AMG - Earnings call transcript Q4 2019 | Affiliated Managers Group, Inc.

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Operator

Greetings and welcome to the AMG Fourth Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anjali Aggarwal, Vice President, Investor Relations. you. Thank

begin. may You

Anjali Aggarwal

joining of discuss XXXX. for the results fourth quarter AMG you our to for Thank

During will constitute conference forward-looking this call, statements. certain matters discussed

due to factors, results a other our this SEC actual could call. assume materially forward-looking and those Our no statements We obligation during differ Form XX-K number any those including projected of filings. referenced update in from to made

earnings website, release, on earnings the call. well measures, copy Investor a its replay provide of a financial of will reconciliation AMG of guidance a section our as as non-GAAP this of call, this Relations announced any on any including

a As investors posted encourage to presentation investor consult our on for updated our reminder, site this information. and we website morning regularly an updated

the the to results Chief and line Horgen, President Financial company’s the quarter Executive Jay on Officer Tom for Chief discuss Officer. With and Wojcik, are us

With that, Jay. I will to turn over call the

Jay Horgen

everyone. and and We a strategy and was year future to good Anjali and within took the change succession a morning completed evolves management business team, action of our Thanks, growth. for our further AMG. core XXXX generational at position evolution transition

earnings Given the nearly entrepreneurial decades team, detail, first we progress over our of the in have significant against we strategy for the our growth management quarter. in let with more we but will competitive a new confident our discuss the built spirit are me together forward three I advantages prospects. have summarize made

by fees, fourth offset and year AMG’s EBITDA affiliates. XXXX. reported margin-based year-over-year grew adjusted economic share full higher the which AMG $XX.XX fourth for for performance per in $X.XX driven quarter earnings declines of quarter the X%

are of seasonal driven that AUM to aligned today than XX% performance of quarter and client strategies for with and coupled quantitative Our strategies EBITDA and that would less strong note while outflows moderate I redemptions. strategies track continued generated that approximately long-term have by run-rate majority EBITDA. large demand our trend. account be our of client The by record certain XX% quantitative the our contribute is in with affiliates secular

our illiquid growing record allocations earnings. levels a collectively streams managed and stable and billion to are example, client For which to AMG’s of alternative private benefiting contribute AUM fee affiliates, markets from of $XXX

wealth collectively of consistent year inflows. managed which management Our posted affiliates, another billion AUM, $XX of

With streams their solutions to and innovation, growing these contribute and orientation fee a earnings. also on AMD’s focus stable affiliates

long-term AMG’s a during fundamental across addition, returns active and number In fees. of the delivering their to equities strong our performance performance records to contributing liquid and alternatives managers excellent year track enhanced clients

focus ESG are we and long-term strategies. our ESG, increasingly on for gaining areas, have focused our AMG these and well-positioned with aligning organic on of these investors many affiliates are affiliates is resources launched earnings growth momentum. growth as strength Finally, products With that across and

up to of certain quarter margin-based the and cost Turning freed decline. AMG strategic affiliates revenue and a initiatives, our of resources to capital in to reallocate number to offset areas order address growth

their affiliates their achieve we clients outcomes as to leading a independent efforts, and strategy for we on and results quarter, highest discussed will are managers. disclosures. of reposition financial At facing discuss certain on initiatives core benefits our we addition, level, Tom partners, partnering to shareholders. with impact basis industry of collaborating to will forward these the collective continue the on and with active In affiliate businesses we these execute our optimal Through AMG’s headwinds realize last

on of to are allocating and growth areas resources highest We focused the return.

growth generating AMG operates time, at built over and of execution investments of enhance we this recurring investments successful have well and clients geographies global in in and investments which the areas, enhance we principle business affiliates. new in which substantial flow a free cash across existing our affiliates to investing is the growth three scale, diversified affiliates future strategy to affiliates, are Due AMG strategies, across today, to

to trends segments additional me long-term investments, gains AMG will fastest the organic future new growing demand and client Through of expand generate are the further. growth. Let exposure aligned market with which

to investment cost without new and ability evolve advantage. risk is our scale business distinct integration unique of Our through or a competitive the

return. that increasing We unique resources this earnings partnerships to inherently further selective growth and is on into array while effort new for in to discipline high-quality to are of dedicating generate in significant pipeline growing our AMG’s and diverse remain we of investment accretive focused shareholder incremental for And timing We highly approach. XXXX. includes the generate partnership their refining our new investments transaction uncertain, structuring momentum a self-selecting have attractive firms individual are expect

have existing Through evolving an we to to attractive opportunity meet with in ability their affiliates needs. prospects, client growth accelerate investments

and For GWK. program new example, leverage quarter, we expanded we our the at of Pantheon supported differentiated and in And including for seed and expertise and evaluate to our affiliates’ for launch reallocating lift-out Artemis, opportunities to we of scale And fourth further to in support capital objectives. distribution products identify to to additional the in our ways affiliates, value invest together strategic on capabilities create resources opportunities. partnering are finally, working AMG’s continue

For our growth effort on our for example, we clients focus recently largest that repositioned opportunities global represent distribution to have affiliates. the

to affiliates. with distribution globally early we collective success on behalf our the added illiquid and AMG’s products also AMG’s partnerships And strategic of LPs have Asia. of resources we relationship enhance that Baring have explore continue strength We leverage seen of to to

enhance growth competitive resources we across are our unique on high-value advantages as capital and AMG’s together, in and Taken investments allocating new leveraging potential. centralized affiliates as affiliates’ existing focused that well

then these highest shareholders value and repurchases to shareholder continue through to create opportunities to to dividend. return in is and invest to capital growth Our priority

focus growth our given annual was invested year, to for Over return business shareholder. the repositioning of we our two-thirds future our flow management The transition past on approximately remaining into initiatives. cash one-third and the

remain in discipline in that see mix towards the – our shift will As several a capital execute on to all we at our years, our but over returns continue to over growth maintain next the maximize allocating shareholder investments, times, we long-term. strategy, we

industry, asset our management took business Stepping ongoing evolution in period a future. the position steps we back, in during the for to in further of XXXX change

our reshaped growth. to footprint and have areas resources reallocated of We and capital

is highly shareholder in AMG. fully of And new evolution place with completed performance affiliates our outperformed confident generation to growth change reposition businesses returns. have new the the We first investment in a finally, alongside of and in a meaningfully pipeline. partnership forward We certain opportunities. leadership collaborated Capital, with has investing in also affiliates aligned year in with our are their while Garda year AMG of at and and business next was firmly XXXX investment we which

ahead. with of affiliates the our forward of we for and strength Moving are the quality in our and XXXX business, the opportunities diversity well-positioned

turn that, With to review quarter. to it the of will Tom the details I over

Tom Wojcik

Thank you, Jay, good and morning, everyone.

to areas, to quarter periods. these in of of position growth footprint approximately resource in million As I related capital one-time Jay up to reallocation offset to cost our initiatives These growth. annually declines revenue AMG business initiatives disclosure detail. will Collectively, The and number that will initiatives the enable in described, affiliates primarily the item million future we several of which, that benefits in more margin-based higher go and in a for actions update $XX and fourth approximately implemented strategic free quarter, that through rationalization. strategic we will repositioning of the and led resulted effectuated our to $XX certain realize

our economic related the transaction. earnings a to million included benefit Additionally, $XX BlueMountain tax

resources. for with The to are fourth also AUM have BlueMountain for meaningfully remainder are headwinds called included outcomes to item We with facing approximately associated the AMG’s while contributing potential adjusted to not AUM this upside we our The billion shareholders. We AMG affiliates AMG’s is table our businesses. their also interest partners $XX and results. quarter to J.M. of component our the And which represents that affiliates we and collaborating disclosure removed future clients management reflect optimize billion in certain where retaining sale better for we strategic with industry repositioning financial collaborating affiliates, for line reposition effort $XX relates of in focusing a largest their Hartwell. AUM are to

me redemptions. seasonality, partially cash certain flows. starting Having and through QX by strategic billion moderated alternatives, driven from quantitative now impact we and to illiquid our financial walked client offset contributions net In $XX were initiatives quantitative reported with let of seasonal client results alternatives and outflows turn the outflows strategies by income Net from levels of driven by products. strategies positive fixed billion of $X.X and our

quantitative has example certain for and challenged, Systematica strategies been performance near-term strong generating others, results. in are at Our Winton

see to of Capula continue fundamental to in in value generate and fixed outperformance including and relative both We book ValueAct liquid continue alternatives which our organic income solid strategies growth. at in Garda, also

market. private and alternatives illiquid in demand client strong from benefiting are We

AMG’s As and and our category Asia, benchmark with IRR outperforming our EIG, basis. fundraising recent at affiliates on of build industry on product XX% performance in capabilities new very an remains existing Pantheon vintages this ongoing strong, with Baring

Turning the to net market and strategies. outflows evenly of split $X.X we in global emerging quarter billion saw equities, between global roughly

we $X.X to of particularly strategies AUM reported five-year of in account performance the equities, when outflows ahead billion, of particularly continue strong period. affiliates with periods generate seasonality into retail net US XX% quarter. long-term category Our in recent improvement fundamental this over In an in benchmark our a taking over

bonds quarter as income continue of $X.X our we primarily AQR in as billion products XXth And flows well and Turning by wealth consecutive positive fixed net muni also products we respectively. income, the inflows and more generated Artemis excited and management to income Fixed GW&K and wealth at and management at Baker within categories. broadly our multi-asset these to driven generated fixed momentum posted our strategies about and net affiliates inflows. Street be

management strategies, As and strength we including growth performance our for growth. alternatives, are actively in these ESG support several Jay illiquid our are long-term resources and we wealth high-growth focusing many areas areas. organic investment of earlier, fundamental excellent across strategies to earnings said well given positioned and And

fourth in approximately EBITDA impacted which per ago. the million in to Now certain of quantitative previously. performance million turning by adjusted included driven initiatives for to the offset fees Economic $X.XX year contributions fees. $X.XX strategies financials, performance repositioning lower related stronger to of mentioned $XXX by share $XX costs versus grew EBITDA quarter, primarily earnings our X% Adjusted was strategic a

along with items, specific to to in estimate modeling simplify an performance estimate the our EBITDA fees an an range to Turning quarter. we upcoming guidance, plan of ahead, for provide effort looking

private and $XXX we carry being $XXX increasing ranging trend the levels throughout first million from which our million more adjusted performance expect EBITDA X% million. fees year opportunity, on versus AUM current to and Based $XX less end, between be distributed year. fees down markets seasonal million our performance the to over quarter will in for asset with time, Given reflect $XX

level consistent expect interest $XX quarter was for share Our expense we the of first the for quarter. million fourth and

reported of share $XXX million impairment Our was fourth method to for quarter, the $XX affiliates. including relating million amortization and equity

of in this item We more quarter normalized return expect to the levels approximately million. $XX line to first

rate effective the GAAP given not of and in benefit. the quarter tax Our were the amortization cash meaningful BlueMountain primarily tax and impairments and impact fourth

taxes expected the normalized to For tax related cash million be respectively modeling and and to fourth economic in rate going of in Other Intangible are levels approximately intangible and to $X expect fourth related our $X first and million XX% deferred the million XX% were quarter. the GAAP were to in forward. $X for items expect more quarter purposes, deferred the $XX we million. approximately be quarter we taxes first return quarter

was share average expect the count approximately quarter and million for $XX.X $XX.X weighted adjusted first count for be share million the fourth to quarter. Our we

have to to and flow turning time. of enhance Jay future and recurring cash growth the our strong growth, investing in earlier and spoke finally, affiliates, cash including our flexibility business balance resources in support of of for to about flows nature strategy opportunities diversified in invest new our that our affiliates. to the returns we sheet, growth sheet And our balance shareholder investing existing substantial to affiliates AMG generate strength and Through execute over investing on the the generation,

resources deploy before disciplined efficiently approach to capital as highest our to business to We allocation returning capital of are the in we growth areas to excess and our return shareholders. in our seek

even over to challenging maintaining the a sheet continue on growth quarters, balance opportunities level several of while We prudent leverage to extending duration capitalize have maintain and and last capacity flexibility in markets. repositioned our

and incremental of the and investments, our investment existing Over one-third growth co-investment affiliates capital. which approximately our deployed of new available XXXX, Garda in course and seed included capital in we investments including

through remainder reduced remaining nearly a returned We including dividend to the levels down million in the to our of $XXX continue fourth revolver manage then we the count earlier our million our leverage share million paying year quarter and and balance which capital the share of our shareholders X% year-over-year. $XXX in on repurchases, in $XX by

repositioning allocate million forward XXXX we shift $XXX future shareholders. $XXX our transaction investments In we to market As towards more business be first to repurchases we to subject activity. to in look conditions the XXXX, to our focus continuing of from while growth, and to million and our share capital return to expect expect to approximately half of capital

remain our expect We as at return. toward allocating areas we dividend quarterly higher growth per capital will $X.XX of prioritize share and

balance affiliates long-term accretion, And with for sheet, create deliver to given future trends, our are that make finally, organic cash aligned profile new earnings we independent client investments our shareholders. that stable flow combination unique flexible to our well-positioned AMG’s of well value and distinctive and growth are both our demand ability

it to open questions. will I that, up With

Operator

Instructions] Katz with of the Please with you. first question. comes Thank question proceed Bill [Operator line Citi. your Our from

Bill Katz

thank Okay, taking very you questions. Good everybody. excuse the me, for much morning

you’ve So capital the mentioned deployment? sort finally presentation and distribution refocused then forth. opportunity growth deal-oriented or side, a and thanks on both side the Can on kick elevated maybe off space management mix seen thought with you of some the of of of about bit Tom, deals it sort Jay both so sort have some where pricing wealth talk now? for of We and then so the a And maybe of sort pretty where deal you that? funding little side new type on the more is and see questioning maybe your the right be whether in a process sort of product

Jay Horgen

significant growth glad you’ve strategy to is known morning, up The know to you picked focus answer investment time you Good is Really great. short it that a Yes, opportunity. your asked Bill. we dedicating and and resources for since long and core think for us question. on Thank a new your question the you I is effort. there to yes, a that it’s are our

momentum and do heard me discussions make in has gained you new we in number As recent high-quality prospects. the say, a of with We advance expect near-term. investments pipeline our are to in months

a pricing On that right the growth. your of in illiquid address areas new market we with remain other stepping align noting. down accelerate on we that client emerging shareholder focused wealth Those in We market, investments secular disciplined prospecting and would of structuring to solutions, as income alternatives, you point are in markets. worth creation. trends areas pretty in expect. And high, fixed We trends in demand come include areas particular, private you for certain today need note are have multi-asset growth One areas, pricing, is AMG? dramatically. back businesses ability outcome the these the and positioned representative is of we potential deals. to What’s a future AMG’s is large regarding pipeline do areas. of growth important are that’s Maybe new value how That’s to thing than don’t at necessarily prospects minute, and to management ESG,

very We lifecycle growth few transactions transition to the always business across of known through succession full execute which to for. been have that that one are can early support we firms solutions from capital oriented of provide a generational transactions the

entrepreneurial I for we partner integration. independent. our think And mentioned, reputation We’ve know, high-quality permanent and franchises. of them and both a needs to to cost adapt affiliates to industry we opportunities we’ve scale about the us learn continue you finding built think ways achieve there preserve through been independent takes let additional successful partnership those the and build structure without an support the addressing that a take us want for allows our and for refining decades, as culture enduring outstanding success. It that decades. to firm We And to to to from of our built have being successes mistakes. growth, reputation our long-term As approach a

all specifics firms equally long-term. independent as to on bullish AMG’s taking we bullish are question. on our of the positioning, So near-term choice as over that both of partner for the your the well Thanks being pipeline on building the together, position

Operator

Thank you.

Craig comes proceed Please line next of from Credit question. Our with Siegenthaler question the your Suisse. with

Craig Siegenthaler

Thanks. everyone. morning, Good

AMG that the much strategic still Hartwell in of BlueMountain that today, sits the are AUM and out remaining AUM First no AMG AUM repositioning, we as on from AMG what of bucket longer with just from EBITDA if back at XQ? remain also the how and will remaining in is the affiliates the that contribution

Jay Horgen

can Craig thanks, your you. will... Yes, and Thomas for I good to and question morning Maybe start,

Tom Wojcik

Craig. Thanks, Good Sure. morning.

that of better Jay respect for we affiliates, the and our have allocate number referenced the going and future, really just to initiatives that about businesses to with effectively So positioned a more had enable strategic on talked AMG also call forward. both the resources taken to you their

of are at we kind our quarter, revised question to any disclosure on of and added not item billion going that a assets this just $XX So removed of repositioning AUM strategic AUM to part line be new take further. reported the your high our level,

importantly, to the very financial been perspective. we do to It expect going your these think an not historically, EBITDA of be question, forward. significant assets contribution is has and from I it not not

optionality designed our us time businesses. of with and shareholders upside but at resources allocate in AMG toward AUM we the to are level realign better them, and appropriately and really to As BlueMountain enable on those J.M. and reposition really maintain help business are affiliates, the on growth of we work related areas and is are with affiliates, you and remaining about those to The noted, only business Hartwell working half where position to to those continuing not also also relates incentives. our portion their affiliate that for to to arrangements, to

Jay, AUM strategies to a with would this is number turn we still right go-forward on we a we before to dedicating basis. how change contribute capital, remaining your really economics I just now. over AMG’s see as reported lastly, really and expect and AMG the to that work it those are actively through the AUM in agreements, ultimately over that I question, asset which So transpires And that us better say, will resulting reflects we time. the time to

Jay Horgen

we in Tom. towards rooted At are the Thanks, also I level. even will at was opportunities took good summary. initiatives firms Craig, work Yes. And maybe higher That that take we level, is growing these it mentioned. a independent. we doing highest that reposition a This in management that XXXX. entrepreneurial in to to We Tom with remain growth ourselves invest successful want teams. strategic

that have preserves evolving everything with independence culture. other As context from us of their our shareholders. all we In of be the in collaborate naturally, what informs Hartwell. consider time you clients, facing aligning The help alternatives And and structure for businesses, endured the may the them partners, across the headwinds, thereafter. investment in guiding alternatives, achieve But different. that know interest, generations we with their affiliate the try circumstances, the That we did position of principle partnerships which endure, to and continue best outcomes is for vast try the our to to partnerships are our the and of our affiliates BlueMountain that majority evolve. is cases, do

system. within partner, the GW&K to and not last of a products worked and our land importantly, the has have may well. very But this grown in beginning strategy. GW&K Trilogy combination we year, helped As you point, that recall, change is Trilogy’s

new growth is on to in as efforts, and worth these lot And in on spent expect to affiliates in to centralized as partnership growth We spend the we on look just time time to we adhere but prepared for that a positioned our of I we opportunities, approach. saying of continue it finally, discussed the permanent resources our more investment, XXXX, our remarks, services. XXXX

Operator

you. Thank

question. Blair. Chris Please with line comes next from proceed question with Our your the of William Shutler

Chris Shutler

timing private talk in when of of any morning. carry you your that Hey start magnitude both numbers? the and the affiliates, guys. equity Could of unrealized the Good terms with up growing could opportunity showing about in some of

Jay Horgen

Yes.

take performance we us. take we experienced is carry Let one. It me will it, that good for duration the realized just that opportunity have growth equity, private Tom have but that have a fees maybe that experienced, and the that and it. we The comes,

Tom Wojcik

Yes.

morning. So Chris question, thanks for your and good

liquid those $XXX for fees, and around XX% to years Baring at year generated take our over see kind in back you if some about and performance that across our Those season to billion recognize couple To are have season, billion about carry this your a our overall, primarily ground have now Asia. So over did recall. of have close we on rate the last of Pantheon inflows earlier businesses overall step now course a businesses us we affiliates, we the think you the and EBITDA. growing and they of And run may realize from the time book $XX generating in got of AUM fees. funds EIG point opportunity do as as performance Pantheon,

Importantly, we performance so are as X, really to fees earned. recognized only they Method on mention,

So of in to the financial our we market not are marking results. context

earned. We taking as those are only they

The in part going of time recognition we of would more we other have slightly distributed will historically, year what to throughout carry. done have that that performance on fees have our and carry our you over see fees, – guidance a grow, realize shifted start is we our as forward less the now point the as a will versus is, make bit seasonality that fact little in in as opportunity bit continues we results performance sort I to

Operator

you. Thank

from Our with Dan line the Please Fannon question. question Jefferies. with proceed of comes your next

Dan Fannon

morning. Thanks. Good

of I repositioning. the So a guess on strategic couple questions

a lastly still of metric two item line the are to And this just perspective, restructuring, EBITDA to guidance from you And to what is quarter’s expect quarterly be, or we on just forward basis, we, have there would of you go to through next forward, should contribution? have of in mentioned? going and are – are with only anticipating a on affiliates it that your you XXXX, you not many kind then now terms fee forward, see of part is So reported get type going said I a guidance. That consistent performance guess, it? in we how what as forward extra going this are

Jay Horgen

and to us way for we not material its know very , point, not affiliates, joining question. this that I on want of to taking here. that part this is those early of We it line the reappear. expect these let item To Coast do well part do we on and third message is will your are in what Maybe given question. assets to Bowl and you period the out early. help thank Tom Dan the are the the of Thomas land will of take To your most to is see we I were point, the AMG, part believe on to after that work born your West is and Super we Thanks, Yes. answer Sunday. strategic initiatives really XXXX second,

Tom Wojcik

Sure.

So I color are be appropriate really that to ongoing said, as names not those your tend guidance give EBITDA And with at would a think there, where as the we have go to just stand to you probably But in as dialog I very and think, this to really question, we in further economics. affiliates are On into you would importantly like appreciate, affiliates. times on to way a still the we color. in point, lot of ahead. couple it contributing any can today, that be not quarter mentioned of our are ahead, they with Jay period respect immediately we significant smaller

I in that being most that half feel gave allocation. we the And some comfortable what kind time for of year guidance is of also you terms We capital think providing.

Operator

you. Thank

next with with comes Mike Lynch. the of America/Merrill Carrier from question. proceed your Bank Please Our question of line

Mike Carrier

the Good – industry. the for taking I year-end thanks see I across past And have morning was a like Thanks. on has just that try the the that, on just flows, any Maybe question. few seen activity that. some quarters, to if like you we if that to that not? the billion, just it guys or to over some think, was kind the you if there of just on of around of then repositioning, driver, strategic big and been can outflows, quantify material provide $XX wanted color mentioned the wanted

Tom Wojcik

Thanks, Mike.

couple a and parts there. Let of me different try your of question hit

to areas So fourth of the business. really two we see quarter in seasonality, with respect seasonality our

on huge First, mutual was loss liquidity not and This a sort also we tax sort alternative it call of fourth fund more would for what to the some harvesting normalized have in tend of Overall, quarter. quarter. windows on that the then names contributor. have is side, of I a seasonal

the that some AUM, there smaller driven whether are know, billion of via time, seasonal across you quarter respect driven. recall, businesses a that With just strategies. is strategic performance of for areas a, XXXX outside taken couple you was If kind think the out This the are normalized, few over an have repositioning, quite different of fourth there we quarter to have have, industry. was more so that been probably can flow or you gotten that

did point the not to there some But as we it over materially of course So see outflows I the outside. would being year. anything

AUM. I think to of EBITDA AMG reflect a really to basis. on that it for has profile more economic looks closely better is been just trying and would are that we not, time a book what you, And ultimately little and like the contributing not an

Jay Horgen

majority flows by been strategy. driven And that, of large our punctuate Yes. quantitative has to just

of I think aware everyone is that.

is to noticeable amount. there while materiality not in a material, So this change is AUM which a is the flows not

Operator

you. Thank

Research]. question. Please Bernstein Our [Autonomous with next Patrick comes the question [sic] from with line Davitt of your proceed

Patrick Davitt

the Good at you on inflow that to what pool flows think question, of inflowing getting if key guys. broadly you look of this when a against the Thank there you year more you there morning and is pool you. outflowing path to the AUM AUM last Perhaps do so? levers as do see

Tom Wojcik

question. some start Jay don’t I can well. then as maybe and share why your for color Patrick, Thanks

time good where our When earnings feel of in products about as we importantly, the trends our of long-term as our about can and the those you demand lot track their is a spend long-term record. we And look combination their remarks all at client our affiliates, performance very driving client well strategy positioning long-term strategy. really about against portfolios growth. and So, live talking prepared existing add

growth profile So very the continue over when think existing base affiliate we to organic long-term, we bullish. our about the be of

performance new we to to potential organic on confident in organic as add that’s really flow do recent we quant we in investments, expect can have In you add continued just growth affiliates near-term are have see And act near-term are an the perspective as and a that as some performance And also from we challenges substantial We pressure flows. new to challenges will where our those growth headwinds continue that Jay to also as side. mentioned know, as overall. addressed, we that continue seen the have area. accelerant

amount are these, seeing Importantly greater though, on of significant are Jay it EBITDA. note while of areas also those our run-rate EBITDA in earnings them. is number contributing on impact areas our less. will we the referenced are contributing time we And I are than positives less to much would a in our profile, I in basis, seeing that flow our so that at now business a XX% our same recap but a really the significantly

record are really at very allocations illiquid affiliates. the in our fundraising they industry from First, benefiting our strong affiliates, and alternatives,

got strong and earnings assets wealth have are performance streams. we and we Jay going we got side, we fundamental seen opportunities we stable to strong growing have forward that contributing sticky managers. some management have where have referenced in ESG very our the some On fundraising think and

still but over the headwinds, very recap, to I So some prospects, prospects. our long-term, we quant bullish are short-term, but will very, on earnings think on see in growth importantly both the organic more we our perhaps growth

Jay Horgen

you digest. not that I and to, is Again, nuance to guess, point, the thing a it Patrick I have think belabor Yes. would just I

where this muted. the We EBITDA is are impact our in but period outflows, are having to we

guidance the just fee, going for very where And sort up – core could the of outflows. first so a like, back context is the even look moderating, that based still if you quarter flattening well EBITDA the you are of it at performance looks see it’s in but and scenario

think to to what I that to analyst you try have are So if that mean. you going digest watch and are an

Operator

you. Thank

line Our comes Please next your proceed question. with the of Lee KBW. from with Robert question

Robert Lee

Great. Thanks. morning, Good guys.

part in curious initiatives bit. that of kind maybe of Just have took all included of that because a retail know last broadly well, rethinking I that’s the of little versus targeting kind just down dig question? that of don’t institutional investors. of kind I how first your much it, was restructuring strategy inside curious am year, place kind may the believe I if just more

Tom Wojcik

just on you Why bit of detail on a taken. numbers actions the Rob. give and have some I of little more bit little give you the Thanks, we don’t detail Jay a maybe then can strategic

little in us. growth talked talked some as coming quarter remarks of lot last prepared of to the we was and of we As margin-based our we really AMG and of I about recognize that EBITDA the our that as across offset costs mentioned, certain resource declines both we to impacted where million in higher affiliates related Jay and is $XX about this about about repositioning, quarter, and some bit had the areas impacting one-time that primarily that that reallocation both quarter, benefits and was capital level rationalization. the initiatives annually of that in will And talk Collectively, resource expect these up enable million of will future reallocation footprint think AMG impacted mentioned at a think you periods. the to changes of of is to free that. side about particular we $XX in revenue A I reallocation

stabilize bottom directly dropped to dollars, much think $XX actions, provided to that at QX guidance then include the helping Importantly, certain we it the as dollars the AMG that would of also sort growth does as line, capital the business the affiliates, guess we I earnings power And these and areas the on, of about I as margins you impact as dollars EBITDA I of think reallocating as a that are at it going that relates that forward. so clean number as toward million the land look should level. are at overall just to wouldn’t about that I

Jay Horgen

summary good really a those Rob, question. And Thanks. and good Yes. is

we in a We level resources a XXXX. Let at succession me and on Obviously, but growth. AMG just some people lot in I because recap the mentioned. a reallocation through I That time and went effort. capital, bit transition went here, as management and towards know pivot did to not includes only

with based we declines. the we facing talked headwinds revenue opportunity We certain our about affiliates Some worked and that. to of took that affiliates of margin are offset our

XXXX Specific new savings rotated the to for point that investing it, have story a be our and of help affiliates ways we existing cost up that those we also Tom to a program, for at our and driver, that affiliates, But those at finding million also positioned through mentioned those and investing resources and looking AMG. on affiliates just and are directly total. AMG AMG affiliates, for we capital we in finer really in about level. We number of those affiliates went and with grow is growth actions kind to seed mentioned capital investments the put $XX then took the at the but to freed growth, financials

that few our a things. We our repositioned the distribution largest on We for global to opportunities clients have resources affiliates. focus represent done

largest We to are asset resources dedicating more and intermediaries. the owners

product we focused respect to We most retail to platform, illiquid the family our related areas, products, right-size have fund the LPs added have and U.S. distribution we with sales resources infrastructure. attractive on on effort our globally

We have unprofitable operating reshaped non-core activities. and

cost. ACA, lower reduced services provider greater a And and strategic leading example, and a finally, allows have global reduction. just our are that breadth, of footprint, affiliate with including relationship outsourcing For legal selective we compliance but headcount a we our now also have

offices we consolidated of and have We have smaller closed satellite offices. some our

we So get this XXXX growth and trying XXXX you through and ahead. when towards the are to take in all opportunities together,

Operator

you. Thank

the Our your with from question. of Sachs. line Blostein Goldman next proceed Alex Please with question comes

Ryan Bailey

of for discretion top when what, give a increases about then on Ryan months, discretionary multi-part capital, XX in is Bailey filling uses can But of us actually you you some question. morning. your This the of over Good think sense Alex. a of This is And affiliates next would a of or of those in types which contractual you’ll you. incremental investments there making? stake be in? equity Thank would any this? direct equity purchases if stake And be be any bit

Tom Wojcik

Thanks for your question.

I that about our me capital you level specifics then overall really kind as at what’s have of a address allocation in fueling capital center take well. the sits let some our is asked strategy. strategy squarely that high strategy. of of the and overall will allocation our try Everything So and And ultimately growth

our foremost, the focused So for I of then future to think investing returning are our we efficiently excess business and on first growth shareholders. and capital

the that As we to three where areas, And well call, affiliates, mentioned primary color existing fastest use them the are gave earlier. see enable appropriately are growth to to us price client on organic on the do of first, best you segments gain we firms, we and highest there firmly earnings remarks capitalize we new really these investments new accretion earlier, structured of our to that trends. going think are growing exposure to in we accretion. capital, lot represent to and demand through market investments when on as businesses their looking evolve the respect of With as Jay help and believe that a both our

through investing seed and are in them co-investments. We

to we return spend of a historically. I Every to investments, disciplined through repurchases and these future well. we we with just to will adjusted point, expertise business, allocating we as dividends, businesses, investing as our capital needs return, and providing reallocate that try to we risk make AMG are of look focused a to to to we and I excess make we an dollar standard, that by growth, capital. and past very and our deliver equity guess return line generate opportunities in in and to capital in affiliates have of to shareholders are we the expertise take going that in lift-outs when development. the and to very also saying our end our approach continue the can exist we returns. allocating high-value combination areas are we the on whether hold high have, some We we investments we the those of appropriate to in investments. to ourselves we focus and drive growth significant we are through and on are in a highest way lastly continue a centralized And looking best investing some to your product that After then our working capabilities at And are resources those succession there,

Jay Horgen

with add to try me question. your to your just Let two I specific will get – to points, specifically and your –

structure want the highest we term. The growth first be though our the capital to are in at We We have obviously doing for that level, that. over well. managing business structure in as capital maintained long a prudent

for used few which historically kind times metric are at is debt So of where EBITDA, a we have us today. to we a

to we capital and goal and said. the as that appropriate comes our both highest are And over-levered these we from deliver business, to that allocate but then we want Tom is or prudent. business those under-levered, capital sure So it’s not realize our We return. in shareholders growth them. you to in we our that if find will repurchases make invest And growth opportunities areas, will growth through into

grow. it structure over hang have like specifically to we that structures, today. equity, As make – where refreshed priced as cash question, incentive a lot a your of to the the that, similarly that more is some with are own to equity we our Tom so, the of affiliates long-duration that allocation. with off typically the underneath of aligned. It agreement, part actually is the incentives right our years. Those they business And term sure of said, time. looks winners, obligations relates in With of incentive obviously over We some do original long and which are of repurchase think we affiliates, tend as get repurchased the do flow. discipline XX have But it capital way we to duration about as the to longest

Operator

Thank you.

question. with Katz Bill follow-up from proceed a question with Please is Citi. final Our your

Bill Katz

Okay, thanks.

if Just you don’t a mind. couple,

was million just question of you is stepping the illiquid. you things I on sort So guidance, range the then and a think to migrate like to to accrued might Just year the to one, what the the fees give a is it for want the end is DE trying pre-performance to the the carry year of to be earnings And a Blackstone such of what sure fees, similar, Jay, ago? focus just on footprint appetite type year. more size etcetera. the performance release which the is possible And for at guys, million methodology, to then sort repositioned first $XXX this What maybe as KKR, back, net $XXX or case. type us of versus make EBITDA of

Jay Horgen

part of to want that? take You first

Tom Wojcik

Sure.

few You, Thank questions Bill. got in a you, there. Thank you.

the $XXX to So million include performance Bill, million piece, EBITDA does fees. the on $XXX

So is of it inclusive performance fees.

Jay Horgen

Yes. And are then, yes, you right.

our of existing new for investments, and we this our And but business positioning business management our fixed comes the of parts relative are pieces private markets our have but say the value, wealth growth fastest other additional and in of also are are the growth alternatives, income from areas, perhaps growth established our as also business. the that We on the of call, certainly the certain affiliates. growing

that why cyclicality So the businesses. number of these across is classes, growth valuable in of of demand there diversification like trend, these a think asset It’s the really both aspect investing also to you secular are We a all areas. the are AMG.

investment structured may have that competitors. the about PE world more come disclosure the markets. We migrates to for And active, to all at There private think clearly in our looking probably diversified-active an shareholder appropriately like time we point, are a where value.

opportunities through of are affiliates our our the that which of But we think items so over a cyclical you all time, consider across group the this selectively is with that of lots that some are magnitude valuable that disclosure we going they diversified including aspect business. of even increase our at these and I helpful I systematic point, of businesses mentioned, a and as affiliates in moment is for can today, think business.

of it as on Method it opportunity, increasing and carry report affiliates one we On reporting that by do the delayed is have you know, is quarter. up a X number are year-over-year. We

So, as gives on we give look some do some this, we that have out you each us guidance. and confidence just which visibility quarter

now are will to number, accrued, in we realized we but think not but the produce I ready consider something the future. So carry that’s

Operator

Thank you.

the We closing over the to end I our have back would reached of Mr. to call Horgen question-and-answer turn like session. for any remarks.

Jay Horgen

Thank this joining morning. for you all again us

we we speaking maximize on look capital focused We allocating execute our discipline in forward heard, shareholder you to are maintain with at as opportunities on you times, we strategy. to next our As growth our returns all And over will the long-term. quarter.

Operator

you. today’s teleconference. This Thank concludes

Thank disconnect your may You you at time. and lines for this your participation a have day. wonderful

Affiliated Managers (MGR) 3 Feb 202019 Q4 Earnings call transcript