs and other—
 —
 0.6
 —
 —
 —
 —
 0.6
Affiliate equity activity:

 

 

 

 

 

 

 

Affiliate equity activity:
Affiliate equity expense—
 —
 9.4
 —
 —
 —
 29.2
 38.6
Affiliate equity compensationAffiliate equity compensation— 3.5 — — — 6.0 9.5 
Issuances—
 —
 (0.2) —
 —
 —
 3.0
 2.8
Issuances— 2.9 — — — 0.2 3.1 
Repurchases—
 —
 34.6
 —
 —
 —
 —
 34.6
Repurchases— 21.0 — — — (2.2)18.8 
Changes in redemption value of Redeemable non-controlling interests—
 —
 (216.4) —
 —
 —
 —
 (216.4)Changes in redemption value of Redeemable non-controlling interests— (50.7)— — — — (50.7)
Transfers to Redeemable non-controlling interests—
 —
 —
 —
 —
 —
 (56.8) (56.8)Transfers to Redeemable non-controlling interests— — — — — (0.2)(0.2)
Capital contributions by Affiliate equity holders—
 —
 —
 —
 —
 —
 4.5
 4.5
Distributions to non-controlling interests—
 —
 —
 —
 —
 —
 (266.8) (266.8)Distributions to non-controlling interests— — — — — (77.4)(77.4)
September 30, 201758.5
 $0.6
 $849.7
 $(51.1) $3,394.4
 $(566.1) $776.8
 $4,404.3
September 30, 2020September 30, 2020$0.6 $764.1 $(154.9)$3,890.1 $(1,651.0)$479.5 $3,328.4 
The accompanying notes are an integral part of the Consolidated Financial Statements.






5
Table of Contents
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
(unaudited)
Nine Months Ended September 30, 2019Total Stockholders' Equity  
Common
Stock		Additional
Paid-In
Capital		Accumulated
Other
Comprehensive Loss		Retained
Earnings		Treasury
Stock at
Cost		Non-
controlling
Interests		Total
Equity
December 31, 2018$0.6 $835.6 $(109.0)$3,876.8 $(1,146.6)$677.5 $4,134.9 
Impact of adoption of new accounting standard (ASU 2018-02)— — — (6.6)— — (6.6)
Net income (loss)— — — (6.8)— 216.1 209.3 
Other comprehensive loss— — (16.0)— — (7.9)(23.9)
Share-based compensation— 30.7 — — — — 30.7 
Common stock issued under share-based incentive plans— (34.0)— — 28.0 — (6.0)
Share repurchases— (7.5)— — (243.2)— (250.7)
Dividends ($0.96 per share)— — — (49.8)— — (49.8)
Issuance costs and other— 0.2 — — — — 0.2 
Affiliate equity activity:
Affiliate equity compensation— 7.3 — — — 24.9 32.2 
Issuances— (3.4)— — — 14.4 11.0 
Repurchases— 11.6 — — — — 11.6 
Changes in redemption value of Redeemable non-controlling interests— (97.9)— — — — (97.9)
Transfers to Redeemable non-controlling interests— — — — — (85.6)(85.6)
Capital contributions and other— — — — — 0.4 0.4 
Distributions to non-controlling interests— — — — — (276.6)(276.6)
September 30, 2019$0.6 $742.6 $(125.0)$3,813.6 $(1,361.8)$563.2 $3,633.2 
Nine Months Ended September 30, 2020Total Stockholders' Equity  
Common
Stock		Additional
Paid-In
Capital		Accumulated
Other
Comprehensive
Loss		Retained
Earnings		Treasury
Stock at
Cost		Non-
controlling
Interests		Total
Equity
December 31, 2019$0.6 $707.2 $(108.8)$3,819.8 $(1,481.3)$561.6 $3,499.1 
Net income— — — 86.3 — 144.9 231.2 
Other comprehensive loss— — (46.1)— — (7.4)(53.5)
Share-based compensation— 46.4 — — — — 46.4 
Common stock issued under share-based incentive plans— (40.9)— — 34.4 — (6.5)
Share repurchases— 0.1 — — (204.1)— (204.0)
Dividends ($0.34 per share)— — — (16.0)— — (16.0)
Affiliate equity activity:
Affiliate equity compensation— 11.4 — — — 24.9 36.3 
Issuances— 1.1 — — — 18.8 19.9 
Repurchases— 57.4 — — — (13.5)43.9 
Changes in redemption value of Redeemable non-controlling interests— (18.6)— — — — (18.6)
Transfers to Redeemable non-controlling interests— — — — — (5.6)(5.6)
Capital contributions and other— — — — — 4.9 4.9 
Distributions to non-controlling interests— — — — — (249.1)(249.1)
September 30, 2020$0.6 $764.1 $(154.9)$3,890.1 $(1,651.0)$479.5 $3,328.4 
The accompanying notes are an integral part of the Consolidated Financial Statements.
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AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 For the Nine Months Ended September 30,
 20192020
Cash flow from (used in) operating activities:
Net income$209.3 $231.2 
Adjustments to reconcile Net income to cash flow from (used in) operating activities: 
Intangible amortization and impairments72.0 133.4 
Depreciation and other amortization16.7 14.7 
Deferred income tax (benefit) expense(77.0)10.6 
Equity method loss (net)318.5 78.8 
Distributions of earnings received from equity method investments210.4 197.2 
Share-based compensation and Affiliate equity expense62.9 82.7 
Other non-cash items(11.5)20.3 
Changes in assets and liabilities: 
Purchases of securities by consolidated Affiliate sponsored investment products0 (83.5)
Sales of securities by consolidated Affiliate sponsored investment products5.5 77.6 
(Increase) decrease in receivables(91.5)9.0 
Increase in other assets(4.0)(8.5)
Decrease in payables, accrued liabilities and other liabilities(94.7)(136.7)
Cash flow from operating activities616.6 626.8 
Cash flow from (used in) investing activities: 
Investments in Affiliates(162.3)(2.4)
Divestments of Affiliates28.8 0 
Purchase of fixed assets(6.4)(6.8)
Purchase of investment securities(33.1)(35.7)
Sale of investment securities33.1 36.9 
Cash flow used in investing activities(139.9)(8.0)
Cash flow from (used in) financing activities: 
Borrowings of senior bank debt and senior notes470.7 874.8 
Repayments of senior bank debt(510.0)(350.0)
Repurchases of common stock (net)(223.4)(213.0)
Dividends paid on common stock(49.6)(16.3)
Distributions to non-controlling interests(276.6)(249.1)
Affiliate equity repurchases and issuances (net)(74.8)(232.5)
Other financing items29.5 (35.4)
Cash flow used in financing activities(634.2)(221.5)
Effect of foreign currency exchange rate changes on cash and cash equivalents(2.9)(5.3)
Net (decrease) increase in cash and cash equivalents(160.4)392.0 
Cash and cash equivalents at beginning of period565.5 539.6 
Effect of deconsolidation of Affiliates and Affiliate sponsored investment products(2.6)(2.2)
Cash and cash equivalents at end of period$402.5 $929.4 
 For the Nine Months Ended September 30,
 2016 2017
Cash flow from (used in) operating activities:   
Net income$533.0
 $614.9
Adjustments to reconcile Net income to net Cash flow from operating activities:   
Intangible amortization and impairments82.2
 65.1
Depreciation and other amortization15.0
 14.9
Deferred income tax provision69.8
 80.3
Income from equity method investments, net of amortization(200.7) (231.6)
Distributions of earnings received from equity method investments287.0
 368.0
Amortization of issuance costs3.6
 3.3
Share-based compensation and Affiliate equity expense65.6
 68.6
Other non-cash items(14.3) (30.7)
Changes in assets and liabilities:   
Purchases of trading securities by Affiliate sponsored consolidated products(62.5) (24.1)
Sales of trading securities by Affiliate sponsored consolidated products59.1
 23.2
(Increase) decrease in receivables37.7
 (131.7)
Increase in other assets(3.9) (3.6)
Decrease in payables, accrued liabilities and other liabilities(187.1) (16.1)
Cash flow from operating activities684.5
 800.5
Cash flow from (used in) investing activities:   
Investments in Affiliates(884.9) (30.3)
Purchase of fixed assets(15.1) (13.9)
Purchase of investment securities(10.2) (22.2)
Sale of investment securities41.5
 71.3
Cash flow from (used in) investing activities(868.7) 4.9
Cash flow from (used in) financing activities:   
Borrowings of senior debt900.0
 445.0
Repayments of senior debt(670.0) (645.0)
Issuance of common stock163.2
 33.7
Dividends paid on common stock—
 (33.8)
Repurchase of common stock(33.4) (276.4)
Distributions to non-controlling interests(270.1) (266.8)
Affiliate equity issuances and repurchases(70.3) (112.5)
Settlement of forward equity sale agreement—
 5.2
Other financing items17.2
 (20.9)
Cash flow from (used in) financing activities36.6
 (871.5)
Effect of foreign exchange rate changes on cash and cash equivalents(19.7) 10.0
Net decrease in cash and cash equivalents(167.3) (56.1)
Cash and cash equivalents at beginning of period563.8
 430.8
Net cash inflows upon the consolidation and deconsolidation of Affiliate sponsored products25.5
 —
Cash and cash equivalents at end of period$422.0
 $374.7

The accompanying notes are an integral part of the Consolidated Financial Statements.
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)





1.Basis of Presentation and Use of Estimates
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 full year financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentationstatement of the Company’s interim financial position and results of operations have been included and all intercompany balances and transactions have been eliminated. 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 otherCertain reclassifications hashave 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, 20162019 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 accordanceconformity 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
2.Accounting Standards and Policies
Recently Adopted Accounting Standards

Effective January 1, 2017,2020, the Company adopted Accounting Standard Update (“ASU”) 2016-07, Investments - Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method2016-13, Measurement of Accounting, and ASU 2016-06, Derivatives, and Hedging: Contingent Put and Call Options in DebtCredit Losses on Financial Instruments. The adoption of these updatesthis standard did not have a significant impact on the Company’s Consolidated Financial Statements.

Recent Accounting Developments

In May 2014,August 2020, the Financial Accounting Standards Board (the “FASB”(“FASB”) issued ASU 2014-09, Revenue from2020-06, Debt with Conversion and Other Options and Derivatives and Hedging - Contracts with Customers, and subsequently issued several related amendments. The standard provides a comprehensive model for revenue recognition and is effective for the Company and its consolidated Affiliates for interim and annual periods beginning after December 15, 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 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 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.Entity’s Own Equity. The standard is effective for interim and 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 by2021 for 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 standardits consolidated Affiliates, and is effective for interim and annual periods beginning after December 15, 2018 for the Company and its consolidated Affiliates and for interim and annual periods beginning after December 15, 20192023 for the Company’s Affiliates accounted for under the 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,June 2020, the FASB extended the effective date of ASU 2016-02, Leases for the Company’s Affiliates accounted for under the equity method. After the extension, ASU 2016-02 is effective for annual periods beginning after December 15, 2021 and interims periods beginning after December 15, 2022. The Company does not expect the adoption of this standard by its equity method investments to have a significant impact to its Consolidated Financial Statements.

In December 2019, 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 in2019-12, Simplifying the statement of cash flows.Accounting for Income Taxes. The standard is effective for interim and annual periods beginning after December 15, 20172020 for the Company and must be adopted using a full retrospective
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


its consolidated Affiliates, and is effective for annual periods beginning after December 15, 2021 and interim periods beginning after December 15, 2022 for the Company’s Affiliates accounted for under the equity method. The Company does not expect the adoption of this standard to have a significant impact onto 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 annual periods beginning after December 15, 2017. The Company will apply the standard prospectively upon adoption. The impact of this standard on the Company’s Consolidated Financial 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. Under the new standard, a goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value. The standard is effective for interim and annual periods beginning after December 15, 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
3.Investments in marketable securities at December 31, 2016 and September 30, 2017 were $122.4 million and $92.4 million, respectively. Marketable Securities
The following is a summary of the cost, gross unrealized gains, andgross unrealized losses and fair value of investments classified as available-for-sale and trading:
 Available-for-Sale Trading
 December 31,
2016		 September 30,
2017		 December 31,
2016		 September 30,
2017
Cost$66.1
 $30.5
 $34.4
 $44.2
Unrealized gains17.6
 10.8
 6.6
 8.5
Unrealized losses(1.8) —
 (0.5) (1.6)
Fair Value$81.9
 $41.3
 $40.5
 $51.1
In the three and nine months ended September 30, 2016, the Company received proceeds of $12.6 million and $47.0 million, respectively, from the sale of investments classified as available-for-sale and recorded gains of $6.2 million and $15.4 million, respectively. 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 $19.2 million, respectively. There were no significant realized gains or losses on investments classified as trading in the three and nine months ended September 30, 2016. In the three and 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
Investments in Affiliatesmarketable securities:

8
The Company’s Affiliates are consolidated or accounted for under the equity method, depending upon the underlying structure
Table of and relationship with each Affiliate.Contents

A limited number of the Company’s Affiliates are considered voting rights entities (“VREs”) because the total equity investment at risk is sufficient to enable the entities to finance their respective activities independently and each entity’s equity holders have 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)



 December 31,
2019		September 30,
2020
Cost$57.9 $67.5 
Unrealized gains2.1 2.4 
Unrealized losses(0.6)(1.7)
Fair value$59.4 $68.2 
The Company recorded proceeds of $2.9 million and $21.4 million for the three and nine months ended September 30, 2019, respectively, and $16.7 million and $80.8 million for the three and nine months ended September 30, 2020, respectively, from the sale of investments in marketable securities. No significant gains or losses were recorded for the three and nine months ended September 30, 2019 and 2020.
As of December 31, 2019 and September 30, 2020, Investments in marketable securities includes consolidated Affiliate sponsored investment products with fair values of $38.1 million and $43.4 million, respectively.
4.Investments in Affiliates and Affiliate Sponsored Investment Products
In evaluating whether an investment must be consolidated, the Company evaluates the risk, rewards and significant terms of each of its Affiliates and other investments to determine if an investment is considered a voting rights entity (“VRE”) or a variable interest entity (“VIE”). An entity is a VRE when the total equity investment at risk is sufficient to enable the entity to finance its activities independently, and when the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to direct the activities of the entity that most significantly impact its economic performance. MostAn entity is a VIE when it lacks one or more of the Company’s Affiliates considered VREs are accountedcharacteristics of a VRE, which, 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 areAffiliate investments structured as partnerships (or similar entities) where the Company is a limited partner and the limited partners lacklacks substantive kick-out or substantive participation rights over the general partner. 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 a VIEVREs when it has control over significant operating, financial and investing decisions of the entity. When the Company lacks such control, but is deemed to have significant influence, the Company accounts for the VRE under the equity method. Other investments in which the Company does not have rights to exercise significant influence are recorded at fair value, with changes in fair value recorded in Investment and other income on the Consolidated Statements of Income.

The Company consolidates VIEs when it is the primary beneficiary of the entity, which is defined as having the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of, or the right to receive benefits from, or the obligation to absorb losses of the entity that could potentially be significant to the VIE. Substantially all of the Company’s consolidated Affiliates considered VIEs are controlled because the Company holds a majority of the voting interests or it is the managing member or general partner. Furthermore, an Affiliate’s assets can be used for purposes other than the settlement of the respective Affiliate’s obligations. The Company applies the equity method of accounting to a VIE when itVIEs where the Company is not the primary beneficiary, but has the ability to exercise significant influence over operating and financial matters of the VIE.

Investments in Affiliates

Substantially all of the Company’s Affiliates are considered VIEs and are either consolidated or accounted for under the equity method. A limited number of the Company’s Affiliates are considered VREs and most of these are accounted for under the equity method.

When an Affiliate is deemedconsolidated, the portion of the earnings attributable to Affiliate management’s equity ownership is included in Net income (non-controlling interests) in the Consolidated Statements of Income. Undistributed earnings attributable to Affiliate managements’ equity ownership, along with their share of any tangible or intangible net assets, are presented within Non-controlling interests on the Consolidated Balance Sheets. Affiliate equity interests where the holder has certain rights to demand settlement are presented, at their current redemption values, as Redeemable non-controlling interests on the Consolidated Balance Sheets. The Company periodically issues, sells and repurchases the equity of its consolidated Affiliates. Because these transactions take place between entities that are under common control, any gains or losses
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

attributable to these transactions are required to be included within Additional paid-in capital in the Consolidated Balance Sheets, net of any related income tax effects in the period the transaction occurs.

When an Affiliate is accounted for under the equity method, the Company’s share of an Affiliate’s earnings or losses, net of amortization and impairments, is included in Equity method income (loss) (net) in the Consolidated Statements of Income and the carrying value of the Affiliate is reported in Equity method investments in Affiliates (net) in the Consolidated Balance Sheets. Deferred taxes recorded on intangible assets upon acquisition of an Affiliate accounted for under the equity method are presented on a gross basis within Equity method investments in Affiliates (net) and Deferred income tax liability (net) in the Consolidated Balance Sheets. The Company’s share of income taxes incurred directly by Affiliates accounted for under the equity method is recorded within Income tax expense in the Consolidated Statements of Income.
The Company periodically performs assessments to determine if the fair value of an investment may have significant influence.

declined below its related carrying value for its Affiliates accounted for under the equity method for a period that the Company considers to be other-than temporary. Where the Company believes that such declines may have occurred, the Company determines the amount of impairment using valuation methods, such as discounted cash flow analyses. Impairments are recorded as an expense in Equity method income (loss) (net) to reduce the carrying value of the Affiliate to its fair value.
The unconsolidated assets, net of liabilities and non-controlling interests of Affiliates accounted for under the equity method Affiliates considered VIEs, and the Company’s carrying value and maximum risk ofexposure to loss, were as follows:
 December 31, 2019September 30, 2020
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$1,141.4 $1,843.0 $1,085.2 $1,812.3 
 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


As of December 31, 2019 and September 30, 2020, the carrying value and maximum exposure to loss for all of the Company’s Affiliates accounted for under the equity method was $2,195.6 million and $1,974.7 million, respectively, including Affiliates accounted for under the equity method considered VREs of $352.6 million and $162.4 million, respectively.

Affiliate Sponsored Investment Products


The Company’s consolidated Affiliates sponsor various investment products for whichwhere they also act as the investment advisor.adviser. These investment products are typically owned primarily owned by third-party investors; however, certain products are funded with general partner and seed capital investments from the Company and its Affiliates.

Third-party investors in Affiliate sponsored investment products are generally entitled to substantially all of the economics of these products, except for the asset and performance based fees earned by the Company’s Affiliates or any gains or losses attributable to the Company’s or its Affiliates’ investments in these products. As a result, the Company does not generally consolidate these products unless the Company’s or its consolidated Affiliate’s interest in the product is considered substantial. When the Company’s or its consolidated Affiliates’ interests are considered substantial and the products are consolidated, the Company retains the specialized investment company accounting principles of the underlying products, and all of the underlying investments are carried at fair value in Investments in marketable securities in the Consolidated Balance Sheets, with corresponding changes in the investments’ fair values reflected in Investment and other income. Purchases and sales of securities are presented within purchases and sales by consolidated Affiliate sponsored investment products in the Consolidated Statements of Cash Flows and the third-party investors’ interests are recorded in Redeemable non-controlling interests. When the Company or its consolidated Affiliates no longer control these products, due to a reduction in ownership or other reasons, the products are deconsolidated with only the Company’s or its consolidated Affiliate’s investment in the product reported from the date of deconsolidation.


The Company’s carrying value, and maximum exposure to loss from unconsolidated Affiliate sponsored investment products, is its and its consolidated Affiliate’s interest in the unconsolidated net assets of the respective products. The net assets of unconsolidated VIEs attributable to Affiliate sponsored investment products, and the Company’s carrying value and maximum exposure to loss, were as follows:
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 December 31, 2019September 30, 2020
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$2,282.1 $0.9 $2,309.7 $0.7 

5.Debt
The following table summarizes the Company’s Debt:
December 31,
2019		September 30,
2020
Senior bank debt$449.7 $349.8 
Senior notes743.8 1,091.5 
Junior convertible securities310.6 313.1 
Junior subordinated notes289.7 556.4 
Debt$1,793.8 $2,310.8 

The Company’s senior notes, junior convertible securities and junior subordinated notes are carried at amortized cost. Unamortized discounts and debt issuance costs are presented in the Consolidated Balance Sheets as an adjustment to the carrying value of the associated debt.

Senior Bank Debt

The Company has a $1.25 billion senior unsecured multicurrency revolving credit facility (the “revolver”) and a $350.0 million senior unsecured term loan facility (the “term loan” and, together with the revolver, the “credit facilities”). The revolver matures on January 18, 2024, and the term loan matures on January 18, 2023. Subject to certain conditions, the Company may increase the commitments under the revolver by up to an additional $500.0 million and may borrow up to an additional $75.0 million under the term loan. The Company pays interest on any outstanding obligations under the credit facilities at specified rates, based either on an applicable LIBOR or prime rate, plus a marginal rate determined based on its credit rating. For the three months ended September 30, 2020, the interest rate for the Company’s borrowings under the term loan was LIBOR plus 0.875%. As of December 31, 2019 and September 30, 2020, the Company had 0 outstanding borrowings under the revolver.

Senior Notes
In the second quarter of 2020, the Company issued $350.0 million of senior unsecured notes with a maturity date of June 15, 2030 (the “2030 senior notes”). The 2030 senior notes bear interest at a fixed rate of 3.3% per annum. Interest is payable semi-annually, and the Company has the right to redeem the 2030 senior notes at any time, in whole or in part, at a make-whole redemption price plus accrued and unpaid interest. In addition to customary event of default provisions, the indenture governing the 2030 senior notes limits the Company's ability to consolidate, merge or sell all or substantially all of its assets and requires the Company to make an offer to repurchase the 2030 senior notes upon certain change of control triggering events.
Junior Subordinated Notes
In September 2020, the Company issued $275.0 million of junior subordinated notes with a maturity date of September 30, 2060 (the “2060 junior subordinated notes”). The 2060 junior subordinated notes bear interest at a fixed rate of 4.750% per annum. Interest is payable quarterly, commencing on December 30, 2020, and the Company has the right to defer interest payments in accordance with the terms of the notes. The 2060 junior subordinated notes were issued at 100% of the principal amount and rank junior and subordinate in right of payment and upon liquidation to all of the Company’s current and future senior indebtedness. On or after September 30, 2025, at the Company’s option, the 2060 junior subordinated notes may be redeemed in whole or in part, at 100% of the principal amount, plus any accrued and unpaid interest. Prior to September 30, 2025, at the Company’s option, the 2060 junior subordinated notes may be redeemed in whole but not in part, at 100% of the principal amount, plus any accrued and unpaid interest, if certain changes in tax laws, regulations or interpretations occur; or at 102% of the principal amount, plus any accrued and unpaid interest, if a rating agency makes certain changes relating to the equity credit criteria for securities with features similar to the 2060 junior subordinated notes.
6.Derivative Financial Instruments
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company and its Affiliates may use derivative financial instruments to offset exposure to changes in interest rates, foreign currency exchange rates and markets.

In 2018, the Company entered into 2 separate pound sterling-denominated forward foreign currency contracts (the “forward contracts”) with a large financial institution (the “counterparty”). Concurrent to entering into each of the forward contracts, the Company also entered into 2 separate collar contracts (the “collar contracts”) with the same counterparty for the same notional amounts and expiration dates as each of the forward contracts. The combinations of the forward contracts and the collar contracts were designated as net investment hedges against fluctuations in foreign currency exchange rates on certain of the Company’s investments in Affiliates with the pound sterling as their functional currency.

In the first quarter of 2020, the Company terminated the forward contracts and the corresponding collar contracts, and upon settlement received net proceeds of $24.9 million. The net proceeds from the termination of the contracts are presented within sale of investment securities in the Consolidated Statements of Cash Flows. The Company’s forward contracts and collar contracts with the counterparty were governed by an International Swaps and Derivative Association Master Agreement, which provided for legally enforceable rights to set-off. The terms of the contracts also required the Company and the counterparty to post cash collateral in certain circumstances throughout the duration of the contracts. As of December 31, 2019, the Company held $8.7 million of cash collateral from the counterparty, and the counterparty held 0 cash collateral from the Company.

In the first quarter of 2020, the Company entered into an interest rate swap contract (the “interest rate swap”) with a large financial institution (the “swap counterparty”), which will expire in March 2023. The interest rate swap, which is designated as a cash flow hedge, is used to exchange the Company’s LIBOR-based interest payments for fixed rate payments. The Company receives payments based on one month LIBOR and makes payments based on an annual fixed rate of 0.5135% on a notional amount of $250.0 million. The terms of the contract also require the Company and the swap counterparty to post cash collateral in certain circumstances throughout the duration of the contract. As of September 30, 2020, the Company held 0 cash collateral from the swap counterparty, and the swap counterparty held $2.2 million of cash collateral from the Company.

Changes in the fair values of cash flow hedges are reported in Change in net realized and unrealized gain (loss) on derivative financial instruments in the Consolidated Statements of Comprehensive Income. Upon termination of the interest rate swap or the repayment of the Company’s outstanding LIBOR-based borrowings, any gain or loss recorded in Accumulated other comprehensive (loss) in the Consolidated Balance Sheets will be reclassified into earnings. Changes in the fair values of the effective net investment hedges are reported in Foreign currency translation gain (loss) in the Consolidated Statements of Comprehensive Income. Upon the sale or liquidation of the underlying investment, any gain or loss remaining in Accumulated other comprehensive loss related to the forward and collar contracts will be reclassified to earnings. The Company assesses hedge effectiveness on a quarterly basis.

Certain of the Company’s Affiliate sponsored investment products are considered VIEs because they are structured as partnerships (or similar entities) andAffiliates use forward foreign currency contracts to hedge the limited partners lack substantive kick-out or substantive participation rights overrisk of foreign exchange rate movements, which were not significant.

The following table summarizes the general partner. The Company's Affiliates’ involvement with sponsored investment products is generally limited to that of a service provider, and their seed capital investments, if any, represent an insignificant interest in the relevant investment products’ net assets. The Company’s and its Affiliates’ derivative financial instruments measured at fair value on a recurring basis:
December 31, 2019September 30, 2020
AssetsLiabilitiesAssetsLiabilities
Forward contracts$23.8 $(1.0)$2.6 $(1.9)
Put options0 (31.0)0 0 
Call options15.1 0 0 0 
Interest rate swap0 0 0 (2.1)
Total$38.9 $(32.0)$2.6 $(4.0)

The forward and collar contracts entered into in 2018 included a set-off right and were therefore, presented on a net basis in Other assets; they were $5.7 million as of December 31, 2019. The Company and certain of its consolidated Affiliates’ exposure to risk in these entities is generally limited to any capital contribution made or required to be made and any earned but uncollected management and performance fees. As a result, in most cases these VIEs areAffiliates have also entered into contracts that do not consolidatedinclude set-off rights and are accounted for under the equity method because neither the Company nor its Affiliates are deemed to be the primary beneficiary.therefore, presented on a gross basis in Other assets and Other liabilities; they were $2.2 million and $1.0 million, respectively, as of December 31, 2019 and $2.6 million and $4.0 million, respectively, as of September 30, 2020.


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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The net assetsfollowing tables summarize the effects of Affiliate sponsored investment products that were considered VIEs accounted for underderivative financial instruments on the equity methodConsolidated Statements of Comprehensive Income and the Company’s maximum riskConsolidated Statements of lossIncome:
For the Three Months Ended September 30,
20192020
Gain (Loss) Recognized in Other Comprehensive Income (Loss)Loss Reclassified from Accumulated Other Comprehensive Loss into Earnings
Gain Recognized in Earnings from Excluded Components(1)
Gain (Loss) Recognized in Other Comprehensive Income (Loss)Gain Reclassified from Accumulated Other Comprehensive Loss into Earnings
Gain (Loss) Recognized in Earnings from Excluded Components(1)
Forward contracts$22.8 $(0.0)$3.5 $0.4 $0.1 $0 
Put options(8.4)0 0 0 0 0 
Call options(7.5)0 0 0 0 0 
Interest rate swap0 0 0 (0.1)0 0 
Total$6.9 $(0.0)$3.5 $0.3 $0.1 $0 

For the Nine Months Ended September 30,
20192020
Gain (Loss) Recognized in Other Comprehensive IncomeGain Reclassified from Accumulated Other Comprehensive Loss into Earnings
Gain Recognized in Earnings from Excluded Components(1)
Gain (Loss) Recognized in Other Comprehensive IncomeGain Reclassified from Accumulated Other Comprehensive Loss into Earnings
Gain Recognized in Earnings from Excluded Components(1)
Forward contracts$32.6 $0.1 $10.4 $64.9 $0.4 $2.8 
Put options(2.8)0 0 (47.7)0 0 
Call options(22.5)0 — (1.3)0 0 
Interest rate swap0 0 0 (2.1)0 0 
Total$7.3 $0.1 $10.4 $13.8 $0.4 $2.8 
___________________________

(1)The excluded components of the forward contracts were recognized in earnings on a straight-line basis over the respective period of the contracts as follows:a reduction to Interest expense on the Consolidated Statements of Income.
 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
7.Commitments and Contingencies

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, was named as a defendant in various legal actions relating to the liquidation and closure of the Third Avenue Focused Credit Fund. The Company was named as a co-defendant in one of these actions, as a purported control person. In 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 related to the Focused Credit Fund. These claims, including those against the Company, were subsequently resolved in a court-approved settlement, and Third Avenue and its insurers paid amounts due under the settlement during the quarter and no additional expense was recognized.
The Company has committed to co-invest in certain Affiliate sponsored investment products. As of September 30, 2017,2020, these unfunded commitments were $94.9$129.4 million and may be called in future periods.
As of September 30, 2017,2020, the Company was obligated to make payments related to an investment in an Affiliate accounted for under the equity method. The maximum the Company is obligated to pay is $35.0 million in 2020 or 2021, and $37.5 million in 2022.
In addition, as of September 30, 2020, the Company was contingently liable upon the achievement by certain Affiliates of specified financial targets, to make payments related to the Company’s investmentsachievement of specified financial targets by certain of its Affiliates accounted for under the equity method, of which $150.0 million may become payable in these Affiliates2021, $77.5 million in 2022 and $62.5 million from 2023 through 2019. For its consolidated Affiliates,2025. As of September 30, 2020, the Company was contingently liable for up to $21.7 million, and expected to make payments of $8.9 million ($1.6 millionapproximately $53 million. The Company expects to make 0 payments in 2017). The present value2020. In
13
Table of these expected payments was $8.1 million. For its equity methodContents
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

the event certain financial targets are not met at one of the Company’s Affiliates, the Company was contingently liable formay receive payments of up to $170.0$12.5 million and expectedalso has the option to make no payments.reduce its ownership interest and receive an incremental payment of $25.0 million.
Affiliate equity interests provide holders with a conditional right to put their interests to the Company over time. See Note 13.14. In addition, in connection with an investmentone of the Company’s investments in an Affiliate, accounted for under the equity method, the Company entered into an arrangement with a minority owner ofhas the Affiliate that gives such owner the right to elect to sell a portion of its ownership interest in the Affiliate to the Company annually beginning inannually. If the minority owner sells its interest to the Company, then the Company will continue to account for the Affiliate under the equity method. In the fourth quarter of 2018. The purchase price2019, the Company was notified by the minority owner that it had elected to sell a 5% interest in the Affiliate to the Company. In the first quarter of these conditional purchases will be at fair market value on2020, with the dateconsent of the transaction.Company, the minority owner rescinded this notice. As of September 30, 2020, the minority owner maintains a 14% ownership interest in the Affiliate.
The Company and certain of its consolidated Affiliates operate under regulatory authorities that require that they maintainthe maintenance of 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.
8.Fair Value Measurements
7.Fair Value Measurements
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,
2019
 Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Financial Assets    
Investments in marketable securities$59.4 $24.4 $35.0 $0 
Derivative financial instruments(1)
7.9 0 7.9 0 
Financial Liabilities(2)
    
Affiliate equity repurchase obligations$19.8 $0 $0 $19.8 
Derivative financial instruments1.0 0 1.0 0 
   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 securities40.5
 40.5
 —
 —
Available-for-sale securities81.9
 81.9
 —
 —
Other investments3.4
 3.4
 —
 —
Foreign currency forward contracts(2)
0.6
 —
 0.6
 —
Financial Liabilities(2)
       
Contingent payment arrangements$8.6
 $—
 $—
 $8.6
Affiliate equity obligations12.1
 —
 —
 12.1
Foreign currency forward contracts0.5
 —
 0.5
 —


AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


   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 securities51.1
 51.1
 —
 —
Available-for-sale securities41.3
 41.3
 —
 —
Foreign currency forward contracts(2)
0.7
 —
 0.7
 —
Financial Liabilities(2)
       
Contingent payment arrangements$8.1
 $—
 $—
 $8.1
Affiliate equity obligations45.7
 —
 —
 45.7
Foreign currency forward contracts1.0
 —
 1.0
 —
  Fair Value Measurements
 September 30,
2020
 Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Financial Assets    
Investments in marketable securities$68.2 $27.5 $40.7 $0 
Derivative financial instruments(1)
2.6 0 2.6 0 
Financial Liabilities(2)
    
Affiliate equity repurchase obligations$69.9 $0 $0 $69.9 
Derivative financial instruments4.0 0 4.0 0 
__________________________

(1)
Principally investments in equity securities.

(2)
(1)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.presented within Other assets.
Cash equivalents consist primarily of highly liquid investments in daily redeeming money market funds, without enacted liquidity fees or redemption gates that
(2)Amounts are valued at net asset value (“NAV”).
Investments in marketable securities consist primarily of investments in publicly traded securities and funds advised by Affiliates that are valued at NAV. Publicly traded securities valued using unadjusted quoted market prices for identical instruments in active markets are classified as level 1. Publicly traded securities valued using quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active 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.
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 September 30, 2016 and 2017.presented within Other liabilities.
Level 3 Financial Assets and Liabilities
The following tables present the changes in level 3 liabilities:assets and liabilities for Affiliate equity repurchase obligations:
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



 For the Three Months Ended September 30,
 20162017
 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) losses0.2
(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, For the Three Months Ended September 30,For the Nine Months Ended September 30,
2016 20172019202020192020
Contingent Payment Arrangements Affiliate Equity Obligations Contingent Payment Arrangements Affiliate Equity Obligations
Balance, beginning of period$10.2
 $62.3
 $8.6
 $12.1
Balance, beginning of period$57.4 $73.3 $36.2 $19.8 
Net realized and unrealized (gains) losses(2.0)
(1) 
0.1
 2.3
(1) 
(0.2)
Purchases and issuances—
 48.2
 —
 161.5
Net realized and unrealized (gains) losses(1)
Net realized and unrealized (gains) losses(1)
0.7 (0.2)0.6 (4.1)
Purchases and issuances(2)
Purchases and issuances(2)
12.1 85.8 85.1 292.8 
Settlements and reductions—
 (83.9) (2.8) (127.7)Settlements and reductions(33.4)(89.0)(85.1)(238.6)
Balance, end of period$8.2
 $26.7
 $8.1
 $45.7
Balance, end of period$36.8 $69.9 $36.8 $69.9 
       
Net change in unrealized (gains) losses relating to instruments still held at the reporting date$(2.0)
(1) 
$—
 2.3
(1) 
$—
Net change in unrealized (gains) losses relating to instruments still held at the reporting date$0 $0 $0 $0 
___________________________


(1)
(1)Accretion expense for these arrangements and obligations is recorded in Interest expense.

(2)Includes transfers from Redeemable non-controlling interests.
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:fair value measurements:
 Quantitative Information About Level 3 Fair Value Measurements
December 31, 2019September 30, 2020
 Valuation
Techniques		Unobservable
Input		Fair ValueRange
Weighted Average(1)
Fair ValueRange
Weighted Average(1)
Affiliate equity repurchase obligationsDiscounted cash flow
Growth rates(2)
$19.8 (9)% - 7%5%$69.9 (1)% - 8%7%
 Discount rates 14% - 17%15% 14% - 16%15%
 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 September 30, 2017 
Range at
 September 30, 2017
Contingent payment arrangementsDiscounted cash flow Growth rates $8.6
 3% - 8% $8.1
 8% - 9%
   Discount rates  
 14% - 15%  
 14% - 15%
Affiliate equity obligationsDiscounted cash flow Growth rates 12.1
 4% - 10% 45.7
 5% - 9%
   Discount rates  
 15% - 16%  
 12% - 16%
___________________________
(1)Calculated by comparing the relative fair value of an obligation to its respective total.
(2)Represents growth rates of asset and performance based fees.
Affiliate equity repurchase obligations include agreements to repurchase Affiliate equity. As of September 30, 2020, there were no changes to growth or discount rates that had a significant impact to Affiliate equity repurchase obligations recorded in prior periods.
Investments Measured at NAV as a Practical Expedient
The Company’s Affiliates sponsor investment products in which the Company and its Affiliates may make general partner and seed capital investments. The Company uses the NAVnet asset value (“NAV”) of these investments as a practical expedient for their fair value.values and reports these investments within Other investments on the Consolidated Balance Sheets. The following table summarizes the naturefair value of the Company’sthese investments unfunded commitments and any related liquidity restrictions or other factors that may impactunfunded commitments:
 December 31, 2019September 30, 2020
Category of InvestmentFair ValueUnfunded
Commitments		Fair ValueUnfunded
Commitments
Private equity funds(1)
$203.3 $127.2 $208.7 $129.4 
Investments in other strategies(2)
8.5 0 6.3 0 
Total(3)
$211.8 $127.2 $215.0 $129.4 
___________________________

(1)The Company accounts for its interests in private equity funds under the ultimate value realized:equity method of accounting and, therefore, 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 third-party funds and 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.
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



(2)These are multi-disciplinary funds that invest across various asset classes and strategies, including 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 $137.6 million and $145.9 million as of December 31, 2019 and September 30, 2020, respectively.
 December 31, 2016 September 30, 2017
Category of InvestmentFair Value 
Unfunded
Commitments
 Fair Value 
Unfunded
Commitments
Private equity funds(1)
$137.8
 $92.2
 $151.9
 $94.9
Other funds(2)
9.7
 —
 8.6
 —
Other investments(3)
$147.5
 $92.2
 $160.5
 $94.9
___________________________

(1)
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)
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 Company has other financial assets and liabilities, which are not required to be carried at fair value, but the Company is required to disclose their fair values. The carrying amount of Cash and cash equivalents, 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 hascredit facilities have 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, 2019September 30, 2020
Carrying ValueFair ValueCarrying ValueFair ValueFair Value Hierarchy
Senior notes$746.8 $797.4 $1,097.2 $1,197.2 Level 2
Junior convertible securities315.4 415.7 317.7 390.4 Level 2
Junior subordinated notes290.7 327.7 565.7 607.9 Level 2
As of December 31, 2019, and September 30, 2020, the Company held investments without readily determinable fair values of 0 and $8.5 million, respectively.
9.Goodwill and Acquired Client Relationships
 December 31, 2016 September 30, 2017  
 Carrying Value Fair Value Carrying Value Fair Value Fair Value Hierarchy
Senior notes$945.1
 $936.0
 $745.5
 $779.6
 Level 2
Convertible securities307.5
 466.9
 309.3
 527.8
 Level 2
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
  Total
Balance, as of December 31, 2016 $2,628.1
Foreign currency translation 33.7
Balance, as of September 30, 2017 $2,661.8
Goodwill
Balance, as of December 31, 2019$2,651.7 
Foreign currency translation(11.0)
Other(1.9)
Balance, as of September 30, 2020$2,638.8 

As of September 30, 2017,2020, the Company completed its annual impairment assessmentsassessment on its goodwill and no0 impairment was indicated.
 Acquired Client Relationships (Net)
 Definite-livedIndefinite-livedTotal
 Gross Book
Value		Accumulated
Amortization		Net Book
Value		Net Book
Value		Net Book
Value
Balance, as of December 31, 2019$1,248.8 $(1,039.0)$209.8 $972.2 $1,182.0 
Intangible amortization and impairments— (62.7)(62.7)(70.7)(133.4)
Foreign currency translation(3.2)1.7 (1.5)(11.9)(13.4)
Transfers(1)
(85.7)85.7 — — — 
Balance, as of September 30, 2020$1,159.9 $(1,014.3)$145.6 $889.6 $1,035.2 
(1)Transfers include acquired client relationships at Affiliates that were deconsolidated during the period.

Definite-lived acquired client relationships at the Company’s consolidated Affiliates are amortized over their expected period of economic benefit. The Company recorded amortization expense within Intangible amortization and impairments were indicated.in
16
 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 translation5.0
 —
 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
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



Definite-lived acquired client relationships are amortized over their expected useful lives. Asthe Consolidated Statements 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,Income for these relationships of $26.9$21.1 million and $82.2$72.0 million for the three and nine months ended September 30, 2016,2019, respectively, and $21.2$7.0 million, and $65.1$48.2 million for the three and nine months ended September 30, 2017,2020, respectively. Based on relationships existing as of September 30, 2017,2020, the Company estimates that its consolidated annual amortization expense will be approximately $85$10 million for the remainder of 2020, approximately $30 million in each of 2017, 20182021, 2022 and 2019, $502023, approximately $20 million in 20202024 and $30approximately $10 million in 2021.2025.

9.Equity Method Investments in Affiliates
In 2016,the second quarter of 2020, the Company agreed with a consolidated Affiliate to strategically reposition their business and to sell its equity interest in the Affiliate. The Company recorded an expense in Intangible amortization and impairments of $32.8 million attributable to the controlling interest ($60.3 million in aggregate) to reduce the carrying value of the Affiliate’s acquired client relationships to zero as of June 30, 2020. In July 2020, the Company sold its interest in the Affiliate and the Company recorded no significant gain or loss on the transaction.

In the third quarter of 2020, the Company completed investmentsan impairment assessment of the indefinite-lived acquired client relationships at one of its Affiliates, and determined that the fair value of the asset had declined below its carrying value. Accordingly, the Company recorded an expense in Systematica Investments L.P.Intangible amortization and Baring Private Equity Asia, bothimpairments of which closed on January 4, 2016, Capula Investment Management, LLP, Mount Lucas Management LP$12.5 million attributable to the controlling interest ($14.0 million in aggregate) to reduce the carrying value of the asset to fair value. The decline in the fair value was a result of a projected decline in assets under management that decreased the forecasted revenue associated with the asset. The fair value of the asset was determined using a discounted cash flow analysis, a level 3 fair value measurement that included a projected growth rate of (14)% for assets under management, discount rate of 15% for asset based fees, and Capeview Capital LLP, alla market participant tax rate of which closed on July 1, 2016, Partner Fund Management, L.P., which closed on25%.

In addition, the Company recorded an expense in Intangible amortization and impairments of $7.4 million attributable to the controlling interest ($10.9 million in aggregate) to reduce the carrying value of an indefinite-lived acquired client relationship to zero due to the closure of one of its Affiliate’s retail investment products.
As of September 30, 2016,2020, no other impairments of indefinite-lived acquired client relationships were indicated. If financial markets worsen as a result of the novel coronavirus global pandemic (“COVID-19”) or other factors, the fair values of these assets could drop below their carrying values resulting in future impairments.
10.Equity Method Investments in Affiliates
In the first quarter of 2020, the Company completed its minority investment in Comvest Partners, and Winton Group Ltd., which closed on October 4, 2016.in the third quarter of 2020, the Company established a minority equity interest in Inclusive Capital Partners. The Company’s purchase price allocations were completedallocation for each transaction was measured using financial models that included assumptions of expected market performance, net client cash flows and discount rates. The majority of the consideration paid is deductible for U.S. tax purposes over a 15-year life.
The financial results of certain Affiliates accounted for under the equity method, Affiliatesincluding those of Comvest Partners, 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 relationships36.9
Tangible assets2.0
Deferred tax liability(91.8)
Goodwill854.4
 $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 September 30, 2016, respectively, and $15.5 million and $33.9 million in the three and nine months ended September 30, 2017, respectively.
The following table presents the change in Equity method investments in Affiliates:Affiliates (net):
Equity Method Investments in Affiliates (Net)
Balance, as of December 31, 2019$2,195.6 
Earnings171.7 
Intangible amortization and impairments(250.5)
Distributions of earnings(197.2)
Foreign currency translation(21.6)
Investments in Affiliates87.1 
Other(10.4)
Balance, as of September 30, 2020$1,974.7 
 Total
Balance, as of December 31, 2016$3,368.3
Equity method earnings303.3
Equity method intangible amortization(71.7)
Distributions of earnings from equity method investments(368.0)
Investments29.8
Foreign currency translation32.1
Other(3.0)
Balance, as of September 30, 2017$3,290.8
As of September 30, 2017, the definite-livedDefinite-lived acquired client relationships at all of the Company’s Affiliates accounted for under the equity method Affiliates were beingare amortized over a weighted average lifetheir expected period of approximately 10 years.economic benefit. The Company recognized amortization expense for these relationships of $14.0$42.1 million and $43.0$104.1 million for the three and nine months ended September 30, 2016,2019, respectively, and $25.9$34.3 million and $71.7$110.5 million for the three and nine months ended September 30, 2017,2020, respectively. Based on relationships existing as
17
Table 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.Contents
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



existing as of September 30, 2020, the Company estimates the amortization expense attributable to its Affiliates will be approximately $40 million for the remainder of 2020, approximately $120 million in 2021, and approximately $50 million in each of 2022, 2023, 2024 and 2025.
In the first quarter of 2019, the Company recorded a $415.0 million expense to reduce the carrying value of an Affiliate to fair value. In March 2019, the Company concluded that the growth expectations of the Affiliate had declined and determined that the estimated fair value of the Affiliate had also declined meaningfully. Therefore, the Company performed a valuation to determine whether the fair value of the Affiliate had declined below its carrying value. The fair value of the investment was determined using a discounted cash flow analysis, a level 3 fair value measurement, that included a projected compounded asset based fee growth over the first five years of (13)%, discount rates of 11% and 20% for asset and performance based fees, respectively, and a market participant tax rate of 25%. Based on the discounted cash flow analysis, the Company concluded that the fair value of its investment had declined below its carrying value and that the decline was other-than-temporary. In October 2019, the Company sold its interest in the Affiliate.

In the third quarter of 2019, the Company recorded a $10.0 million expense to reduce the carrying value of an Affiliate to fair value. The fair value of the investment was determined using a discounted cash flow analysis, a level 3 fair value measurement, that included a projected growth rate of (20)%, discount rates of 11% and 20% for asset and performance based fees, respectively, and a market participant tax rate of 25%. Based on the discounted cash flow analysis, the Company concluded that the fair value of its investment had declined below its carrying value and that the decline was other-than-temporary.

In the first quarter of 2020, the Company recorded a $140.0 million expense to reduce the carrying value of an Affiliate to fair value. The decline in the fair value was a result of a decline in assets under management and a reduction in projected growth, which decreased the forecasted revenue associated with the investment. The fair value of the investment was determined using a discounted cash flow analysis, a level 3 fair value measurement, that included projected compounded growth in assets under management over the first five years of (2)%, discount rates of 11% and 20% for asset and performance based fees, respectively, and a market participant tax rate of 25%. Based on the discounted cash flow analysis, the Company concluded that the fair value of its investment had declined below its carrying value and that the decline was other-than-temporary.
As of September 30, 2020, the estimated fair values of the Company’s Affiliates accounted for under the equity method exceeded their carrying values. If financial markets worsen as a result of COVID-19 or other factors, or the financial performance of an Affiliate worsens as a result of net client cash outflows or performance, regardless of the performance of financial markets, the fair values of these assets could drop below their carrying values for periods considered other than temporary, resulting in future impairments.

The Company has determined that onecertain of its Affiliates accounted for under the equity method Affiliates isare significant under Rule 10-01(b)(1) of Regulation S-X. For the three and nine months ended September 30, 2016, this equity method Affiliate2019, these Affiliates recognized revenue of $230.2$122.7 million and $658.6$429.8 million, respectively, and net income of $126.4$75.2 million and $361.0$290.9 million, respectively. For the three and nine months ended September 30, 2017, this equity method Affiliate2020, these Affiliates recognized revenue of $301.8$116.2 million and $826.6$524.5 million, respectively, and net income of $178.3$74.2 million and $471.3$379.5 million, respectively.
10.Related Party Transactions
11.Related Party Transactions
A prior owner of one of the Company’s consolidated Affiliates retained an interestretains interests in certain of the Affiliate’s private equity investment partnerships.partnerships and, as a result, is a related party of the Company. The prior owner’s interest isinterests are 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 $67.8and were $38.5 million and $64.1$33.8 million atas of December 31, 20162019 and September 30, 2017, respectively. The total non-controlling interest was $2.5 million and $0.8 million at December 31, 2016 and September 30, 2017,2020, respectively.
The Company may invest from time to time in funds or products advised by its Affiliates. The Company’s executive officers and directors may invest from time to time in funds advised or products offered by its Affiliates on substantially the same terms as other investors. In addition, the Company and its Affiliates earn asset based revenue,and performance fees, distribution and servicing and otherbased fees and incur distribution and servicing and other expenses for services provided to Affiliate sponsored investment products. In addition, Affiliate management owners and Companythe Company’s officers may serve as trustees or directors of certain investment vehicles from which the Company or an Affiliate earns 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 $8.1 million as of December 31, 2016 and September 30, 2017, respectively, and were included in Other liabilities.fees.
The Company has related party transactions in association with its contingent payment arrangements and Affiliate equity transactions, as more fully described in Notes 127, 13 and 13.14.
18
11.Share-Based Compensation
The following is a summary of share-based compensation expense:
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2017 2016 2017
Share-based compensation$10.7
 $10.3
 $30.7
 $30.0
Tax benefit4.1
 4.0
 11.8
 11.5
The Company had $66.4 million and $73.8 million
Table of unrecognized share-based compensation as of December 31, 2016 and September 30, 2017, respectively, which will be recognized over a weighted average period of approximately three years (assuming no forfeitures).Contents
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)
Unexercised options outstanding - December 31, 20161.4
 $108.53
  
Options granted0.0
 168.60
  
Options exercised(0.6) 96.86
  
Options forfeited(0.1) 140.26
  
Unexercised options outstanding - September 30, 20170.7
 118.35
 3.5
Exercisable at September 30, 20170.3
 108.55
 1.5

For the nine months ended September 30, 2016 and 2017, the Company granted stock options with fair values of $16.4 million and $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.12.Share-Based Compensation
The fair valuefollowing table presents share-based compensation expense:
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2019202020192020
Share-based compensation$11.7 $15.7 $30.7 $46.4 
Tax benefit2.0 2.9 6.7 8.4 

As of options granted was estimated usingDecember 31, 2019, the Black-Scholes option pricing model. For the nine months endedCompany had unrecognized share-based compensation expense of $106.6 million. As of September 30, 2016 and 2017,2020, the Company had unrecognized share-based compensation expense of $88.8 million, which will be recognized over a weighted average fair valuesperiod of options granted were $39.02 and $48.05, per option, respectively, based on the weighted-average grant date assumptions stated below.
  For the Nine Months Ended September 30,
  2016 2017
Dividend yield —
 0.5%
Expected volatility 30.7% 28.0%
Risk-free interest rate 1.6% 2.1%
Expected life of options (in years) 5.7
 5.7
Forfeiture rate —
 —
approximately three years (assuming no forfeitures).
Restricted Stock
The following table summarizes transactions in the Company’s restricted stock units:
Restricted Stock UnitsWeighted Average Grant Date Value
Restricted
Stock Units
 
Weighted
Average
Grant Date
Value
Unvested units - December 31, 20160.6
 $168.84
Unvested units - December 31, 2019Unvested units - December 31, 20191.1 $123.70 
Units granted0.2
 153.09
Units granted0.4 73.73 
Units vested(0.2) 167.72
Units vested(0.4)141.67 
Units forfeited(0.0) 170.52
Units forfeited(0.0)136.54 
Unvested units - September 30, 20170.6
 162.97
Performance condition changesPerformance condition changes(0.0)121.96 
Unvested units - September 30, 2020Unvested units - September 30, 20201.1 99.21 
For the nine months ended September 30, 20162019 and 2017,2020, the Company granted awardsrestricted stock units with fair values of $28.0$60.6 million and $36.7$31.6 million, respectively. These awardsrestricted stock units were valued based on the closing price of the Company’s common stock on the grant date and containthe number of shares expected to be delivered. Restricted stock units containing vesting conditions requiringgenerally require service over a period of three years to four years. In certain circumstances, awardsyears and may also require the satisfaction of certain performance conditions. For awards with performance conditions, the number of restricted stock units expected to be satisfied.vest may change over time depending upon the performance level achieved.
Stock Options
The following table summarizes transactions in the Company’s stock options:
Stock OptionsWeighted Average
Exercise Price		Weighted Average
Remaining
Contractual Life
(Years)
Unexercised options outstanding - December 31, 20192.3 $85.58  
Options granted0.2 74.29 
Options exercised0 0 
Options forfeited(0.0)128.20  
Performance condition changes0 0 
Unexercised options outstanding - September 30, 20202.5 84.03 5.2
Exercisable at September 30, 20200.4 128.91 1.9
For the nine months ended September 30, 2019 and 2020, the Company granted stock options with fair values of $33.3 million and $4.4 million, respectively. Stock options generally vest over a period of three years to five years and expire seven years after the grant date. All stock options have been granted with exercise prices equal to the closing price of the Company’s common stock on the grant date. Substantially all of the Company’s outstanding stock options contain both service and
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12.Redeemable Non-Controlling Interests
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

performance conditions. For awards with performance conditions, the number of stock options expected to vest may change over time depending upon the performance level achieved.
The weighted average fair value of options granted was $18.36 and $18.23, per option, for the nine months ended September 30, 2019 and 2020, respectively. The Company uses the Black-Scholes option pricing model to determine the fair value of options. The weighted average grant date assumptions used to estimate the fair value of stock options granted were as follows:
For the Nine Months Ended September 30,
20192020
Dividend yield0.9 %1.6 %
Expected volatility26.2 %30.4 %
Risk-free interest rate2.9 %0.9 %
Expected life of options (in years)5.75.7
Forfeiture rate0 %0 %

13.Redeemable Non-Controlling Interests
Affiliate equity interests provide holders with a ratable portion of ownershipan equity interest in one of the Company’s consolidated 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 years 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 redemptionPrior to becoming redeemable, the value of the Company’s Affiliate equity is presented within Non-controlling interests. Upon becoming redeemable, the value of these interests is reclassified and the current redemption value of these interests is presented as Redeemable non-controlling interests. Changes in the current redemption value are recorded to Additional paid-in capital. When the Company receives a put notice, and, therefore, has an unconditional obligation to repurchase Affiliate equity interests, they are reclassified to Other liabilities.

The following table presents the changes in Redeemable non-controlling interests:
  Redeemable Non-controlling interests
Balance, as of December 31, 2016 $673.5
Changes attributable to consolidated products 9.5
Repurchases of redeemable Affiliate equity (151.6)
Transfers from non-controlling interests 56.8
Changes in redemption value 216.4
Balance, as of September 30, 2017 $804.6
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


13.Redeemable Non-controlling Interests
Balance, as of December 31, 2019(1)
$916.7 
Changes attributable to consolidated Affiliate Equitysponsored investment products3.9 
Transfers to Other liabilities(292.8)
Transfers from Non-controlling interests5.6 
Changes in redemption value18.6 
Balance, as of September 30, 2020(1)
$652.0 
___________________________
(1)As of December 31, 2019 and September 30, 2020, Redeemable non-controlling interests includes consolidated Affiliate sponsored investment products primarily attributable to third-party investors of $21.6 million and $25.5 million, respectively.
14.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 nine months ended September 30, 20162019 and 2017,2020, distributions paid to Affiliate equity holders (non-controlling interests) were $270.1$276.6 million and $266.8$249.1 million, respectively.


The Company periodically repurchases Affiliate equity interests from and issues Affiliate equity to the Company’s consolidated Affiliate partners and its officers under agreements that provide the Company with a conditional right to call and Affiliate equity holders the conditional right to put their Affiliate equity interests to its Affiliate equity holders.the Company at certain intervals. For the nine months ended September 30, 20162019 and 2017,2020, the amount of cash paid for repurchases was $82.1$85.2 million and $121.3$249.6 million,
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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

respectively. For the nine months ended September 30, 20162019 and 2017,2020, the total amount of cash received for issuances was $11.8$10.4 million and $8.8$17.1 million, respectively.


Sales and repurchases of Affiliate equity generally occur at fair value; however, the Company also grants Affiliate equity to its consolidated Affiliate partners employees and its 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 suchthe difference is recorded as compensation expense in Compensation and related expenses in the Consolidated Statements of Income over the requisite service period.
The following is a summary oftable presents Affiliate equity compensation expense:
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30,For the Nine Months Ended September 30,
2016 2017 2016 20172019202020192020
Controlling interest$3.2
 $2.3
 $7.7
 $9.4
Controlling interest$2.3 $3.5 $7.3 $11.4 
Non-controlling interests18.5
 7.7
 27.2
 29.2
Non-controlling interests6.9 6.0 24.9 24.9 
Total$21.7
 $10.0
 $34.9
 $38.6
Total$9.2 $9.5 $32.2 $36.3 
The following is a summary oftable presents unrecognized Affiliate equity compensation expense:

Controlling Interest Remaining Life Non-controlling Interests Remaining Life
December 31, 2016$31.3
 4 years $70.7
 5 years
September 30, 201733.0
 4 years 82.5
 5 years
Controlling InterestRemaining LifeNon-controlling InterestsRemaining Life
December 31, 2019$40.9 4 years$124.6 6 years
September 30, 202037.6 4 years115.2 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.period and other related transactions. The total amount receivable was $22.9$14.8 million and $10.9$14.6 million atas of December 31, 20162019 and September 30, 2017,2020, respectively, and was included in Other assets. The total amount payable was $12.1$19.8 million and $45.7$69.9 million as of December 31, 20162019 and September 30, 2017,2020, 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 the Consolidated Statements of 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 disclosespresents the cumulative effect that ownership changes had on the controlling interest’s equity related only to Affiliate equity transactions that settled during the applicable periods:
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2019202020192020
Net income (loss) (controlling interest)$86.3 $71.3 $(6.8)$86.3 
(Decrease) increase in controlling interest paid-in capital from Affiliate equity issuances(1.9)2.9 (2.8)1.6 
Decrease in controlling interest paid-in capital from Affiliate equity repurchases(7.6)(65.4)(38.2)(226.0)
Net income (loss) (controlling interest) including the net impact of Affiliate equity transactions$76.8 $8.8 $(47.8)$(138.1)

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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



15.Income Taxes
 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 issuances5.3
 (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
14.Income Taxes
The Company’s 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:interests.
The following table presents the consolidated provision for income taxes:
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2019202020192020
Controlling interest:  
Current taxes$24.7 $4.4 $73.7 $25.0 
Intangible-related deferred taxes3.5 27.0 (83.6)(7.1)
Other deferred taxes0.1 1.1 6.8 15.8 
Total controlling interest28.3 32.5 (3.1)33.7 
Non-controlling interests:    
Current taxes$2.3 $3.1 $7.7 $7.4 
Deferred taxes(0.1)1.9 (0.2)1.9 
Total non-controlling interests2.2 5.0 7.5 9.3 
Income tax expense$30.5 $37.5 $4.4 $43.0 
Income (loss) before income taxes (controlling interest)$114.6 $103.8 $(9.9)$120.0 
Effective tax rate (controlling interests)(1)
24.7 %31.3 %31.5 %28.1 %
___________________________
(1)Taxes attributable to the controlling interest divided by income (loss) before income taxes (controlling interest).

The Company’s effective tax rate (controlling interest) increased to 31.3% for the three months ended September 30, 2020, primarily due to an $8.1 million deferred tax expense resulting from the revaluation of certain of the Company’s deferred tax liabilities due to an increase in the UK tax rate during the period.

The Company’s effective tax rate (controlling interest) decreased to 28.1% for the nine months ended September 30, 2020, primarily due to a $129.9 million increase in Income before income taxes (controlling interest) and state and foreign income tax accruals in the nine months ended September 30, 2019 that did not recur in 2020.
16.Earnings Per Share
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2017 2016 2017
Controlling interest:       
Current tax$29.5
 $39.6
 $84.2
 $102.0
Intangible-related deferred taxes19.5
 22.9
 63.0
 61.8
Other deferred taxes1.1
 1.6
 8.4
 18.7
Total controlling interest50.1
 64.1
 155.6
 182.5
Non-controlling interests:       
Current tax$1.5
 $2.1
 $5.7
 $5.9
Deferred taxes(1.3) (0.1) (1.6) (0.2)
Total non-controlling interests0.2
 2.0
 4.1
 5.7
Provision for income taxes$50.3
 $66.1
 $159.7
 $188.2
Income before income taxes (controlling interest)$160.3
 $189.5
 $478.1
 $556.7
Effective tax rate attributable to controlling interest(1)
31.3% 33.8% 32.5% 32.8%
__________________________

(1)
Taxes attributable to the controlling interest divided by Income before income taxes (controlling interest).
15.Earnings Per Share
The calculation of basic earningsEarnings (loss) per share (basic) is based on the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted earningsEarnings (loss) per share (diluted) is similar to basic earningsEarnings (loss) per share (basic), but adjusts for the dilutive effect of the potential issuance of incremental shares of the Company’s common stock.

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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following is a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings (loss) per share available to common stockholders.stockholders:
AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


For the Three Months Ended September 30, For the Nine Months Ended September 30, For the Three Months Ended September 30,For the Nine Months Ended September 30,
2016 2017 2016 2017 2019202020192020
Numerator       Numerator  
Net income (controlling interest)$110.2
 $125.4
 $322.5
 $374.2
Interest expense on convertible securities, net of taxes3.9
 3.9
 11.6
 11.6
Net income (controlling interest), as adjusted$114.1
 $129.3
 $334.1
 $385.8
Net income (loss) (controlling interest)Net income (loss) (controlling interest)$86.3 $71.3 $(6.8)$86.3 
Interest expense on junior convertible securities, net of taxesInterest expense on junior convertible securities, net of taxes0 0 0 0 
Net income (loss) (controlling interest), as adjustedNet income (loss) (controlling interest), as adjusted$86.3 $71.3 $(6.8)$86.3 
Denominator       Denominator    
Average shares outstanding (basic)53.9
 55.8
 53.9
 56.3
Average shares outstanding (basic)50.4 46.3 51.1 47.1 
Effect of dilutive instruments:       Effect of dilutive instruments:    
Stock options and restricted stock units0.5
 0.3
 0.5
 0.3
Stock options and restricted stock units0.0 0.2 0 0.1 
Junior convertible securities2.2
 2.2
 2.2
 2.2
Average shares outstanding (diluted)56.6
 58.3
 56.6
 58.8
Average shares outstanding (diluted)50.4 46.5 51.1 47.2 
Average shares outstanding (diluted) in the table above exclude share awardsexcludes stock options and restricted stock units that have not satisfiedmet certain performance conditions and theitems that have an anti-dilutive effect on Earnings (loss) per share (diluted). The following is a summary of items excluded from the following shares:denominator in the table above:
For the Three Months Ended September 30, For the Nine Months Ended September 30, For the Three Months Ended September 30,For the Nine Months Ended September 30,
2016 2017 2016 2017 2019202020192020
Stock options and restricted stock units0.5
 0.0
 0.7
 0.1
Stock options and restricted stock units2.3 2.9 2.4 3.1 
Shares subject to forward sale agreement2.0
 —
 2.0
 —
Junior convertible securitiesJunior convertible securities2.2 2.2 2.2 2.2 
The Company may settle portions of its Affiliate equity purchases in shares of its common stock. Because it is the Company’s intentintention to settle these potential purchases in cash, the calculation of diluted earnings per shareAverage shares outstanding (diluted) excludes any potential dilutive effect from possible share settlements of Affiliate equity purchases.
InFor the three and nine months ended September 30, 2017,2020, the Company repurchased 0.41.3 million and 1.72.8 million shares, respectively, of its common stock, at an average price per share of $175.68$67.82 and $164.00,$72.22, respectively.
16.Comprehensive Income
17.Comprehensive Income
The following tables showpresent the tax effects allocated to each component of Other comprehensive income (loss):
For the Three Months Ended September 30,
20192020
Pre-TaxTax BenefitNet of TaxPre-TaxTax ExpenseNet of Tax
Foreign currency translation gain (loss)$(41.2)$3.6 $(37.6)$25.2 $(0.5)$24.7 
Change in net realized and unrealized gain on derivative financial instruments0.5 0 0.5 0.2 0 0.2 
Other comprehensive income (loss)$(40.7)$3.6 $(37.1)$25.4 $(0.5)$24.9 
For the Nine Months Ended September 30,
20192020
Pre-TaxTax BenefitNet of TaxPre-TaxTax (Expense)
Benefit		Net of Tax
Foreign currency translation gain (loss)$(34.6)$9.7 $(24.9)$(39.7)$(11.7)$(51.4)
Change in net realized and unrealized gain (loss) on derivative financial instruments1.0 0 1.0 (2.6)0.5 (2.1)
Other comprehensive income (loss)$(33.6)$9.7 $(23.9)$(42.3)$(11.2)$(53.5)
23
 For the Three 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$(16.8) $—
 $(16.8) $53.0
 $—
 $53.0
Change in net realized and unrealized gain (loss) on derivative securities0.1
 (0.0) 0.1
 0.2
 (0.1) 0.1
Change in net unrealized gain (loss) on investment securities5.8
 (1.8) 4.0
 (6.8) 2.5
 (4.3)
Other comprehensive income (loss)$(10.9) $(1.8) $(12.7) $46.4
 $2.4
 $48.8
Table of Contents
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),loss, net of taxes, were as follows:
Foreign
Currency
Translation
Adjustment		Realized and
Unrealized Gains (Losses)
on Derivative Financial Instruments		Total
Balance, as of December 31, 2019$(177.1)$1.2 $(175.9)
Other comprehensive loss before reclassifications(51.4)(2.5)(53.9)
Amounts reclassified0 0.4 0.4 
Net other comprehensive loss(51.4)(2.1)(53.5)
Balance, as of September 30, 2020$(228.5)$(0.9)$(229.4)
24
 
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
 $(203.7)
Other comprehensive gain (loss) before reclassifications92.1
 (0.4) 13.8
 105.5
Amounts reclassified—
 (0.4) (17.2) (17.6)
Net other comprehensive gain (loss)92.1
 (0.8) (3.4) 87.9
Balance, as of September 30, 2017$(121.8) $(0.4) $6.4
 $(115.8)
__________________________

(1)
See Note 3 for amounts reclassified from Other comprehensive income (loss).
17.Segment Information
In the first quarterTable of 2017, the Company’s Chief Operating Decision Maker (the “CODM”) changed the manner in which he assesses the Company’s performance. In 2016, the CODM assessed the performance of the Company in three business segments representing 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. 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.Contents


Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
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,” “preliminary,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “projects,” “positioned,” “prospects,” “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.
2019, and also under “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the period ended March 31, 2020. These factors (among others) could affect our financial condition, business activities, results of operations, cash flows or overall financial performance and could cause our actual results and business activities to differ materially from historical earningsperiods 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 of Financial Condition and Results of Operations should be read in conjunction with theour Consolidated Financial Statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q.
Executive Overview
We are a global asset management company with equity investments in leadinghigh-quality boutique investment management firms, which we refer to ascall 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 shareholderlong-term value by investing in leading independent active investment managers, through a proven partnership approach, and allocating resources across our unique opportunity set to the areas of highest growth of existing Affiliates, as well as through investmentsand return. Through our innovative partnership approach, each Affiliate’s management team retains significant equity ownership in new Affiliates and additional investments in existing Affiliates.their firm while maintaining operational autonomy. In addition, we provideoffer centralized assistancecapabilities to our Affiliates in strategic matters,across a variety of areas, including strategy, marketing and distribution, and product development and operations.development. As of September 30, 2017,2020, our aggregate assets under management were $803.7$653.5 billion, in more than 550 investment products across a broad range of active, return-oriented strategies.
During the nine months ended September 30, 2020, the pandemic caused by the novel coronavirus (“COVID-19”) had a significant impact on the global economy, which may continue for months to come. The overall extent and duration of COVID-19 on businesses and economic activity generally remains unclear. We hold meaningful equity interests in eachand our Affiliates remain focused on the health and well-being of the individuals and families at AMG, our Affiliates, and the community at large. Given the nature of our Affiliates. In certain cases,decentralized operations and our entrepreneurial culture, we consolidateand our Affiliates remain fully operational and have experienced minimal disruption in continuing to serve our key stakeholders, most importantly our clients.  We continue to monitor the Affiliate’seconomic uncertainty related to COVID-19, and the extent of the impact on our business operations and financial results will depend on a number of factors and future developments, which are uncertain and cannot be predicted. 

Operating Performance Measures
Under accounting principles generally accepted in the U.S. (“GAAP”), we are required to consolidate certain of our Revenue, Operating expensesAffiliates and 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 and are integral to our operations. Accordingly, Income from equity method investments is included in Operating income.
others. Whether we account forconsolidate an Affiliate on a consolidated or use the equity method basis of accounting, we generally maintain the same innovative partnership approach and provide support and assistance in substantially the same manner andfor all of our operating model is generally the same.Affiliates. Furthermore, all of our Affiliates are boutique investment managers and are impacted by similar marketplace factors and operational trends, which may not be observable when analyzing the financial results ofindustry trends. Therefore, our consolidated and equity method Affiliates separately. Therefore, we believe ourkey aggregate operating performance 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 increasinglyare important in providing management and investors with a more comprehensive view of the operating performance and material trends across our entire business. Aggregate revenue
The following table presents our key aggregate operating performance measures:
25
Table of Contents
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)20192020% Change20192020% Change
Assets under management$750.7 $653.5 (13)%$750.7 $653.5 (13)%
Average assets under management765.4 657.9 (14)%770.7 652.2 (15)%
Aggregate fees (in millions)1,130.5 961.7 (15)%3,545.6 3,175.7 (10)%
As of and for the three and nine months ended September 30, 2020, assets under management and average assets under management exclude the assets under management of certain Affiliates in which we have repositioned or are repositioning our interests. These Affiliates are not significant to our operating performance measures or our results of operations. Assets under management is calculatedpresented on a current basis without regard to the timing of the inclusion of an Affiliate’s financial results in our operating performance measures and Consolidated Financial Statements. Average assets under management reflects the timing of the inclusion of an Affiliate’s financial results in our operating performance measures and Consolidated Financial Statements. Average assets under management for mutual funds and similar retail investment products represents an average of the daily net assets under management, while for institutional and high net worth clients, average assets under management represents an average of the assets at the beginning or end of each month during the applicable period.
For the three and nine months ended September 30, 2019 and 2020, aggregate fees consists of the total asset and performance based fees earned by combining the Revenueall of our consolidated Affiliates with equity method revenue. We discuss both Revenue at our consolidated Affiliates and equity method revenueAffiliates, and includes the aggregate fees of certain Affiliates in which we have repositioned or are repositioning our interests. These Affiliates are not significant to our operating performance measures or our results of operations. For certain of our Affiliates accounted for under the equity method, we report aggregate fees and the Affiliate’s financial results in our Results of Operations. Equity method revenue and aggregate revenue areConsolidated Financial Statements one quarter in arrears. Aggregate fees is provided in addition to, but not as substitutesa substitute for, Revenue at our consolidated Affiliates.Consolidated revenue or other GAAP performance measures.
The following table presents our key operating performance measures:


  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
Assets under management(1)
            
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)
            
Consolidated Affiliate average assets under management $378.0
 $414.5
 10% $371.9
 $400.9
 8%
Equity method Affiliate average assets under management 285.5
 376.1
 32% 273.6
 365.6
 34%
Total $663.5
 $790.6
 19% $645.5
 $766.5
 19%
             
Revenue (in millions) $544.7
 $585.7
 8% $1,644.2
 $1,700.9
 3%
Equity method revenue (in millions)(2)
 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 manageprovide a comprehensive and diverse range of active, return-oriented strategies rather than passive or indexing strategies, fixed income or money market products, which typically carry lower fee rates.designed to assist institutional, retail and high net worth clients worldwide in achieving their investment objectives. We continue to see meaningful client demand for active, return-oriented strategies, particularly in illiquid alternative and multi-asset and fixed income 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, andmarkets, while we have experiencedare experiencing outflows in U.S. equityquantitative strategies consistent with this industry-wide trend.across alternative strategies and equities strategies. We expect client demand for alternative and multi-asset strategies to continue, and believe the best-performingbest performing active equity managers (whether global-, regional-, or country-specific) will continue to have significant opportunities to grow fromas a result of net client cash inflows. We believe we are well positionedwell-positioned to benefit from these trends.


The outbreak of COVID-19 has created significant disruption in economic activity. The impact of the COVID-19 outbreak on our Affiliates and their clients’ demand for investment strategies is currently uncertain, and could result in changes in investor demand for our strategies in ways that cannot be predicted but could vary from recent trends. If financial markets were to worsen as a result of COVID-19 or other factors, our average assets under management and asset based fees could be adversely impacted.

















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Table of Contents
The following charts and tables providepresent information regarding the composition of our assets under management by active, return-oriented strategy and client type as of September 30, 2020:
Assets Under Management (in billions)
amg-20200930_g2.jpg
___________________________

(1)Alternatives include illiquid alternative strategies, which accounted for 15% of our assets under management as of September 30, 2020.

(2)Global equities include emerging markets strategies, which accounted for 8% of our assets under management as of September 30, 2020.

The following tables present changes in our assets under management on a current basis by active, return-oriented strategy and client type:type for the three months ended September 30, 2020:

aumpiechartv6a01.jpg


__________________

(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.

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


By Strategy - Quarter to Date
(in billions)AlternativesGlobal EquitiesU.S. EquitiesMulti-Asset & Fixed IncomeTotal
June 30, 2020$220.5 $229.2 $84.0 $104.7 $638.4 
    Client cash inflows and commitments6.3 7.7 3.1 5.8 22.9 
    Client cash outflows(9.9)(13.5)(8.5)(5.0)(36.9)
        Net client cash flows(3.6)(5.8)(5.4)0.8 (14.0)
    Market changes1.3 15.1 5.5 3.5 25.4 
    Foreign exchange(1)
1.7 2.3 0.2 0.5 4.7 
    Realizations and distributions (net)(0.7)(0.1)— — (0.8)
    Other(2)
(0.1)— — (0.1)(0.2)
September 30, 2020$219.1 $240.7 $84.3 $109.4 $653.5 














27
(in billions)Alternatives Global Equities U.S. Equities Multi-asset & Other Total
June 30, 2017$296.3
 $267.9
 $110.7
 $97.2
 $772.1
   Client cash inflows and commitments20.7
 7.3
 3.8
 3.9
 35.7
   Client cash outflows and realizations(10.4) (11.9) (7.0) (3.3) (32.6)
        Net client cash flows10.3
 (4.6) (3.2) 0.6
 3.1
   Market changes5.6
 13.6
 4.1
 0.9
 24.2
   Foreign exchange(1)
1.4
 2.4
 0.2
 0.5
 4.5
   Other(0.2) —
 —
 —
 (0.2)
September 30, 2017$313.4
 $279.3
 $111.8
 $99.2
 $803.7
Table of Contents
By Client Type - Quarter to Date
(in billions)InstitutionalRetailHigh Net WorthTotal
June 30, 2020$364.9 $161.8 $111.7 $638.4 
    Client cash inflows and commitments9.1 8.9 4.9 22.9 
    Client cash outflows(19.4)(12.9)(4.6)(36.9)
        Net client cash flows(10.3)(4.0)0.3 (14.0)
    Market changes14.0 7.7 3.7 25.4 
    Foreign exchange(1)
2.5 2.0 0.2 4.7 
    Realizations and distributions (net)(0.7)(0.1)— (0.8)
    Other(2)
— (0.2)— (0.2)
September 30, 2020$370.4 $167.2 $115.9 $653.5 
(in billions)Institutional Retail High Net Worth Total
June 30, 2017$457.4
 $207.1
 $107.6
 $772.1
Client cash inflows and commitments16.3
 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 changes14.8
 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
AlternativesGlobal EquitiesU.S. EquitiesMulti-Asset & Fixed IncomeTotal
December 31, 2019$241.2 $274.9 $100.0 $106.4 $722.5 
    Client cash inflows and commitments22.6 24.9 10.8 16.7 75.0 
    Client cash outflows(35.9)(46.4)(23.0)(15.7)(121.0)
        Net client cash flows(13.3)(21.5)(12.2)1.0 (46.0)
    New investments3.7 — — — 3.7 
    Market changes(9.5)(9.5)(2.4)2.9 (18.5)
    Foreign exchange(1)
(1.3)(2.8)(0.2)(0.9)(5.2)
    Realizations and distributions (net)(1.4)(0.1)— (0.2)(1.7)
    Other(2)
(0.3)(0.3)(0.9)0.2 (1.3)
September 30, 2020$219.1 $240.7 $84.3 $109.4 $653.5 
(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 commitments47.3
 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 flows19.4
 (5.5) (11.0) 0.8
 3.7
   New investments30.6
 1.5
 —
 3.3
 35.4
   Market changes8.3
 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

InstitutionalRetailHigh Net WorthTotal
December 31, 2019$407.2 $198.1 $117.2 $722.5 
    Client cash inflows and commitments30.4 30.4 14.2 75.0 
    Client cash outflows(57.2)(48.9)(14.9)(121.0)
        Net client cash flows(26.8)(18.5)(0.7)(46.0)
    New investments3.7 — — 3.7 
    Market changes(9.2)(9.2)(0.1)(18.5)
    Foreign exchange(1)
(2.6)(2.3)(0.3)(5.2)
    Realizations and distributions (net)(1.4)(0.2)(0.1)(1.7)
    Other(2)
(0.5)(0.7)(0.1)(1.3)
September 30, 2020$370.4 $167.2 $115.9 $653.5 

___________________________


(in billions)Institutional Retail High Net Worth Total
December 31, 2016$401.2
 $188.3
 $99.2
 $688.7
Client cash inflows and commitments44.2
 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 Investments31.0
 1.2
 3.2
 35.4
Market changes39.6
 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)
(1)Foreign exchange reflects the impact of translating into U.S. dollars 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. Averageof our Affiliates whose functional currency is not the U.S. dollar.

(2)Other includes assets under management provides a more meaningful relationshipattributable to our financialproduct transitions 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.reclassifications.

Average assets under management increased $127.1 billion or 19% in the three months ended September 30, 2017 compared to the corresponding period in the prior year, due to a 32% increase in average assets under management at equity method Affiliates and a 10% increase in average assets under management at consolidated Affiliates. Average assets under management increased $121.0 billion or 19% in 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 method Affiliates and a 8% increase in average assets under management at consolidated Affiliates.


Aggregate RevenueFees

28
Table of Contents

Aggregate revenue is calculated by combining the Revenuefees consists 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.based fees. Asset based revenue includesfees include 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 based fees are billed based uponon investment performance, typically on an absolute basis or relative to a benchmark.

Our ratio ofbenchmark, and are recognized when they are earned (i.e., when they become billable to customers and are not subject to claw-back). Performance based fees are generally billed less frequently than asset based revenuefees, and although performance based fees inherently depend on investment performance and will vary from period to period, we anticipate performance based fees will be a recurring component of our aggregate fees.

Aggregate fees is generally determined by the level of our average assets under management, (“the composition of these assets across our active, return-oriented strategies that realize different asset based revenue ratio”), either in the aggregate or separately for consolidated Affiliates or equity method Affiliates,fee ratios, and performance based fees. Our asset based fee ratio is calculated as asset based revenuefees 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.management.
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 27% infees were $961.7 million for the three months ended September 30, 2017. This increase2020, a decrease of $168.8 million or 15% as compared to the three months ended September 30, 2019. The decrease in our aggregate fees was due to a $230.2$165.5 million or 50% increase in equity method revenue15% decrease from asset based fees and a $41.0$3.3 million or 8% increaseless than 1% decrease from performance based fees.  The decrease in Revenue at our consolidated Affiliates. The increase in equity method revenueasset based fees was due to an increase of $166.8 million or 36% from asset based revenuea decrease in our average assets under management, principally in our alternative strategies and an


increase of $63.4 million or 14% from performance fees. The increase in Revenue at our consolidated Affiliates wasequities strategies due to an increase of $38.2 million or 7% from asset based revenuenet client cash outflows and a $2.8 million or 1% increase from performance fees.change in the composition of our assets under management.


Aggregate revenue increased 29% infees were $3,175.7 million for the nine months ended September 30, 2017,2020, a decrease of $369.9 million or 10% as compared to the nine months ended September 30, 2019. The decrease in our aggregate fees was due to an increase in equity method revenue of $809.3a $464.1 million or 60% and13% decrease from asset based fees, partially offset by a $56.7$94.2 million or 3% increase in Revenue at our consolidated Affiliates.from performance based fees.  The increasedecrease in equity method revenue was due to an increase of $532.9 million or 40% from asset based revenue and an increase of $276.4 million or 20% from performance fees. The increase in Revenue at our consolidated Affiliatesfees was due to a $70.1 million or 4% increase from asset based revenue, partially offset bydecrease in our average assets under management, principally in our alternative strategies and global equity strategies due to net client cash outflows and a $13.4 million or 1% decrease from performance fees.change in the composition of our assets under management.

See Results of Operations for a further discussion of the changes in Revenue at our consolidated 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 September 30, For the Nine Months Ended September 30, 
(in millions)20192020% Change20192020% Change
Net income (loss) (controlling interest)$86.3 $71.3 (17)%$(6.8)$86.3 
N.M.(1)
Adjusted EBITDA (controlling interest)(2)
206.5 181.2 (12)%641.3 543.6 (15)%
Economic net income (controlling interest)(2)
159.4 152.1 (5)%498.5 433.0 (13)%
  For the Three Months Ended September 30,   For the Nine Months Ended September 30,  
(in millions) 2016 2017 % Change 2016 2017 % Change
Net income (controlling interest) $110.2
 $125.4
 14% $322.5
 $374.2
 16%
Adjusted EBITDA (controlling interest)(1)
 219.8
 256.3
 17% 655.8
 754.8
 15%
Economic net income (controlling interest)(1)
 165.5
 191.3
 16% 492.3
 563.2
 14%
___________________________
__________________________

(1)Percentage change is not meaningful.

(2)Adjusted EBITDA (controlling interest) and Economic net income (controlling interest) are non-GAAP performance measures and are discussed in “Supplemental Financial Performance Measures.”
(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)as it 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. Conversely, our GAAP financial performance measures, Operating income and Income before income taxes, include the non-controlling 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 50% inbusiness. For the three months ended September 30, 2017,2020, our Revenue from consolidated Affiliates increased 8%, resulting in a $36.5Adjusted EBITDA (controlling interest) decreased $25.3 million or 12%, primarily due to a $168.8 million or 15% decrease in aggregate fees.
While aggregate fees decreased $369.9 million or 10% in the nine months ended September 30, 2020, our Adjusted EBITDA (controlling interest) decreased $97.7 million or 15%. Adjusted EBITDA (controlling interest) decreased more than aggregate fees on a percentage basis due to a decline in earnings at certain Affiliates in which we share in revenue less agreed-upon expenses and the recognition of performance based fees at Affiliates in which we hold less of an economic interest. The decrease was also due to a $15.7 million increase in share-based compensation primarily due to an event that accelerated certain share-based compensation.
For the three months ended September 30, 2020, our Net income (controlling interest) decreased $15.0 million or 17% increase, primarily due to a $25.3 million decrease from the decline in Adjusted EBITDA (controlling interest), partially offset by a $9.3 million decrease in Intangible amortization and impairments attributable to the controlling interest.
29

While Adjusted EBITDA (controlling interest) decreased $97.7 million or 15%, for the nine months ended September 30, 2020, our Net income (controlling interest) increased $93.1 million. The increase in Net income (controlling interest) was primarily due to a $278.6 million decrease in equity method intangible amortization and impairments.  This increase was partially offset by a $36.2 million increase in Intangible amortization and impairments, and a $36.8 million increase in Income tax expense, both attributable to the controlling interest.
We believe Economic net income (controlling interest) is an important supplemental financial performance measure because it represents our performance before non-cash expenses relating to the acquisition of interests in Affiliates and improves comparability of performance between periods. In the three months ended September 30, 2020, our Economic net income (controlling interest) decreased $7.3 million or 5%. This decrease was primarily due to a $25.3 million decrease in Adjusted EBITDA (controlling interest), partially offset by a $19.3 million decrease in current and other deferred taxes attributable to the controlling interest.
In the nine months ended September 30, 2017,2020, our equity method revenue increased 60%, while our Revenue from consolidated Affiliates increased 3%, resulting in a $99.0Economic net income (controlling interest) decreased $65.5 million or 15% increase13%. This decrease was primarily due to a $97.7 million decrease in Adjusted EBITDA (controlling interest)., partially offset by a $39.7 million decrease in current and other deferred taxes attributable to the controlling interest.
Our Net income (controlling interest) increased $15.2 million or 14% and $51.7 million or 16% in the three and nine months ended September 30, 2017, respectively, which was consistent with the 17% and 15% increases in 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 $25.8 million or 16% and $70.9 million or 14% in the three and nine months ended September 30, 2017, respectively, which was consistent with the 17% and 15% increases in Adjusted EBITDA (controlling interest) during the respective periods.
Results of Operations
The following discussion includes the key operating performance measures and financial results of our consolidated and equity method Affiliates. Our consolidated Affiliates’ financial results are included in our Revenue, OperatingConsolidated revenue, Consolidated expenses, and Non-operating (income)Investment and expenses,other income, and our share of our equity method Affiliates’ financial results is reported, (netnet of intangible amortization)amortization and impairments, in Income from equityEquity method investments in Operating income.income (loss) (net).
Consolidated Revenue


The following table summarizespresents our consolidated Affiliate average assets under management and Revenue:Consolidated revenue:    
 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
Consolidated Affiliates average assets under management (in billions)$378.0
 $414.5
 10% $371.9
 $400.9
 8%
Revenue$544.7
 $585.7
 8% $1,644.2
 $1,700.9
 3%

 For the Three Months Ended September 30,For the Nine Months Ended September 30,
(in millions, except as noted)20192020% Change20192020% Change
Consolidated Affiliate average assets under management (in billions)$400.3 $365.2 (9)%$402.3 $352.3 (12)%
Consolidated revenue$549.0 $494.8 (10)%$1,684.0 $1,473.2 (13)%
Our Revenue increased $41.0Consolidated revenue decreased $54.2 million or 8% in10% for the three months ended September 30, 2017,2020, due to a $38.2$51.3 million or 7% increase9% decrease from asset based revenue,fees and a $2.8$2.9 million or 1% increasedecrease from performance based fees.  The changedecrease in asset based revenuefees was due to a 10% increasedecrease in consolidated Affiliate average assets under management, partially offset by a 2% declineprincipally in our asset based revenue ratio. The decline in our asset based revenue ratio was primarilyalternative strategies and U.S. equity strategies due to changesnet client cash outflows and a change in the composition of our average assets under management.


Our Revenue increased $56.7Consolidated revenue decreased $210.8 million or 3% in13% for the nine months ended September 30, 2017,2020, due to a $70.1$172.5 million or 4% increase11% decrease from asset based revenue, partially offset byfees and a $13.4$38.3 million or 1%2% decrease from performance based fees. The changedecrease in asset based revenue was due to an 8% increase in average assets under management and a 3% decline in our asset based revenue ratio. The decline in our asset based revenue ratiofees was due to a decrease in asset based revenue related to renewal commissions at one of our Affiliates in the United Kingdom as a result of a regulatory change which was offset by a reduction in distribution expenses at theconsolidated Affiliate which were reported in Selling, general and administrative expenses. The declineaverage assets under management, principally in our asset based revenue ratio was alsoalternative strategies and U.S. equity strategies due to changesnet client cash outflows and a change in the composition of our average assets under management.
Operating
Consolidated Expenses
The following table summarizes our consolidated operating expenses:
 For the Three Months Ended September 30,   For the Nine Months Ended September 30,  
 % Change % Change
(in millions)2016 2017  2016 2017 
Compensation and related expenses$244.2
 $238.7
 (2)% $702.9
 $722.9
 3%
Selling, general and administrative94.2
 91.9
 (2)% 286.7
 269.7
 (6)%
Intangible amortization and impairments26.9
 21.2
 (21)% 82.2
 65.1
 (21)%
Depreciation and other amortization5.0
 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)%
___________________________
(1)
Percentage change is not meaningful.
Our operatingConsolidated expenses are primarily attributable to the non-controlling interests because the substantial majority of these expenses are incurred byour consolidated Affiliates within which we share in revenue without regard to expenses. For these Affiliates, the amount of their operating expenses attributable to the non-controlling interests, including compensation, is generally determined by the percentage of revenue allocated to operating expenses as part of the structured partnership interests in place at the respective Affiliate. Accordingly, our operating expenses are impacted by increases or decreases in revenue generally will increase a consolidated Affiliate’s revenueexpenses attributable to the non-controlling interests and corresponding increases or decreases in revenue will generally decrease a consolidated Affiliate’s operating expenses.expenses attributable to the non-controlling interests.
The following table presents our Consolidated expenses:
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 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
 % Change% Change
(in millions)2019202020192020
Compensation and related expenses$222.0 $212.5 (4)%$708.2 $636.9 (10)%
Selling, general and administrative91.5 74.1 (19)%283.3 237.9 (16)%
Intangible amortization and impairments21.1 31.9 51 %72.0 133.4 85 %
Interest expense19.5 23.8 22 %57.4 65.6 14 %
Depreciation and other amortization6.2 4.6 (26)%16.7 14.7 (12)%
Other expenses (net)13.1 12.3 (6)%36.2 34.6 (4)%
Total consolidated expenses$373.4 $359.2 (4)%$1,173.8 $1,123.1 (4)%

Compensation and related expenses decreased $5.5$9.5 million or 2% in4% for the three months ended September 30, 2017,2020, primarily due to a $11.9$13.9 million or 5% decrease from compensationin bonus and salary expenses, associated with Affiliate equity transactions,principally as a result of the decline in Consolidated revenue and headcount repositioning in 2019. This decrease was partially offset by an $8.0a $4.0 million or 3% increase fromin share-based compensation expenses at Affiliates. These changes primarily relate to the non-controlling interests.expense.
Compensation and related expenses increased $20.0decreased $71.3 million or 3% in10% for the nine months ended September 30, 2017,2020, primarily due to a $17.0$91.2 million or 2%decrease in bonus and salary expenses, principally as a result of the decline in Consolidated revenue and headcount repositioning in 2019. This decrease was partially offset by a $15.7 million increase fromin share-based compensation, expenses at Affiliatesprimarily due to an event that accelerated certain share-based compensation and a $3.6$4.1 million or 1% increase from compensation expenses associated within Affiliate equity transactions. These changes primarily relate to the non-controlling interests.compensation expense.


There was no significant change in Selling, general and administrative expenses indecreased $17.4 million or 19% for the three months ended September 30, 2017. 2020, primarily due to a $5.4 million decrease in travel-related expenses, a $4.6 million decrease from sub-advisory and distribution expenses related to a decrease in consolidated Affiliate average assets under management, and a $3.6 million decrease in renewal commissions.
Selling, general and administrative expenses decreased $17.0$45.4 million or 6% in16% for the nine months ended September 30, 2017,2020, primarily due to a $8.8$15.3 million or 3% decrease from a reduction insub-advisory and distribution expenses related to commissions at certain of our Affiliatesa decrease in the United Kingdomconsolidated Affiliate average assets under management, a $13.6 million decrease in travel-related expenses, an $11.1 million decrease in renewal commissions, and a $5.8$4.6 million or 2% decrease from a reductionin costs due to the impact of expenses in wealth management initiatives.office closures.
Intangible amortization and impairments decreased $5.7increased $10.8 million or 21% in51% for the three months ended September 30, 2017,2020, primarily due to a $3.3$24.9 million or 12% decrease fromexpense to reduce the carrying value of acquired client relationships at certain of our Affiliates to fair value. See Note 9 of our Consolidated Financial Statements. These increases were partially offset by a change$14.2 million reduction in the pattern of economic benefit foramortization expense related to certain assets and a $2.4 million or 9% decrease from certaindefinite-lived assets being fully amortized.
Intangible amortization and impairments decreased $17.1increased $61.4 million or 21% in85% for the nine months ended September 30, 2017,2020, primarily due to an $85.2 million expense to reduce the carrying value of acquired client relationships at certain of our Affiliates to fair value. See Note 9 of our Consolidated Financial Statements. These increases were partially offset by a $19.5 million reduction in amortization expense related to certain definite-lived assets being fully amortized and a $4.4 million reduction in amortization expense related to a decrease in actual and expected client attrition for certain definite-lived acquired client relationships.
Interest expense increased $4.3 million or 22% for the three months ended September 30, 2020, primarily due to a $11.6$3.5 million increase due to the termination of our pound sterling-denominated forward foreign currency contracts in March 2020 and a $2.9 million increase from our 3.3% senior unsecured notes due June 15, 2030 issued in June 2020 (the “2030 senior notes”). These increases were partially offset by a $2.4 million decrease from lower interest rates and lower borrowings on our senior unsecured term loan facility (the “term loan”).
Interest expense increased $8.2 million or 14% for the nine months ended September 30, 2020, primarily due to a $7.6 million increase due to the termination of our pound sterling-denominated forward foreign currency contracts in March 2020, a $4.3 million increase from our 5.875% junior subordinated notes issued in March 2019, and a $3.8 million increase from our 2030 senior notes. These increases were partially offset by a $7.6 million decrease from a change in the pattern of economic benefit for certain assetslower interest rates and a $5.5 million or 7% decrease from certain assets being fully amortized.lower borrowings on our term loan and our senior unsecured multicurrency revolving credit facility (the “revolver”).
There were no significant changes in Depreciation and other amortization inor Other expenses (net) for the three and nine months ended September 30, 2017.2020.
Other operating expenses (net) increased $6.9 million
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Equity Method Income (Loss) (Net)
For a majority of our Affiliates accounted for under the equity method, we use structured partnership interests in which we contractually share in the three months ended September 30, 2017, primarily from decreasesAffiliate’s revenue less agreed-upon expenses. We also use structured partnership interests in net gains on Affiliate sponsored consolidated investment products of $6.2 million. This change primarily relates to the non-controlling interests.
Other operating expenses (net) increased $6.1 million or 24%which we contractually share 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
For equity method Affiliates, our share of 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. 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 Affiliates accounted for under the equity method, investmentsnet of amortization and impairments, is included in 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 Consolidated Financial Statements.Equity method income (loss) (net).
The following table summarizes equity method earnings and equity method intangible amortization, which together comprise Income from equity method investments, as well aspresents equity method Affiliate average assets under management and equity method revenue.revenue, as well as equity method earnings and equity method intangible amortization and impairments, which in aggregate form Equity method revenue is provided in addition to, but not as a substitute for, Revenue at our consolidated Affiliates.income (loss) (net):
 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
Equity method earnings$81.5
 $96.6
 19% $243.7
 $303.3
 24%
Equity method intangible amortization(14.0) (25.9) 85% (43.0) (71.7) 67%
Income from equity method investments$67.5
 $70.7
 5% $200.7
 $231.6
 15%
            
Operating Measures           
Equity method Affiliates average assets under management (in billions)$285.5
 $376.1
 32% $273.6
 $365.6
 34%
Equity method revenue$456.4
 $686.6
 50% $1,350.5
 $2,159.8
 60%

 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
(in millions, except as noted)20192020% Change20192020% Change
Operating Performance Measures
Equity method Affiliate average assets under management (in billions)$365.1 $292.7 (20)%$368.4 $299.9 (19)%
Equity method revenue$581.5 $466.9 (20)%$1,861.6 $1,702.5 (9)%
Financial Performance Measures
Equity method earnings$62.4 $51.3 (18)%$210.6 $171.7 (18)%
Equity method intangible amortization and impairments(52.1)(34.3)(34)%(529.1)(250.5)(53)%
Equity method income (loss) (net)$10.3 $17.0 65 %$(318.5)$(78.8)(75)%
Our equity method revenue increased $230.2decreased $114.6 million or 50% in20% for the three months ended September 30, 2017,2020, primarily due to a $166.8$114.2 million or 36% increase20% decrease from asset based revenue and a $63.4 million or 14% increase from performance fees.  The increasedecrease in asset based revenuefees was due to increases of $125.4 million or 27% from our 2016 investments in new Affiliates and $41.4 million or 9% from existing Affiliates. The increase in performance fees wasprimarily due to a $57.8 million or 13% increase from existing Affiliatesdecrease in equity method Affiliate average assets under management, principally in our alternative strategies due to net client cash outflows and a $5.6 million or 1% increase fromchange in the composition of our 2016 investments in new Affiliates.assets under management.


While equity method revenue increased 50% inFor the three months ended September 30, 2017,2020, equity method earnings increased $15.1decreased $11.1 million or 19%18%,primarily due to our 2016 investmentsa $114.6 million or 20% decrease in new Affiliates, in which we own less of the equity interests than in our existing equity method Affiliates.revenue.
Equity method intangible amortization increased $11.9and impairments decreased $17.8 million or 85% in34% for the three months ended September 30, 2017,2020, primarily due to a $10.0 million decrease in expenses to reduce the carrying value of an Affiliate to fair value. See Note 10 of our 2016 investmentsConsolidated Financial Statements. The decrease was also due to a $7.5 million reduction in new Affiliates.amortization expense related to a decrease in actual and expected client attrition for certain definite-lived acquired client relationships.
Our equity method revenue increased $809.3decreased $159.1 million or 60% in9% for the nine months ended September 30, 2017,2020, due to a $532.9$291.4 million or 40% increase16% decrease from asset based revenue andfees, partially offset by a $276.4$132.3 million or 20%7% increase from performance based fees.  The increasedecrease in asset based revenuefees 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 wasprimarily due to a $238.2 million or 18% increase from performance fees fromdecrease in equity method Affiliate average assets under management, principally in our 2016 investments in new Affiliatesalternative strategies due to net client cash outflows and a $38.1 million or 3% increase from existing Affiliates.change in the composition of our assets under management.
While equity method revenue increased 60% indecreased $159.1 million or 9% for the nine months ended September 30, 2017,2020, equity method earnings increased $59.6decreased $38.9 million or 24%, primarily18%. Equity method earnings decreased more than equity method revenue on a percentage basis due to our 2016 investmentsa decline in newearnings at certain Affiliates in which we ownshare in revenue less of the equity interests than in our existing equity method Affiliates.agreed-upon expenses.
Equity method intangible amortization increased $28.7and impairments decreased $278.6 million or 67% in53% for the nine months ended September 30, 2017,2020, primarily due to a $22.9$285.0 million or 53%decrease in expenses to reduce the carrying value of certain Affiliates to fair value. See Note 10 of our Consolidated Financial Statements. This decrease was partially offset by an $8.0 million increase from our 2016 investments in new Affiliatesamortization expense due to an increase in actual and a $5.8 million or 14% increase from a change in the pattern of economic benefit related to assets atexpected client attrition for certain existing Affiliates.definite-lived acquired client relationships.
Non-Operating (Income)Investment and ExpensesOther Income
The following table summarizes non-operating incomepresents our Investment and expense data:other income:
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 For the Three Months Ended September 30,   For the Nine Months Ended September 30,  
(in millions)2016 2017 % Change 2016 2017 % Change
Investment and other income$(11.0) $(15.6) 42 % $(26.7) $(44.7) 67 %
Interest expense22.4
 21.5
 (4)% 66.4
 65.8
 (1)%
Imputed interest expense and contingent payment arrangements0.9
 0.7
 (22)% (0.2) 3.7
 
N.M.(1)

Income taxes50.3
 66.1
 31 % 159.7
 188.2
 18 %
 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
(in millions)20192020% Change20192020% Change
Investment and other income$6.7 $12.7 90 %$22.0 $2.9 (87)%
___________________________
(1)
Percentage change is not meaningful.
Investment and other income increased $4.6$6.0 million or 42% in90% for the three months ended September 30, 2017,2020, primarily due to a $2.9$5.4 million or 26% increase from changes in the fair value of investments and a $1.4 million or 13% increase from realizednet unrealized gains on the sale of investment securities.Other investments.

Investment and other income increased $18.0decreased $19.1 million or 67% in87% for the nine months ended September 30, 2017,2020, primarily due to a $14.2$22.9 million or 53% increasenet decrease from changes in the fair value of investmentsvaluation and a $5.7 million or 21% increase from realized gains on the salesales of investmentInvestments in marketable securities and Other investments, partially offset by a $1.7$5.5 million increase from foreign currency translation.
Income Tax Expense
The following table presents our Income tax expense:
 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
(in millions)20192020% Change20192020% Change
Income tax expense$30.5 $37.5 23 %$4.4 $43.0 
N.M.(1)
___________________________
(1)Percentage change is not meaningful.

Income tax expense increased $7.0 million or 6% decrease from lower dividend income.
There were no significant changes in Interest expense in the three and nine months ended September 30, 2017.
There was no significant change in Imputed interest expense and contingent payment arrangements in23% for the three months ended September 30, 2017. Imputed interest2020, primarily due to a $10.1 million increase in deferred tax expense resulting from the revaluation of certain of our deferred tax liabilities due to an increase in the UK tax rate during the period and contingent payment arrangementsa $6.4 million increase in a valuation allowance against certain foreign net operating losses. These increases were partially offset by a $6.4 million capital loss benefit for an amount carried back to a year prior to the effective date of the Tax Cuts and Jobs Act and a $3.2 million decrease in estimated Global Intangible Low Tax Income (“GILTI”) expense as a result of regulatory guidance issued during the period.

Income tax expense increased $3.9$38.6 million infor the nine months ended September 30, 2017,2020, primarily due to a $2.8$129.9 million gain on the revaluation of a contingent payment arrangement in the nine months ended September 30, 2016, which did not 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 $15.8 million or 31% and $28.5 million or 18% in the three and nine months ended September 30, 2017, respectively, primarily due to an increase in Income before income taxes attributable to the controlling interest, a $10.1 million increase in deferred tax expense resulting from the revaluation of certain of our deferred tax liabilities due to an increase in the UK tax rate during the period and a $10.7 million increase in valuation allowances against certain state and foreign loss carryforwards. These increases were partially offset by stock compensation tax benefits. In$10.5 million of capital loss benefits for amounts carried back to years prior to the effective date of the Tax Cuts and Jobs Act and a $3.2 million decrease in estimated GILTI expense as a result of regulatory guidance issued during the period.
Net Income (Loss)
The following table presents Net income, Net income (non-controlling interests) and Net income (loss) (controlling interest):
 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
(in millions)20192020% Change20192020% Change
Net income$162.1 $127.8 (21)%$209.3 $231.2 10 %
Net income (non-controlling interests)75.8 56.5 (25)%216.1 144.9 (33)%
Net income (loss) (controlling interest)86.3 71.3 (17)%(6.8)86.3 
N.M.(1)
___________________________
(1)Percentage change is not meaningful.

Net income (controlling interest) decreased $15.0 million or 17% for the three months ended September 30, 2016, we also recognized a benefit2020, primarily due to the reductiona decrease in corporate tax ratesConsolidated revenue and increases in the United Kingdom, which did not recur in 2017.
Net Income


The previously discussed changes in Revenue, expensesconsolidated Intangible amortization and impairments, Interest expense and Income from equitytax expense, partially offset by an increase in Equity method investments hadincome (net).

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Net income (controlling interest) increased $93.1 million for the following effect on Net income:nine months ended September 30, 2020, primarily due to a decrease in Equity method loss (net), partially offset by a decrease in Consolidated revenue and increases in Income tax expense and consolidated Intangible amortization and impairments.
 For the Three Months Ended September 30,   For the Nine Months Ended September 30,  
(in millions)2016 2017 % Change 2016 2017 % Change
Net income$175.9
 $216.8
 23% $533.0
 $614.9
 15%
Net income (non-controlling interests)65.7
 91.4
 39% 210.5
 240.7
 14%
Net income (controlling interest)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 beforeis an important supplemental financial performance measure for management as it provides a comprehensive view of our share of the financial performance of our business before interest, expense, income taxes, depreciation, amortization, impairments, certain Affiliate equity expenses, gains and losses on general partner and seed capital investments, and adjustments to our contingent payment obligations.arrangements. We believe that many investors use this informationmeasure 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 (loss) (controlling interest) or any other GAAP measures of financial performance.performance measures.
The following table providespresents a reconciliation of Net income (loss) (controlling interest) to Adjusted EBITDA (controlling interest):
For the Three Months Ended September 30,For the Nine Months Ended September 30,
(in millions)2019202020192020
Net income (loss) (controlling interest)$86.3 $71.3 $(6.8)$86.3 
Interest expense19.5 23.8 57.4 65.6 
Income taxes28.3 32.5 (3.1)33.7 
Intangible amortization and impairments(1)
68.4 59.1 583.5 341.1 
Other items(2)
4.0 (5.5)10.3 16.9 
Adjusted EBITDA (controlling interest)$206.5 $181.2 $641.3 $543.6 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
(in millions)2016 2017 2016 2017
Net income (controlling interest)$110.2
 $125.4
 $322.5
 $374.2
Interest expense22.4
 21.5
 66.4
 65.8
Imputed interest expense and contingent payment arrangements(1)
0.9
 0.7
 (0.2) 3.7
Income taxes50.1
 64.1
 155.6
 182.5
Depreciation and other amortization2.0
 2.4
 5.9
 7.1
Intangible amortization and impairments(2)
34.2
 42.2
 105.6
 121.5
Adjusted EBITDA (controlling interest)$219.8
 $256.3
 $655.8
 $754.8
___________________________
___________________________
(1)
For the nine months ended September 30, 2016 and 2017, Imputed interest expense and contingent payment 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.
(1)Intangible amortization and impairments in our Consolidated Statement of Income includes amortization attributable to our non-controlling interests. For our Affiliates accounted for under the equity method, we do not separately report intangible amortization and impairments in our Consolidated Statements of Income. Our share of these Affiliates’ amortization is reported in Equity method income (loss) (net). The following table summarizespresents the Intangible amortization and impairments shown above:
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
(in millions)2019202020192020
Consolidated intangible amortization and impairments$21.1 $31.9 $72.0 $133.4 
Consolidated intangible amortization and impairments (non-controlling interests)(4.8)(7.1)(17.6)(42.8)
Equity method intangible amortization and impairments52.1 34.3 529.1 250.5 
Total$68.4 $59.1 $583.5 $341.1 
 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 amortization14.0
 25.9
 43.0
 71.7
Total$34.2
 $42.2
 $105.6
 $121.5


(2)Other items includes depreciation and adjustments to contingent payment arrangements. Beginning with the first quarter of 2020, other items also includes certain Affiliate equity expenses and gains and losses on general partner and seed capital investments. These changes were made to improve the comparability of performance between periods. Prior periods have not been revised as the amounts were not significant.
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 considerbelieve Economic net income (controlling interest) and Economic earnings per share to beare important measures of our financial performance, as we believebecause they best represent our performance before our share of non-cash expenses relating to ourthe acquisition of interests in our Affiliates and they are, therefore, employed as our principal financialimprove comparability of performance measures.between periods. Economic net income (controlling
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(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 non-GAAP performance measures are provided in addition to, but not as substitutes for, other GAAP measures of financial performance, such as Net income (loss) (controlling interest) and Earnings per share (diluted). or other GAAP performance measures.
Under ourWe adjust Net income (loss) (controlling interest) to calculate Economic net income (controlling interest) definition, we add to Net income (controlling interest)by adding back our share of pre-tax intangible amortization and impairments attributable to intangible assets (including the portion attributable to equity method investments in 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 the value of these assets, which do not diminish predictably over time. The portion ofWe also add back the 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. WeFurther, we add back non-cash imputed interest and reductions or increases in contingent payment arrangementsother economic items to better reflect our contractual interest obligations. We add back non-cash expenses relating to certain transfersimprove comparability of equityperformance between Affiliate partners when these transfers have no dilutive effect to shareholders.periods.

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 junior 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 junior 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 providespresents a reconciliation of Net income (loss) (controlling interest) to Economic net income (controlling interest): and Economic earnings per share:
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
(in millions, except per share data)2019202020192020
Net income (loss) (controlling interest)$86.3 $71.3 $(6.8)$86.3 
Intangible amortization and impairments(1)
68.4 59.1 583.5 341.1 
Intangible-related deferred taxes3.5 27.0 (83.6)(7.1)
Other economic items(2)
1.2 (5.3)5.4 12.7 
Economic net income (controlling interest)$159.4 $152.1 $498.5 $433.0 
Average shares outstanding (diluted)50.4 46.5 51.1 47.2 
Stock options and restricted stock units— — 0.0 — 
Average shares outstanding (adjusted diluted)50.4 46.5 51.1 47.2 
Economic earnings per share$3.16 $3.27 $9.75 $9.17 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
(in millions, except per share data)2016 2017 2016 2017
Net income (controlling interest)$110.2
 $125.4
 $322.5
 $374.2
Intangible amortization and impairments(1)
34.2
 42.2
 105.6
 121.5
Intangible-related deferred taxes19.5
 22.9
 63.0
 61.8
Other economic items(2)(3)
1.6
 0.8
 1.2
 5.7
Economic net income (controlling interest)$165.5
 $191.3
 $492.3
 $563.2
Average shares outstanding (diluted)56.6
 58.3
 56.6
 58.8
Assumed issuance of junior convertible securities shares(2.2) (2.2) (2.2) (2.2)
Average shares outstanding (adjusted diluted)54.4
 56.1
 54.4
 56.6
Economic earnings per share$3.04
 $3.41
 $9.04
 $9.95
___________________________
____________________________(1)See note (1) to the table in “Adjusted EBITDA (controlling interest).”


(2)Other economic items includes non-cash imputed interest (principally related to the accounting for convertible securities and contingent payment arrangements), tax windfalls and shortfalls from share-based compensation and certain Affiliate equity expenses. Beginning with the first quarter of 2020, other economic items also includes gains and losses on general partner and seed capital investments. These changes were made to improve the comparability of performance between periods. Prior periods have not been revised as the amounts were not significant. For the three and nine months ended September 30, 2019 and 2020, other economic items were net of income tax expense (benefit) of $0.3 million and $0.7 million, respectively, and $2.3 million and $(0.8) million, respectively.
(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 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 $0.1 million and income tax expense of $1.4 million, respectively.
Liquidity and Capital Resources
DuringWe generate long-term value by investing in new Affiliates, investing in existing Affiliates, and investing in centralized capabilities through which we can leverage our scale and resources to benefit our Affiliates and enhance their long-term growth prospects. We then return capital to shareholders through share repurchases and the payment of cash dividends on our common stock while maintaining a conservative capital structure consistent with an investment grade rating.

Cash and cash equivalents were $929.4 million as of September 30, 2020 and were attributable to both the controlling and non-controlling interests. In the nine months ended September 30, 2017,2020, we met our cash requirements primarily through cash generated
35

by operating activities. Our principal uses of cash during the quarternine months ended September 30, 2020 were, and for the foreseeable future are expected to be, for


repayments investments in new Affiliates, investments in existing Affiliates primarily through repurchases of senior debt, distributions to Affiliate equity holders,interests, repayment of debt, the return of capital through share repurchases of common stock, Affiliate equity repurchases,and the payment of cash dividends on our common stock, distributions to Affiliate equity holders, 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 September 30, 2017 were $430.8 million and $374.7 million, respectively, including $18.9 million and $24.9 million, respectively, in our 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 Nine Months Ended September 30,
(in millions)2016 2017
Operating cash flow$684.5
 $800.5
Investing cash flow(868.7) 4.9
Financing cash flow36.6
 (871.5)

Operating Cash Flow
In the nine months ended September 30, 2017, Cash flow from operating activities increased $116.0 million, of which approximately 70% was attributable to the controlling interest. Cash flow from operating activities attributable to the controlling interest increased primarilyaddition, we may draw funding from the receipt of cash distributions of our share ofdebt and equity method earnings from our 2016 investments in new Affiliates.
Investing Cash Flow
In the nine months ended September 30, 2017, Cash flows from investing activities, which is primarily attributable to the controlling interest, increased $873.6 million, primarily due to a decrease in Investments in Affiliates of $854.6 million.
Financing 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 $908.1 million. This increase was primarily due to a change in senior debt activity from net borrowings of $230.0 million in the nine months ended September 30, 2016 to net repayments of $200.0 million in the nine months ended September 30, 2017.  This increase was also due to an increase in repurchases of common stock of $243.0 millioncapital markets, and a decrease in cash received for the issuance of common stock of $129.5 million. 
The following table summarizes the carrying value of our outstanding indebtedness:
(in millions)December 31, 2016 September 30, 2017
Senior bank debt$870.0
 $870.0
Senior notes945.1
 745.5
Convertible securities307.5
 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 September 30, 2017, we were in compliance with all terms of our credit facilities and had approximately $1 billionratings, among other factors, allow us to access these sources 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.
funding on favorable terms. We are currently rated A3 by Moody’s Investors Service and A-BBB+ 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

The following table presents operating, investing and financing cash flow activities:
For the Nine Months Ended September 30,
(in millions)20192020
Operating cash flow$616.6 $626.8 
Investing cash flow(139.9)(8.0)
Financing cash flow(634.2)(221.5)
Operating Cash Flow
Operating cash flows are calculated by adjusting Net income for other significant impactsources and uses of cash, significant non-cash items, and timing differences in the cash settlement of assets and liabilities. 

For the nine months ended September 30, 2020, Cash flows from operating activities were $626.8 million, primarily from Net income adjusted for non-cash items of $571.7 million and Distributions of earnings received from equity method investments of $197.2 million. These items were partially offset by timing differences in the cash settlement of assets and liabilities of $136.2 million, primarily due to the payment of incentive compensation. For the nine months ended September 30, 2020, operating cash flows were primarily attributable to the controlling interest.
Investing Cash Flow
For the nine months ended September 30, 2020, Cash flows from investing activities were $8.0 million, primarily due to the purchases of fixed assets of $6.8 million.
Financing Cash Flow
For the nine months ended September 30, 2020, Cash flows used in financing activities were $221.5 million, primarily due to $249.1 million of distributions to non-controlling interests, $232.5 million of Affiliate equity repurchases, net of issuances, the return of $229.3 million of capital to shareholders through share repurchases and dividends 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 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 onand a forward basis) having an aggregate sales price$100.0 million paydown of up to $500.0our term loan. Cash flows used in financing activities was partially offset by the receipt of $349.8 million (the “equity distribution program”).  Asof proceeds from the issuance of 2030 senior notes and $275.0 million of proceeds from the issuance of our junior subordinated notes with a maturity date of September 30, 2017, no sales have occurred under the equity distribution program.2060 (the “2060 junior subordinated notes”).
Affiliate Equity
Many ofWe periodically repurchase Affiliate equity from and issue Affiliate equity to our consolidated Affiliate partners and our officers, under agreements that provide us with a conditional right to call and Affiliate equity holders with thea conditional right to put their Affiliate equity interests to us at certain intervals. For Affiliates accounted for under the 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 September 30, 2017,2020, our current redemption value of $804.6$652.0 million for these interests (including $25.5 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors) has been presented as Redeemable non-controlling interests. Although the timing and amounts of these purchases are difficult to predict, we repurchased $161.5paid $232.5 million offor Affiliate equity repurchases, net of issuances during the nine months ended September 30, 2017,2020, and we expect to repurchasenet repurchases of approximately $10$65 million inof Affiliate equity during the fourth quarterremainder of 2017.2020. In the event of a repurchase, we 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 September 30, 2017, these unfunded commitments totaled $94.9 million See Notes 13 and may be called in future periods.
As of 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 $21.7 million, and expected to make payments of $8.9 million ($1.6 million in 2017). The present value of these expected payments was $8.1 million. For our equity method Affiliates, we were contingently liable for up to $170.0 million, and expected to make no 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 certain14 of our Affiliates operate under regulatory authorities, which require that we and they maintain minimum financial or capital requirements.Consolidated Financial Statements.
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Share Repurchases
Our Board of Directors authorized share repurchase programs in May 2015October 2019 and January 2017, authorizing us2019 to repurchase up to 3.06.0 million and 1.93.3 million shares of our common stock, respectively, for a totaland these authorizations have no expiry. Purchases may be made from time to time, at management’s discretion, in the open market or in privately negotiated transactions, including through the use of 4.9 million shares, which do not expire. As of September 30, 2017, we had repurchased 2.6 million shares of this total authorized amount. Inderivative financial instruments and accelerated share repurchase programs. During the three and nine months ended September 30, 2017,2020, we repurchased 0.41.3 million and 1.72.8 million shares, respectively, of our common stock, at an average price per share of $175.68$67.82 and $164.00,$72.22, respectively. As of September 30, 2020, we had repurchased all of the shares of the January 2019 authorized amount, and there were a total of 4.1 millionshares available for repurchase under our October 2019 share repurchase program.
Debt
The following table presents the carrying value of our outstanding indebtedness. See Note 5 of our Consolidated Financial Statements:    
(in millions)December 31, 2019September 30, 2020
Senior bank debt$450.0 $350.0 
Senior notes746.8 1,097.2 
Junior convertible securities315.4 317.7 
Junior subordinated notes290.7 565.7 

The carrying value of our debt differs from the amount reported in the notes to our Consolidated Financial Statements, as the carrying value of our debt in the table above is not reduced for debt issuance costs.
Senior Bank Debt
We have a $1.25 billion revolver and a $350.0 million term loan (together, the “credit facilities”). The revolver matures on January 18, 2024, and the term loan matures on January 18, 2023. Subject to certain conditions, we may increase the commitments under the revolver by up to an additional $500.0 million and may borrow up to an additional $75.0 million under the term loan.

As of September 30, 2020, we had no outstanding borrowings under the revolver, and could borrow all capacity and remain in compliance with our credit facilities.
Senior Notes
In the second quarter of 2020, we issued $350.0 million of senior unsecured notes with a maturity date of June 15, 2030. The 2030 senior notes bear interest at a fixed rate of 3.3% per annum. Interest is payable semi-annually, and we have the right to redeem the 2030 senior notes at any time, in whole or in part, at a make-whole redemption price plus accrued and unpaid interest. In addition to customary event of default provisions, the indenture governing the 2030 senior notes limits our ability to consolidate, merge or sell all or substantially all of our assets and requires us to make an offer to repurchase the 2030 senior notes upon certain change of control triggering events.
In the second quarter of 2020, we used $250.0 million of the net proceeds from the 2030 senior notes to repay all of the outstanding indebtedness under our revolver, and $100.0 million of the remaining net proceeds to repay a portion of the outstanding indebtedness under the term loan.
Junior Subordinated Notes
In September 2020, we issued $275.0 million of junior subordinated notes. The 2060 junior subordinated notes bear interest at a fixed rate of 4.750% per annum. Interest is payable quarterly, commencing on December 30, 2020, and we have the right to defer interest payments in accordance with the terms of the notes. The 2060 junior subordinated notes were issued at 100% of the principal amount and rank junior and subordinate in right of payment and upon liquidation to all of our current and future senior indebtedness. On or after September 30, 2025, at our option, the 2060 junior subordinated notes may be redeemed in whole or in part, at 100% of the principal amount, plus any accrued and unpaid interest. Prior to September 30, 2025, at our option, the 2060 junior subordinated notes may be redeemed in whole but not in part, at 100% of the principal amount, plus any accrued and unpaid interest, if certain changes in tax laws, regulations or interpretations occur; or at 102% of the principal amount, plus any accrued and unpaid interest, if a rating agency makes certain changes relating to the equity credit criteria for securities with features similar to the 2060 junior subordinated notes.
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We intend to use the net proceeds from the 2060 junior subordinated notes for general corporate purposes, which may include the repayment of indebtedness, share repurchases and investments in new and existing boutique investment management firms.

Equity Distribution Program

We have equity distribution and forward equity agreements with several major securities firms under which we may, from time to time, 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 September 30, 2020, no sales had occurred under the equity distribution program.
Derivatives
In the first quarter of 2020, we entered into an interest rate swap contract (the “interest rate swap”) with a financial institution, which will expire in March 2023. The interest rate swap, which is designated as a cash flow hedge, is used to exchange our LIBOR-based interest payments for fixed rate payments. Under the contract, we receive payments based on one month LIBOR and make payments based on an annual fixed rate of 0.5135% on a notional amount of $250.0 million.

In the first quarter of 2020, we terminated our forward contracts and corresponding collar contracts entered into in 2018, and we received net proceeds of $24.9 million upon settlement. See Note 6 of our Consolidated Financial Statements.
Commitments
See Note 7 of our Consolidated Financial Statements.
Contractual Obligations


The following table summarizes our contractual obligations as of September 30, 2017.2020. 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(in millions)TotalRemainder of 20202021-20222023-2024Thereafter
Contractual Obligations(1)
         
Contractual ObligationsContractual Obligations     
Senior bank debt$870.0
 $—
 $—
 $870.0
 $—
Senior bank debt$350.0 $— $— $350.0 $— 
Senior notes958.5
 —
 58.5
 58.5
 841.5
Senior notes1,336.6 6.1 81.6 473.1 775.8 
Junior convertible securities880.1
 5.5
 44.4
 44.4
 785.8
Junior convertible securities813.5 5.5 44.4 44.4 719.2 
Junior subordinated notesJunior subordinated notes1,776.5 8.0 61.4 61.4 1,645.7 
Leases(2)(1)
199.4
 9.6
 67.9
 59.2
 62.7
228.6 10.8 75.6 56.2 86.0 
Affiliate equity45.7
 44.3
 1.4
 —
 —
Affiliate equity repurchase obligations(2)
Affiliate equity repurchase obligations(2)
69.9 64.7 5.2 — — 
Other obligations(3)
Other obligations(3)
73.7 35.0 38.7 — — 
Total contractual obligations$2,953.7
 $59.4
 $172.2
 $1,032.1
 $1,690.0
Total contractual obligations$4,648.8 $130.1 $306.9 $985.1 $3,226.7 
Contingent Obligations         Contingent Obligations     
Contingent payment obligations(3)
$8.9
 $1.6
 $7.3
 $—
 $—
Contingent payment arrangements(4)
Contingent payment arrangements(4)
$52.5 $— $40.0 $12.5 $— 
___________________________
(1)The total controlling interest portion is $50.4 million ($3.2 million through 2020, $22.1 million in 2021-2022, $16.5 million in 2023-2024 and $8.6 million thereafter).
(2)Affiliate equity repurchase obligations represent the fair value of obligations put to us and outstanding as of September 30, 2020.
(3)Other obligations represent obligations to make investments in an Affiliate and for liabilities at certain consolidated Affiliates as of September 30, 2020.
(4)Contingent payment arrangements represent the expected settlement amounts. The maximum contingent obligation that may become payable is $150.0 million in 2021, $77.5 million in 2022 and $62.5 million from 2023 through 2025.
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The table above does not include liabilities for commitments to co-invest in certain Affiliate sponsored investment products or uncertain tax positions of $129.4 million and $61.7 million, respectively. This table also does not include potential obligations relating to our derivative financial instruments. See Note 6 of our Consolidated Financial Statements. These items are excluded as we cannot predict the timing of when such obligations will be paid.
(1)
This table does not include liabilities for commitments to co-invest in certain investment partnerships or uncertain tax positions of $94.9 million and $26.4 million, respectively, as of September 30, 2017, as we cannot predict when such obligations will be paid.
(2)
The controlling interest portion is $3.0 million through 2017, $22.8 million in 2018-2019, $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 $4.7 million, $187.0 million in 2018-2019 and none thereafter.
Recent Accounting Developments
See Note 2 of theour Consolidated Financial Statements.
Critical Accounting Estimates and Judgments
Our 2019 Annual Report on Form 10‑K includes additional information about our Critical Accounting Estimates and Judgments, and should be read in conjunction with this Quarterly Report on Form 10‑Q.

Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 3.Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our Quantitative and Qualitative Disclosures About Market Risk infor the three
months ended September 30, 2017.2020. Please refer to the below as well as the additional disclosures in Item 7A of our 20162019 Annual Report on Form 10-K.
Foreign Currency Exchange Risk
To illustrate the effect of possible changes in currency exchange rates, 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 $13 million and $2 million, respectively, as of September 30, 2017, and annual changes to Income before income taxes of $1.1 million and $0.3 million, respectively.

Item 4.Controls and Procedures
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.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
(a)None.
(b)None.
(c)Purchases of Equity Securities by the Issuer:
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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
  
Period
Total Number of Shares Purchased(1)
Average Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsAverage Price Paid Per Share
Maximum Number of Shares that May Yet Be Purchased Under Outstanding Plans or Programs(2)
July 1-31, 2020(3)
108,173 $71.61 108,173 $71.61 5,277,444 
August 1-31, 2020297,805 70.16 297,805 70.16 4,979,639 
September 1-30, 2020911,085 66.61 906,085 66.60 4,073,554 
Total1,317,063 67.82 1,312,063 67.82 
_______________________________________________________
(1)Includes shares surrendered to the Company to satisfy tax withholding and/or option exercise price obligations in connection with stock swap option exercise transactions, if any. Also includes 5,000 shares purchased in open market transactions by the President and Chief Executive Officer of the Company, which were previously disclosed on a Form 4 filed with the Securities and Exchange Commission.
(2)Our Board of Directors authorized share repurchase programs in October 2019 and January 2019 to repurchase up to 6.0 million and 3.3 million shares of our common stock, respectively, and these authorizations have no expiry. Purchases may be made from time to time, at management’s discretion, in the open market or in privately negotiated transactions, including through the use of derivative financial instruments and accelerated share repurchase programs. As of September 30, 2020, we had repurchased all of the shares of the January 2019 authorized amount, and there were a total of 4.1 million shares available for repurchase under our October 2019 share repurchase program.
(3)Includes 0.1 million shares delivered upon completion of a $15.0 million accelerated share repurchase program entered into in June 2020 and completed in July 2020, under which we repurchased a total of 0.2 million shares of our common stock at an average price of $72.00 per share.
(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 September 30, 2017, we had repurchased 2.6 million shares of this total authorized amount.
(3)
Includes 1,838 shares delivered upon the completion of 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 at an average share price of $175.14 per share. This average share price has been used for the shares delivered upon completion of the program in July 2017 included in this table.
Item 6.Exhibits
Item 6.Exhibits
The exhibits are listed on the Exhibit Index and are included elsewhere in this Quarterly Report on Form 10-Q.

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EXHIBIT INDEX
Exhibit No.Description
4.1 
4.2 
31.1 
31.2 
32.1 
32.2 
101 The following financial statements from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 are filed herewith, formatted in XBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Statements of Income for the three- and nine-month periods ended September 30, 2020 and 2019, (ii) the Consolidated Statements of Comprehensive Income for the three- and nine-month periods ended September 30, 2020 and 2019, (iii) the Consolidated Balance Sheets at September 30, 2020 and December 31, 2019, (iv) the Consolidated Statements of Changes in Equity for the three- and nine-month periods ended September 30, 2020 and 2019, (v) the Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2020 and 2019, and (vi) the Notes to the Consolidated Financial Statements
104 The cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in XBRL (Inline eXtensible Business Reporting Language) and contained in Exhibit 101

*    Filed herewith
**    Furnished herewith

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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)
November 2, 2017October 30, 2020/s/ JAY C. HORGENTHOMAS M. WOJCIK
Jay C. HorgenThomas M. Wojcik
on behalf of the Registrant as Chief Financial Officer and Treasurer (and also as Principal Financial and Principal Accounting Officer)

42

EXHIBIT INDEX
Table of Contents
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 September 30, 2017 are filed herewith, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income for the three-and nine-month periods ended September 30, 2017 and 2016, (ii) the Consolidated Balance Sheets at September 30, 2017 and December 31, 2016, (iii) the Consolidated Statements of Equity for the nine-month periods ended September 30, 2017 and 2016, (iv) the Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2017 and 2016, and (v) the Notes to the Consolidated Financial Statements.


QuickLinks
Item 1. 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