Greetings, and welcome to the AMG Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. 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.

Thank you for joining AMG to discuss the results for the fourth quarter of 2017. 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 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, 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 to 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. AMG reported record economic earnings per share of $4.68 for the fourth quarter and $14.60 for the full-year, representing growth of 23% and 14% over the respective periods of 2016. Our assets under management also grew 21% to a record $836 billion. Our excellent results for the year reflects strong organic growth, including the long-term investment outperformance of our Alpha generating affiliates and positive net client cash flows along with the ongoing execution of our growth strategy. Given the increased scale and diversity and earnings power of our business, we are confident in our ability to continue to generate strong growth going forward. We're pleased with the organic growth we generated in 2017 with assets under management having increased nearly $150 billion in the year. Our results demonstrate AMG’s ability to generate strong growth in a rising equity market environment, notwithstanding our substantial exposure to uncorrelated alternative strategies, which are optimally positioned for periods of market volatility and provide stability and resilience to our business across market cycles. We also were pleased to generate positive net client cash flows during both the quarter and the year, notwithstanding continued industry wide net outflows enacted in actively managed strategies. Looking ahead, we're seeing increasing demand for Affiliates global equity and alternative strategies, as clients around the world continue to seek differentiated return streams in anticipation of an environment of increasing dispersion of asset returns. The fourth quarter was a record of gross sales quarter for us and has enabled described further we are seeing strong business momentum across our Alfa oriented product set. Given the underlying fundamentals in many non-U.S. regions both U.S. and non-U.S. investors are expanding their allocations to these markets and we're seeing ongoing opportunities for growth in global activities, which today account…

Thanks, and good morning, everyone. As Sean said, AMG ended the year with the very good fourth quarter as we participated in rising markets, our Affiliates of the growth added to their excellent long-term track records and our Affiliates and AMG together added positive net flows. We are entering 2018 with great momentum across our diverse range of actively managed strategies, absolute and relative performance continue to be excellent and the level of execution of both AMG and our Affiliates business development team is very high moving across the channel at all stages of the pipeline. Before turning to the details though, I wanted to review some of the highlights from our flow profile last quarter. While the net number was positive 1 billion that really understates the size of the opportunity we’re executing against. From a sales standpoint, this is our best quarter ever with nearly 40 billion in gross sales as a result of good execution across all of our client types. While we did some lumpy winds in the quarter. We also had a couple of lumpy partial redemptions in the quarter as clients rebalanced in some accounts that significantly appreciated. Finally, this excellent sales quarter was also impacted by some fourth quarter seasonality including tax loss harvesting and dividend and capital gains distributions within our retail business. As I said, we feel very good about the forward pipeline and opportunities as we enter 2018. With a high level of institutional activity across one that unfunded mandates, finals and RFPs across our diversified equity, multi-assets and alternative strategies. And our fund-raising pipeline with illiquid strategy is in private equity, infrastructure, real estates, credit and co-investment product is not only beginning to convert, but is also continuing to extending grow. Overall, we see tremendous ongoing opportunities for performance-oriented…

Thank you, Nate. As Sean discussed, we are pleased to report strong earnings growth for the fourth quarter and the full year driven by strong organic growth and assets under management and a solid contribution from performance fees in the fourth quarter. With a record AUM of $836 billion at year end and the positive contribution from changes in the U.S. tax law, the scale and earnings power of our business has meaningfully increased and we are well positioned for continued earnings growth in 2018 and beyond. As you saw in the release, we reported economic earnings per share of $4.58 for the fourth quarter and $14.50 for 2017, which excluded the one-time benefit from changes in the U.S. tax law that I'll describe in a moment. Economic earnings per share for the fourth quarter included net performance fees of $1.09 bringing our total to $1.45 for 2017. On a GAAP basis, we reported earnings per share of $5.50 for the fourth quarter and $12.03 for 2017. Turning to our performance metrics. During the quarter, we remained aggregate revenue to aggregate fees, but there was no change in the calculation of this operating measure. Aggregate fees grew 29% both in the fourth quarter and for the full year to $1.7 billion and $5.5 billion respectively, driven primarily by strong markets and organic growth and alternatives together with a full effect of our 2016 new investments. For the full year 2017, the ratio of our aggregate fees to average assets under management increased year-over-year from 66 basis points to 71 basis points, reflecting an increase in performance fees. Excluding performance fees, we also saw a modest increase in this ratio, as our AUM composition shifted towards a greater contribution from higher fee alternative products. For the fourth quarter, adjusted EBITDA grew…

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

Thanks, good morning. I guess, Jay, just to follow up on the last question with regards to guidance, a couple things. It sounds like the first-quarter performance fee number looks -- you said $0.20 to $0.30. I guess maybe that you give us the context for the year as well as some of the other -- your general outlook for flows or other assumptions as you think about 2018 in that $16.50 to $18 range.

Okay. Yeah, thanks. Thanks Dan. Well, let me start, I’ll address the first quarter in a moment. So, let me just start by talking about the model convention again. We start the year obviously at $836 billion which is the record for us, but as of Friday our market blind is up about 4%. Quarter-to-date which means our AUM is nearly $870 billion at this point just based on markets. And as you know we don't assume anymore markets in the quarter, for model convention put 2% in our models per quarter thereafter. You also know that you can track our market blend over time based upon the indices that we've indicated in our innate script. If you could be able to track that and adjust throughout the year, but obviously we're starting the year at a high level and we we've gone higher. I also mentioned that for the full year we see EBITDA at average AUM at about 14.1 basis points and we anticipate about 13% contribution from performance fees. In 2017 we had about 10% contribution from performance fees, I think people are aware that we had a very good fourth quarter across all of our business, but in particular in the systematic diversified and that sets us well for 2018. As we did last year, we expect to give you quarterly updates on performance fees and talk about seasonality because there isn’t seasonality business with respect to performance fees. Lastly, like we did last year we're going to indicate the forward repurchases, we have put $300 million into our model for repurchases in the first half. We’ll update you next quarter as we reflect on the pacing of new investments. And clearly with us repurchase scenario as well as our new dividend we only are putting…

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

Okay, thank you very much for taking the questions. I apologize for the hoarse voice. Could you maybe pick up on that last point, Jay -- or actually Sean? Now that we have the tax reform behind us, obviously markets are doing what they are doing. Could you give us a sense of how that may be changing the dialogue in terms of new opportunities on the deal side? And then maybe facilitating seeing a bit of a pickup on pricing as well. Sort of talk about maybe both the pipeline now that we know where we are on taxes as well as the pricing associated with that pipeline. Thank you.

Thanks Bill. Away from the direct impact of the tax law on our earnings which Jay commented on, there is an effect on new investments I would say first it contributes along the tax law, contributes along with a very attractive market backdrop to what we’re seeing at least so far in the year I expect it to continue and accelerate which is an increasing level of interest on the part of excellent boutique firms and pursuing succession-oriented transactions. It’s clear that at the end of last year, there was uncertainty around what happened with the tax law and the new tax law creates the certainty is there and of course there is more value that I am sure will be shared with sellers and buyers, but that contributes to a very attractive environment and opportunity for us. I would remind you that if you just to get a sense of the size of the opportunity set if you take the top hundred prospects that we have in our universe firms with which we built strong relationships over time, the transaction value interpolating from the size of these firms and what we know of them, the transaction value would be over $50 billion so it’s an enormous opportunity, a tremendous secular opportunity for AMG. The last thing I would say is that this is a bit more nuance, but its real the competitive dynamics are more favorable for us relative to non-U.S. firms than they have ever been. Historically, non-U.S. firms as I am sure you realize had an advantage and their ability to earnings strip and achieve a lower rate for those firms that were in jurisdictions with our home country rates and now that advantage has been removed and in some ways even there is actually a disadvantage to those firms and inverted entities that who we inevitably compete with. So, the overall affect, as I said away from the direct effect of the tax law, I think will be quite positive for us.

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

Thanks, guys. Maybe just a question on the flows and the organic growth. When we look at your mix, both on the alternatives and international, you are fairly well positioned, just given some of the industry dynamics. But Nate, maybe for you. If you can give us some color around where you are seeing some of those rebalancings, some of the seasonal distribution impacts on the retail side. And then when you look across all the affiliates, areas where things are going well, you are seeing the demand performances there versus any pockets where you have some performance challenges that may or may not rebound in 2018 or 2019.

Perfect. So, let me start with -- I'll try to hit all these pieces, so as you heard us say in our prepared remarks, obviously growth sales were very strong this quarter kind of possibility. So that was kind of both very positive sign and I’d say they were three things that impacted us on the kind of redemption side, which, if I am going to try to dimension in my public dimension together it is about kind of 4 billion or so across the three things, I’m going to hit here. One is seasonality and the retail across products, but primarily that came through in all points in a second. There was some seasonality in both the institutional line of work, chance as well and I’ll describe that. And then there were some of these institutional rebalances and some of that actually also came through and also if you look at all growth outflow numbers, you’ll see that showing up there as well. So, to take those in order maybe the seasonality in retail, some of that’s kind of across much of the retail book, which is kind of distribution and that will be invested amount. But also, there is tax law selling and that came through primarily in the alts book, you can think of something like managed features, which have been kind of down for the year and we talked about that and there was a period when lots of equity products appreciated. So, people were taking those losses. We saw the same thing last year. And then we also saw those flows reverse into the first quarter. And if you look at what’s happening in January so far, you’re seeing exactly that. You’re seeing those flows kind of reverse into the year. So that was the…

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

This is actually Ryan Bailey filling in for Alex. Actually, I had a quick question on the impairment charge. I was wondering if you could give us any additional color there? And maybe if you can't speak to which affiliate it came from, could you take us through why you took the charge? Thank you.

Yes. Thanks. So just the backdrop of -- we account for our affiliates and amortize, the intangibles over time, and to the extent that any point in time and again that's based upon the original purchased assets. So, what we don't count in accounting is the growth of new clients. So, I want to first say this is an accounting charge and it’s a non-cash accounting charge and we think we've been conservative here just given that the client in one of our equity method of affiliates, but again it's based upon the original clients not on its new clients. To take it in a bigger broader perspective as you know the sum of all of our affiliates have grown dramatically over the years and so we don't marke up our affiliates as they grow. And then just specifically on this one affiliate, yeah, I think we can describe it as a small equity method affiliate, it only contributed about $0.03 to our earnings. So, it did not have -- it does not have a contribution. This doesn't reflect any material economics to AMG. Again, it's just an account charge and frankly we're confident that that business has big prospects and will benefit from a different investment environment. Do you want to give a little more context?

Sure. And again, I want to kind of reemphasize the point Jay just mentioned, this is us I think being conservative and its just non-cash account charge that doesn’t really say much more than that to the firm and it’s a firm, we’re confident over the short, medium and long-term frankly. The firm is Ivory which is, a of couple of billion AUM long, and short equity term. They have a very good long-term track record, but over the last couple of years, they've had this kind of -- I will describe it as sort of a bearish value-oriented bias both in how they are constructed on the loan side, but also the short side of book and they had roughly loan exposure. So, that positioning has made some challenges performance and then also some client withdrawals which obviously are not material to AMG on any level. But look at the end, begin to reemphasize the point, we’re very confident a firm and we’re working together on just the best way to take this forward, but overall, great long-term track record, really good investment process and people and we’re very confident on them.

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

Thanks for taking my questions. Just curious -- could we -- maybe update us a little bit on if we look at your gross sales, could you give us a sense of how much of that today do you attribute to being helped -- flowing through or being helped by your global distribution? And then maybe also update us on some of your AMG funds in retail initiatives where I believe it's probably been, given the environment, a little bit more of a challenge. But maybe update us on where that stands?

Sure. I’ll start and then ask Nate to add. I think with respect of global distribution, we don’t break out the specific contribution quarter to quarter. over the last five years more than $50 billion in net flows have been true or are involving our AMG’s global distribution effort and I think prospectively the opportunity as I described and you hard us talk about this and I think others know the trends of increasing concentration by the largest global institutional clients of their manager set and I think all that plays very much to our advantage. We continue to invest and build our global distribution effort. I think the most recent or most material update I would give is that we are beginning very good traction in Japan and we expect to open later this year an office in Japan which will be our major step forward. With respect to AMG funds I think there are two, scale is increasingly important and you will have seen news in the industry around the major distributors also concentrating their relationships and I think we’re well positioned across AMG’s overall business including Affiliates, but also at the AMG funds level and we feel good about it. Obviously, U.S. retail is a very difficult competitive space, but I believe I know we’ve brought the scale and I feel good about how we’re positioned and our performance this year, we’re very pleased with the flows to date. Nate, do you want to add anything to that?

Well I think maybe one high level one point and one detail. The high level point I think everybody is tracking but especially on the institutional side but are increasingly on the retail side both in the U.S. and outside the U.S. There is really three categories of kind of wins; one is where the Affiliates all have their own sales, marketing kind of services, infrastructure and themselves, one is where our infrastructure is really leading the sale and then the third is where we’re collaborative to a greater or lesser extent and that third bucket is growing more and more, which plays into the theme that Sean just described because as buyers are centralized and intermediaries are centralizing, they are all recognizing whether the Affiliates are coming directly or not, but the relationship with us and they are also working with us more broadly it’s just the volume of those conversations and the interactions just continue to increase. And then the D-side [ph] that part was actually quite incorporate [ph] in our distribution teams where I think we're pretty impactful on some in the flows, is great to see and is coming across a number of Affiliates and many of them are -- and that’s just working very well.

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

Good morning. In private equity, it feels like a lot of the big flows are yet to come. But would you just please talk about the private equity flows in the quarter? And then I don't know if it is too specific, but I know EIG was in the news winning a big subadvisory mandate with FS Investments in December. I think the number was around $4 billion or so. Just want to better understand how or if that will flow into the net flow picture. Thanks.

So, as you heard us say, in the illiquid which again I would describe as including PE but certainly much broader than just PE and we went through some of the weather infrastructure, real assets credit, real estate those kinds of things as well. But when you think about our illiquids business in general, I’d say very good quarter, we had some sizable wins in the quarter and we had kind of a relative, what I’ll describe as kind of relatively normal level of realization, realization activity kind of on the other side. So, at the highest level, that’s what it is. Obviously as you alluded, there is lots of rules what we can and can't say and both of those kind of on the legal side, but also a bunch of clients have confidentiality requirements and things like that. But I would say about both the quarter and the pipeline is what the people is definitely building both growing in size and extending in duration, so those, let’s say dynamic. And I would say the main components of that are, let’s talk about some of those, sort of flagship funds. We’re starting to see some interim closings, we’re seeing some additional funds beginning to market. And then also, there is a separate account pipeline that’s also really building kind of alongside that. And some of these are complicated mandates and in some cases, these are actually better to think about, it’s kind of programs, other than mandates, because they are intended to expand kind of multiple products and even multiple cycles where this place into the theme of consolidated relationships as well frankly, which is people are trying to figure out how to get all these exposures on in a predictable fashion over long period of time and again across our set, Affiliates by themselves. These and frankly in a couple of places across them, there is that opportunity. So that separate account pipeline is, again sort of complicated mandate, but also, you can think about these programs. And then what we have been calling sort of product line extensions and we’re seeing good momentum here some funds with both interim and final closing, some separate account activity. But I think important point is, that the line between these three segments kind of blur, because as you think about these separate account programs especially in the multi-product ones, sometimes those gets expressed as investments in funds plus customized additions and once product line extensions obviously get traction, I think you thought it as clearly Affiliate. At the highest level, the overall pipeline and illiquid is growing, extending and there is some very large many, I’d say, many large opportunities in the sort of coming quarters. So, it’s part of the reason why we feel so quite good about them.

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

Good morning, folks. If we could just focus back a little bit on some of the dynamics of the flows. Thanks for the comment on realizations. Maybe if you can talk a little bit about the private equity gross fund raises. I think originally you were indicating about $10 billion from that. I think that's expanded since that original outlook. If you can maybe talk about what you've raised so far on the gross side. And then what it's looking like for the 2018 trajectory. And then also comment on the -- it looks like the sales -- gross sales picked up pretty nicely in US equities. Double the pace of the quarterly run rate. Maybe the driver of that. And then, Jay, just within your 2018 guidance, what your sort of range is for flows within that.

I’ll try to capture, at least all of the, parts of the, first year products. So, on the illiquid one, I think the way I would describe it is pretty much the way I'll describe it to the earlier question, which is definitely larger and extending. And sort of hard, because the way we describe it is, kind of a 10 billion over a finite period. I do think we’re going to exceed, I think it’s a [indiscernible]. We’re going to exceed the number. But it is, again it is both growing and extending and I think if you look at it kind of year-on-year I think we think that the contribution in 2018 [indiscernible] will certainly be -- we think will be larger than the contribution in 2017 just looking at the schedule and some of these kind of mandates and programs and conversations that are happening. That’s…

And that’s an enduring rather than episodic, I think, is the way I think about it.

Yeah. Absolutely. So, I think that's on the first part. And then as you -- to the second piece on U.S. equity, I think as you know there, right, we had good kind of sales growth in U.S. equity, while our overall continues to be frankly, a bit of a challenging, right, we saw little bit better institutional redemption and we did see sales growth and probably going to describe where the sales growth is coming from, I think it is mostly described as coming from the sort of more [indiscernible] or factor kind of equity strategies. The other note I will have it on the redemption side, while it did improve, there's still that seasonal impact kind of dividends and capital gains distribution etcetera within the retail business. So, I think we do see an improving trend, but I think the overall dynamics as we described.

Behind your question the flow trends in global equities were actually quite positive and as you heard in our prepared remarks, we see very good and improving, increasing opportunities there in that category. Jay do you want to…

Just on guidance - maybe I will just up the level, Brian, we do have some structural conservatism in our range always. Obviously, everybody is well aware of the capital. So again, just to repeat we have about $600 million of capital that is not in our guidance. I would also just point out that on the tax side, while we didn't conservative, I think estimating a $50 million run rate number that number will grow of course with incremental growth comes a higher margin on those earnings, if you will. And I think there's some refinements in our business that will prove out that that we will actually experience a higher than a $50 million run rate. So, we have capital, we have tax and we also have flows because we don't really forecast flows. We put a very conservative number really to just show some upward momentum, but the reality is the words that Nate and Sean have commented on here with respect to our momentum in flows just really is not in our model.

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

Good morning. My question's around the global -- the US to global dynamic you were talking about. I guess the first part is does that suggest that we should expect accelerating outflows in the US equity bucket? And to what extent are you seeing those redemptions look elsewhere within the AMG affiliate group, maybe on the global side? Is it rotating within the complex, so to speak?

I’ll start and then I ask Nate to add. No, the answer is the U.S. equity flow trends have been improving and I think the way our business is works is, sure, you realize it is, it's not integrated. And so, the opportunities that we're seeing in global equities across affiliates don't relate to our U.S. equity products that that there aren't going to be fundings from redemptions in our U.S. equity book. I mean, it just doesn't work that way. So, I think we remain positive and optimistic around U.S. equities, which as you know is only 14% of our earnings. But especially positive and optimistic about global equity opportunities which is partly around the performance of individual affiliates, but also representing a view that the overall backdrop of the market environment we mentioned that is home country by us eroding relative valuations between U.S. and non-U.S. markets, relative growth rates of other economies and finally the decline in the dollar obviously benefits non-U.S. markets and us to our greater exposure to global equity. So, I think all of that contributes to a very positive backdrop certainly in the year, but these are trends that we’re seeing in place and accelerate it. Do you want to add?

Thank you. Our next question is a follow-up from the line of William Katz from Citigroup. Please proceed with your question.

So early on in your prepared comments, you had mentioned that you are seeing a pickup in some of these strategic alliances. Maybe that is embedded in some of the back and forth we've had with Nate in some of the other Q&A. Could you talk a little bit about just in terms of what you are seeing in terms of economics on these mandates? Are these just longer-lived assets that are slightly lower in terms of fee rates? Or how is this working, if you will?

Well at the highest level, the trend represents just a kind of obvious move toward greater efficiency. I think global institutional clients and intermediaries with very large pools of assets and just the increasing challenge of overseen numerous managers is itself a reason for concentrating relationship obviously also a desire to have certainty and comfort around operational and legal due diligence items as well also driving this concentration. But I think there is an important strategic component which relates to these large global institutional clients wanting to have flexibility and choice around a range of alpha-oriented products and AMG is very, very advantaged in this respect because we have the broadest array of independent alpha-oriented products especially in global equities and alternative. And so of course there is an effort on our part with our Affiliates to coordinate an offer the efficiency advantages that an integrated firm can provide, but if you think about over time what the competitive dynamics are yes, scale matters and large integrated firms have an advantage in that respect because they can more easily coordinate among their product. But ultimately the most important competitive dynamic is going to be around through alpha generation and the broadest set of differentiated sources of alpha and on that basis, we together with our Affiliates are enormously advantage and well positioned. Maybe Nate you can address the more specific question around how some of these mandates, what the economics can be although the answer is quite broad.

I think the way we think about this sort of a range, right. At one end of the -- and sort of easiest to execute on one end is sort of a bit of simple coordination and making the lives of clients and intermediaries a bitter easier in accessing the down streams [ph] do that many, many places right now. At the other kind of extreme and as Sean said, we have the largest collection across our Affiliates group, maybe the largest collection, this is truly outstanding return-oriented stream, recurrent streams. And the challenge for the intermediaries or the large end clients is how do you get those streams into portfolios, right. How do I do that both efficiently, when I get that done efficiently? But ultimately, they need something that’s the fact that when they produce it to their end clients. So that’s a couple of performance, but also can we make the servicing and the oversight of the products and et cetera and operational infrastructure, could we make that all work easily for them across their entire platforms or across the entire -- their client base in the case of intermediary. And so that’s kind of the continuum. The point on PE is, I do think there can be PE dynamics relative to these large mandates especially these large scale multi product and we’re talking across many things. But the other related point is, the effectiveness with which we can bring products to market but also the effectiveness with which they can access those products creates margin benefits on both our side and their side, right. And so, which ultimately [indiscernible] the benefit of the end client. So, I think, you have to think about it not just on fees, but you also think about it, in terms of the benefits in both kind of efficiency and doing it in the margin benefits there as well so effectively getting along to the portfolios.

Thank you. Ladies and gentlemen, that is the end of time for question. I’ll turn the floor back to Mr. Healey for any final comment.

Thank you again for joining us this morning. We’re pleased with our results for the quarter and confident in our ability to continue to create shareholder value through the organic growth for our existing Affiliates, accretive investments and new Affiliates and consistent capital return to investors. We look forward to speaking with you again in April. Thank you.

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