Affiliated Managers Group, Inc. (AMG) Q3 2015 Earnings Report, Transcript and Summary

Greetings and welcome to the AMG third quarter 2015 earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Selene Oh, Vice President, Investor Relations for AMG. Thank you, you may begin. Selene Oh - Vice President-Finance & Investor Relations: Thank you for joining AMG to discuss our results for the third quarter of 2015. In this conference call, certain matters discussed will constitute forward-looking statements. Actual results can 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 Chief Executive Officer; Nate Dalton, President and Chief Operating Officer; and Jay Horgen, Chief Financial Officer. With that, I'll turn the call over to Sean Healey. Sean M. Healey - Chairman & Chief Executive Officer: Thanks, Selene, and good morning, everyone. AMG reported economic earnings per share of $2.93 for the third quarter of 2015, which is 6% higher than the year-ago quarter, notwithstanding meaningful declines in global market indices over the same period. While our overall results for the quarter were inevitably impacted by declining markets and muted investor risk appetite, our affiliates continued to build on their outstanding long-term track records of investment performance. And most notably, we made significant progress in the execution of our new investment strategy. As you saw on our release, we were very pleased to announce the addition of Systematica Investments, Abax Investments, and Ivory Investment Management to our affiliate group. And looking ahead, we continue to have an excellent pipeline of prospective affiliates and seek ongoing opportunities to generate incremental earnings accretion from additional investments in outstanding boutique firms worldwide. Our third quarter results reflect the strength of our business and the quality of our affiliates. Periods of market dislocation and falling stock correlations provide the best active equity and alternative managers with opportunities to distinguish themselves. And as Nate will describe further, our affiliates outperformed peers and indices across a broad array of global emerging market and U.S. equity products during the quarter, building on their outstanding long-term track records. Likewise, our alternative managers continued to generate strong results across a wide range of liquid and illiquid strategies. As we all know, investment performance is the primary driver of future organic growth for actively managed alpha-generating products. And given their exceptional long-term performance track records, our affiliates are well-positioned to attract strong client cash flows going forward. While we have generated consistently strong organic growth in every quarter over the past five years and we're very confident in the outlook for AMG's long-term organic growth, against the backdrop of a volatile risk-off quarter, it was inevitable that it would be a difficult period for our return-oriented product set in terms of client flows. In addition to general risk aversion among institutional and retail clients, which reduced gross sales, a small number of institutional clients elected to reposition their portfolios in the quarter, resulting in one-off but meaningful redemptions unrelated to investment performance. Looking ahead, we see a resumption of new business momentum across our global distribution platform, with ongoing client demand for our affiliates' return-oriented strategies and improving prospects in U.S. retail. Over the longer term, we are extremely well-positioned for strong organic growth. First, our strategic focus on building exposure to the highest quality global equity and alternative products has given us a leading position in these attractive areas, further enhanced by our announcements today. Over 75% of our earnings are generated in these areas, which continue to be of great interest to global institutional clients and large retail platforms. Second, AMG is now the fifth largest manager of return-oriented assets worldwide. Many clients around the world are looking to narrow the range of their managers while also deepening those relationships, and clients perceive AMG as offering a unique proposition in that environment, which brings together the focus and specialized expertise that clients prefer in those asset classes with the breadth of product provided by AMG's scale and diversity. Finally, AMG's brand is increasingly recognized by sophisticated clients in all channels globally, as differentiated both by the quality of our affiliates individually and collectively, as well as the unique partnership structure which incents and enhances our affiliate partners' future success. In addition, given global clients' high regard for AMG and our affiliates, top-quality prospective affiliates around the world are increasingly drawn to AMG today, which in turn serves to reinforce our appeal to clients in this virtuous circle. The three investments we announced this morning reflect the strength of our competitive position and the long-term success of our distribution capability. Let me spend a moment describing these outstanding new affiliates. Systematica, led by Leda Braga, is recognized as one of the leading systematic trading managers in the world. Based in Geneva with offices in four other countries, the firm manages $8.8 billion in assets through trend-following algorithmic trading strategies and quantitative equity investing. And its award-winning flagship fund, BlueTrend, has an outstanding record of return since its inception over a decade ago. Leda and her partners are renowned for their innovative approach and industry-leading performance. And with the opportunity to choose a permanent institutional partner to facilitate their firm's independence from BlueCrest Capital Management, Systematica chose AMG. Systematica has exceptional long-term prospects, and I'm very pleased to welcome Leda and her team as partners. Based in Cape Town, Abax is a $5.4 billion manager of South African and global equities, utilizing fundamental research to invest in companies with strong secular growth opportunities. With its tremendous long-term performance record over the past dozen years, as well as its expertise across a broad team of seasoned professionals, Abax has outstanding prospects ahead. I'm delighted that Anthony Sedgwick and his partners are joining our affiliate group. Ivory, led by Curtis Macnguyen, is one of the industry's preeminent long/short equity managers, with a 17-year track record of alpha generation. The firm has $3.6 billion under management and an excellent forward outlook, given its consistent track record of outstanding risk-adjusted returns. Known for its entrepreneurial culture and disciplined approach to investing, Ivory has a tremendous opportunity to leverage its reputation and performance record with a long-only product that offers excellent opportunities for growth. We're looking forward to working with Curtis and his team, and are pleased to add Ivory to AMG's group of industry-leading affiliates. Together, these partnerships meaningfully increase the earnings power of our business and diversify our exposures. Moreover, while all three firms have excellent prospects for growth, with AMG as their partner, we can further enhance their respective forward opportunity sets through leveraging the reach and success of AMG's global institutional distribution and U.S. retail platforms. Key partners at all three firms have made long-term commitments to their businesses and clients. And in each case, the transaction reaffirms their independence and operational and investment autonomy, preserving the essential elements for success at a specialist firm. Each firm chose AMG on the basis of our 20-year track record as a partner to excellent boutiques globally, as well as for the range and quality of our strategic capabilities. All three transactions were negotiated directly with management and arose from proprietary relationships that AMG built with the principals. And two of the three resulted from referrals from existing affiliates. That three such high-caliber businesses have each chosen to partner with AMG provides compelling evidence of the strength of AMG's competitive position as a prospective partner to high-quality boutiques. And the fact that these new affiliates are on three different continents underscores the increasingly global nature of our franchise and opportunity set. Looking ahead, we continue to have an outstanding opportunity for generating meaningful earnings growth through the execution of all elements of our growth strategy. In a quarter marked by significant equity market volatility, our affiliates generated excellent investment performance, positioning them for continued strong organic growth. In addition, given our unparalleled competitive position, including the proprietary relationships we've been building for over 20 years with the world's best boutique firms, as well as our track record as a partner to our outstanding affiliates, we have a unique opportunity to create shareholder value through additional accretive new investments going forward. With that, I'll turn it to Nate to discuss our affiliates' results in further detail. Nathaniel Dalton - President & Chief Operating Officer: Thanks. Good morning, everyone. As Sean said, against the backdrop of a volatile market environment this past quarter, our affiliates generated good performance relative to their peers and benchmarks, adding to their already strong long-term track records, which positions us extremely well for future growth. I'll cover our affiliates' performance in more detail in a moment. But first, I'd like to give a bit more context to our net cash flows in what was a unique quarter. Against the backdrop of 21 straight quarters of significant positive flows, we had three factors challenge our net flows in the quarter. First, we had several significant idiosyncratic outflows unrelated to performance, meaning the underlying products are performing well. These were primarily institutional in nature, and so inherently lumpy. Second, we were not immune to investor risk aversion in reaction to market volatility, and so we encountered a meaningful level of delayed fundings. The combination of these two alone caused our total flows to turn negative. Third and finally were continued outflows from U.S. equities, especially in U.S. retail, which we've talked about on prior calls. Now a couple comments as we look ahead; first, as market conditions stabilized, some of the delayed mandates have already funded in the fourth quarter, and we expect institutional sales to pick back up. Second, while of course it is still early in the quarter, the flows in our retail channel look to be improving, as inflows to alternatives and global and emerging market equities are offsetting our U.S. equity outflows, which are slowing. Now turning to investment performance. which, as we mentioned, was very strong on a relative basis in the quarter. Starting with the alternatives category, where we offer a wide range of strategies, our affiliates performed well in a volatile market environment. Standouts included AQR, where their Style Premia and Multi-Strategy Alternative funds ranked as the best and second best mutual funds in the Morningstar category. Also notable were First Quadrant's currency, AQR's managed futures, and BlueMountain's flagship BMCA fund. Lastly, ValueAct's relative performance was good, as they beat their benchmarks and outperformed most of their highest quality peers, even though the absolute performance was negative, as it was for other alternative products with significant equity beta components. Overall, long-term performance track records across the majority of the largest products in the alternatives category continue to be very strong, including especially AQR, BlueMountain, Pantheon, and ValueAct. Finally, with the addition of Systematica and Ivory, we are further diversifying our alternatives product set and expanding our sources of potential performance fees. Next, moving to the global developed markets category, where our affiliates had very strong relative performance, highlights for the quarter came from major global equity product at AQR, Artemis, Harding Loevner, Tweedy Browne, and Veritas. Tweedy Browne's flagship Global Value Fund once again stood at the top of its category in a challenging market environment, ranking in the first percentile in Morningstar. These products continue to have outstanding performance track records across longer-term periods as well. In the emerging markets category, the products managed by Harding Loevner, Genesis, and AQR all outperformed the benchmarks in the quarter. Furthermore, long-term performance records across their product suites remains very good. Finally, with respect to our U.S. equity products, performance significantly improved in the quarter, with Yacktman, Times Square, GW&K, and River Road all beating their benchmark. While Frontier and SouthernSun trailed their respective indices in the quarter, long-term performance across both affiliates remains very strong. Now turning to flows for the quarter, as we always say, flows to both the institutional and sub-advisor channels are inherently lumpy, and we certainly saw that this quarter. Starting with the institutional channel, we had outflows of $2.6 billion. Positive contributions from many affiliates across alternatives and global emerging markets equities were overshadowed by the factors I mentioned. In our high net worth channel, we had net inflows of $385, million with contributions coming from GW&K, Harding Loevner, Veritable, Clarfeld, and BlueMountain. Finally, in the mutual fund channel, we had outflows of $3.3 billion. Once again, we had positive inflows to a number of alternatives and global and emerging market equity strategies, including those from Artemis, AQR, and Harding Loevner. These were not enough to offset outflows from U.S. retail strategies, consistent with broad market trends. As you know, our mutual fund channel has a higher concentration of U.S. equities than the rest of our business. Maybe one final point about flows and distributions, while this quarter was a more challenging environment for gathering assets, we are well-positioned to generate meaningful net flows as investors return their focus to their strategic investment objectives, notably with regards to their allocations to return-oriented investments. Our affiliates' recent excellent performance, building on their already strong long-term track records, reinforces our confidence in the significant positive flow generation by both the affiliates own selling efforts as well as our complementary global distribution team. With that, I'll turn it to Jay to discuss our financials. Jay C. Horgen - Chief Financial Officer & Treasurer: Thank you, Nate. As we discussed, despite a difficult market environment, we are pleased with our ongoing earnings growth, including an increase of 6% in economic earnings per share for the third quarter when compared year over year. As Sean said, AMG has a differentiated ability to grow our earnings across all market environments through both the organic growth of our affiliates as well as through our new investment strategy, which includes the proprietary relationships that we've built over the past two decades. Each of these new investments, Systematica, Abax, and Ivory, will be immediately accretive to our earnings, and together they further diversify and meaningfully increase the earnings power of our business. As you saw in the release, we reported economic earnings per share of $2.93 for the third quarter, with net performance fees contributing $0.08. Now on a GAAP basis, we reported earnings per share of $1.98. Turning to more specific modeling items, for the third quarter our EBITDA was $218.9 million, and the ratio of our EBITDA to end-of-period assets under management was approximately 14.7 basis points or approximately 14.3 basis points excluding performance fees. In the fourth quarter we expect this ratio to be approximately 17.1 basis points, reflecting the higher performance fee contribution that we typically experience in the fourth quarter. With regard to our taxes, our effective GAAP tax rate for the quarter was 33.2% and our cash tax rate was approximately 22.5%. For modeling purposes, we expect our GAAP tax rate to be 33% and our cash tax rate to be 22%. Intangible-related deferred taxes for the third quarter were $21.1 million, and we expect this number to be approximately $22 million in the fourth quarter. Our share of reported amortization for the quarter was $29.9 million, which includes $8.6 million of amortization from affiliates accounted for under the equity method. We expect our share of amortization to remain at approximately $30 million in the fourth quarter. Our share of interest expense for the third quarter was $23.6 million. And for the fourth quarter we expect our share of interest expense to decrease to $20 million, reflecting the interest savings from the redemption of our 2022 senior bonds. Our other economic items for the third quarter were $0.8 million, of which pre-tax non-cash imputed interest expense was $0.3 million. For modeling purposes, we expect our other economic items to be approximately $1 million per quarter. Turning to our balance sheet, our capital structure is well-positioned for growth in all markets. This quarter, in anticipation of our three new investments, we closed a new $1.3 billion five-year unsecured revolver and a $350 million term loan, while simultaneously calling $140 million of our senior bonds. These transactions were leverage-neutral and meaningfully reduced our cost of funding. In addition, the cash flow generated from the size, scale, and diversity of our business continues to provide us with significant capacity to execute new investments and the flexibility to return capital by repurchasing shares. In the quarter we repurchased $53 million, bringing our year-to-date total to approximately $332 million, just shy of our model convention of 50% of expected annual economic net income. We expect to fund all three new investments by year end and have a revolver balance of approximately $500 million at that time. Looking forward, with $800 million of capacity under the revolver combined with run rate EBITDA of approximately $1 billion, we continue to be well-positioned to create incremental opportunities for earnings growth. Now turning to guidance, we are updating our 2015 guidance, as we now expect economic earnings per share to be in the range of $12.20 to $12.80. This guidance range reflects market performance through last Friday, our current view of fourth quarter performance fees, and a weighted average share count of 55.2 million for 2015, which assumes no share repurchases in the fourth quarter. For 2016, we expect economic earnings per share to be in the range of $13.20 to $14.80. This guidance range assumes our normal model convention of actual market performance through Friday for the current quarter and 2% quarterly market growth beginning in the first quarter of 2016. As I mentioned earlier, we expect all three new investments to close by year end, and we also assume share repurchases equal to 50% of expected annual economic net income over the course of 2016, which results in an expected weighted average share count of approximately 54 million. The lower end of our guidance includes a modest contribution from performance fees and organic growth, while the upper end assumes a more robust contribution from performance fees and net client cash flows. As always, these assumptions do not include earnings from future new investments and are based on our current expectation of affiliate growth rates, performance, and the mix of affiliate contribution to our earnings. Of course, substantial changes in markets and the earnings contribution of our affiliates would impact these expectations. Now we'll be happy to answer your questions.

Thank you. Our first question comes from the line of Craig Siegenthaler with Credit Suisse. Please proceed with your question. Craig Siegenthaler - Credit Suisse Securities (USA) LLC (Broker): Thanks, good morning. Sean M. Healey - Chairman & Chief Executive Officer: Good morning. Nathaniel Dalton - President & Chief Operating Officer: Good morning. Craig Siegenthaler - Credit Suisse Securities (USA) LLC (Broker): So I appreciate Nate's comments on the net flow variance analysis versus 2Q. But other than Yacktman's net flow reversal, what other themes or trends can you point us to as reasons why flows have continued to slow versus the very strong levels back in 2012 and 2013? Sean M. Healey - Chairman & Chief Executive Officer: I think we covered the variance in our prepared remarks around a small number of institutional clients who chose this quarter to reposition their portfolios independent of performance, so that I think is the dominant effect. Nate, would you add anything to that? Nathaniel Dalton - President & Chief Operating Officer: Yes, so let me just say a couple things. So first, I think we talked about this quarter the three specific things that impacted it. One, the one you called out, which I would say is really U.S. equities in general rather than just Yacktman-specific, so U.S. equities in general, especially U.S. equities in retail, whereas we said in our prepared remarks it was disproportionately larger. And then we had the specific to this quarter events. Other than that, I think if you look at the long-term trends, we feel pretty good about it, and I think that includes the trends over this multiyear period, which is a large number of good performing products. The global distribution platform is growing. We have this opportunity to keep adding products both from product development as well as from new investments, investments in additional affiliates as you saw today. And so I think those long-term trends over the long term I think remain in place. Obviously, any one quarter will have the kinds of things that we talked about in our remarks. Sean M. Healey - Chairman & Chief Executive Officer: But on an overall basis, we see, as we noted, a resumption of the momentum that we've had for now a very long term. Craig Siegenthaler - Credit Suisse Securities (USA) LLC (Broker): Got it. And then just as my follow-up, how does your total deal capacity stand as of today between your revolver and excess cash after the three new investments, maybe then just for that? And then also, I may have missed this. But what was buyback activity in 3Q? Jay C. Horgen - Chief Financial Officer & Treasurer: Sure, Craig. It's Jay. So I mentioned this earlier that we have – we expect to close at the end of the year and have $500 million drawn on our revolver, which leaves $800 million under the revolver spot rate. Plus of course, we have $1 billion of EBITDA annually. So depending on the timing of new investments, we have all that we need from revolver or the cash flow from the business. As it relates to your question on repurchases, we repurchased $53 million in the quarter and $332 million year to date. We do not expect to repurchase any in the fourth quarter, but we would resume our model convention for 2016. Craig Siegenthaler - Credit Suisse Securities (USA) LLC (Broker): Great. Thanks, guys.

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

Thanks, good morning. I guess, Jay, if you could, help us with the new investments that were announced this morning or yesterday, and give us a sense of the contribution as you think about next year, and the guidance you gave from those transactions, and separate that from the existing business and the growth of that? Jay C. Horgen - Chief Financial Officer & Treasurer: Sure. So on the deals, I think I'd maybe start where the last question left off. We had $60 million drawn on the revolver at September 30. Of course, we got our distributions from affiliates in the third quarter this past month. So we've obviously paid off our revolver. I think we expect our revolver balance to be a little over $500 million at 12/31, expecting to close all of the deals at that time. So we're not individually calling out the purchase prices, but I think you can tell, order of magnitude, the amount of capital deployed. When you think about typical capital deployment into deals, we've said in the past we see accretion in the $0.10 to $0.14 range per $100 million spent. So I think you can get a good sense for what's in the 2016 guidance based upon that capital and that metric. Because we expect them to close on 12/31, we will get a full year of that in 2016. Maybe I will take a step back and just talk about 2016 more broadly, if that's okay, Dan, which is that that range of $13.20 to $14.80, it obviously starts with our pro forma AUM with those deals. And since we're going to get a full-year effect, includes markets as of Friday, and that blend was up a little bit less than 4% as of Friday for the quarter to-date, so that's since the end of the quarter. Because you can see what our AUM was at the end of the quarter, you have to put myCIO, which closed on 10/1, into that number, grow it by the 4%, more or less, and then you end up adding the deals, and you can see what the full-year effect would be in 2016. We have our normal model convention of 2% per quarter beginning the first quarter of 2016, no market performance through the rest of the 2015 period. And then we have a range of performance fee assumptions for the year. And then we also have our model convention of repurchasing 50% of annual economic net income, and I gave you the weighted average share count that we expect next year of 54 million, down from 55.2 million. So I think that's the broad set of assumptions that I think you'll need for 2016.

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

Hi, thanks. This is actually Jack Keeler standing in for Bill. My question is just around the deal pipeline. I guess, A, what's the status of the deal pipeline? What are you seeing? And then, B, the market volatility in the third quarter, does that have any impact on the potential pipeline? Thanks. Sean M. Healey - Chairman & Chief Executive Officer: As we indicated, the pipeline continues to be very strong, I would say, including traditional, alternative firms, wealth management firms, on a global basis. The volatility – I think if the volatility in the quarter had continued, it probably would have had an effect, but there's no discernible effect that we're seeing on the firms that are in our pipeline at this point. The large majority of our opportunities continue to be in negotiated transactions that arise out of proprietary relationships. We do our best to avoid organized auction processes. And you saw the effect in the transactions we announced, where all of them, as I noted, arose out of proprietary relationships and were negotiated in a way that was attentive to the particular circumstances of each new affiliate. And going forward, we think that by far, that's the most attractive way to make investments, most appropriate way to make investments, and obviously results, we think, in a much better transaction for everybody.

Thank you. Our next question comes from the line of Michael Kim with Sandler O'Neill. Please proceed with your question. Michael S. Kim - Sandler O'Neill & Partners LP: Hey, guys. Good morning, maybe another question for Jay in terms of the guidance range for this year. Any changes to organic growth or performance fee assumptions for the fourth quarter, just given the downturn last quarter? And then looking ahead to next year, are you still pointing to maybe the 5% to 10% range of total earnings for performance fees? Jay C. Horgen - Chief Financial Officer & Treasurer: Good question. So the 2015 guidance range of $12.20 to $12.80, so first, Michael, that reflects the actual results. We've already booked $8.93 year to date. We do have an estimate in our model for the fourth quarter, and that's based upon the third quarter AUM plus the closing of myCIO, and then noting that quarter-to-date market blend up a little less than 4% gets you to a reasonable estimate for where our AUM is right now in early November. We don't assume any more beta. So the last bit then would be performance fees, and performance fees are the primary driver of the range at this point. We have lowered our expectation for performance fees given the market volatility over the past three months, especially in products that are beta-sensitive. That being said, because of the diversity of our performance fee opportunity in both the absolute products as well as the beta-sensitive products, we still see the 2015 performance fees coming in at 5% to 10% of earnings. If you remember, last quarter we thought it might be a little bit higher than 10% at the top end, but we're back to that 5% to 10%, just also noting that we've already booked $0.23 year to date. So there's already 2% that's already done. And then as it relates to 2016, just to round that out, I mentioned the impact in 2015 on the performance fees on the beta-sensitive products. But in the main, these products have good long-term track records with annual resets. And so they're well-positioned to generate meaningful performance fees in 2016. So when you think about these products combined with the broad range of absolute products as well as the new investments that we just made, each of which have some performance fee opportunity, but especially Systematica and Ivory, we do expect a slightly higher contribution from performance fees at the top end of our 2016 range. We've reflected that a bit in the wider range in the guidance of $1.60. So we do have that opportunity as our AUM in alternatives is growing. I think the last thing I would say about performance fees, just to round it out, is as we add more diversity to our already broad range of performance fee opportunity, I think we've said this in the past. We feel good about a base level of performance fees. The diversity creates a positive asymmetry for investors as it increases the probability at the bottom end of our range of achieving that level of performance fees, while the top end gives us more optionality because we could experience upside even above our range, as there's no cap on performance fees. So I think that's how we'd characterize our performance fee opportunity.

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

Hi. Thanks, guys. Just a question on maybe the slower outlook, and the color of this quarter was helpful, in two parts. I think one, just on the three affiliates you made the transactions with, any color on how their organic growth has been trending in the last call it year or two? And then I think when you look at all the affiliates and you look at the industry trends in demand and maybe the performance of the affiliates, it's harder for us to see some of that. I just wanted to get your sense. When you look over the next year or two, do you feel like the firm is well-positioned to maybe generate above-average organic growth relative to the industry? Sean M. Healey - Chairman & Chief Executive Officer: So I'll answer the first bit and then turn to Nate for the broader part of your question. With respect to the new affiliates where we announced investments today, they are all doing very well both from a performance standpoint as well as in terms of organic growth. You would expect that in a way because firms generally choose to pursue investment transactions when they have strong momentum in their business, and these three certainly do. Systematica has terrific long-term and near-term performance, is opening new products and gaining market share in their larger existing products. Abax, the same goes for them, having an excellent year in terms of performance, with a very exciting opportunity to build a global equity product or build on and grow an already very successful, well-performing global equity product. And then Ivory has, as we noted, an outstanding long-term alpha generation record, but has a long-only product which has just terrific prospects for growth and excellent performance. So these three affiliates I think are all very well-positioned to generate strong growth, as is our overall franchise, but I'll let Nate add more color to that. Nathaniel Dalton - President & Chief Operating Officer: Sure. So I think the way you set it up was a really good way to do it, which is look at the next couple years, and I'll try and do it that way. But then I also think there are some longer-term trends even in that that maybe I'll touch on. So as you look at this medium-term year or two trend out, I think our affiliates continue to benefit from a set of trends that we've talked about on prior calls, which is investors need to get returns into their portfolios and investors continue to – we've talked about it as barbelling their portfolios between exposures on one end and then active return-seeking managers to meet their return goals, and how boutique firms, specialist firms are very well-positioned to meet those needs. And we've actually talked about that also in the white paper that we published earlier in the year. So I think those trends benefit our affiliates on this time you mentioned – you described. In addition, and this is the thing that AMG can bring to bear on behalf of these affiliates, is in addition, we're taking these good performing products and we're marrying it to the scope and scale of an increasingly diversified global distribution platform institutionally in many, many markets, retail in some markets, U.S., and we've begun building some retail exposure in others. So we're taking those affiliates that on their own have this really good opportunity set over the next couple years and we're marrying it to the distribution business that further enhances their opportunity. And we've talked about on calls that we take those together, we're able to build a relationship with the marketplace, which is really a unique relationship. And again, we're in the early stages of doing this, which is building a relationship where we can bring all of this to bear with the most sophisticated institutions, with the intermediaries who serve them with platforms, and allow them access to all this fantastic manufacturing through a single very high-quality point of contact. And so when you think about bringing those together and then the last thing I'll say here is the virtuous circle component, which is as we continue to execute that on behalf of these affiliates, and we're having very good success, that obviously makes us more attractive as a potential partner to additional affiliates. And that was part of some of these things the firms – investments you saw announced today, which is they understand that opportunity that we bring them. So I think the firms have a very good opportunity on their own, but I think combining that with what AMG is doing in distribution really creates a very significant opportunity.

Thank you. Our next question comes from the line of Chris Shutler with William Blair. Please proceed with your question. Christopher C. Shutler - William Blair & Co. LLC: Hey, guys. Good morning. Sean M. Healey - Chairman & Chief Executive Officer: Good morning. Christopher C. Shutler - William Blair & Co. LLC: So I think it had been a year and half or so since the last large new affiliate investment. You had done AQR and I know some stuff on the wealth management side, but it had been a while otherwise. So I guess the question is just what changed over the last few months, or was the timing here just a coincidence in that you did three? And ultimately, I'm wondering. Did something change in the environment with the market downturn in the back half of the quarter that opened the floodgates, or what exactly happened? Thanks. Sean M. Healey - Chairman & Chief Executive Officer: Sure. I can understand the question given the number of transactions, but it is actually just the fortuity of the circumstances. And as you know, our investments in the main rise out of proprietary relationships that we've built over the years. And obviously, that's a very important part of our forward opportunity set. The timing of transactions is driven by idiosyncratic circumstances of each prospective affiliate. And it varies from demographic considerations to an outside investor's preferences, for example, in part of what was involved in the Systematica investment. The market volatility in the quarter, I would say, had those transactions really no effect. Those transactions were well underway. And importantly, as I said in response to an earlier question, going forward we don't see any discernible effect from the market volatility on our forward opportunity set, and we continue to be very optimistic about our prospects going forward, with a very strong pipeline and a competitive position that continues to be extremely strong. So lots of good opportunities, but they will never appear in a precise orderly timing, because that's just not how it works.

Thank you. Our next question is a follow-up from the line of Dan Fannon with Jefferies. Please proceed with your question.

Thanks. Just to follow up on just the quarterly flows and the outlook, I think there was a comment, Nate, that you mentioned about some delayed fundings. So just curious if those delays have now funded, and if you actually – and also just looking back on the quarter, did you lose some of the business that you might have thought that was coming in the door and that's not coming, back based on either performance or client decisions? And then also, I think the question was asked, but I'm not sure it was specifically answered. Are you assuming inflows for the remainder of the year in your 4Q guidance, and the low end of guidance next year still assumes inflows? Just want to clarify that. Jay C. Horgen - Chief Financial Officer & Treasurer: Okay, so let me try and take those in order. So the question about deferred fundings, as I said in the prepared remarks, we did have some mandates in the third quarter that were deferred due to that volatility. A number of them have funded. Some of them have not. And obviously, the ones that have not, obviously, you're never 100% sure until it's done. I do think the volatility may have – there were a few mandates that I'm not sure. This is, again, completely unrelated to performance. I think the volatility in some product categories did have some potential investors say that they're slowing it, and so I think some of those might not come back. I think that this is highly possible. But again, you'll see what happens if things are stable from here. So I think that's the first bit, which is, I think we've had a number of them fund, not all. I think there are a couple that you don't know. And then the other thing I'd say on flows looking ahead is, we've gotten those – obviously it's still in the quarter and all that, but the trends that we've been seeing look like they're meaningful trends, but they're all there and good. And then the other thing I'd say, which I think were in our prepared remarks a bit, but let me, just be to clear, which is I think, if you look at the mutual fund channel, I think we're continuing to see good inflows in alternatives, global, and emerging markets. And we are seeing slowing outflows in U.S. equity, so that channel in particular looks better. Sean M. Healey - Chairman & Chief Executive Officer: And with respect to your question about guidance, Dan, as you know, we never guide to flow. So you have heard, I think, a pretty optimistic and positive view of our forward organic growth prospects. And embedded in the earnings guidance which we gave, of course, is I think very good growth looking ahead, which obviously, if markets are better and we make additional new investments, we'll be even higher than we forecast. But just the earnings forecast itself, I think, embeds some strong internal growth without getting to the place of guiding to flow specifically.

Thank you. Our next question comes from the line of Michael Kim with Sandler O'Neill. Please proceed with your question. Michael S. Kim - Sandler O'Neill & Partners LP: Hi, thanks for taking my follow-up. I'm just curious if your thinking or timeline has shifted at all as it relates to building out the U.S. retail platform, just in light of some of the more recent flow trends and sustained lack of demand for actively managed domestic equity funds, really across the industry? Nathaniel Dalton - President & Chief Operating Officer: So let me just talk a little bit about what we're doing right now in the U.S. retail business. So first, I'd say we're making good progress on the product development side. A little bit of this is related typically to – look, we have a scaled business with the exposures that it has, but we have a bunch of very good opportunities to take the team that we've got there, and the sales and marketing client service infrastructure, and marry it with the good – and we've talked about this on prior calls – marry that with the very good performing products, especially in alternative, global, and emerging markets. So when you focus on this quarter, I think we've done a lot of work on what I'll call product development side, and maybe I'll call out two specific examples. One is we've started working with Harding Loevner in the wirehouse channel, which is taking their products which are performing well, having good flow in the distribution channel, and leveraging the places that we think we can really be additive. That's one example. And then another example I'd give, and this goes specifically to the opportunity set in alternatives, I think we've talked about on prior calls a product that we've been building with Pantheon in bringing private equity into the 1940 Act funds space. We've built that. We've now got that, 1940 Act (44:33) registered this past quarter. They'll be rolling that out through the team, and so things like that. We've been making additional progress on product development on some concentrated equity things and some other alternative products. It's good progress in product development to leverage our affiliate capabilities through the distribution team. I guess the other thing I say is look, all the judgments about that business and what it can achieve, further to Sean's point, are in the forecast that we've given you. And in the forecast, we're not really assuming any big trend changes to that trajectory. As some of these product development things come on, we expect it will take a little while to really gain traction and change things. But the last thing I'll say, to repeat a point I made earlier, we are seeing slowing outflows in U.S. equities and we are seeing good momentum on the alts, global, and on the EM side, both within our AMG funds platform but within our retail distribution more broadly.

Thank you. Our next question from the line of Chris Shutler with William Blair. Please proceed with your question. Christopher C. Shutler - William Blair & Co. LLC: Hey, guys. Thanks for taking my follow-up. On the institutional outflows in the quarter, can you just talk about what types of strategies that you saw that the repositioning occur? I've had a couple of investors ask me if – it sounded like they're concerned about momentum types of strategies that have obviously worked well during the bull market that we've been in. Maybe just talk about where you've been seeing the repositioning. Nathaniel Dalton - President & Chief Operating Officer: So I think it's very hard to generalize. So I think the repositioning came – I'll say it had three pieces. So one, there were some, and this wasn't the bulk of it, but there were some where it was related to performance, so that's some of it. I think the others where it's clearly unrelated to performance and performance was quite good, I think it would be very hard to generalize and assign into a strategy. It was a couple things, and they were all we think unrelated. So I don't think there's something I'd generalize beyond that there.

Thank you. Our next question comes from the line of Craig Siegenthaler with Credit Suisse. Please proceed with your question. Craig Siegenthaler - Credit Suisse Securities (USA) LLC (Broker): Thanks. I may have missed this, but to the response to my second question, did this $500 million draw on the revolver, did that include the three new investments and myCIO, or just the three new investments? Jay C. Horgen - Chief Financial Officer & Treasurer: No, so we had already – because we closed on 10/1, but we actually expected to close on 9/30, we had already drawn from myCIO at the end of the quarter – or done in the quarter. Craig Siegenthaler - Credit Suisse Securities (USA) LLC (Broker): Okay, thank you.

Thank you. Mr. Healy, there are no further questions at this time. I'd like turn the floor back to you for any final concluding remarks. Sean M. Healey - Chairman & Chief Executive Officer: Thank you again for joining us this morning. As you've heard, we were pleased with our earnings growth in the third quarter and especially to welcome three outstanding new affiliates. We remain confident in our ability to continue to create shareholder value through both organic growth for existing affiliates as well as to create investments in new affiliates going forward. We look forward to speaking with you in January.

Thank you. This concludes the teleconference. You may disconnect your lines at this time. Thank you for your participation.