Affiliated Managers Group's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Affiliated Managers Group, Inc. ( AMG)

Q4 2011 Earnings Call

January 31, 2012; 11:00am ET

Executives

Sean Healey - Chairman & Chief Executive Officer

Nate Dalton - President & Chief Operating Officer

Jay Horgen - Chief Financial Officer

Alexandra Lynn - Vice President of Corporate Strategy & Investor Relations

Analysts

Bill Katz - Citigroup

Robert Lee - KBW

Michael Kim - Sandler O’Neill

Daniel Fannon - Jefferies & Co.

Craig Siegenthaler - Credit Suisse Group

Cynthia Mayer - Bank of America

Presentation

Operator

Greetings and welcome to the Affiliated Managers Group, fourth quarter 2011 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).

It is now my pleasure to introduce your host, Alexandra Lynn, Vice President of Corporate Strategy and Investor Relations for Affiliated Managers Group. Thank you. Ms. Lynn, you may begin.

Alexandra Lynn

Thank you for joining Affiliated Managers Group to discuss our results for the fourth quarter and full year of 2011.

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 website at www.amg.com, a replay of the call and a copy of our announcement of our results for the 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 and good morning everyone. AMG reported economic earnings per share of $1.76 for the fourth quarter and $6.62 for the full year. Despite the volatile markets in 2011, including 15% to 20% declines in non-U.S. equity markets, AMG generated strong results with year-over-year earnings growth and outstanding net client cash flows of $23 billion.

Against an industry backdrop of muted client demand for alpha generating products, we were very pleased with our organic growth from net client flows of $4 billion in the quarter, marking our seventh consequent quarter of strong net inflows. Our net flows which lead the industry in return oriented products reflect the quality of our specialist affiliates, our unique position in highly attracted product areas and the ongoing success of our global distribution strategy. Our strategic focus on global and emerging market equity and alternative products, which collectively account for three quarters of our EBITDA, continues to drive the growth of our business.

Our highly regarded affiliates are leaders in their respective investment disciplines, including global and emerging market equity managers such as Tweedy, Browne, Genesis and Harding Loevner and alternative firms like Pantheon, AQR, BlueMountain and ValueAct. Our affiliates continue to generate excellent relevant investment performance in these areas and we are particularly pleased and proud that Tweedy, Browne was just named Morningstar’s International Stock Manager of the Year for 2011.

Our global distribution strategy combines the resources and scale of a global asset management company, with the investment expertise of our boutique affiliates and continues to generate strong client cash flows, especially from non-U.S. clients, which accounted for all of our net flows this quarter.

We are seeing strong momentum in the East region, including Australia, the Middle East, Europe and Asia and given the ongoing success of our global strategy, we are continuing to invest in our distribution platform worldwide, with the addition of new personnel and incremental coverage regions.

Given our forward new business pipeline and the strong execution of our global distribution strategy, we continue to be confident in both our near and long-term organic growth prospects. We’ve generated strong organic growth from net client flows in a difficult period for return oriented products and we expect that we will see even greater growth as markets stabilize and institutional and retail investors, including especially the U.S. investors, increasingly return to risk oriented products. This trend will benefit our affiliates broadly and we expect continuing and even accelerating client demand for our global and emerging markets equity and alternative products.

Finally we are making significant progress in the new investments area. As we noted, our market position and opportunity set are outstanding and we’re having active discussions with traditional, alternative and wealth management prospects around the world, with prospective affiliates at all stages of the pipeline. While the timing and execution of transactions is inherently difficult to predict, we are confident that we will continue to materially enhance our earnings growth through accretive investments and new affiliates going forward.

Looking ahead, we are very well positioned across all aspects of our business. We have a fantastic group of performance-oriented affiliates, which are recognized as industry leaders in highly attractive product areas. We’re successfully executing our global distribution strategy and generating outstanding net client cash flows even in a volatile market environment. And finally our new investment opportunity is better than ever.

While there are ongoing concerns about the macro economic and political environment, we come into 2012, poised to build on our strong momentum and are feeling very optimistic of our business and forward prospects.

Let me now turn it over to Nate, who will discuss our affiliates results in greater detail.

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