Greetings and welcome to the AMG First Quarter 2018 Earnings Conference Call. At this, 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 first quarter of 2018. 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 will turn the call over to Sean Healey.

Thanks, Selene and good morning everyone. AMG had a strong start to 2018 with year-over-year growth of 22% in the economic earnings per share. Our results reflect the strength of our strategic position and our Affiliates track record of alpha generation. Looking ahead with multiple avenues of growth created by the scale and breadth of our business, including a strong pipeline of new affiliate investments, we are confident in our prospects with significant additional earnings growth ahead. During the quarter, our Affiliates alternative products continued to generate strong positive net client cash flows as clients expand allocation to the highest quality uncorrelated return stream. These inflows were offset by net equity outflows reflecting client risk aversion amidst market volatility, including two large emerging market equity rebalancing. As Nate will discuss, our Affiliates generated very strong performance across a range of global equity strategies during the quarter building on their excellent long-term track record and we continue to see substantial opportunities to organic growth across our alpha-oriented product set. With outstanding high conviction active equity products alongside a wide array of uncorrelated alternatives, AMG is positioned to grow in rising equity market environment, while also producing stable and resilient earnings in periods of market dislocation. As global clients increasingly concentrate their alpha-oriented relationships with the more limited number of managers, the breadth and quality of our performance-oriented product range continues to be a clear competitive advantage. AMG’s global distribution platform offers investors access to a broad array of best-in-class performance-oriented boutique firms with the scale resources and risk management of a global asset management partner. As we continue to build strategic cross product and cross Affiliate relationship with large clients and intermediaries, we see increasing opportunities to gain market share and leverage our scale on our Affiliates behalf in markets around…

Thanks and good morning everyone. As Sean said in the first quarter our Affiliates produced excellent investment returns across a broad range of strategies. As we all know that we are started with equity markets generally moving upward in January, that trend broke down in February and March as volatility increased asset dispersion across and within those markets. In this environment, the best active managers are able to outperform and many of our Affiliates generated meaningful alpha. I will cover performance in more detail in a moment, but first let me provide some context for our flow profile for the quarter and look ahead to what we expect from the rest of the year. In terms of the quarter, there were several underlying things. Consistent with trends for some time now, we continue to see very good demand for a large number of alternative products across our distribution channel and we have a very consistent and solid growth within our multi-asset product type. In the first quarter however, these positives were offset by continued weakness within the U.S. equities, consistent with industry trend and our global and emerging markets equities where our institutional business was impacted by two large rebalances as clients took gains from accounts that are significantly appreciated. Conversely, our retail channel saw good continued flows in both global and emerging markets equities. Looking ahead, we are very optimistic about the potential for strong organic growth in 2018 and the longer term opportunity we are executing against. From a short-term standpoint, performance is good and there are some very large pieces of institutional business in the pipeline. Here, I will observe that some of these large mandates are quite complex and are taking a bit longer to close than we initially anticipated. Outside of the institutional pipeline, we…

Thank you, Nate. As Sean discussed, our first quarter results reflect strong year-over-year growth across our key performance metrics, including 22% growth in economic earnings per share. Given the strength and diversity of our Affiliates together with the substantial cash generated by our business we continued to produce stable and growing earnings across market environments. As you saw on the release, we reported economic earnings per share of $3.92 for the first quarter which included net performance fees of $0.40. On a GAAP basis, we reported earnings per share of $2.77. Turning to our performance metrics, for the first quarter aggregate fees which was previously referred to as aggregate revenue grew 21% to $1.6 billion from the year ago driven by positive markets, organic growth in alternatives and a higher level of performance fees. The ratio of aggregate fees to average assets under management increased year-over-year from 72 basis points to 79 basis points reflecting an increase in performance fees. Adjusted EBITDA grew 18% to $286.5 million from the year ago reflecting our ownership mix between consolidated and equity method Affiliates. Economic net income grew 18% to $215.2 million from the year ago while economic earnings per share grew 22% to $3.90 reflecting a lower year-over-year share count due to repurchase activity. Turning to more specific modeling items, for the first quarter the ratio of adjusted EBITDA to average assets under management was 13.6 basis points or 12.2 basis points excluding performance fees. Looking ahead, we expect adjusted EBITDA to average assets under management to be approximately 12.1 basis points in the second quarter reflecting the performance fee contribution between $0.05 and $0.15 per share. Our share of interest expense was $21.6 million for the first quarter. In the second quarter, we expect our share of interest expense to be…

Thank you. At this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Chris Shutler with William Blair. Please proceed with your question.

Hey guys, good morning.

Good morning.

Maybe just on the deal pipeline, Sean you saw that a real bit more positive, but is that a fair read I am saying out over the last several quarters and how should we be thinking about asset classes, geographies and scale of potential investment?

Sure. The short answer is yes, we are seeing a definite increase in new investment activity. I would say it’s broadly by firm type and geography and while some opportunities are in auction settings, most have come from the relationships we have built over time and in these situations we know the firms well and the transactions occur in a negotiated form really custom tailored to the firm circumstances. So we feel very good about the pipeline. I would say as always the pacing of transactions, especially negotiated transactions is hard to gauge, but we are definitely – we definitely feel that we are entering a period of elevated activity and I would say finally, we remain highly selective of course, but also committed to continuing to repurchase our stock especially at current valuation level.

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

Okay. Thank you very much for taking the question this morning. So, maybe one for Nate, Nate you called out a couple of EM rebalances, I was wondering, so it’s a poor question, could you sort of size that and then you used some very strong descriptive language to talk about the pipelines looking into second half this year. So, could you give us a sense of how big that pipeline might be today versus where we were 3 or 6 months ago?

Sure. Let me take those in order. So, on the two EM rebalances that we just done in the prepared remarks, so we just had a couple of things here. So, two different affiliates as I said sort of in the institutional channel and these were both kind of very long tenured investments that it’s significantly appreciated, performance was good and partial redemption/rebalances is what happened and each of them was roughly in the kind of $1.5 billion kind of size range. So, that’s just to size them – that’s sort of roughly where they were? And then in terms of the pipeline, the pipeline is really continuing to improve and I would say sort of significantly improved, some of it is and I touched on this a little bit in the prepared remarks as well to be clear, some of it is – some of these very large mandates that are quite complex and are just honestly taking a little longer to close, but even beyond that the pipeline is really building as we said coming from alternatives liquids and illiquids as well as in global equities, global meaning global developed as well as emerging. So yes, the pipeline is really building well.

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

Great, thanks. Good morning. Thanks for the realization disclosure. That’s also helpful. Just going back to a couple of maybe different ones in the pipeline for global equities, maybe if you can describe, Nate, your comments on the complexity of that and the timing of that and it looks like I thought you said if I may have written this down around, but I think that the environment was a little bit slower for global equity, it looks like the actual sales gross number was actually pretty good. So just trying to get a better flavor of that global equity category going forward and whether Japan is also part of that over the nature of the Japan pipeline?

Yes. So, bunch of questions, let me try to make sure I get all of them. So on global equity growth sales in the quarter it was – the growth number was that, what I was speaking to there was relative to our expectation given what’s in the pipeline, right. So, some things did slow down in the quarter and again some of that might have been risk aversion as we said, but some of it is certainly this what I had sort of described as this complexity point and is manifesting itself in a couple of different ways, but I would put them all under the category of the – there are conversations that are quite large, some of them are multi-strategy and so it’s making sure those pieces put together some of them are multi-geography, so it’s making sure all of the regulatory and legal structure and stuff all sits together. And so there are things building in the pipeline sort of also addressed a little bit, the last question is sort of things building in the pipeline that are sort of quite large in just taking a bit of longer to come in. To the Japan question, I think the products that we are seeing lots of traction with and with moving us forward is sort of in the execution phase. And we have all talked about having to understand we have a large number of marketplaces that we are looking at. We talked about the way we think about them top-down in terms of opportunities for focus boutiques and evolutions and then sort of bottom I mean match our product set against them and the traction. We also talked about the pull are being pulled into markets. And so we have been having some really increasing success in Japan, some of which is starting to come through and some of that’s a little bit – some of us trying to come through, but a lot of it is also building and the product set that we are working with their is really kind of reflective of the product set more broadly which is it’s coming through in the global equities product set as well as very significantly in alternatives liquid and certainly in liquid as well, so have that alternative couple of months.

Thank you. Our next question comes from the line of Craig Siegenthaler with Credit Suisse. Please proceed with your question.

Hey, good morning. My question is on active equities and maybe it’s more of a Nate question, but many of your peers are starting to see an improvement in the active equity flows and I want to say positive, but really just less that, but I know would you see that in your – this quarter, but the quarters will be 90 days, so what is your internal view across your 40 Affiliates and if we could see better active equity flows, really given the better performance over the last year versus benchmark?

So, first I think you hit on just the key point there at the end which is investment performance. And as we described in our prepared remarks the performance really across the Affiliate strategies we will look at what placement against benchmarks and peers. The performance, again it’s not every single product and one of that, but the performance and the name was really good this quarter. And so one dimension to it is as you say it’s just the quarter. I want to mention to you it is also that we maybe going to we have talked about this for a little while, we may be going through a better regime change here from sort of monetary policy perspective, which maybe making it an environment where active managers can really outperform. So I think those things are certainly a part of that. When you look at our flow profile, I do think it was – one that we look at as we look at the retail, I think it’s just a quarter but when we look at is be to retail flow profile which really was pretty good. And then on the institutional side I think the really good progress we are making was impacted by really the two dynamics we mentioned without which the net number I mean in response to the earlier question the global equity flows from a global sales standpoint where it’s actually that bad. Notwithstanding the fact that we see things on the large end building up and so this quarter I think that that number was really just impacted by the two things we highlighted.

Yes. I would add Craig just in a different way distinguishing us from our peers we have a much bigger position in alternatives. Deliberately, we have increased over the past 5 years our assets and earnings contribution from alternatives to – from 25% to 40%. I would say we collectively and certainly some individual affiliates notably AQR are real leaders and retail alternatives. And if you look at the breath and depth of our alternative product set we are at the very top of the industry and that is seen – we are seeing the benefit of that in some of these large strategic distribution conversations that we have referenced. So I think prospectively will be increasingly important to focus on alternatives as the major category and not just active equities where obviously we have a strong position especially in global.

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

Great. Thanks. Thanks guys. Thanks for taking my question. Just let me talk a little bit about kind of global distribution, I guess one of the things, just two parts of this, number one as you have continued to expand your global distribution, I guess it’s been about almost a decade now, are you starting to see the number or maybe keep track of clients that to what extent they have actually been expanding the number of Affiliates that they do business with through your global distribution and maybe someone start with one and added up to three. And then maybe Nate this goes to some of the more complex multi-asset strategies, are you seeing – are you guys at a plan we are actually seeing we are able to do together no mandates that may span multiple Affiliates with one big mandate?

Yes. So, thanks very much. It’s actually been over a decade. So the answer to the first part of the question was absolutely right and that’s always been part of the value we thought about global distribution which is again just working with our Affiliates. They have their own excellent distribution themselves and building things that we have alongside. And we talked about that and I think I have talked about it on our call sort of building this exponential growth because then we go to a geography and begin building. And then on the back of that getting the first mandates and then getting diversity into mandates and both within a single affiliate that has multiple product capability as well as across Affiliates. So absolutely what’s happening and happening sort of all over. But while what we say, hey we have been doing it for more than a decade, we really did build a kind of step function geography by geography in first couple of years in each geography, but really quite modest in terms of flows generally. I think Japan is an exception given the traction has got there. But absolutely happening and we are seeing it happening literally everywhere we are working, some of that is with intermediaries. Some of those intermediaries are themselves global and so you are getting that leverage not just within the geographies, but across geographies as you build relationships with multi-geography intermediaries. So, on the first part of the question, absolutely. On the second, we have – it’s a really interesting topic, I think a source of potential significant future growth although today it’s much more of a coordination role rather than us really combining multi-Affiliate product into single – multi-Affiliate capabilities into a single product that we can deliver. It is something we have done in very small ways as we learn and an grow with our capability, but this is not something that we are really doing the scale, yes, it is definitely something that could be done.

And I would just add that as we have discussed and I think our peers mentioned this as well, it’s another aspect where scale and breadth of product is becoming increasingly important in the industry and it plays very much to our strength.

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

Thanks. Good morning, I guess maybe just another one institutional, just looking at redemption trends and I get this quarter the couple of minutes you called out and obviously redemption gentle, so it’s difficult to predict, but we are looking at the third quarter in a row elevated redemptions and you mentioned risk aversion is something that clients are talking about, so I guess just looking ahead, how we should think about redemptions caveat it with the pipeline all the good things you have been talking about?

Yes. So you are right, I think – I do think institutional redemptions did improve quarter-over-quarter even including the minutes or the rebalances that I described. And I think – if you normalize for them actually I think it was actually kind of a trend quarterly balances. So yes, I think about that a little more. And let caveat with one of the things is I think we have it, we much more visibility on the growth sales side, right, that we do on rebalances or redemptions side. So with those caveats again I think we – I would come back to performance again, which is performance is really good. And so that stands to reason that that would improve the redemption trends over time and so or maybe even in the short run to extend there is something that’s close. So I would go back to that and so look I think the redemptions trends except for those two rebounds is I think we are actually not that bad. And I think with them really good performance I would say that’s always been the reason that would improve.

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

Alright. Thanks guys. Just I know it’s early in the year, but given some of the volatility that we saw in the quarter, when you kind of look across all the Affiliates performance what drives the performance fees, are we still kind of in the average kind of environment meaning nothing really kind of got taken down or is really not going to cover up really to the kind off where we are typically thinking of the expectations for an average year?

Yes. Thanks Michael. Well, let me get to performance fees, I will just give you other element first which is just the AUM and sort of tracking that since our last call and you are right, it’s been volatile kind of quarter and year-to-date period. So we started the year at $836 billion, when we gave an update on January 29, this is kind of the last call we are about $870 billion. So since that call, we have finished the quarter at $831 million as you can see in the table which was a decline of about 5% and AUM balances are 1% decrease from the beginning of the year. So it wasn’t much from the beginning of the year, but it was from the time we gave our last call. Looking into this quarter that we are already up about 0.5% as of the Friday, so we are marking it up about 0.5% is right. And then to your performance fee question and I will hit capital as well. Those are the two other main assumptions that go into models that affect economic earnings per share. And you heard me say performance and alternative strategies was mix. In some places, it was well, first of all our performance – our Affiliates performance was quite good, but the indices themselves were mixed somewhere modestly positive. And if you were at least CPAs was down a bit about 4%. So it’s still early in the year. We had originally thought we would be in the low to mid-teens kind of on an average basis for performance fees. We might be slightly below that kind of 10% to 12% is now the percentage of earnings, but not much, but a little bit lower mainly because of the CPA segment. And then lastly on capital as you heard both Sean and I say on the on the call – both of us say we do anticipate repurchasing throughout the year even in an environment with new investments and 150 million is expected in the second quarter.

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

Hi, good morning guys. Jay just a follow-up I guess on your last point around the buyback, so it looks like you guys bought back a little bit heavier in the beginning of the year versus kind of the second part of the quarter and I guess not to get too specific, but do you guys clearly generally have a lot of free cash flow, why not support [ph] the buyback, given where the valuation of the stock was?

Well, so just to kind of play all the comments together, we elevated share purchase in the first quarter. They were averaging middle of the quarter just did a little bit throughout the quarter. That 150 million was higher than last year. We still expect this elevated level in this quarter. As you heard Sean say, we have a good pipeline, a building pipeline and the strong one. So we are mindful of new investments, but we do expect to do both this year as we look to the second half of the year. So we are finally we are mindful that valuation is strong, but we are also interested in buying back our shares at this level. So 150 million is a reasonable level for us kind of go higher, yes where we considered yes.

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

Hi. Thanks for taking the follow-up. So for Jay on the realizations, you gave the number in the quarter, can you give us the realization number of calendar ‘17 so we can get better sense of how to think about that. And then global equities kind of seen significant outflows through the last three quarters, were those the same clients, same strategies we are trying to think about risk from here how more assets those clients or strategies need to have?

Yes. So this is Nate, let me take the second half of that question. So the short answer is no, it’s – in terms of the things we called out this quarter on EM rebalances – the two EM rebalances that was no relationship in the prior quarter.

And big clients who have ongoing mandates with those firms and with other Affiliates. And then on the EM reporting just maybe taking a step back because it is worth, this is new disclosure. It’s worth to talking about it a bit. We continue to make incremental improvements in our disclosure we have over last several years. We typically tried to do that at the beginning of the year to so we can roll it out throughout the year. You do see that we have broken out realizations and distributions net of reinvestments, so we put all three of those in the same line item. We want to make sure that’s clear, it has been requested by analysts and investors. And I think some of our peers have broken it out separately, so we have pulled that out. This new line item provides transparency into movements that are hardwired as a result of the product features and then our client decisions and that’s why we pulled that out. We are not going to do pro forma work on our historical numbers, but it wasn’t material to our 2017 numbers. Going forward, we will see a modest amount of realizations and distributions net of reinvestments in those kind of second and third quarter with some seasonality in the fourth quarter.

Thank you. Mr. Healey, there are no further question at this time. We will turn the floor back to you for any final comments.

Well, thank you again for joining us this morning. We are pleased with our results for the quarter, confident in our ability to continue to create long-term shareholder value. We look forward to speaking with you in July.

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