Affiliated Managers (MGR) 30 Jul 182018 Q2 Earnings call transcript

Greetings and welcome to the AMG Second Quarter 2018 Earnings Conference Call. At this, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. to conference like host, to now Ms. would turn over the your I President, AMG. Relations Oh, Investor Selene Vice for Thank you.

You may begin.

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positive quarter economic $X.X flow year-over-year of of billion, client share. strong results in Thanks, Selene. Good cash everyone. morning in net per X% the growth and second earnings generated with AMG

position areas. the strong streams client overall of areas we're ongoing growth highest sales level in Our these normal pleased Affiliates' with return in the alternative for active redemption. growth global strategic and our as At demand especially and range distinctive continued our results of of generate return significant equities organic and attractive our strength of reflects broad more level, we

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up in the continue XXX time. X.X% X.X% quarter industry Selected up and have improving X.X% be benchmarks for the challenged and and Russell U.S. were quarter While over overall industry the been to year-to-date. equities for positive the X.X% XXXX with our redemptions S&P year-to-date trends

and fixed a our and of net within as slightly mandates number management and $XXX for multi-asset we business wealth positive well in producing specialty quarter had XX% income flows our encompasses AUM account Finally and others products multi-asset balanced multi-asset million. of of as a

products, continue some systematic products our we income. good legacy affiliates generate flows including and to momentum While with our we positive saw income new fixed in fixed are seeing management weakness wealth

new geographies. as improving with are Before our packaging, benefits turning products, and growth the of the we profile affiliates to our financials, are pleased we reiterate new organic I realizing and that to wanted new

to turning our Now financials.

we economic of share the per per As reported release, in quarter earnings which we we $X.XX. for performance net reported fees basis, second $X.XX. of included of earnings GAAP share On saw the $X.XX a

reflecting points from in $XXX.X basis XX X% AUM by recognition positive and to points The declined second basis part driven for of million which differences modestly the fees, grew XX other in Economic gains, the lower EBITDA position ratio year-over-year from from to $X.XX count well lower performance activity. X% $X.X year-ago impact growth was revenue and year as X% $XXX.X interest economic between composition ago investments grew repurchase our driven and expense reflecting to AUM. share fees year-over-year as and growth. which lower assets of alternatives. while organic realized billion Adjusted our For net lower business to million a per from a average under share to fees grew aggregate year timing tax decreased aggregate changes by given earnings of quarter, due to from markets rate, unrealized ago and management modestly income X% lower income and net long-term a to

to more modeling to basis was the average fees. quarter management Turning under points XX.X the excluding items EBITDA points performance basis of for or of specific second assets adjusted ratio XX.X

and performance be and capabilities. XX.X EBITDA we basis management ahead, the points investment approximately in Looking fees development product under lower assets quarter expect adjusted to in distribution third to seasonally continued reflecting average

million was of to our interest second $XX quarter. for Our share interest approximately third we of share remain the expense million. In expense the expect $XX.X at quarter

Our the elevated related of $XX.X $XX from amortization million quarter Affiliates due share million impairment to which million non-cash primarily impairments method before was a Ivory. the second $XX.X the was equity for for charge under including to accounted

in the reduced non-cash our roughly at carrying far million was value quarter. economic this to less impact of zero, per While $X charge yield

to share million. a return normalized to our third ahead before amortization the we the to level expect $XX of Looking quarter,

to a XX.X% second Turning XX.X% tax taxes, and tax these to in rate due on rate to GAAP normalize our regard our we basis. which to tax was was adjustments our reform our full-year rates related effective U.S. cash with tax to lower expect the was and rate quarter

Intangible we quarter level tax impairment. to and $X.X amortization taxes XX% was the to tax rate GAAP the XX%. related our lower were forward, given rate Looking and deferred our million expect be in approximately be which cash to of approximately

quarter. approximately million intangible for million the normalizes. our to for For as economic taxes $XX the quarter, we third related amortization second expect Other $X.X items negative to return were

For modeling quarter. purposes per items we to million expect our approximately $X other be economic

adjusted average Our be expect full-year we a now it quarter share was second be adjusted and quarter third expect repurchases continued level approximately weighted the of the our we million. the share count average to for for count weighted million XX.X XX.X million approximately reflecting $XX.X and to for

Turning in and sheet the to we dividend quarter, paid per share second our repurchased XXX we million balance in a shares. $X.XX

new and repurchase the the XXX to half on the year, activity. second expect to Looking investment of we million depending between XXX of level million

ahead, value in the long-term Looking affiliates are shareholders. while returning new in to into we our also growth ability investments organic outstanding well capital as our deployment business confident of asset outstanding generate shareholder capital through both consistently to as of management the accretive global

to questions. happy your Now I’d be answer

Thank you. [Operator Instructions].

the of Will Our proceed question. first from your line Katz Citigroup. question with comes Please with

taking much. very you thank the you thank questions. for Okay, And

some more So how gains peers even and it and terms new out for little opportunity, geographies, just the the products, and the structural into sort of half that about et you XXXX? look think of second maybe year sort of alternative much just of flows your there if in this the of moment expanded sort might expanded with come back be on how of is third of to out just some beyond it's side update last of do a think how that you you much cetera quarter of even given versus week, cyclical differentiated product ended

Will Great. the Thanks, for question.

you about seeing are equities prepared really probably great okay covered pretty think nothing different I like these used prepared Affiliates channel level Winton word sort structural And I are and year-and-a-half of in about brand is that last I look actually capabilities doing levels and therefore much or and of matching of producing, brands as simply Veritas needs about or evolving on records Pantheon, it distinctive better but like better the with client that good. we and Harding in is talking then geographies. remarks been that across sustainable the of our I EIG. global Affiliates if and and franchises the sales of or there approximization why And and about we the the the is have gross with starts job is alternatives highlighted sales talking firm, new the I our then over overall brands, and it Loevner institutional but talked the we we’ve expanding AQR like this using been talked growth all question much because So brands and much it year well just are it’s it so and and but think remarks as that put way and these so really the our said track firms from in with and is are think the of which the liquids are growing we in a these Baring, are we or it’s Capula some

sales so you a step lines. fastest the products five didn’t layer sort back, of are in have of those we the those some sort in of had like in bunch down a if include and products that growing ago XXX years quarter something And and of

overall getting the jointly of exploiting us this have to make this serve see back got Again then kind there prudent just can product knowledge our then market raising for kind said something important, ability in cycles leveraging the of a is talk Now wave that stages Affiliate it is well at is of early we product cycle where say we’re or distinctive, one bringing main that Affiliates products to And important tracking to have that of we’re as scope something happens have add just always But most the our as scale. that's development that we and mechanism. still fund fees. again the most better to evolution we theme. happens the and And the development that distinctive and at of that Affiliates. some Affiliates is everybody of also at sure you to about because it new specific of with that some course better Affiliates is alone, us with opportunities is will and unique especially a have products at performing product where through it

of not drive actually that put forward. the the this have up showing we those product all are will also way going simply we brand, bringing our doing gross talked been as some remarks, channel So product in that but as continue capabilities, talk making in and important it’s packaging things kind and in Zodiac that bit that is modest investments the we've the channels. last -- that about here, some Europe in said or in product Asia Tokyo and as packaging public development distribution size about just we so are to and of a adding those it’s gross and and the in then and new And all to like innovation innovation also expansions highlight performance, and have sort development bit we If wrappers engine it. we prepared little this in and distribution will and like of Fund, and Middle-East the to then and sales sales would the the couple we I have here it’s been of geographies of that we’ve some Pantheon, note capabilities resources and things extensions while which been the think years can also opening together is over places really we little something

Thank you.

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

the kind morning. the update your Jay where your of think versus outlook views kind I the of year good terms and you the back of guidance Thanks, we us could of views, year half in you the sit? from of kind benchmarks about just earlier performance guess in on into

Yes, thanks Dan.

I So the rest take then and two year. maybe quarter talk the will maybe pieces. about in I'll of third this the

see prepared XX have flows July positive categories a in in current said seen that's to I positive FX first off and XX well numbers. up blend as start, billion our we So includes -- as that the in markets a you base which we’re remarks, all of X.X% on the far from can June $XXX so the across June good is

So we’re us should here for in the the of little bit July year. a quarter lift in and up give

earnings call You And gave also remind that a quarter. a fee third to I which average us low just around is one for the pennies in just primarily some both basis we everyone EBITDA turn quarter typically in points so XX.X than the two third is population very only to the of and third to given EBITDA lower performance result in came to point or one the population, low crystallize we’re quarter want expecting this slightly week quarter while of this seasonally contracts AUM I a as guidance our our third in quarter.

investments So in the capabilities a full-year beyond looking from staying the all to on then narrow to that’s maybe obviously third new make as points. in Nate then I’ll performance continue of products perspective new for then fourth And fourth of XX.X it to and in quarter. reflected the moment the there that's and basis take fees the just you I’ll business to and quarter the we heard

that systematic really about performance my in good of those benchmarks exception make primarily benchmarks overall and for with the comment alternative about modestly benchmarks prepared is challenging is is our the mentioned if are continuing Given diversified. environment remarks category relative the and I of so the more most the the positive pretty

is in in third and half least think the we’ve is now the whole I where a we’re and together performance are in a and conservative when this just about the So in the $X.XX year, already pennies in that, quarter, so factor we in range first quarter, all is you around year of July. about really mentioned for the closer $X.XX tracking good, think is one we're about relative to performance booked fees estimate benchmark modest fourth two course at you I that or $X.XX

obviously quarter environments performance about the lots where third of bring we’ve many So fees. had and fourth

So of on I given capital just maybe point and our I even products. that will still the And fees about on prospects just alternative feeling the out long-term deployment relative touch performance a good XXXX beyond of finally little XXXX to pretty wanted then, bit here. performance

you of what we said, repurchase in reasonably have XXX at to the think half high the As about continue year. second you shares to XXX a level

already average we’re XXX in $XX quite We the share have count million. average look share done the first touch we $XX seeing count year the just we $XX to weighted half expect it that's count bit, a below below when the million our share down for at brought year-end breakthrough million, a and

that going and next we’re million. we this year ending as pretty set-up So $XX started million into good it is $XX a year

forward our we're of share going things looking lower that. to count, So XXXX to on forward some together improving business and with looking growth sort good profile, organic

Thank you.

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

actual the Jay all is you that inflow your that to help and Good just than being getting the did of July of Last quarters waiting through in is comments pipeline? you. morning, couple some commitments pipeline and Thanks. wins you delayed, come of or some XQ, about big adding those about to that talked for still XQ thank all more or

on take up can last me bit. maybe let Jay Yes, that and then start

job, intermediaries the as both this kind how is of and terms are of overall one the pools absolutely capital folks hey and of of the a well mandates. clear so compositioning which it overall was the I side -- is the start channel do part be lots of of not one-time there and as is part they're is of in like the we’ve good the narrowing of and kind mix that is kind have been against all sort off the With think complicated of increasingly more pipeline in we increasing the large of we have replenished sort the that this to product talked of as of in pipeline other to our because think I do marketplace second geographies materialize So to combination talk trend some quarter good that’s behavior but could about which pursuing about That overall mandates two trend. that and thing. on job did those that it’s some been spacing trends, affiliates that you is capabilities and our again again evolving and lots more of

pull-through and growing then seeing we opportunity the to you know of -- that but just long opportunity. I a So are we also -- also touch we’re on Jay seeing as And some don’t that if want

we liquid $X.X I illiquid flows maybe Yes, books. in just prepared starting saw in we and mentioned billion both my quarter, for quarter Patrick net net with the that in second saw the mentioned remarks flows this second and also I

going number illiquids we market those what imagine without something there real funds more second the them haven’t into number I saw in Those can’t. in into made say have our we a would because more news, flows been that July, close equity of managers the net being you some the going than I we’re equal private but of of quarter. we’re in bit some in had detail on of have as seeing of quite a So both. any seeing the number to a neighborhood that and starting weighing good that assets

Thank you.

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

of part guys. two thanks question. right, All Kind

look just you make investments those guess think you they on I it if return positioned in you is that horizon I the picture be terms are guess investments guys sense. you at like time I First structural of how on year-over-year, for much the think just you and mentioned like down Jay, then may just the mentioned and EBITDA, makes you’re the where investment income or allocation the on about sense, investments bigger and you I fees like making then investments, that should the the performance maybe the other on -- like weighing mentioned how on

inflows side On obviously just if a you out bit like so more all of to five many maybe benchmarks just whole you been because having are there? on like the outperforming how on understand little how on across it flows stats to even the a impairment has or the look all sustainability good do had a bit just the trailing the industry like get more it’s a wanted something and the a to I when outflows have are performance Thanks. affiliates any longer-term muted as other with many color Ivory, then for get three, for color year seems the affiliates XX-months, you little but of quarter maybe are the versus the

back with will turn to then I and Jay. start it the half

So are comment of different is and themes themes I we as different couple together a you and of have there to a work we that appreciate have there the are here. couple

are start performance I think about look So places see, opportunities we ways we will and think sort can the one see see where about are short-term do in in can this we where get we've we place now those products are that at But I look sounds of think where can for here, significant we is some which to areas have term are they those, we with of we but we're specific can so where where there of a performance we short much have themes we right. on data kind so of again really out. see kind capabilities, kind on and and down through the levels -- meaningful the lot the specific heard ways where the you of for part through are this better as questions, can to I go of would talk and and been the where ways better good themes,

I and don’t so And use that. start think an can that us and think you just as alternatives specifically a to but place I in example

we that so Affiliates is capabilities And our for there the opportunity a long-term think have.

about that's it performing outperforming some the you in the peers. than underperforming, alternative products the products alternative the think projects Some are absolutely the are about gone start that. just demand because capabilities And better products think versus better which you've in absolutely and main across main categories whole, the products to performing way to category once right within it from there the is and then all check probably

main, Affiliates get ways out So than that. we and will performing figure peers in the are to our better

the you've our to demand so of are definitions are put all want within dimensions somewhat part? capabilities we’ve which them there’s demands So know we those both then and remarks, two and and ultimately if liquid business also Jay it -- of but talked for around stakes then the about specifically add and sort these characteristics, illiquid, brand. about -- doing reasonably its on at these the to platforms can artificial look two is see opportunity they and easy as businesses within what opportunity capabilities prepared are the behaving we set incredible little extensions behaving it definition. also set illiquid don’t there we and illiquid expand liquid affiliates or as heard is, second that is take is better the way under I our If you an and talk even that products amount do the just book way good extent of more is as illiquid the us their to consistently stakes to their in existing the that this like around

Yes, yes.

take there here. say could is a lot, I is So a let the me second lot there part,

try be So brief. I just will to

the level to that's some first in and third. affecting fees and second the seasonally sure look Just I higher in on in the make to note where that, third earnings, we our so EBITDA at of to the the if that EBITDA extent and is the kind seasonal, and second we business our low the quarters are, performance we you want have fourth

half, So guess it spreading of kind sort take you'll second at kind of I of think the look if fees. half see first will you at account more I business into numbers be those will performance the you of least

was I income a The realized we the statement last actually than clearly line but the made down bit prepared other see you year financial had item $X.X we it was line year. million point this the on gains that more could is in do item remarks down other

$X.X So $X it’s not like down million more million. really

or we’ve of typically investments and and that are part those gains that's GP So obviously made business. SE investments impacted our that from

to expect them up time. go we So and our we earnings in see that over

history that think that you significant dimensionalize start-up in in And and and both just quarter. points. of almost a because before that mentioned Japan and front make which all something bit, just this that’s included in that affiliates expanding XX.X So a will you we non-cash think of that and million we in down by about you element we demand to quarter remarks as our robust make contribution same. you would every is but not bit it Japanese business I to example in in reconcile about know is if have and bit a a the only my that's like is up the Japan is say guidance statement of of then basis and year-over-year. comment in of have do we do some as is we contextualized, the et that the investments and take our the moved out just there participation there recurring would in did this not There $XX I quarter little a we open the about even there We we affiliates office see it Japan. be have a the little a initially of then cetera expense a will our then usually work I if from more spread helped it's million mentioned, I geographies Australia, Ivory to $X an Middle-East Ivory think I’ll as have about

those we’ve had side-by-side that’s as with of you that cost a do way that through work return history. it’s our so forward if projections been and through that see we and as accumulated sure coming expect regions bit we little in the you AUM the in and come Pantheon to that about in through So when get a think start-up Pantheon our numbers,

less to hasn’t as we’re have but already in to the we traction but I'd said market on which maybe And we to just of see place had of while of most not sort kind in demand we as said, ground the entering a some traction point been Let good which little but come really much are we obviously on we’re me in then and at enough than then good and invest contingency and Japan we there. we just of add the time add we and that’s point a is text going execute going as we and of we that has we we’ve Jay a everywhere clear we quite looking bit after for have are enough, the office -- have start to to where way, a as there place obviously say Dublin much our process had the really a experience we’re through our Affiliates open experience -- to be small start-up having had a I'll the to have and to is other Japan them. now we're costs is seeing start and growth already curve. last

we’re but will obviously shape Brexit money lot and ultimate our on obviously with having it stand of the out. depend to but of So not conversation and regulators a that

Thank you.

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

I I commitments of some your of maybe Blackstone’s in amount looking first kind little strategy perceive anticipate to looking and New you I they of happening coming just about can guess what about talked parts, and that permanent vehicles a haven’t you AUM haven’t you stakes all you discipline permitting second on lot when whether a as that fair but of or that's bit it I’m are one closing. in market, into competitors beyond the called July, invest turned I you capital to kind Good stakes maybe business this talk platform, guess for assuming of in a seen of marketplace acquiring on it’s fees. managers? know to relates the these Dell maybe is of part, activity kind and in lot partner two a flow minority or seeing you’re all going I each my some compare the morning, the fund then ask what York’s And is will guess of maybe to if first board guys but M&A, on obviously question well

pipeline on? commitments a like we’re seeing yet kind what not getting sense but if received anyway there they -- maybe your sense affiliates So turned or AUM any a getting is of that powder of dry been haven’t in your of have

have first second. Jay Great, the I'll so on to part the let do start then and me

I it well. and understand really and So think well you you it exactly it framed framed

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

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Thank you.

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

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our to concludes Mr. Thank the time this final for back questions. will I At Dalton any floor time, for you. it turn comments.

Thank you. us morning. for Thank you this again joining

look in pleased value. and to Thank shareholder very October. We you quarter to continue in again We’re to our much. confident results create forward you with speaking long-term with ability for our we’re the

This concludes teleconference. Thank you. today’s

your at you this lines time. You participation. may disconnect for Thank