Greetings. And welcome to the AMG Third Quarter 2016 Earnings Conference 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] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Selene Oh, Vice President of Investor Relations for AMG. Thank you. You may begin.

Thank you for joining AMG to discuss the results for the third quarter of 2016. 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 the call. AMG will provide on the Investor Relations section of its website at www.amg.com a replay of the call and a copy of 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, including a reconciliation of any estimates of the company’s economic earnings per share for future periods that are announced on this call. 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.

Thanks, Selene, and good morning, everyone. We were pleased to report strong results in the third quarter, including economic earnings per share $3.02 and record assets under management of approximately $730 billion, which represents a 23% increase year-over-year. Our results reflect consistently strong execution across all aspects of our growth strategy, including the completion of several new affiliate investments during the quarter, along with the continued excellent investment performance and strong positive net client cash flows of our existing Affiliates. As Jay will describe, we continue to see strong earnings growth ahead for AMG. We were pleased with our third quarter net client cash flows of $5.8 billion into our Affiliates’ actively-managed strategies during the quarter, particularly across an array of alternative products. As Nate will discuss, our net inflows were positive across each of our institutional, retail, and high net worth channels and also across all client geographies. We believe that the quality of our independent boutique Affiliates and the unique breadth and diversity of our alpha product set have together driven the consistency of our organic growth results over the past seven years. AMG has now generated net inflows in 24 quarters of the last 26 quarters, including year-to-date net inflows of approximately $11.5 billion, notwithstanding, continued muted industry-wide flows into actively-managed products. The strength of our results reflects the success of our strategy of partnering with outstanding performance driven boutiques and our focus on attractive alpha-oriented product areas, especially global and emerging market equities and a select set of alternative strategy. The best independent boutiques have meaningful competitive advantages in generating excess returns and value-added alpha generating product areas as demonstrated by the outstanding long-term performance records of our Affiliates. Even in a period of growth in passive products, on the back of cyclical and to some…

Thanks, and good morning, everyone. As Sean said, against the backdrop of muted industry demand for actively-managed strategies, we generated strong net flows in the quarter across all three of our distribution channels. This continues our broadly positive flow results of the past seven years, which ultimately stems from our Affiliates’ excellent long-term investment performance and track record. In addition, as Sean said, we are also continuing to benefit from our strategic product positioning against some positive client demand trends, as well as our unique distribution approach which includes each Affiliate’s dedicated distribution capabilities complemented by AMG’s global distribution efforts. While these flows have been remarkably consistent, positive in 24 quarters of the last 26 quarters for example, it is important to look at the long-term performance, long-term strategic positioning, and our fundamental distribution strategy. As we regularly remind, flows, particularly in the institutional and sub-advisory channels are inherently lumpy in any given quarter. So looking over a longer period provides a clearer picture, and on that basis, we continue to generate consistent positive net flows. Now picking up on a point Sean made, one of the most important drivers of our organic growth over the last several years has been our decision to increase our participation in alternatives and within alternatives the areas we’ve chosen to focus on. Through our active and consistent new investment activity and significant product development by our Affiliates, we are one of the largest managers of alternatives in the industry. While one key point is our Affiliates manage a very diverse portfolio of alternative strategies across a wide range of investment categories, an equally important point is that we have substantial participation in areas of alternatives that are in high demand from institutional and retail clients as they seek returns, while also trying to…

Thank you, Nate. As Sean and Nate discussed we generated strong net client cash flows of $5.8 billion in the quarter and successfully closed all of our announced new investments, which brings our assets under management to approximately $730 billion, increasing the strength, diversity and earnings power of our business. As you saw on the release, we reported Economic earnings per share of $3.02 for the third quarter, which included net performance fees of $0.02. On a GAAP basis we reported earnings per share of $2. Turning to more specific modeling items, during the quarter we updated our non-GAAP disclosures to rename EBITDA to adjusted EBITDA, but there was no change in the calculation of this performance measure. For the third quarter our adjusted EBITDA was $219.8 million, which did not include our recent new investments given the one quarter lag in reporting. The ratio of our adjusted EBITDA at the end of period assets under management was 13.1 basis points or 13 basis points excluding performance fees. In the fourth quarter, we expect this ratio to increase to approximately 16 basis points reflecting a higher performance fee contribution that we typically realize in the fourth quarter. With regard to our taxes, our effective GAAP tax rate for the quarter was 31.9% reflecting a further decrease in the U.K. corporate tax rate and our cash tax rate was 19.7%. In the fourth quarter and for the full year 2016, we expect our GAAP tax rate to be approximately 33% and our cash tax rate to be approximately 20%. Intangible-related deferred taxes for the third quarter were $19.5 million. We expect this number to increase to $21 million in the fourth quarter. For the full year 2016 we expect our intangible-related deferred taxes to be approximately $84 million. Our share of…

Thank you. [Operator Instructions] Our first question comes from the line of Craig Siegenthaler with Credit Suisse. Please proceed with your question.

Thanks. Good morning, everyone.

Good morning, Craig.

Just wanted to start on the strong flow result, and I know it’s very difficult to predict flows on a short three-month time period, but can you provide some backdrop behind metrics like RFP activity, new sales levels, the institutional pipeline, I mean, that would be helpful in the institutional channel, and then on the mutual fund channel, I was wondering if you have any data points in terms of how flows are tracking quarter-to-date in the U.S. and outside the U.S. in your retail channel?

Okay. Thanks. So, as we said, sort of in our prepared remarks, we feel really good about the underlying trends and activity levels, and so we’re focusing on the institutional channel, the ones I’d call out is sort of the our levels of RFP activity and then sort of the levels of finals activity, which were really strong and actually up again this quarter, so good finals activity in the third quarter. I think, as you say, it’s hard to predict on sort of short-term looking three months. But I will say, looking to the fourth quarter, that’s often kind of a seasonally weak quarter for us, I think couple of the reasons for that are, we’ve got kind of the year-end redemptions from both quarterly and annual lock vehicles and we’ve obviously got the distribution of performance fees that are earned during the year, so those put a little bit of a headwind in. And then, in retail, you often see people sort of reticent to buy ahead of kind of taxes reason and stuff. And then, as I said in the prepared remarks, this year there is actually more volatility in flows than normal, I think, that’s due to the macro environment. So, we wouldn’t be surprised if you also saw some retail flow downs due to just macro stuff like election. But that said, underlying and fundamentally both with respect to the quarter and then sort of looking at that longer term trend, as I said in the prepared remarks, institutional pipelines were really strong and RFP activity is good, finals activity continues to tick-up. And then, if you look at the medium term, obviously, we still think the trends -- look there are some headwinds, obviously, but the trends are benefiting from remaining intact, so investors have to get returns into their portfolios. We do think people will continue to barbell between sort of passive on the one side and then return oriented on the other, and our Affiliates are really well-positioned to compete for and win those mandates and take share.

Thanks, Nate. If I could just squeeze one more in on Andrew Dyson, I just want to see how this move will impact the business model and if we could see any impact of flows or the business over the short-term from this move? And also when do you think we could learn of his replacement by?

Well, the short answer to the first part of your question is, no. When we launched our distribution strategy 15 years ago, the core vision was to offer Affiliates the benefit of scale and institutional, especially global institutional and retail markets on a basis that was bespoke, best suited for them and complementary to each of their own distribution strategies and efforts. We established our U.S. retail platform in 2004 and opened our first non-U.S. institutional distribution office couple years later in Australia. In fact, in a few weeks I’ll be in Sydney celebrating the 10th anniversary of our office founding. Andrew has been a valued member of our team, for sure, since he joined five years ago, but our strategic vision, commitment to the business remain completely consistent. And remember for clients, we’re providing a unique offering, where the clients, especially global institutional clients, but increasingly retail clients get the benefit of the focused expertise of industry-leading specialist firms, combined with or backed by the scale, resources, and operational risk management of a global franchise. And they get, especially in these far flung markets, the benefit of in-market client service and a single point of access to this very broad array of many of the industry’s best boutique firms. And if you want any demonstration of or validation of the effectiveness of the strategy, you have only to look at the success that we’ve had over the past seven years. As you know, 24 quarters out of the past 26 quarters, strong positive flows in our active equity and alterative product set. It’s a record that we’d compare to any in the industry. Sorry, the one other question that you asked is when you’ll get an announcement, and I think, in my prepared remarks, I said, early 2017, and I think, I’m going to stick with that. Thanks, Craig.

Thank you. [Operator Instructions] Our next question comes from the line of Alex Blostein with Goldman Sachs. Please proceed with your question.

Hey. Good morning, everybody.

Good morning.

Just sticking with the flow question, I was wondering if you guys can spend a minute on the high net worth channel, it’s just third quarter in a row with pretty robust flows and it seems like the activity there has been a little bit stickier recently than over the last couple of years. Maybe comment, I guess, kind of on what’s different in this channel today versus last few years. And then if there is any particular product or Affiliate that’s driving this strength that will be helpful too? Thanks.

Okay. So, this is Nate. So, I think, you’re right. We’ve had some really good traction in the high net worth channel. I think the driver really -- I’d really sort of highlight two main drivers. So one is strong flows into separate accounts and that includes through our AMG platform, probably the one that’s doing the best there would be GW&K and that’s both on some of their equity products, as well as their muni bond products. But then the thing that’s also different is we’ve begun to build in more consistent over the last couple of quarters, positive net flow contribution from our Wealth Partners Affiliates and we continue to develop the traction there and as you heard we’re continuing to grow out that platform. So, I think, that’s also building some nice stability and diversity into that channel.

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

Thanks. Good morning.

Good morning.

I guess, Jay, just looking at the guidance in the fourth quarter in particular, I guess, into the next year, can you go through the moving parts from what we heard from you last of when you -- first when you gave guidance last. And then the range from fourth quarter seems a bit larger, usually I think you typically narrow that. I guess some context around performance fees and where they sit today and how you’re thinking about those into the fourth quarter.

Sure. Thanks. Thanks, Dan. I’ll -- just bear with me here, I’ll try to give you all the pieces and as you said, we did leave guidance unchanged primarily because the impact from market today was only modest. It will only have a modest impact on the fourth quarter as you would expect given that we’re three quarters of the way through the year. But just on the components, when we last gave guidance which was August 1st. Our market bond at that time was 2% up in the prior transcript. As you can see from our AUM tables, we experienced approximately 3.1% in market changes, which included FX I put those two numbers together for the entire quarter, so 3.1% versus a 2% that we knew about. It had a positive impact of 1.1% relative to the last time we gave guidance going through the end of the quarter. So that was through the end of the third quarter. Since the beginning of the fourth quarter though, we have seen markets including FX off about 1.5%, so it took that positive 1% down to negative 0.5%. I think the other thing that you’re probably aware of is that, when we remove our 2% market growth assumption for the fourth quarter, relative to our model that has a negative impact. So, really down 2.5% from the model. All that being said though, given it’s the fourth quarter, we will only have a small impact on 2016. So we left guidance unchanged because, setting markets aside, our 2016 range is primarily a judgment on performance fees as you had mentioned. And when we look at various performance fee scenarios for the remainder of the year, both up and down scenarios, we have considered a few lumpy performance fees, as well as…

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

Okay. Thanks very much. I’m sure you had mentioned that you still feel pretty good about the new investment pipeline, I guess, there has been sort of a seminal transaction in the space in between last time you spoke and today. So why don’t if you can talk a little bit about how you see the M&A backdrop and in fact that you’re seeing some public-to-public deals happening, does that help or hurt your opportunity and for yourself?

Sure. I think most of the activity in the industry generally including the kinds of transactions you described is either not a fit with our strategy or not interesting and attractive to us. We continue to build relationships with outstanding boutique firms, which are generating alpha, generating strong organic growth and investments in those firms will arise as they always have out of these relationships that we’ve built over years and occur at a time that is appropriate and driven by the firms themselves. As always and in this environment, and maybe I’ll say especially given the uncertainty in the environment, we are very careful and very disciplined in our approach to pricing and structuring new investments. But we feel, as I said in the prepared remarks, very optimistic about our prospects both in the near-term and long-term to continue to in our own unique way generate incremental shareholder value through this strategy.

Thank you. Our next question comes from Robert Lee with KBW. Please proceed with your question.

Hi, everyone. Good morning. This is actually…

Hi.

… Andy McLaughlin in for Rob Lee. We just had a quick question about institutional flows. We know that mutual funds are strongly driven by AQR. We’re wondering if you’re seeing something similar on the institutional channel and if you could add that that at all.

Yeah. So, I guess, I would say -- I wouldn’t describe it that way, I would say the themes to sort of think about in the institutional flow side for the quarter and then maybe I’ll talk a little bit looking forward. As we talked in the prepared remarks, there was significantly higher gross sales on alternatives, AQR has contributed there, but it was -- AQR were down and Pantheon it was a number of firms that contributed significantly there. Also we had relatively lower redemption rates in alternatives, so that was sort of the alternatives category did play well. We also saw an uptick in gross sales in U.S. equities and sort of same things have been moderating out in U.S. equity. So, I think, there was a couple of things there. I’ve talked already about sort of fourth quarter and some of the seasonality there, but I think, again, the main thing to focus on, as you look forward in the institutional channel is the trends that we think we’ve been benefiting from, put the headwinds aside for a second. Those remain intact and it’s how the people get returns in the portfolios, it’s how the people continue to barbell passive and active, and how well-positioned we are to compete for those active allocations, right. We’ve a large number of very good performing products in high demand areas, global and emerging markets, and also as we’ve talked about and now we’ve got -- as Sean mentioned, we’ve got this unique sort of go-to-market distribution strategy combining Affiliates focus teams at their level with the scope and scale of a large institution with significant sort of expertise by geography or by channel to bring to bear for the Affiliates as they wanted. So, I think you put those things together and we feel really good about the opportunity set in the institutional channel.

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

Great. Thanks. Good morning, folks.

Good morning.

Maybe, Sean and Nate, can you talk a little bit more about the AMG distribution strategy in light of Andrew Dyson leaving, I guess, first of all, just what proportion of sales are coming from AMG distribution, say, in the third quarter and year-to-date and how does that compare with the trend over the last five years? And what type of replacement are you looking for, are you looking to anything different in that global distribution strategy? And then, maybe if you could just comment on Department of Labor, how you’re looking at that coming into the next couple of quarter?

You squeezed quite a few questions in that one question there Brian. So I’ll try to address some and then, Nate, I’ll ask you to fill in. The distribute -- contribution to our flows from core AMG distribution varies quarter-to-quarter and we don’t track it in a direct way because a lot of the influence is going to be in indirect way. So, I would say, over time it is in aggregate over the past six years, seven years about $50 billion in incremental contribution at least and in any given period it’s been half, sometimes more than half and sometimes, of course, given the dynamics of a particular quarter, it’s a less significant contribution. So, I think, the trend lines remain very much consistent and intact, as you heard Nate describe, we feel very good about our forward opportunity, especially, I mean, ultimately, fundamentally driven by the quality and performance of our Affiliates. But their distribution and our distribution alongside theirs is absolutely contributing to our continued organic growth. Looking ahead, as I said, we see no change there’ll be, of course, inevitable evolution, adaptation, growth in our distribution capabilities and strategy, but no fundamental change to the vision or strategy. We’re looking for a -- and I’m very confident we’ll find a very high quality, experienced, driven, motivated person who’s a cultural fit with our team, and of course, with our Affiliates and our overall corporate philosophy. So, I’m quite confident that we’ll complete a search in a very expeditious way with somebody who were enthusiastic to have join the AMG team. Nate, I think, I left DOL and maybe something else.

Certainly. I’ll -- let me pick up on the DOL piece there. So, I’ll do it in probably at least two parts, right. So, first, I think, as we’ve said before, we don’t believe that the DOL fiduciary rules will have a significant direct impact on the business and all of our Affiliates that are interacting with retirement investors are already fiduciaries. And frankly -- and this goes beyond the direct fees -- and frankly, the retirement area is actually one on our U.S. side, this is part of a business is relatively modest and is actually an area at least sort of look out over the medium to long term an area we should be able to really grow. I do think -- look the other thing I think we’ve also said before is, we’re probably doing much of the same thing as many other people similarly situated, which is we’re trying to help our distribution partners, the people that we work through and we’re trying to figure out how we can best partner with them as they evolve the way they bring their offering to market. I do think there are some other things I’d add though, which is, I think, while we have a small share, we’re relatively well-positioned as you look at how those partners may be evolving their businesses. So, we don’t really have brokerage, we’re almost all in the advisory side, we have, by and large, the right kinds of share classes to, that will be attractive. And then, importantly, and this picks up on a point Sean made earlier, we have -- this is a place where we can be enormously useful to our Affiliates, because having the scope and scale and breadth to be a good partner to while have with others, as they go through their product rationalization may be very, very important. So, again, it’s not a direct impact and the retirement piece is small -- relatively small part of our business today. And while there will be a bunch of sort of noise and work as we go through this, I do think there are opportunities on the kind of medium-term to long-term for us to partner well with our channel partners here.

Thank you. Our next question comes from Chris Shutler with William Blair. Please proceed with your question.

Hey, guys. Good morning. I wanted to follow-up on one of the questions from earlier. Just curious, have you sensed any pick-up in the deal pipeline which you would attribute to the DOL or just broadly an increasing recognition, particularly within the U.S. retail of the importance of scale?

Well, I would say and, Jay, tell me if you disagree or have something to add. I would say there has been a pickup in the activity level or the number of firms who are “for sale” or looking for a transaction. But in the main those really aren’t firms that we would include in our pipeline and pursue as prospective Affiliates. So, I think, on the margin, the scale and expertise that we provide and to your question retail distribution and more broadly in global institutional distribution, global compliance. These kinds of scale benefits when delivered or packaged with a two-decade plus proven track record of being a good partner and providing protection for the unique operating and investment culture of our Affiliates, which is absolutely critical fundamental, that really is distinguishing. And so we’re looking for Affiliates -- prospective Affiliates who appreciate the advantages of that capability but are themselves making a decision to move forward from a position of strength. These are strong growing firms which recognize that on the margin we can help them but we’re not interested in opportunities, of which there are absolutely some, where firms are struggling with the changes in the environment and “need a partner” that’s for other firms with different strategies.

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

Hi. Thanks, guys. I guess, the question, just on the alternative speed of Affiliates and the demand that you’re seeing. I think on one hand, we see a lot of interest in that area. On the other hand, it’s been a tough year for certain strategies on the hedge fund side. So, just wanted to get maybe an update on the Affiliate mix, how you see that playing out, where are you’re seeing demand and maybe where are you’re seeing some lack of demand? And then, Jay, if I can sneak in a quick one, just given the Affiliates that you have been acquiring, any change in like the tax rate or the bias to the tax rate going forward, just given more of an international thing? Thanks, Jay.

Right. I’ll start with a high level response to your question, which is for all of the industry talk and the news that you see in the media around the decisions that certain clients have made around limiting their alternative or “hedge fund” manager universe or the challenges that we read about regarding certain firms and certain strategies especially long, short equity and macro, that obscures the underlying reality which we’re seeing, which you see in our results this quarter. And I think with the very best alternative firms globally you’re seeing as well, which is there is increasing demand by global institutional clients especially, but also to some extent retail clients, for high quality, differentiated, uncorrelated or less correlated strategies, which have a track record of generating alpha. And our approach to alternatives is very focused and strategic in a set of defined product areas, which Nate described and we find for the best of those firms absolutely ongoing demand both in the short and in our view long term for those products and those firms. Do you want to...

Yeah. Maybe just like a couple of things. So I do think we’re seeing -- we described the four kind of general groupings within our alternatives book, private equity and real assets, Systematic Diversified, fixed income and equity relative value and multi-asset and multi-strategy, and within each of those categories we’re still seeing strong flows to the best performing products. I think the point I’d make and this is consistent with the point Sean was just making, which is, look, the pressure is coming when you have poor returns in a space that’s relatively crowded even if people want that space and so, those are the places where you’re seeing the pressure. But even in those areas, the strongest managers are both continuing to do well and continuing to track assets and then also will ultimately benefit from that evolution or shakeout or what have you. And then, again, as Sean said, the long-term fees are also attractiveness of these kinds of products in terms of the need for people to get into their portfolios is, because we think absolutely intact.

Then on the tax rate, you’re right, our tax rate has been coming down both our GAAP reported tax rate but also our cash tax rate that is a trend that’s been going on for three years now, each of the last three years we’ve seen a decrease in those rates. I do think it’s stabilizing at the current level, it has -- it is a structural change and that structural change is because of new investments offshore, we spent some money offshore and the effect of non-U.S. corporate taxes or lower than U.S. corporate taxes. So having AMG avail ourselves of a global rate has lowered our both GAAP and cash rate. For the moment, I think that level of 33% GAAP and 20% cash going forward is the right rate to consider, but that is certainly down year-over-year and over the last two years.

Thank you. There are no further questions at this time. I would like to turn the call back over to Mr. Sean Healey for any closing remarks.

Thank you again for joining us this morning. As you’ve heard, we’re pleased with our results for the quarter and confident in our ability to continue to create shareholder value through both organic growth and accretive investments and new Affiliates. We look forward to speaking with you in January. Thank you.

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.