Affiliated Managers (MGR) 6 May 192019 Q1 Earnings call transcript

Greetings and welcome to the AMG First Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Miss. Anjali Aggarwal, Vice President, Investor Relations for AMG. Thank you.

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Now we're your happy answer to question.

Instructions] [Operator from you. the of line Dan question comes Our with Fannon Thank first Jefferies.

Thanks. Good morning. I about Jay, guess first, the Nate, your I wish your role to role talk at new extended you I on wanted alternatives. well firm. and guess in broadly congrats

kind If big you the a think business next of BlueMountain. about could performance at elaborate contributor How to firm see happening should outlook with And mentioned is we the being on of kind over we of months we what’s at such BlueMountain time of which for liquid changes of that period? category there? this the years you flow the think well been challenged, the your several and kind some XX some as last can if the over the this products at over still as AQR component of

Perfect.

I’ll So, pick the I Jay that other this maybe part BlueMountain of and question. is Maybe on will think then Nate. start

those trends especially history. look, BlueMountain but last credit -- performance but some look, couple some just out diversifying was impact along business forward infrastructure, like on some performance building some of were was just they and challenging client also So, kind – has BlueMountain the outlook I’d and over industry both that had strength, impact volatility and specifically real track not with certainly performance on on the that for their on kind fees, on recent say, about fundamentally years And also core the which the clients. of the of really record quarter’s first of

that And some it activated. if so, feasible makes record but the products sustain, client capabilities and of kind and infrastructure kind the to of it’s base, I not of current track those think

focusing So really agree this core strength. of outstanding -- issue think them we an for I issue really of those and an on is

alts I we’re think generally, turn on maybe maybe why believers the very [ph] more Jay. strong to I’ll

Dan. Thanks Yes.

quarter both do starting So, be had really I two add with do I think the a the these to diversity diverse but the lumpy your and liquid the quarter, We where did we client products outflows their We the are. to performance, different from set alts products client they some have portfolio. about unrelated the flows particular question great correlation transition expected that have think we of in aspect there. in that portfolio. to long-term need of They think

the place. demand trend long-term So, in

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emerging have performance We improving in market.

all to long-term and equities. about performance improving These in medium profile. be reason generally global us flow have give the optimistic We

you. Thank

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

to Jay. I Good Garda. want ask about Hey, congrats, and morning guys.

your at talk investment point. any a in maybe fit know more you relative so Thanks. smaller this and it’s But they about And ambitions entrepreneurial the comments about had income value? could it I to beyond reasonably regarding moved how more. teams Garda. maybe philosophy fits fixed How just into does previously talk around it bit management a little

Thanks, Yes. Chris.

both prepared as remained this first, we his and I quality is as disciplined my team Nate all you’ve well firm. on quality, for. there. for. what what has partnership exactly welcome we’re Garda, on over – of new both High looking is partnership are for Drobny management XX low of and remarks sure Jeff record specialist, think we’re and reflects indices. excited to looking Garda exceptional very far that making So in to pricing We traditional elements We those fixed-income, heard focused we’re great track alignment, value, and relative the as think years, very correlation a entire

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equity cargo in as $X.XX on of say, growth is calling XXXX, out this proprietary the through within and this It times your deal and that line as the neighborhood is $XX partnership or to in the year. see then work this interest that. clients $X.XX find EBITDA of XXXX that math of accretion meaningful our XXXX came that’s to will of million of cycle. business the through low perspective X pricing you do As our EBITDA. we you of for contribution with me half an our of XX back example share run from you’ll heard in accretion seen our about go point effort to of second minority half we’ve of really a items, at of in structured benefits this EBITDA pricing, in the or the is of rate range, The half but us the And method end revenue at Garda it and if -- kind substantial the way growth partner allows growing

think here alignment very this I we’re So both on and about excited quality again pricing partnership.

Thank you.

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

morning everyone. Thanks. Good

the role, on congrats new just Jay, First, deserve. well

Thanks Craig.

EPS Garda? Or the is potentially platforms it is investment follow-up look what that businesses question opportunities also smaller provide you if last actually pipeline AMG But businesses larger today, is a at So, the my larger could it shareholders? some like from to inside multi-manager has mostly accretion new is one. on the pipeline,

Yes.

So, making long-term. the relationship quite I our near optimistic are business obviously more about good term We’ve we’re that as say, heard progress dialogue had building we’re we me the you broadly. over on think in Craig pipeline,

your me see M&A backup then the pretty today as specific back I’ll Let being come question. active. We market

of seen difficult transaction, specifically think execute general of and think on market And I types focused on the Garda. those predominantly do those of are consolidated including different both some transactions the to in transactions transactions lots that that cost-saving. particularly larger like larger we’ve are we in

is that not course we what Of do.

investment transaction We in puts have obtain a strategic accrue of can new execution successful unique business the integrate. that to to our we without through model in having strategy us where of position that a benefits scale

I think of scale that’s our aspect larger really ability firms to it's midsize firms. important of whether series or a

of project is firms. it at ability where about through We have to they’re transition save, larger of you to midsize the through two exactly or a firms so also much end inevitable. integration whether I investments or how or planning new that say to our is succession would ultimately grow the ability excited unclear of year the having very scale without go

As you the ago trends the we’re John in say identified firm. what still heard do capitalizing Nate occur XX me years and and demographic on that’s that

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we’re term. excited like medium investment opportunity the over the the more about So new and very will activity we ahead and of us year feel we see

you. Thank

with Citi. comes of next Bill line proceed your from the Please question. Our Katz with question

very to the congratulations everybody. you taking questions Thank Okay. for and

realign see theme the AMG of you staying the sort of you to growth sort asset Jay, tend beyond strategy opportunities? related sort business, big to management of accelerate just evolution of see the just So organic do picture, of acquisition it anyway to the evolution on as any of

Thanks us evolving. these and We to presents for strength. capitalizing will on acknowledge our industry us effectively embrace on It Bill. focus it. Look, is we opportunities our require and opportunities

partner the firms XX-year foremost, our and most accomplished to to that continue of We that. to history over First and want we think the to globally. independent be do choice highly we’re we’ve regarded going

order to and you think pipeline or that and see to new value; current strategy also only in do scale this in products want shareholder this ago new as powerful excellent geographies so, We entrepreneurial make experience and affiliates we said, partnerships. are shareholder prospects will and highest In I know generation. them execution the continue building change. level our all the on and Sean, The in growth focused relationships know on as our on our of not with phone will at strong to enhance our spirit. want grow across in maintain to leverage affiliates element united been I Nate way our everyone moment combination efficient affiliates, that prospect We we earnings create the a We deep that adding accretive and to investment. business in these our not as new I value, new do accretive have channels new do but we ways. said ability as new it find and to have

built in diverse independently have return relationships We excellent asset of firm. by also stream the And today managers our managed industry. owned most independently -- we have array

that with array of independently being relationships most you of reputation pipeline And world’s differentiated diverse I an we excellent so, team has the right will the you evolve forward manage and portfolio also partner. market with new think will of on And say set, as that look finally prospects; strategies when forward investment and this orientation, we have a it. we skill notwithstanding evolving the

you. Thank

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

Thank morning. Good you.

move are fair watermarks? is view fees bit – out of your you up say performance it to quarter market the quite of come Given high versus a to-date, that where could come yearend where have terms in

Thanks Patrick. Yes.

So, well, a take me step let back. just

kind the was As and our is is that of with blend exposures all on normal of would year profile about market consistent which Friday across our up last our X% say, market of convention. I

year because we've ground just progress goal. good still As hasn’t we would to the high – on been have high would in our regained early specific some in said, out of and and in we along making sort say, expect for fees gave really there question the it to mainly to so gone quite a we so your progression is on of of consistent That watermarks, that over with watermarks, term convention. that I longer our change model are cases what we it's way range a answer view o the performance bit

pennies, have guidance highlighted the opportunity. a do experienced and quarter $X.XX it to this in it $X.XX second down and quarter $X.XX in kind typically third would You performance of goes in $X.XX we have to $X.XX then of seasonality quarter. of in to We the couple note fee call that we that

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to would on then feel we opportunity performance say the recent with is that the because our balance assets of is, addition both the average market. and fees in flows but So of I have of of under earn consistent. say the Garda. But EBITDA the would fee ratios management, in thing good opportunity the performance of second increased half year I addition uptick last all also Garda the our the And by been cash to about

Thank you.

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

good morning guys. Hey,

out. Just a put quick question around the AUM disclosure you

bigger like negative the at within couple forward other If that you number the bucket total over the look role of seems becoming last a it's quarter.

kind billion sort Thanks. was that, the little it's of beyond would any quarter. with or be EBITDA I expand what's of think coming bit Can that you that Just this footnote? impact X over where it associated a in helpful? from is

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you. Thank

your Please with with Deutsche of Our next question. comes question the Bank. from proceed Bedell line Brian

new well, been ton and has Thanks area outlook a another you one relative Maybe, view over as sort deserve. for the of you activity? the seeing? a couple to can you deal view prioritize become of long you a say your would well fixed deals; past the making done investments next if the to that one next what frame, to do really on Jay comment a over ask stock deal alternatives. on you relative have the guys currently for other as you Great. might years been where capacity Maybe income five years income deals bigger And some you're plus you've obviously pipeline also that then fixed over congrats just given that over and of as Jay buyback haven't you that part a time

Thanks, Okay. Brian.

So differentiated few I -- take a core fix like can income. I and would so kind them I the generally if of U.S. think we're fixed strategies we income there are interested bond in you’ve remember asked global. Hopefully them. that kind I'll within the fixed say of We things On off. income, in

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a business owned partly and So, say because number large is you a conglomerate also are tremendous type of a scaled or them tough them firms it exist that scale business. it don't by of use see kind to and just would tougher be organization. that's I business

strategy we those differentiated fixed than So types new we look will like income make in investments businesses. of to

want what what close think in been always distribution as I to staying to long in demand stay information looking their relates – portfolios term from our both investments. and We global for it to trends. our understanding clients using existing looking good affiliates are from new at we've to clients close well term. long as As Look, we're in general we for -- our

is income businesses kind of portfolios. interested that interested differentiated trends in are we're fixed other within why so term in cyclical and long number And We're in that we're different. involved of client a

forward of about new and we investments So look we are where kind that is how on our think prospecting.

quarter. us our sheet over about highlighted of lots have we lots for question also the bond XX-year we did revolver investment. because capacity it a as relates execute don't new $XXX and billion gave capacity do new we investments the it but I additional it significant therefore in We new think to positioning. some to did million I look, revolver, us capacity, to balance down As we and pipeline, a our that long which we allows can term is think $X.X appreciate pay investment revolver that enough

repurchase in other million I XX say the quarter we The thing is shares. did would in

see how more develops. this in imagine repurchases quarter. we're a As of this doing would said, amount modest I to pipeline We going

our so well that the to just Although as will think that. of pipeline as conditions, we'll dependent be market near-term timing upon continue about

capital returns a model our opportunity. initiatives, as will way those our first that a the new will to against we maintain along initiatives long balancing to yes, we at forward sheet invest that that our far term are priority As in generate sure and appropriately making shareholders the affiliates risks capital allocation priority goes; we But is businesses for new shareholders. the course when not in of are of investing balance our value

Thank you.

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

on for is This Mike. guys. Hi Sean actually

picture trends flow year, to end and you to the guys given hit of do expect that growth XXXX? by improve the organic still growth the tougher organic Just the X% start

let yes, Nate, and you to add if to take me me do. this, let want please So

elements long-term in how in see to on over in X% and get it The timing described remarks said and trends earlier, do liquid we of As level of there I the long-term. prepared medium in to place that be our we at performance depend the the alts. we will part

uptick seeing and of other U.S. relates in it to those the some illiquids global aspects equities performance products. as and business our are cases markets think I equities, emerging for demand in we both

I performance and need moving to we is the think timing as stabilized can our term a see before things going quite that said, the of with challenges illiquids feel respect were there's think a us period move bit I look, in we alts near business. on period underlying X% when those occurs. of that front through through of That in to good confident we

also demand that. challenges medium that see our X% in really As know business. exactly it's the could over alts performance, growth for timing reasonable being of I’d expect mentioned to these the other we're a in to of term the upticks do rate noted having hard any number illiquids We therefore outweigh

Thank you.

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

of of X% a like a to just the if my kind EBITDA to of the the luck think the outlook if and the we're flows Great. of organic reasonable reflective what maybe quarter on guess get outflows over trying on best quarter. Is be term. Thank the -- And if economic growth Is of in and and proxy kind is first question is impact? of kind what of you. this that seeing I was Jay feel impact congratulations near -- we seem [Indiscernible]. growth the this minus track

assets you So, say are the disconnect of good have I written but on I have the the ownership affiliate, a a underlying of because bit particularly raised and flows question. actually challenging you would it of not us, is would -- metric only that's what even equation. the there for it's really so on between as EBITDA. depends -- it's

the but there. to think an I that we has the a some point look I lead things much impacted of repositioning ratio cost so and do improving that has addition and ratio near mix AUM. can When because down see a a fees it's you us those term. the in kind the other both of it’s come the that we what of return I all increasing also for is – by easily performance profitability EBITDA the BlueMountain. in of but could of a to which should way forward shift, costs and the back performance those to remarks. It we average to would comments well for just is been see you track made down is go prepared the overall recently see as of for bit us of this from and around come It that that ratio improving time, we business see That us. mix over my ratio year fees abate, very Garda,

Thank you.

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

Thanks. that press broader on? mentioned or is X the repositioning I has sleeve something just wanted going billion to the BlueMountain confirm is the there just

Yes.

businesses, in book. is none the should our EBITDA, the would meeting is of the first a the a the basis and and is do the price think that is that events, also business actual of to write our we've market write not quarter being impact say that Value revalued. historical allow had repositioning. at opportunity and GAAP statements, growth the cost one element do therefore is as that that all that our and financial reevaluation say does the non-cash look where purchase I seen -- think one you forward but Act the can't is that in of current is such to I look therefore So, it's these up. I I on I thing really -- anything with businesses charge pay we've just significant you the that we had [ph] that, in outlook and thereafter would note of

-- itself write-down can't EBITDA. down on not to future. than we requires there The write the the So the what's experience current is not is tell that asymmetry in going other only have asymmetry some gain here is does recognize you you And really GAAP our assets. the

of The they are again we thing all equity those one value, Frankly, above have across can't different a you methods effect strategies. of one above carrying The value. sum and any is investment sum carrying noting offset of is any our portfolio significantly or from investment. the investments, are worth portfolio all any significantly the lots their of of other

Thank you.

Lee proceed from line the KBW. a question follow-up with is Robert next of Our with question. Please your

a I I have -- it. just is think bottom real question, This missed Jay. simple Hi. Yes. But may did you

You mentioned the contribution the in performance quarter? fee

That $X.XX down quarter. and was in to It first quarter the similar quarter. the it's Yes. from the fourth is

So, remember a And have we that's quarter it's performance of lag mainly one fees. affiliate number a at when year-over-year because a generate if down. you you in look to

were year. by think drop-off quarter we're so first really quarter. impacted for about now in you of quarter the which That's quarter this reporting And to that last the reason the lag year what if just affiliates fourth from this happened one those the

Thank you.

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

relationship for in solutions the I to follow-up. prepared go want back taking investment new the just Thanks on to about distribution remarks your provider. comment a Hi.

think big more any What is? detail you there how timing? you Just this will fit strategies and can on company provide

Sure.

So, this Nate. -- is just

set to second. Just level for a

independent ago pick array guess is and easiest we've to if it independently the how what of step and it's said, world's way which diverse take the returns its talked do into largest the stream is we streams you So, array trajectory have set starting in you back, about so just client that managed the is I couple just how And kind and challenges do framework returning most a quarters up and think it portfolios, efficiently the necessarily the of of you and right? opportunity not of streams. get fund on about right product, Nordea, of the sort Jay

understand what of work transferring get think and the what example. and so efficiently that still been as there's in do. infrastructure infrastructure of the We trends. believe understand them building affiliates But really base We've who their first partners these really to there efficiently channel up And out understand it. to each we're bit demand our we was we're client the as of their the or settings are into portfolios dynamics who partners, and little doing of a partners to building the finding

as product year other process the I manufacturing right. plunging they're in half the we now, of places, where with we're our packaging geographies have said what we – the regulatory the think in that’s launching done strong, And to distribution this going together So the exceptionally the bringing our back through into in going their channel, it's price, together end. begin affiliate right and

of to relationship, remarks, geographies. as different is prepared this in alluded that kind that we channel, different For our

more and also So, I overlapping I of the think retail not of all. at institutional channels. an And, when -- footprint kind think about

going through so that process. So, we're same

our characteristics which first efficiently may return to by be base. agreement. as beginning to conceptual are working building, their the streams through that on of information infrastructure demand, not for We're able our going they're in which We're portfolio are appropriate the products, have to be them. they expressed particularly that product, the used about affiliates and client We see be get to work the of

And there it, not So, product are development starting able one this of joint we're that concept to where on kind to with other places few this where this name some one a things together. a you're able on it's together. but work

really intermediary ways complementary we distribution, the that So a extraordinary a concentrate we and and return clearly strength, have terms is has that streams and point But three get Jay get focused we're and in their one how made, to managed clients and distribution. it's own of have is of last client on I’ll things I’ll real about in desire and product go into talked ways evolution competitive efficiently, do and with have industry, to this array very relationships we one which have really play now affiliates portfolio each we my independently back One this to to things global it's doing sort our partnerships this desires that portfolio. is, now their really raise we're the We with those -- get say AMG of in especially their thing get efficiently. do this. are last returns purposes, building concentrate of the into our of in some again Jay to that channel and for these choose all is

and Horgen this turn comments. our for answer to any gentlemen, final session. and the Ladies question back you. floor Thank concludes I'll Mr.

again this you morning. for Thank all joining us

our for we confident heard, term growth. you long in As are prospects significant

investment wide you next strategy. business, industry across established, records of term with outperformance a track some array which Thank firms a quality independent the look built with highest We diverse includes to quarter. of in long speaking forward have We you. of the

today's This teleconference. you. concludes Thank

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