Greetings and welcome to the AMG First Quarter 2019 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Miss. Anjali Aggarwal, Vice President, Investor Relations for AMG. Thank you. You may begin.

Thank you for joining AMG to discuss our results for the first quarter of 2019. 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 ir.amg.com, a replay of the call, a copy of the announcement of our results for the quarter and a reconciliation of any non-GAAP financial measures to the most directly comparable GAAP financial measures, including a reconciliation of any estimate of the company’s economic earnings per share for future periods that are announced on this call. As a reminder, we have also included an updated investor presentation on this section of our website. AMG encourages investors to consult the Investor Relations section of its website regularly for updated information. With us on the line to discuss the company’s results for the quarter are Nate Dalton, Chief Executive Officer and Jay Horgen, President and Chief Financial Officer. With that, I will turn the call over to Nate.

Thanks Anjali and good morning everyone. I'd like to begin by congratulating Jay and thanking our shareholders, affiliate, employees and friends for your support over this past year. I’ll cover the evolution of roles in a moment, but first, in terms of the quarter, AMG reported economic earnings per share of $3.26. Our results for the quarter were inevitably impacted by the significant equity market declines in the fourth quarter of last year, leading to both a reduced, starting AUM for the quarter, and also a lower performance fee generation in the quarter, as beta sensitive products needed to make up their high watermark. During the first quarter, however, the beta rally drove AUM higher recovering that lost ground for a subset of our performance fee product as our affiliates continue to build on a strong long term performance track record across many areas. Turning to flow, we had net outflows of $7.4 billion in the first quarter, a significant improvement from the previous quarter. Flows are driven by expected, continued softness in our liquid alternatives and [Indiscernible] equity businesses, including 3.3 billion from two client redemption, neither of which was related to the affiliate performance. In addition, during the quarter we continued to make progress executing on our investment strategy, and, as you saw in our separate release this morning, we were very pleased to announce the addition of Garda Capital Partners to our group of outstanding affiliate. Looking ahead, we are very confident in our long term growth prospects, because first, we have actively positioned our business to focus on the attractive growth opportunities in alternative and distinctive equity. Second, these are areas where boutiques have a proven ability to outperform, and where our affiliates have exceptional long term performance records across a broad range of product. Third,…

Thank you, Nate. I’m honored to have the opportunity to lead AMG as our next CEO. And I look forward to working with you in your ongoing role. I also want to take a moment to recognize Nate for the countless contribution he's made to the firm over his 25 years. As AMG has grown from just an idea into a $775 billion global asset manager. From a personal perspective, I'm enormously grateful to both Nate and Sean for their support, guidance and partnership over the past 12 years and especially during this past year as my responsibilities have evolved. In my new role, I look forward to continuing to work closely with our board, and Sean as executive chairman, as well as the rest of the senior management team, most of whom I've had the pleasure of working with for more than a decade, and many of whom I recruited to AMG. This team shares with me, and with Sean and Nate, the entrepreneurial spirit and partnership orientation that has always defined AMGs culture, and I am confident in our ability to create significant shareholder value together in the years ahead. Now, there are a number of themes I'll develop further. But let me first go through the details of the quarter. Turning to our flows by asset class and starting with alternatives, which account for 38% of our AUM, we reported outflows of $2.9 billion driven by our liquid alternative strategy and partially offset by positive contributions from illiquid product set. The outflows in this category were largely driven by a single client redemption, which was not performance related. Our illiquid which includes strategies, such as global and regional private equity, co-investments, credit, real assets, infrastructure and real estate, generated another solid level of fundings in the quarter,…

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

Thanks. Good morning. I guess first, Nate, I wish you well in your new role and Jay, congrats on your extended role at the firm. I guess wanted to talk broadly about alternatives. If you could elaborate on BlueMountain and what’s happening there? And if we think the kind of over the next kind of 12 months kind of the flow outlook for this category which is been such a big contributor to your firm over the last several years with performance at some of the products we can see at AQR still being challenged, as well as some of the changes you mentioned at BlueMountain. How we should think about the liquid component of this business over that time period?

Perfect. So, this is Nate. Maybe I’ll start on BlueMountain and then I think Jay maybe will pick the other part of that question. So, look, on BlueMountain specifically I’d say, look, fundamentally BlueMountain had some real core strength, certainly about – like their credit and volatility history. And over the last couple years they were diversifying the business along with some industry trends that building out infrastructure, but recent performance especially the first quarter’s performance was really challenging and that was impact just -- not just on kind of performance fees, but also on some of the track record which has the impact on both client and also on kind of forward outlook for some of those clients. And so, the current client base, but those track record and some of the products and capabilities makes it kind of not feasible to sustain, I think if that infrastructure kind of it’s activated. So this is really I think for them an issue of -- and we agree an issue of focusing on those really outstanding core strength. I think maybe on the alts [ph] more generally, why we’re very strong believers maybe I’ll turn to Jay.

Yes. Thanks Dan. So, starting with the quarter, the quarter I think we had expected the flows to be about where they are. We did have some lumpy outflows from two different client transition unrelated performance, but your question to the liquid alts in particular I do think that we have a really diverse great set of products there. We do think that long-term client need these products in their portfolio. They add both diversity and to the correlation aspect of the portfolio. So, the long-term demand trend in place. I think we need our way through the sort of near term performance challenges. There are bright spots and there are certainly some products that are doing quite well. And so, we do think that the arc of that is the return to long-term positive growth. I would take the opportunity to highlight a couple of other important elements of sort of low-profile that are quite strong. Obviously, the continued illiquid private equity funding continue; we still see extension and innovation coming from our illiquid managers and we see that long-term growth profile enduring. We've also had an uptick in demand for our U.S. fundamental equity managers especially in the fourth quarter, in the first part of this past quarter where volatility picked up and the value of those managers and the portfolio became clear that we did see an uptick in demand there. We have improving performance in emerging market. We have improving performance generally in global equities. These all give us reason to be optimistic about the medium and long-term flow profile.

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

Hey, guys. Good morning and congrats, Jay. I want to ask about Garda. And so maybe you could just talk about Garda. How it fits into the investment philosophy a little bit more. I know it’s reasonably a smaller at this point. But how does it fit in regarding your comments previously around more entrepreneurial management teams and maybe talk about any ambitions they had moved beyond to fixed income relative value? Thanks.

Yes. Thanks, Chris. So far – first, as you’ve heard in both Nate and my prepared remarks we’re excited to welcome Garda, Jeff Drobny and his the entire management team there. We think that this partnership is exactly what we are looking for. We remained very focused on both quality and alignment, as well as making sure we’re disciplined on pricing and I think new partnership has reflects all of those elements of what we’re looking for. Garda is a great firm. High quality, relative value, fixed-income, specialist, exceptional track record for over 15 years, very low correlation to traditional indices. As you said, the business is small but not that small, actually 4 billion with really strong flow momentum and the capacity to grow. It’s highly rated. We’ve seen substantial appetite from institutions for fixed income relative value. Importantly, I think the firm has its strong entrepreneurial and investment centric culture. The long tenured management team committed to building and enduring franchise over multiple generations. I also would just note that this opportunity is unique for us. The business was started in 1999 and for 15 years it was within cargo. Therefore not open to external capital. As the business came out of cargo we’ve seen substantial growth in clients and this is an example of our -- the benefits of our proprietary calling effort allows us to partner with Garda at this point in this growth cycle. And then second on pricing, as you heard me say, we do see $0.20 of run rate accretion or 2019 accretion and growing half of that in 2020, half of that in 2019 or about $0.10 for the back half of this year. It is a meaningful EBITDA contribution if you work your way through the math you’ll find to that’s in the neighborhood of $15 million of EBITDA. The partnership is structured as the minority interest revenue share and it will go through kind of our equity method line items, the deal from pricing perspective within our 8 to 10 times EBITDA range, but really at the low end of that. So I think here again both on quality pricing and alignment we’re very excited about this partnership.

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

Thanks. Good morning everyone. First, Jay, just congrats on the new role, well deserve.

Thanks Craig.

So, my question is actually on the new investment pipeline, a follow-up to the last one. But if you look at what is inside the pipeline today, is it mostly smaller businesses like Garda? Or is it also has some larger businesses potentially multi-manager platforms that could provide larger EPS accretion opportunities from AMG shareholders?

Yes. So, I think as you heard me say, Craig that we’re quite optimistic about the progress we’re making on our near term pipeline, obviously we are in the relationship building business over long-term. We’ve had good dialogue more broadly. Let me backup then I’ll come back your specific question. We see the M&A market today as being pretty active. I think we’ve seen lots of different types of transactions in the market including both larger transactions and transactions like Garda. And specifically on some of the larger consolidated transaction, in general we do think that those are difficult to execute particularly those that are focused predominantly on cost-saving. Of course that is not what we do. We have unique business model that puts us in a position where we can through the successful execution of our new investment strategy obtain to benefits of scale that accrue in a strategic transaction without having to integrate. I think that’s really important aspect of our ability to scale whether it's a series of midsize firms or larger firms. We have the ability to scale without having to go through a year or two integration project where at the end of it is unclear exactly how much you ultimately save, so very excited about our ability to grow through new investments whether they’re midsize or larger firms. I would also say that the transition of or succession planning of firms is inevitable. As you heard me say that’s what John and Nate identified 25 years ago and we’re still capitalizing on the demographic trends that do occur in the firm. We are very good at partnerships at AMG, both the organizational aspects of it, as well as the alignment aspect of it and the technical aspect of it. And I think that is going to be -- a reason why we’re going to continue to be able to execute on the market opportunity as succession planning needs surface at managers. In terms of the size and the complexion of our current pipeline, but we have good diversity in our pipeline. I would describe it generally as global which include emerging and alternative firms in that pipeline. It does range from midsize to larger. I do think that the bar on larger transaction is higher given the importance of making sure that you price it right. And I would also just note that on pricing generally in the private markets we’re seeing finally pricing come down in the private market. But the lag I guess relative to the public market, but we do think that we are able to execute it on the lower half of our sort of general pricing range of 8 to 10 times in this market. So we’re very excited about the opportunity ahead of us and we feel like we will see more new investment activity over the year and the medium term.

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

Okay. Thank you very for taking the questions and congratulations to everybody. So just sort of staying on the theme of big picture, Jay, just as you sort of see the evolution of the asset management business, do you see any evolution of AMG strategy to sort of realign it anyway to tend to accelerate organic growth beyond the acquisition related opportunities?

Thanks Bill. Look, our industry is evolving. We acknowledge and we embrace it. It presents opportunities for us and capitalizing effectively on these opportunities will require us to focus on our strength. First and foremost, we want to be the partner of choice to the most highly regarded independent firms globally. We think we’ve accomplished that over our 25-year history and we’re going to continue to do that. I think as you know everyone on the phone know that Sean, Nate and I have all been united in our entrepreneurial spirit. In this way and our focused on excellent execution in order to do grow shareholder value; this will not change. The element of our strategy will continue on at the highest level building strong relationships with our affiliates to maintain them across generation. We want to enhance our affiliates growth prospects and leverage scale in efficient ways. We want to find new affiliates, new prospect that are not only earnings accretive but also business accretive and adding new products and new channels and new geographies as we do so, that powerful combination to create shareholder value, and as we said or as I said, a moment ago we see in our current pipeline the ability to make it new investment. We do have deep experience in these partnerships. We also have built excellent relationships in our industry. And today we have the most diverse array of return stream by independently managed -- asset managers independently owned firm. And so, when you look forward you say with that portfolio of pipeline relationships and new investment the world’s most diverse array of independently manage differentiated strategies and reputation of being an excellent partner. And finally a team that has the right orientation, skill set, I think we will as we also have on this forward prospects; notwithstanding the evolving market we will evolve with it.

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

Good morning. Thank you. Given the market move quarter to-date, is it fair to say that your view of where yearend performance fees could come out – have come up quite a bit in terms of where you are versus high watermarks?

Thanks Patrick. Yes. So, well, let me just take a step back. As of last Friday our market blend was up about 2% on the year which is kind of across all of our exposures and that profile I would say, is consistent with our normal market convention. As it – so just to answer to your specific question I would say, there really hasn’t been a change in our view of sort o longer term range that we gave out on performance fees mainly because it's still early in the year and the progression is consistent with what we would expect for our model of convention. That said, we have regained quite a bit of ground on high watermarks, in some cases we've gone over high watermarks, and so we are making good progress along the way to that goal. You would note that we do have seasonality in that performance fee opportunity. We experienced $0.17 in this quarter and we have highlighted kind of guidance of $0.03 to $0.05 in the second quarter and then it typically goes down to a couple of pennies, call it $0.01 to $0.03 in the third quarter. So it's really the fourth quarter where we see the bulk of our performance fee opportunities seasonally. And I think when you pull that all together we're still in that $0.50 to $0.0150 range on top of the performance fees that we'll experience in the first three quarters. So that is consistent. But I would say on balance we feel good about the performance fee opportunity because of the recent uptick in market. And then the last thing I would say is, with the addition of Garda in the second half of the year both our ratios of EBITDA to average assets under management, but also our cash flows and the opportunity to earn performance fees have all been increased by the addition of Garda.

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

Hey, good morning guys. Just a quick question around the AUM disclosure you put out. If you look at the other bucket within the total role forward that seems like it's becoming a bigger negative number over the last couple of quarter. I think it was over 6 billion this quarter. Can you expand a little bit beyond what's in the footnote? Just kind of where it's coming from or any sort of EBITDA impact that is associated with that, that would be helpful? Thanks.

Yes. It's a very simple answer. In the quarter -- at the very beginning of the quarter I think we've probably made the announcement in January and I think we've talked about it briefly on the last call. Clarfeld, we sold Clarfeld in a transaction and so it's really just the removal of their AUM coming out of our table. We did remove -- we did generate a small profit on Clarfeld, but as it comes out of our financial that has to come out of our AUM and that's really the point on other. And I'll just say more generally on the – say, the distribution, the realization that was a normal quarter for us and I think we've only been reporting this way for about a year but that just seems like a normal quarter on that basis as well.

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

Great. Thanks and congrats Jay as well, well deserve. Maybe just to ask you another one on the outlook for deals; obviously you guys as you've been making new investments over a long time frame, fixed income has been one area where you really haven't done a ton relative to some other alternatives. Maybe, Jay relative to the past do you have a sort of a view over the next say five plus years that fixed income might become a bigger part of that deal activity? And then also if you can comment on what you view as your capacity for deals over the next couple of years and would you prioritize that over stock buyback given the deal pipeline that you're currently seeing?

Okay. Thanks, Brian. So you’ve asked a few things in there so if I can take them off. Hopefully I'll remember them. On fixed income generally I would say that we are -- I think we're interested in fix income. We like the differentiated strategies within fixed income, the kind of core kind of bond U.S. and global. The first thing I would note is there's very few independently sort of boutique still management owned businesses out there. There are few and I think we would have an interest in the highest quality of those firms. So, you just don't see them exist partly because it is a tremendous scale business and number of them are owned by large kind of conglomerate type firms or scaled organization. I would also say that that's a tougher business and it use to be a tough business. So we like differentiated fixed income strategy than we will look to make new investments in those types of businesses. As it relates to -- in general what we're looking for in new investments. Look, we want to stay close to what clients are looking for in their portfolios long term. We – I think we've always been good at using our information both from our existing affiliates as well as from our global distribution staying close to clients and understanding long term demand trends. And so that is why we're interested in differentiated fixed income and we're different. We're interested in a number of other businesses that are involved in kind of long term cyclical trends within client portfolios. So that is our kind of forward look on how we think about new investments and where we are prospecting. As it relates to capacity, look, we did some balance sheet positioning. I appreciate the question…

Thank you. Our next question comes from line of Mike Carrier with Bank of America. Please proceed with your question.

Hi guys. This is actually Sean on for Mike. Just given the tougher organic growth trends to start the year, do you guys still expect the flow picture to improve and hit that 2% organic growth by the end of 2019?

So yes, let me let me take and if Nate, you want to add to this, please do. As we described in our prepared remarks and I said earlier, we do see the long-term trends in place to be at that 2% level over the medium to long-term. The elements of how we get there and the timing of it will in part depend on performance in liquid alts. I think as it relates to the other aspects of our business illiquids global equities, emerging markets and U.S. equities we are seeing uptick in both performance and in some cases demand for those products. I think illiquids alts were moving through a period of near term performance challenges and as we move through that period we need to see those stabilized before I think we can feel confident that the timing is in front of us with respect to when the 2% occurs. That said, look, there's quite a bit of good things going on underlying in our business. As I’d mentioned these other upticks in demand really could outweigh any of the performance, challenges we're having in illiquids alts also therefore it's hard to know exactly the timing of that. We do expect over the medium term noted to see that 2% number being a reasonable growth rate for our business.

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

Great. Thank you. And congratulations Jay and best of luck on the [Indiscernible]. I guess my first question is if we think of the outlook this quarter and kind of what -- maybe what seem to be on track over the near term. Is the -- just trying to get a feel if the economic impact of the flows is reflective of kind of the growth outflows we're seeing and if organic growth was like minus 1% in this quarter. Is that a reasonable proxy kind of EBITDA impact?

So, it's a good question. I would actually -- as you have -- you have even written on there is a bit of disconnect between the metric of flows and EBITDA. I would say for us, it's particularly challenging because it depends on not only what assets are raised but the ownership of the underlying affiliate, so that's really the equation. I think what I would point you to is the EBITDA to average AUM. I made some comments around that in my prepared remarks. It has been impacted recently for us by both performance fees and the mix shift, but also the cost of repositioning BlueMountain. When you look forward this year we do see that that ratio which is a bit of a profitability ratio for us improving – it’s improving because we see that those costs abate, we see a return of performance fees and we see the addition of Garda, so all of those things should lead to an increasing kind of ratio there. That is a ratio to track for us. It has come down over time, but it's come down as much from just the mix of the overall business and that can easily go back the other way and very well could in the near term.

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

Thanks. I just wanted to confirm that the BlueMountain repositioning is just the 1 billion sleeve the press has mentioned or is there something broader going on?

Yes. So, look I think it's the -- the business is meeting the market opportunity and therefore that is one element of repositioning. I do think that all of the -- the cost of that is in our first quarter EBITDA, and is in our forward outlook and the one thing I would say is that, none of that had anything to do with the actual book. I should say that the impact on a current basis in our financial statements, the non-cash charge is really a historical look at the purchase price that we pay and that is just being revalued. I would also note that we've had reevaluation events, such as Value Act where we've seen significant growth thereafter and therefore you can't write these businesses, but GAAP [ph] does not allow you to write businesses up. So there is some asymmetry to what's going on here other than the experience that we have in our current EBITDA. The write-down itself is not -- does not tell the future. And the asymmetry is really you can't recognize the gain GAAP only requires you write down assets. The other thing is worth noting is we have a portfolio of investment across lots of different strategies. The sum of all those investments, they are significantly above their carrying value. Frankly, the sum of all of our equity methods are significantly above the carrying value, and again you can't offset any portfolio effect from any one or any one investment.

Thank you. Our next question is a follow-up from the line of Robert Lee with KBW. Please proceed with your question.

Yes. Hi. This is just a simple real bottom question, Jay. But did you -- I think I may have missed it. You mentioned the performance fee contribution in the quarter?

Yes. It was $0.17 in the quarter. That is similar to the fourth quarter and it's down from the first quarter. So, when you look at a year-over-year it's down. And that's mainly because if you remember we have a one quarter lag in a number of affiliate to generate performance fees. And so if you think about what happened the fourth quarter those affiliates were impacted by that one quarter lag which we're just now reporting in this quarter. That's really the reason for the drop-off from the first quarter of last year to this year.

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. I just want to go back to your comment in the prepared remarks about a new distribution relationship on investment solutions provider. Just any more detail you can provide there on how big this company is? What strategies you think will fit and timing?

Sure. So, just -- this is Nate. Just to level set for a second. So, the easiest kind of framework to think about it and the trajectory is the way we've talked about in Nordea, starting I guess a couple quarters ago which is if you sort of step back, pick up on what Jay said, we have the world's most diverse array of independent and largest array of independently managed fund streams and so the challenges how do you and the opportunity is how do you take that set of returns stream and efficiently get it into the right client portfolios, right? And it's not just necessarily just product, its returning streams. And so what we're doing in each of these settings as we're finding what we believe are partners who really understand it. We think of them as channel partners, partners who really understand that there was the first example. We've been building out the infrastructure and there's still a little bit of work to do. But building up the infrastructure to efficiently get our affiliates or transferring into their portfolios and to efficiently understand the dynamics of their client base and the demand trends. So that’s what we have done in the – in the end. And I think as we said we're in the back half of this year going to begin launching our product together it's going through the regulatory process right now, plunging price, the other bringing our affiliate manufacturing together with their packaging and distribution into the places, channel, geographies where they're exceptionally strong, right. For that kind of that relationship, this is as we alluded to in our prepared remarks, different channel, different geographies. So, not kind of an overlapping footprint at all. And, also more institutional and retail when I think…

Thank you. Ladies and gentlemen, this concludes our question and answer session. I'll turn the floor back to Mr. Horgen for any final comments.

Thank you all again for joining us this morning. As you heard, we are confident in our prospects for significant long term growth. We have built a diverse business, which includes some of the highest quality independent firms in the industry with established, long term track records of outperformance across a wide array of investment strategy. We look forward to speaking with you next quarter. Thank you.

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