Affiliated Managers Group, Inc. (



Q2 2011 Earnings Call

July 26, 2011 11:00 AM ET


Alexandra Lynn – Head, IR

Sean Healey – Chairman and CEO

Nathaniel Dalton – President and COO

Jay Horgen – CFO and Treasurer


Craig Siegenthaler – Credit Suisse

William Katz – Citigroup Global Markets

Daniel Fannon – Jefferies & Co.

Cynthia Mayer – Bank of America Merrill Lynch

Robert Lee – Keefe, Bruyette & Woods

Marc Irizarry – Goldman Sachs & Co.

Michael Kim – Sandler O’Neill & Partners



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Greetings and welcome to the Affiliated Managers Group Second Quarter 2011 Earnings Call. A brief question-and-answer session will follow the formal presentation (Operator Instructions) It is now my pleasure to introduce your host, Allie Lynn, Vice President of Corporate Strategy and Investor Relations. Thank you. Ms. Lynn, you may begin.

Alexandra Lynn

Thank you for joining Affiliated Managers Group to discuss our results for the second quarter and first half of 2011. By now you should’ve received the press release we issued this morning. However, if anyone needs a copy, please contact us at (617) 747-3300 and we’ll send you one immediately following the call.

In this conference call certain matters discussed will constitute forward-looking statements. Actual results could differ materially from those projected due to a number of factors including, but not limited to, those referenced in the company’s Form 10-K and other filings we make with the SEC from time to time. We assume no obligation to update any forward-looking statements made during this call.

AMG will provide on its Web site at a replay of the call and a copy of our announcement of our results for this quarter as well as a reconciliation of any non-GAAP financial measures to the most directly comparable GAAP financial measures.

With us on the line to discuss the company’s results for the quarter are Sean Healey, Chairman and CEO; Nate Dalton, President and COO; and Jay Horgen, CFO. And now I’d like to turn the call over to Sean Healey.

Sean Healey

Thanks, Allie. Good morning, everyone and welcome to AMG’s conference call to discuss our financial and operating results for the second quarter of 2011. Our economic earnings per share were $1.71, an increase of 27% over the prior year, driven by the strong performance of our affiliates and outstanding organic growth. With $24 billion in net client cash flows over the past 12 months and continued strong investment performance, especially in global and emerging markets equity and alternative products, our assets under management are now approximately $350 billion, an increase of 40% over the prior year. We generated net client cash flows of $7.5 billion this quarter and our flows were actually even higher than the headline number as Nate will describe in a moment.

Looking ahead, we see continued strong organic growth as investors around the world, both institutional and retail, are increasingly focused on specialized global and emerging markets equity and alternative strategies for the alpha portion of their portfolios. This strong secular trend reflects an ongoing globalization of client portfolios as well as a growing recognition that global and emerging market equities, along with alternative strategies, offer the greatest opportunity for alpha generation. Together these areas generate over 70% of our EBITDA and have produced virtually all of our net client cash flows over the past year.

We believe that boutique specialist managers have a competitive advantage in generating out-performance in these product areas and our affiliates include many of the industry leaders. Global and emerging markets equity managers like Tweedy Browne, Genesis, Artemis and Harding Loevner, and alternative affiliates including AQR, First Quadrant, BlueMountain and ValueAct have outstanding long-term track records in focused differentiated strategies.

In the midst of a weak macroeconomic environment and political gridlock, industry-wide client flow trends continue to favor asset classes such as fixed income that seem less risky. But we believe over the medium- to long-term return-oriented products, including especially global and emerging market equity and alternative strategies, will capture an increasingly large share of institutional and retail investor allocations.

We’ve achieved strong organic growth in spite of broader market and flow trends, reflecting the successful execution of our global distribution strategy as we combine the advantages of our affiliates’ capabilities with the global reach of AMG’s centralized platform. With over 55% of our EBITDA generated outside the U.S., our client base continues to diversify as we further expand in key markets, adding incremental regional coverage in our offices in Australia, Asia, Europe and the Middle East.

During the quarter we appointed Andrew Dyson as Head of Global Distribution, a newly created position based in London. Andrew was most recently head of the Global Institutional business for BlackRock and his experience and track record of leadership will provide tremendous advantages as we continue to build out AMG’s global distribution capabilities.

Finally, turning to new investments we made significant progress in advancing discussions with outstanding prospects around the world. Our new investment pipeline is strong and diverse and includes both alternative and traditional managers, and our competitive position and the transaction environment continue to be highly favorable.

Finally, during the second quarter we were pleased to formally launch our wealth management strategy through our new subsidiary, AMG Wealth Partners, which as you know, will apply AMG’s proven investment model to the wealth management industry and will meaningfully expand the set of investment opportunities before us.

With that I’ll turn it to Nate to discuss our affiliates’ results in further detail.

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