PART I—FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This chapter provides the company's unaudited consolidated financial statements and accompanying notes, detailing accounting policies, investments, debt, equity, commitments, and contingencies [Consolidated Statements of Income](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) This section presents key consolidated income statement data, including revenue, expenses, net income, and earnings per share, for the specified periods Key Consolidated Statements of Income Data (Millions of USD, except per share data) for the Three and Nine Months Ended September 30, 2022 | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :---------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Consolidated Revenue | $575.2 | $578.6 | $1,720.6 | $1,789.9 | | Total Consolidated Expenses | $395.3 | $425.4 | $1,163.7 | $1,221.0 | | Equity Method Income (Net) | $35.9 | $44.8 | $125.1 | $123.9 | | Investment and Other Income (Expense) | $37.5 | $3.1 | $91.1 | $(5.3) | | Net Income | $208.4 | $164.3 | $606.7 | $557.0 | | Net Income Attributable to Controlling Interests | $128.4 | $112.6 | $387.3 | $368.0 | | Earnings Per Share (Diluted) | $3.00 | $2.80 | $8.95 | $8.83 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) This section details consolidated comprehensive income, including net income and other comprehensive income components like foreign currency translation adjustments Key Consolidated Statements of Comprehensive Income Data (Millions of USD) for the Three and Nine Months Ended September 30, 2022 | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :--------------------------------------------------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net Income | $208.4 | $164.3 | $606.7 | $557.0 | | Foreign Currency Translation Gains (Losses), Net | $(19.7) | $(86.8) | $11.7 | $(172.0) | | Changes in Realized and Unrealized Gains (Losses) on Derivative Financial Instruments | $(1.9) | $(1.6) | $(1.0) | $(2.2) | | Other Comprehensive Income (Loss), Net of Tax | $(21.6) | $(88.4) | $10.7 | $(174.2) | | Comprehensive Income | $186.8 | $75.9 | $617.4 | $382.8 | | Comprehensive Income Attributable to Controlling Interests | $109.5 | $44.4 | $401.9 | $242.0 | [Consolidated Balance Sheets](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) This section presents the consolidated balance sheets, outlining assets, liabilities, and equity as of December 31, 2021, and September 30, 2022 Key Consolidated Balance Sheets Data (Millions of USD) as of September 30, 2022, and December 31, 2021 | Metric | Dec 31, 2021 | Sep 30, 2022 | | :----------------------------------------------------------------------------------------------------------------------- | :------------- | :------------- | | Cash and Cash Equivalents | $908.5 | $622.9 | | Accounts Receivable | $419.2 | $377.7 | | Investments in Marketable Securities | $78.5 | $183.7 | | Goodwill | $2,689.2 | $2,627.9 | | Acquired Client Relationships (Net) | $1,966.4 | $1,864.1 | | Equity Method Investments in Affiliates (Net) | $2,134.4 | $2,046.8 | | Total Assets | $8,876.4 | $8,430.2 | | Accounts Payable and Accrued Liabilities | $789.1 | $569.1 | | Debt | $2,490.4 | $2,534.8 | | Total Liabilities | $4,491.9 | $4,288.2 | | Redeemable Non-Controlling Interests | $673.9 | $486.6 | | Total Shareholders' Equity | $2,786.4 | $2,766.2 | | Non-Controlling Interests | $924.2 | $889.2 | | Total Equity | $3,710.6 | $3,655.4 | | Total Liabilities and Equity | $8,876.4 | $8,430.2 | [Consolidated Statements of Changes in Equity](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20EQUITY) This section outlines changes in consolidated equity, reflecting net income, other comprehensive loss, share repurchases, and non-controlling interest adjustments - As of September 30, 2022, the company's total equity was **$3,655.4 million**, a slight decrease from **$3,710.6 million** on December 31, 2021. Key changes included: - Net income contribution of **$557.0 million** - Other comprehensive loss (net of tax) of **($174.2 million)**, primarily due to foreign currency translation losses - Share repurchases increasing treasury stock by **($344.7 million)** - Changes in redeemable non-controlling interests' redemption value increasing by **$142.9 million**[31](index=31&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section summarizes consolidated cash flows from operating, investing, and financing activities for the nine months ended September 30 Key Consolidated Statements of Cash Flows Data (Millions of USD) for the Nine Months Ended September 30, 2022 | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :---------------------------------------------------------------------------------------------------------------------------- | :-------------------- | :-------------------- | | Cash Flow from Operating Activities | $897.3 | $797.4 | | Cash Flow from Investing Activities | $(177.8) | $(266.6) | | Cash Flow from Financing Activities | $(625.5) | $(779.1) | | Net Increase (Decrease) in Cash and Cash Equivalents | $92.2 | $(285.6) | | Cash and Cash Equivalents, End of Period | $1,128.0 | $622.9 | [Notes to the Consolidated Financial Statements (Unaudited)](index=10&type=section&id=NOTES%20TO%20THE%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(unaudited)) This section provides detailed explanations and disclosures supporting the consolidated financial statements, covering various accounting policies and financial instruments [1. Basis of Presentation and Use of Estimates](index=10&type=section&id=1.%20Basis%20of%20Presentation%20and%20Use%20of%20Estimates) This section explains the financial statements are prepared under GAAP and Form 10-Q, involving management estimates, and interim results may not predict full-year performance - The company's consolidated financial statements are prepared in accordance with U.S. GAAP and Form 10-Q instructions, including normal recurring adjustments deemed necessary by management, but do not include all information required for annual financial statements. Interim operating results are not necessarily indicative of full-year results[36](index=36&type=chunk) [2. Accounting Standards and Policies](index=10&type=section&id=2.%20Accounting%20Standards%20and%20Policies) This section details the adoption of ASU 2020-06 for convertible securities and ASU 2022-03 for equity securities, outlining their impact on financial reporting - The company adopted ASU 2020-06 on January 1, 2022, treating convertible junior subordinated securities entirely as debt, which increased debt and beginning retained earnings while decreasing additional paid-in capital and deferred income tax liabilities. This change also updated the accounting policy for earnings per share, requiring the assumption that all redeemable non-controlling interests settle at the maximum share count and applying the "if-converted" method for convertible junior subordinated securities in diluted EPS calculations[38](index=38&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - FASB issued ASU 2022-03 in June 2022, clarifying fair value measurement guidance for equity securities subject to contractual sale restrictions and requiring related disclosures. This standard is effective for the company for periods beginning after December 15, 2023, and is not currently expected to have a material impact on the consolidated financial statements[43](index=43&type=chunk) [3. Investments in Marketable Securities](index=11&type=section&id=3.%20Investments%20in%20Marketable%20Securities) This section provides a breakdown of equity and debt securities investments, including their cost, unrealized gains/losses, and fair value Equity Securities Investments (Millions of USD) | Metric | Dec 31, 2021 | Sep 30, 2022 | | :----------- | :------------- | :------------- | | Cost | $59.1 | $73.8 | | Unrealized Gains | $8.1 | $10.5 | | Unrealized Losses | $(2.7) | $(10.9) | | Fair Value | $64.5 | $73.4 | Debt Securities Investments (Millions of USD) | Metric | Dec 31, 2021 | Sep 30, 2022 | | :----------- | :------------- | :------------- | | Cost | $14.1 | $113.4 | | Unrealized Losses | $(0.1) | $(3.1) | | Fair Value | $14.0 | $110.3 | [4. Other Investments](index=11&type=section&id=4.%20Other%20Investments) This section describes other investments, including those measured at NAV and those without readily determinable fair values, detailing their composition and changes - Other investments include fund investments in affiliates measured at Net Asset Value (NAV) as a practical expedient, and other investments without readily determinable fair values. Gains and losses from these investments are recognized in "Investment and Other Income" in the consolidated statements of income[48](index=48&type=chunk) Investments Measured at NAV and Uncommitted Capital (Millions of USD) | Investment Category | Fair Value as of Dec 31, 2021 | Uncommitted Capital as of Dec 31, 2021 | Fair Value as of Sep 30, 2022 | Uncommitted Capital as of Sep 30, 2022 | | :-------------------- | :--------------------- | :----------------------- | :-------------------- | :----------------------- | | Private Equity Funds | $310.2 | $156.3 | $285.3 | $154.7 | | Other Strategic Investments | $14.6 | $0.0 | $18.0 | $0.0 | | Total | $324.8 | $156.3 | $303.3 | $154.7 | Investments Without Readily Determinable Fair Values (Millions of USD) | Metric | Dec 31, 2021 | Sep 30, 2022 | | :----------- | :------------- | :------------- | | Cost | $8.5 | $8.5 | | Cumulative Unrealized Gains | $41.9 | $41.9 | | Carrying Value | $50.4 | $50.4 | Changes in Other Investments (Millions of USD) for the Three and Nine Months Ended September 30, 2022 | Type of Change | Total for Three Months 2021 | Total for Three Months 2022 | Total for Nine Months 2021 | Total for Nine Months 2022 | | :--------------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | | Beginning Balance | $312.1 | $384.7 | $257.2 | $375.2 | | Net Realized and Unrealized Gains (Losses) | $37.7 | $(10.4) | $87.9 | $(8.8) | | Purchases and Commitments | $17.7 | $11.2 | $44.6 | $38.3 | | Sales and Distributions | $(10.4) | $(31.8) | $(32.6) | $(51.0) | | Ending Balance | $357.1 | $353.7 | $357.1 | $353.7 | [5. Fair Value Measurements](index=14&type=section&id=5.%20Fair%20Value%20Measurements) This section presents financial assets and liabilities measured at fair value, categorized by Level 1, 2, and 3 inputs, and details changes in Level 3 liabilities Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (Millions of USD) | Financial Asset/Liability | Fair Value as of Dec 31, 2021 | Level 1 | Level 2 | Level 3 | | :-------------------------- | :--------------------- | :------ | :------ | :------ | | Investments in Marketable Securities | $78.5 | $64.5 | $14.0 | $0.0 | | Derivative Financial Instruments | $0.9 | $0.0 | $0.9 | $0.0 | | Contingent Payment Obligations | $40.3 | $0.0 | $0.0 | $40.3 | | Affiliate Equity Purchase Obligations | $12.6 | $0.0 | $0.0 | $12.6 | | Derivative Financial Instruments | $0.8 | $0.0 | $0.8 | $0.0 | | Financial Asset/Liability | Fair Value as of Sep 30, 2022 | Level 1 | Level 2 | Level 3 | | :-------------------------- | :--------------------- | :------ | :------ | :------ | | Investments in Marketable Securities | $183.7 | $73.4 | $110.3 | $0.0 | | Derivative Financial Instruments | $4.0 | $0.0 | $4.0 | $0.0 | | Contingent Payment Obligations | $13.9 | $0.0 | $0.0 | $13.9 | | Affiliate Equity Purchase Obligations | $25.4 | $0.0 | $0.0 | $25.4 | | Derivative Financial Instruments | $6.1 | $0.0 | $6.1 | $0.0 | Changes in Level 3 Financial Liabilities (Millions of USD) for the Three and Nine Months Ended September 30, 2022 | Liability Type | Beginning Balance for Three Months 2021 | Beginning Balance for Three Months 2022 | Beginning Balance for Nine Months 2021 | Beginning Balance for Nine Months 2022 | | :--------------------------------- | :------------------- | :------------------- | :------------------- | :------------------- | | Contingent Payment Obligations | $0.0 | $14.2 | $0.0 | $40.3 | | Affiliate Equity Purchase Obligations | $47.9 | $25.0 | $22.0 | $12.6 | | Liability Type | Ending Balance for Three Months 2021 | Ending Balance for Three Months 2022 | Ending Balance for Nine Months 2021 | Ending Balance for Nine Months 2022 | | :--------------------------------- | :------------------- | :------------------- | :------------------- | :------------------- | | Contingent Payment Obligations | $0.0 | $13.9 | $0.0 | $13.9 | | Affiliate Equity Purchase Obligations | $47.7 | $25.4 | $47.7 | $25.4 | Other Financial Liabilities Not Measured at Fair Value (Millions of USD) | Liability Type | Carrying Value as of Dec 31, 2021 | Fair Value as of Dec 31, 2021 | Carrying Value as of Sep 30, 2022 | Fair Value as of Sep 30, 2022 | Fair Value Level | | :-------------------- | :--------------------- | :--------------------- | :-------------------- | :-------------------- | :----------- | | Senior Notes | $1,098.0 | $1,165.6 | $1,098.5 | $1,022.9 | Level 2 | | Junior Subordinated Notes | $765.8 | $809.1 | $765.9 | $617.1 | Level 2 | | Convertible Junior Subordinated Securities | $299.5 | $461.4 | $341.7 | $330.9 | Level 2 | [6. Investments in Affiliates and Affiliate Sponsored Investment Products](index=16&type=section&id=6.%20Investments%20in%20Affiliates%20and%20Affiliate%20Sponsored%20Investment%20Products) This section explains the accounting for affiliate investments and affiliate-sponsored investment products, based on VRE/VIE criteria and consolidation policies - The company determines whether to consolidate affiliates or account for them using the equity method based on assessments of Voting Right Entities (VREs) or Variable Interest Entities (VIEs). Most affiliates are considered VIEs, and consolidation or equity method accounting depends on whether the company is the primary beneficiary. The company maintains a consistent investment strategy for affiliates, regardless of accounting treatment[67](index=67&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) - As of September 30, 2022, the unconsolidated net assets of equity method affiliates (considered VIEs) were **$1,558.4 million**, with the company's maximum loss exposure at **$1,951.3 million**. The carrying value and maximum loss exposure for all equity method affiliates (including VREs) totaled **$2,046.8 million**[73](index=73&type=chunk) - Affiliate-sponsored investment products are typically held by third-party investors, and the company generally does not consolidate these products. However, consolidation occurs if the company's affiliate, as investment manager, has power over product activities and significant economic exposure. In such cases, third-party investors' interests are recorded as redeemable non-controlling interests[75](index=75&type=chunk) Net Assets of Unconsolidated Affiliate Sponsored Investment Products and Company's Maximum Loss Exposure (Millions of USD) | Metric | Unconsolidated VIE Net Assets as of Dec 31, 2021 | Carrying Value and Maximum Loss Exposure as of Dec 31, 2021 | Unconsolidated VIE Net Assets as of Sep 30, 2022 | Carrying Value and Maximum Loss Exposure as of Sep 30, 2022 | | :-------------------------- | :-------------------------- | :----------------------------------- | :-------------------------- | :----------------------------------- | | Affiliate Sponsored Investment Products | $4,958.5 | $15.7 | $4,722.0 | $21.8 | [7. Debt](index=18&type=section&id=7.%20Debt) This section provides an overview of the company's debt, including senior bank debt, senior notes, junior subordinated notes, and convertible securities Company Debt Overview (Millions of USD) | Debt Type | Dec 31, 2021 | Sep 30, 2022 | | :--------------- | :------------- | :------------- | | Senior Bank Debt | $349.9 | $349.9 | | Senior Notes | $1,093.5 | $1,094.8 | | Junior Subordinated Notes | $751.4 | $751.5 | | Convertible Junior Subordinated Securities | $295.6 | $338.6 | | **Total Debt** | **$2,490.4** | **$2,534.8** | - The company has a **$1.25 billion** senior unsecured multi-currency revolving credit facility and a **$350 million** senior unsecured term loan facility, both maturing on October 23, 2026. As of September 30, 2022, the term loan bore interest at LIBOR plus 0.85%, and there were no outstanding borrowings under the revolving credit facility[79](index=79&type=chunk) Senior Notes Key Terms (as of September 30, 2022) | Metric | 2024 Senior Notes | 2025 Senior Notes | 2030 Senior Notes | | :----------- | :------------- | :------------- | :------------- | | Issue Date | Feb 2014 | Feb 2015 | Jun 2020 | | Maturity Date | Feb 2024 | Aug 2025 | Jun 2030 | | Face Value | $400.0 | $350.0 | $350.0 | | Coupon Rate | 4.25% | 3.50% | 3.30% | | Interest Payment Frequency | Semi-annually | Semi-annually | Semi-annually | | Potential Redemption Date | Any time | Any time | Any time | Junior Subordinated Notes Key Terms (as of September 30, 2022) | Metric | 2059 Junior Subordinated Notes | 2060 Junior Subordinated Notes | 2061 Junior Subordinated Notes | | :----------- | :------------- | :------------- | :------------- | | Issue Date | Mar 2019 | Sep 2020 | Jul 2021 | | Maturity Date | Mar 2059 | Sep 2060 | Sep 2061 | | Face Value | $300.0 | $275.0 | $200.0 | | Coupon Rate | 5.875% | 4.75% | 4.20% | | Interest Payment Frequency | Quarterly | Quarterly | Quarterly | | Potential Redemption Date | Mar 2024 | Sep 2025 | Sep 2026 | - As of September 30, 2022, the company had **$341.7 million** of 5.15% Convertible Junior Subordinated Trust Preferred Securities (due 2037) outstanding. The company repurchased **$28.7 million** and **$60.9 million** of convertible junior subordinated securities during the nine months ended September 30, 2021, and 2022, respectively[85](index=85&type=chunk)[87](index=87&type=chunk) [8. Equity Distribution Program](index=20&type=section&id=8.%20Equity%20Distribution%20Program) This section describes the new equity distribution program, launched in Q2 2022, allowing for up to $500 million in common stock issuance, with no sales to date - The company launched a new equity distribution program in the second quarter of 2022, allowing for the issuance and sale of up to **$500 million** in common stock. No sales have occurred under this program as of September 30, 2022[88](index=88&type=chunk) [9. Commitments and Contingencies](index=20&type=section&id=9.%20Commitments%20and%20Contingencies) This section details the company's commitments for co-investments, deferred payment obligations, contingent payment obligations, and affiliate payment obligations - As of September 30, 2022, the company was committed to co-invest in certain affiliate-sponsored investment products, with **$154.7 million** in uncommitted capital. The company also had deferred payment obligations totaling **$265 million** and contingent payment obligations totaling **$13.9 million**[89](index=89&type=chunk)[90](index=90&type=chunk) - As of September 30, 2022, the company had payment obligations of up to **$68 million** to equity method affiliates, all payable within 2022. Additionally, the company may pay **$147.5 million** if certain affiliates achieve specific financial targets, with approximately **$13 million** expected to be paid between 2023 and 2029[92](index=92&type=chunk)[93](index=93&type=chunk) [10. Goodwill and Acquired Client Relationships](index=21&type=section&id=10.%20Goodwill%20and%20Acquired%20Client%20Relationships) This section presents changes in goodwill and acquired client relationships, including foreign currency translation effects and amortization expenses, with no impairment Changes in Goodwill (Millions of USD) | Metric | Goodwill | | :-------------------------- | :----- | | Balance as of Dec 31, 2021 | $2,689.2 | | Foreign Currency Translation | $(61.3) | | Balance as of Sep 30, 2022 | $2,627.9 | Changes in Acquired Client Relationships (Net) (Millions of USD) | Metric | Total Carrying Value as of Dec 31, 2021 | Total Carrying Value as of Sep 30, 2022 | | :--------------------------------- | :----------------------- | :----------------------- | | Definite-Lived Acquired Client Relationships (Net) | $336.1 | $297.0 | | Indefinite-Lived Acquired Client Relationships (Net) | $1,630.3 | $1,567.1 | | **Total** | **$1,966.4** | **$1,864.1** | Amortization Expense (Millions of USD) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Definite-Lived Acquired Client Relationships Amortization Expense | $8.9 | $12.2 | $25.3 | $36.9 | - As of September 30, 2022, the company completed its annual goodwill impairment assessment and found no impairment indicators. Amortization expense is estimated to be approximately **$12 million** for the remainder of 2022, **$50 million** for 2023, and approximately **$35 million** annually from 2024 to 2027[96](index=96&type=chunk)[97](index=97&type=chunk) [11. Equity Method Investments in Affiliates](index=23&type=section&id=11.%20Equity%20Method%20Investments%20in%20Affiliates) This section details additional investments, divestitures, the composition of equity method investments, and expected amortization expenses for affiliates - In the first quarter of 2022, the company made an additional investment in Systematica Investments, with most of the consideration expected to be deductible for U.S. tax purposes over 15 years. The company also entered into an agreement with EQT AB to sell its equity interest in Baring Private Equity Asia (BPEA), expecting to receive **$240 million** in cash and **28.68 million** shares of EQT ordinary shares, while retaining future carried interests in certain existing funds. This transaction closed in October 2022[99](index=99&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) Composition of Equity Method Investments in Affiliates (Net) (Millions of USD) | Metric | Dec 31, 2021 | Sep 30, 2022 | | :--------------------------------- | :------------- | :------------- | | Goodwill | $1,264.4 | $1,330.9 | | Definite-Lived Acquired Client Relationships (Net) | $470.1 | $462.3 | | Indefinite-Lived Acquired Client Relationships (Net) | $174.4 | $171.4 | | Undistributed Earnings and Tangible Capital | $225.5 | $82.2 | | **Total** | **$2,134.4** | **$2,046.8** | Changes in Equity Method Investments in Affiliates (Net) (Millions of USD) | Type of Change | Amount | | :-------------------------- | :----- | | Balance as of Dec 31, 2021 | $2,134.4 | | Affiliate Investments | $182.8 | | Income | $213.2 | | Intangible Asset Amortization and Impairment | $(89.3) | | Distributions of Income | $(340.9) | | Return of Capital | $(0.8) | | Foreign Currency Translation | $(44.1) | | Other | $(8.5) | | **Balance as of Sep 30, 2022** | **$2,046.8** | - As of September 30, 2022, the company accounted for **21** affiliates using the equity method. Amortization expense is estimated to be approximately **$25 million** for the remainder of 2022, **$80 million** for 2023, approximately **$50 million** annually for 2024-2025, and approximately **$40 million** annually for 2026-2027[101](index=101&type=chunk)[102](index=102&type=chunk) [12. Related Party Transactions](index=24&type=section&id=12.%20Related%20Party%20Transactions) This section describes transactions with related parties, including former owners' interests in private equity partnerships and investments by company executives - The company engages in transactions with related parties, including former owners' interests in certain private equity partnerships (**$19 million** as of September 30, 2022), and investments by the company and its executives and directors in affiliate funds. The company also earns asset-based and performance-linked fees from affiliate-sponsored investment products[106](index=106&type=chunk)[107](index=107&type=chunk) [13. Share-Based Compensation](index=24&type=section&id=13.%20Share-Based%20Compensation) This section provides share-based compensation expenses, unrecognized compensation costs, and an overview of restricted stock units and stock option transactions Share-Based Compensation Expense (Millions of USD) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :----------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Share-Based Compensation | $21.2 | $15.2 | $44.5 | $45.0 | | Tax Benefit | $3.5 | $2.0 | $7.8 | $5.6 | - As of September 30, 2022, the company had **$76.7 million** in unrecognized share-based compensation expense, expected to be recognized over approximately two years. Restricted stock units and stock options granted by the company typically have three-to-five-year vesting periods and may include performance conditions[109](index=109&type=chunk)[112](index=112&type=chunk)[114](index=114&type=chunk) Restricted Stock Unit Transactions Overview | Metric | Stock Units (Millions) | Weighted-Average Grant Date Fair Value | | :-------------------------- | :----------------- | :----------------- | | Unvested Units as of Dec 31, 2021 | 1.1 | $95.03 | | Units Granted | 0.4 | $129.46 | | Units Vested | (0.4) | $99.38 | | Units Forfeited | (0.0) | $97.83 | | Changes in Performance Conditions | 0.0 | $139.30 | | Unvested Units as of Sep 30, 2022 | 1.1 | $105.87 | Stock Option Transactions Overview | Metric | Stock Options (Millions) | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (Years) | | :--------------------------------- | :----------------- | :--------------- | :----------------------- | | Outstanding Options as of Dec 31, 2021 | 3.2 | $77.39 | | | Options Granted | 0.0 | $129.17 | | | Options Exercised | (0.0) | $105.90 | | | Options Forfeited | (0.0) | $166.15 | | | Options Expired | (0.0) | $207.63 | | | Changes in Performance Conditions | 0.0 | $139.31 | | | Outstanding Options as of Sep 30, 2022 | 3.2 | $76.91 | 3.9 | | Exercisable Options as of Sep 30, 2022 | 0.1 | $121.58 | 2.2 | [14. Redeemable Non-Controlling Interests](index=25&type=section&id=14.%20Redeemable%20Non-Controlling%20Interests) This section explains the accounting for redeemable non-controlling interests, their reclassification, and changes in their redemption value - Affiliate equity interests grant holders a conditional right to sell their interests to the company at specified intervals. These interests are reported as non-controlling interests until they become redeemable, at which point they are reclassified as redeemable non-controlling interests at their current redemption value. Changes in redemption value are recorded in additional paid-in capital[117](index=117&type=chunk) Changes in Redeemable Non-Controlling Interests (Millions of USD) | Type of Change | Redeemable Non-Controlling Interests | | :------------------------------------------------------------------------------------------ | :--------------- | | Balance as of Dec 31, 2021 | $673.9 | | Decrease Attributable to Consolidated Affiliate Sponsored Investment Products | $(6.3) | | Transfer to Other Liabilities | $(39.9) | | Transfer from Non-Controlling Interests | $1.8 | | Changes in Redemption Value | $(142.9) | | **Balance as of Sep 30, 2022** | **$486.6** | [15. Affiliate Equity](index=26&type=section&id=15.%20Affiliate%20Equity) This section discusses quarterly distributions to affiliate equity holders, compensation expenses related to affiliate equity, and unrecognized compensation costs - Affiliate equity holders receive quarterly distributions. Distributions to non-controlling interest affiliate equity holders were **$260.9 million** and **$278.0 million** for the nine months ended September 30, 2021, and 2022, respectively. The company regularly purchases and issues affiliate equity and has the option to settle a portion of purchases with common stock[121](index=121&type=chunk)[122](index=122&type=chunk) Affiliate Equity Compensation Expense (Millions of USD) | Category | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :------------------ | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Controlling Interests | $2.8 | $0.5 | $9.9 | $0.8 | | Non-Controlling Interests | $8.9 | $8.5 | $36.5 | $35.1 | | **Total** | **$11.7** | **$9.0** | **$46.4** | **$35.9** | Unrecognized Affiliate Equity Compensation Expense (Millions of USD) | Date | Controlling Interests | Remaining Term (Years) | Non-Controlling Interests | Remaining Term (Years) | | :----------------- | :------- | :------------- | :--------- | :------------- | | Dec 31, 2021 | $41.9 | 6 | $294.1 | 7 | | Sep 30, 2022 | $34.2 | 5 | $297.1 | 7 | - The cumulative impact of changes in company ownership on controlling interests resulted in a **$37.3 million** decrease in additional paid-in capital for the nine months ended September 30, 2022, compared to a **$74.7 million** decrease for the same period in 2021[129](index=129&type=chunk) [16. Income Taxes](index=27&type=section&id=16.%20Income%20Taxes) This section presents consolidated income tax expenses, effective tax rates for controlling interests, and factors influencing tax rate changes Consolidated Income Tax Expense (Millions of USD) | Category | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :-------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Total Controlling Interests | $42.6 | $34.8 | $153.2 | $121.1 | | Total Non-Controlling Interests | $2.3 | $2.0 | $13.2 | $9.4 | | **Income Tax Expense** | **$44.9** | **$36.8** | **$166.4** | **$130.5** | | Pre-Tax Income Attributable to Controlling Interests | $171.0 | $147.4 | $540.5 | $489.1 | | Effective Tax Rate for Controlling Interests | 24.9% | 23.6% | 28.3% | 24.8% | - In the third quarter of 2022, the effective tax rate for controlling interests decreased to **23.6%**, primarily due to a **$3.3 million** tax benefit from changes in estimated foreign taxes related to 2021. The effective tax rate for the nine months ended September 30, 2022, was largely consistent with the **24.5%** marginal tax rate[133](index=133&type=chunk) [17. Earnings Per Share](index=28&type=section&id=17.%20Earnings%20Per%20Share) This section provides reconciliation tables for basic and diluted EPS, including adjustments for redeemable non-controlling interests and convertible securities Reconciliation of Numerator and Denominator for Basic and Diluted EPS Calculation (Millions of USD, except per share data) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :---------------------------------------------------------------------------------------------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net Income Attributable to Controlling Interests | $128.4 | $112.6 | $387.3 | $368.0 | | Earnings from Assumed Settlement of Redeemable Non-Controlling Interests (Net of Tax) | $0.0 | $5.8 | $0.0 | $43.4 | | Interest Expense on Convertible Junior Subordinated Securities (Net of Tax) | $4.6 | $3.4 | $13.9 | $10.6 | | **Adjusted Net Income Attributable to Controlling Interests** | **$133.0** | **$121.8** | **$401.2** | **$422.0** | | Weighted-Average Shares Outstanding (Basic) | 41.1 | 38.2 | 41.8 | 38.8 | | Impact of Dilutive Instruments: | | | | | | Stock Options and Restricted Stock Units | 1.1 | 1.3 | 0.9 | 1.4 | | Assumed Issuance of Shares to Settle Redeemable Non-Controlling Interests | 0.0 | 2.3 | 0.0 | 5.7 | | Convertible Junior Subordinated Securities | 2.1 | 1.7 | 2.1 | 1.9 | | **Weighted-Average Shares Outstanding (Diluted)** | **44.3** | **43.5** | **44.8** | **47.8** | - In the third quarter of 2022, the company repurchased **0.6 million** shares of common stock at an average price of **$125.13** per share. For the nine months ended September 30, 2022, the company repurchased **2.5 million** shares of common stock at an average price of **$135.73** per share[136](index=136&type=chunk) [18. Comprehensive Income](index=29&type=section&id=18.%20Comprehensive%20Income) This section details the tax effects of other comprehensive income/loss components, such as foreign currency translation and derivative changes, and accumulated loss Tax Effects of Each Component of Other Comprehensive Income (Loss) (Millions of USD) | Metric | Pre-Tax for Three Months Ended Sep 30, 2021 | Tax Expense for Three Months Ended Sep 30, 2021 | Net of Tax for Three Months Ended Sep 30, 2021 | Pre-Tax for Three Months Ended Sep 30, 2022 | Tax Expense for Three Months Ended Sep 30, 2022 | Net of Tax for Three Months Ended Sep 30, 2022 | | :------------------------------------------------------------------------------------------ | :------------------------ | :------------------------ | :---------------------------- | :------------------------ | :------------------------ | :---------------------------- | | Foreign Currency Translation Gains (Losses) | $(19.0) | $(0.7) | $(19.7) | $(91.7) | $4.9 | $(86.8) | | Changes in Realized and Unrealized Gains (Losses) on Derivative Financial Instruments | $(1.9) | $(0.0) | $(1.9) | $(1.6) | $0.0 | $(1.6) | | **Other Comprehensive Income (Loss)** | **$(20.9)** | **$(0.7)** | **$(21.6)** | **$(93.3)** | **$4.9** | **$(88.4)** | | Metric | Pre-Tax for Nine Months Ended Sep 30, 2021 | Tax Expense for Nine Months Ended Sep 30, 2021 | Net of Tax for Nine Months Ended Sep 30, 2021 | Pre-Tax for Nine Months Ended Sep 30, 2022 | Tax Expense for Nine Months Ended Sep 30, 2022 | Net of Tax for Nine Months Ended Sep 30, 2022 | | :------------------------------------------------------------------------------------------ | :------------------------ | :------------------------ | :---------------------------- | :------------------------ | :------------------------ | :---------------------------- | | Foreign Currency Translation Gains (Losses) | $18.6 | $(6.9) | $11.7 | $(174.8) | $2.8 | $(172.0) | | Changes in Realized and Unrealized Gains (Losses) on Derivative Financial Instruments | $(0.9) | $(0.1) | $(1.0) | $(2.2) | $0.0 | $(2.2) | | **Other Comprehensive Income (Loss)** | **$17.7** | **$(7.0)** | **$10.7** | **$(177.0)** | **$2.8** | **$(174.2)** | Components of Accumulated Other Comprehensive Loss (Net of Tax) (Millions of USD) | Metric | Foreign Currency Translation Adjustments | Realized and Unrealized Gains (Losses) on Derivative Financial Instruments | | :-------------------------------------------------------------------- | :------------- | :----------------------------- | | Balance as of Dec 31, 2021 | $(155.1) | $0.1 | | Other Comprehensive Income (Loss) Before Reclassifications | $(172.0) | $0.0 | | Amounts Reclassified | $0.0 | $(2.2) | | Net Other Comprehensive Loss | $(172.0) | $(2.2) | | **Balance as of Sep 30, 2022** | **$(327.1)** | **$(2.1)** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This chapter analyzes the company's financial condition and operating results, discussing business strategy, assets under management, expense structure, affiliate performance, liquidity, and capital resources, emphasizing long-term value creation through independent asset manager investments [Executive Overview](index=30&type=section&id=Executive%20Overview) This section highlights the company's strategy as a partner to independent asset managers, its assets under management, and recent strategic investment activities - The company is a leading partner to independent active investment managers globally, creating long-term value by investing in a diversified portfolio of high-quality independent partnerships. As of September 30, 2022, the company's total Assets Under Management (AUM) was approximately **$645 billion**[145](index=145&type=chunk) - In the first quarter of 2022, the company made an additional investment in Systematica Investments and entered into an agreement with EQT AB to sell its equity interest in Baring Private Equity Asia (BPEA), with the transaction closing in October 2022. In October 2022, the company also made a minority equity investment in a private markets firm focused on communications infrastructure[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) [Operating Performance Measures](index=30&type=section&id=Operating%20Performance%20Measures) This section presents key operating metrics, including assets under management and total fees, analyzing changes driven by market conditions and client flows Key Operating Performance Measures (Billions of USD, unless otherwise stated) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | % Change | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | % Change | | :-------------------------- | :-------------------- | :-------------------- | :--------- | :-------------------- | :-------------------- | :--------- | | Assets Under Management (AUM) | $747.8 | $644.6 | (14)% | $747.8 | $644.6 | (14)% | | Average Assets Under Management (AUM) | $751.8 | $680.1 | (10)% | $745.8 | $731.8 | (2)% | | Total Fees (Millions of USD) | $1,076.2 | $1,165.5 | 8% | $3,676.2 | $3,675.6 | (0)% | - The company's Assets Under Management (AUM) decreased by **14%** in both the third quarter and the nine months ended September 30, 2022, primarily due to market changes and foreign exchange impacts. The company continued to experience net inflows in private markets, liquid alternatives, Asia, wealth management, and ESG, but saw outflows in certain equity strategies[151](index=151&type=chunk)[153](index=153&type=chunk) Changes in Assets Under Management (Billions of USD) by Strategy as of September 30, 2022 | Strategy | Jun 30, 2022 | Net Client Cash Flow | Market Change | Foreign Exchange | Sep 30, 2022 | | :-------------------- | :------------- | :----------- | :------- | :--- | :------------- | | Alternatives | $243.8 | $2.2 | $(0.7) | $(3.3) | $237.4 | | Global Equities | $201.1 | $(7.7) | $(11.5) | $(5.8) | $176.2 | | US Equities | $134.3 | $(1.4) | $(5.9) | $(1.2) | $125.7 | | Multi-Asset & Fixed Income | $111.7 | $(1.9) | $(3.1) | $(1.3) | $105.3 | | **Total** | **$690.9** | **$(8.8)** | **$(21.2)** | **$(11.6)** | **$644.6** | Changes in Assets Under Management (Billions of USD) by Client Type as of September 30, 2022 | Client Type | Jun 30, 2022 | Net Client Cash Flow | Market Change | Foreign Exchange | Sep 30, 2022 | | :-------------------- | :------------- | :----------- | :------- | :--- | :------------- | | Institutional | $368.0 | $(4.3) | $(7.7) | $(6.2) | $345.3 | | Retail | $194.6 | $(3.5) | $(9.0) | $(4.5) | $177.5 | | High Net Worth | $128.3 | $(1.0) | $(4.5) | $(0.9) | $121.8 | | **Total** | **$690.9** | **$(8.8)** | **$(21.2)** | **$(11.6)** | **$644.6** | - Total fees increased by **8%** to **$1,165.5 million** in the third quarter of 2022, primarily driven by a **$105.1 million** increase in performance-linked fees, partially offset by a **$15.8 million** decrease in asset-linked fees. For the nine months ended September 30, 2022, total fees remained largely flat at **$3,675.6 million**, with a **$77.3 million** decrease in performance-linked fees offset by a **$76.7 million** increase in asset-linked fees[166](index=166&type=chunk)[167](index=167&type=chunk) [Financial and Supplemental Financial Performance Measures](index=34&type=section&id=Financial%20and%20Supplemental%20Financial%20Performance%20Measures) This section discusses key financial metrics, including net income, adjusted EBITDA, and economic net income attributable to controlling interests, and their changes Key Financial and Supplemental Financial Performance Measures (Millions of USD) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | % Change | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | % Change | | :--------------------------------------- | :-------------------- | :-------------------- | :--------- | :-------------------- | :-------------------- | :--------- | | Net Income Attributable to Controlling Interests | $128.4 | $112.6 | (12)% | $387.3 | $368.0 | (5)% | | Adjusted EBITDA (Attributable to Controlling Interests) | $227.7 | $220.4 | (3)% | $701.8 | $689.1 | (2)% | | Economic Net Income (Attributable to Controlling Interests) | $168.5 | $166.4 | (1)% | $524.5 | $516.9 | (1)% | - In the third quarter of 2022, net income attributable to controlling interests decreased by **12%** to **$112.6 million**, primarily due to lower investment and other income. Adjusted EBITDA (attributable to controlling interests) decreased by **3%** to **$220.4 million**, mainly because net gains from strategic investments in the prior year period did not recur. Economic net income (attributable to controlling interests) decreased by **1%** to **$166.4 million**, primarily impacted by the decrease in Adjusted EBITDA[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - For the nine months ended September 30, 2022, net income attributable to controlling interests decreased by **5%** to **$368.0 million**, primarily due to lower investment and other income, partially offset by lower income tax expense. Adjusted EBITDA (attributable to controlling interests) decreased by **2%** to **$689.1 million**, mainly due to the non-recurrence of net gains from strategic investments and the recognition of performance fees with less economic interest. Economic net income (attributable to controlling interests) decreased by **1%** to **$516.9 million**, primarily impacted by the decrease in Adjusted EBITDA[169](index=169&type=chunk)[171](index=171&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) This section provides a detailed breakdown of consolidated revenue, expenses, equity method income, investment income, and net income [Consolidated Revenue](index=35&type=section&id=Consolidated%20Revenue) This section analyzes changes in consolidated revenue, driven by performance-linked fees and asset-linked fees, and average AUM of consolidated affiliates Average AUM of Consolidated Affiliates and Consolidated Revenue (Millions of USD, unless otherwise stated) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | % Change | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | % Change | | :---------------------------------------------------------------------------------------------------------------------------- | :-------------------- | :-------------------- | :--------- | :-------------------- | :-------------------- | :--------- | | Average AUM of Consolidated Affiliates (Billions of USD) | $435.9 | $397.8 | (9)% | $431.1 | $434.1 | 1% | | **Consolidated Revenue** | **$575.2** | **$578.6** | **1%** | **$1,720.6** | **$1,789.9** | **4%** | - In the third quarter of 2022, consolidated revenue increased by **1%** to **$578.6 million**, primarily driven by a **$48.1 million** increase in performance-linked fees, partially offset by a **$44.7 million** decrease in asset-linked fees. For the nine months ended September 30, 2022, consolidated revenue increased by **4%** to **$1,789.9 million**, primarily due to a **$90.1 million** increase in performance-linked fees, partially offset by a **$20.8 million** decrease in asset-linked fees[174](index=174&type=chunk)[175](index=175&type=chunk) [Consolidated Expenses](index=36&type=section&id=Consolidated%20Expenses) This section details changes in consolidated expenses, including compensation, SG&A, intangible asset amortization, and other expenses, influenced by new affiliate investments Consolidated Expenses (Millions of USD) | Expense Category | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | % Change | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | % Change | | :---------------------------------- | :-------------------- | :-------------------- | :--------- | :-------------------- | :-------------------- | :--------- | | Compensation and Related Expenses | $256.4 | $273.8 | 7% | $752.2 | $797.0 | 6% | | Selling, General and Administrative Expenses | $82.9 | $93.2 | 12% | $250.3 | $275.7 | 10% | | Amortization and Impairment of Intangible Assets | $8.9 | $14.4 | 62% | $25.3 | $39.4 | 56% | | Interest Expense | $28.5 | $28.3 | (1)% | $82.8 | $84.7 | 2% | | Depreciation and Other Amortization | $4.0 | $3.8 | (5)% | $12.5 | $11.9 | (5)% | | Other Expenses (Net) | $14.6 | $11.9 | (18)% | $40.6 | $12.3 | (70)% | | **Total Consolidated Expenses** | **$395.3** | **$425.4** | **8%** | **$1,163.7** | **$1,221.0** | **5%** | - In the third quarter of 2022, compensation and related expenses increased by **7%** to **$273.8 million**, primarily due to new affiliate investments. Selling, general and administrative expenses increased by **12%** to **$93.2 million**, mainly driven by higher distribution and investment-related expenses from new affiliate investments. Amortization and impairment of intangible assets increased by **62%** to **$14.4 million**, primarily due to increased amortization expense from new affiliate investments[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) - For the nine months ended September 30, 2022, compensation and related expenses increased by **6%** to **$797.0 million**, primarily due to new affiliate investments. Selling, general and administrative expenses increased by **10%** to **$275.7 million**, mainly driven by higher distribution and investment-related expenses from new affiliate investments. Amortization and impairment of intangible assets increased by **56%** to **$39.4 million**, primarily due to increased amortization expense from new affiliate investments. Other expenses (net) decreased by **70%** to **$12.3 million**, mainly due to lower expenses related to changes in the value of contingent payment obligations and affiliate equity purchase obligations[178](index=178&type=chunk)[179](index=179&type=chunk)[181](index=181&type=chunk) [Equity Method Income (Net)](index=37&type=section&id=Equity%20Method%20Income%20(Net)) This section analyzes changes in equity method income, influenced by average AUM of equity method affiliates, performance-linked fees, and asset-linked fees Average AUM of Equity Method Affiliates and Equity Method Income (Millions of USD, unless otherwise stated) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | % Change | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | % Change | | :------------------------------------------------------------------------------------------ | :-------------------- | :-------------------- | :--------- | :-------------------- | :-------------------- | :--------- | | Average AUM of Equity Method Affiliates (Billions of USD) | $315.9 | $282.3 | (11)% | $314.7 | $297.7 | (5)% | | Equity Method Revenue | $501.0 | $586.9 | 17% | $1,955.6 | $1,885.7 | (4)% | | Equity Method Income | $65.2 | $76.2 | 17% | $218.9 | $213.2 | (3)% | | Equity Method Intangible Asset Amortization | $(29.3) | $(31.4) | 7% | $(93.8) | $(89.3) | (5)% | | **Equity Method Income (Net)** | **$35.9** | **$44.8** | **25%** | **$125.1** | **$123.9** | **(1)%** | - In the third quarter of 2022, equity method revenue increased by **17%** to **$586.9 million**, primarily due to higher performance-linked and asset-linked fees. Equity method income (net) increased by **25%** to **$44.8 million**. For the nine months ended September 30, 2022, equity method revenue decreased by **4%** to **$1,885.7 million**, primarily due to lower performance-linked fees, partially offset by higher asset-linked fees. Equity method income (net) decreased by **1%** to **$123.9 million**[183](index=183&type=chunk)[185](index=185&type=chunk) [Investment and Other Income (Expense)](index=38&type=section&id=Investment%20and%20Other%20Income%20(Expense)) This section discusses changes in investment and other income/expense, primarily driven by unrealized net gains/losses from other investments and marketable securities Investment and Other Income (Expense) (Millions of USD) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | % Change | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | % Change | | :---------------------------------- | :-------------------- | :-------------------- | :--------- | :-------------------- | :-------------------- | :--------- | | Investment and Other Income (Expense) | $37.5 | $3.1 | (92)% | $91.1 | $(5.3) | (1) N.M. | - In the third quarter of 2022, investment and other income decreased by **92%** to **$3.1 million**, primarily due to a **$40.0 million** decrease in net unrealized gains from other investments. For the nine months ended September 30, 2022, investment and other income decreased by **$96.4 million** to **($5.3 million)**, primarily due to lower net unrealized gains from other investments and marketable securities[188](index=188&type=chunk)[189](index=189&type=chunk) [Income Tax Expense](index=38&type=section&id=Income%20Tax%20Expense) This section analyzes changes in income tax expense, influenced by pre-tax income attributable to controlling interests and tax benefits from foreign tax estimates Income Tax Expense (Millions of USD) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | % Change | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | % Change | | :----------------- | :-------------------- | :-------------------- | :--------- | :-------------------- | :-------------------- | :--------- | | Income Tax Expense | $44.9 | $36.8 | (18)% | $166.4 | $130.5 | (22)% | - In the third quarter of 2022, income tax expense decreased by **18%** to **$36.8 million**, primarily due to lower pre-tax income attributable to controlling interests and a tax benefit from changes in estimated foreign taxes related to 2021. For the nine months ended September 30, 2022, income tax expense decreased by **22%** to **$130.5 million**, primarily due to lower pre-tax income attributable to controlling interests and the non-recurrence of deferred tax expenses from the UK tax rate increase in the second quarter of 2021[190](index=190&type=chunk)[191](index=191&type=chunk) [Net Income](index=38&type=section&id=Net%20Income) This section presents net income, net income attributable to non-controlling interests, and net income attributable to controlling interests, explaining changes Net Income, Net Income Attributable to Non-Controlling Interests, and Net Income Attributable to Controlling Interests (Millions of USD) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | % Change | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | % Change | | :-------------------------- | :-------------------- | :-------------------- | :--------- | :-------------------- | :-------------------- | :--------- | | Net Income | $208.4 | $164.3 | (21)% | $606.7 | $557.0 | (8)% | | Net Income Attributable to Non-Controlling Interests | $80.0 | $51.7 | (35)% | $219.4 | $189.0 | (14)% | | **Net Income Attributable to Controlling Interests** | **$128.4** | **$112.6** | **(12)%** | **$387.3** | **$368.0** | **(5)%** | - In the third quarter of 2022, net income attributable to controlling interests decreased by **12%** to **$112.6 million**, primarily due to lower investment and other income, partially offset by higher equity method income (net). For the nine months ended September 30, 2022, net income attributable to controlling interests decreased by **5%** to **$368.0 million**, primarily due to lower investment and other income, partially offset by lower income tax expense[193](index=193&type=chunk)[194](index=194&type=chunk) [Supplemental Financial Performance Measures](index=39&type=section&id=Supplemental%20Financial%20Performance%20Measures) This section reconciles GAAP net income to non-GAAP measures like adjusted EBITDA and economic net income, providing a clearer view of performance - Adjusted EBITDA (attributable to controlling interests) and Economic Net Income (attributable to controlling interests) are non-GAAP financial measures used to provide a comprehensive view of the company's financial performance and enhance comparability across periods. These metrics exclude non-cash expenses such as interest, income taxes, depreciation, amortization, impairment, certain affiliate equity expenses, certain gains and losses, and adjustments for contingent payment obligations[195](index=195&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) Reconciliation of Net Income Attributable to Controlling Interests to Adjusted EBITDA (Attributable to Controlling Interests) (Millions of USD) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :---------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net Income Attributable to Controlling Interests | $128.4 | $112.6 | $387.3 | $368.0 | | Interest Expense | $28.5 | $28.3 | $82.8 | $84.7 | | Income Taxes | $42.6 | $34.8 | $153.2 | $121.1 | | Amortization and Impairment of Intangible Assets | $35.6 | $41.9 | $111.7 | $116.9 | | Other Items | $(7.4) | $2.8 | $(33.2) | $(1.6) | | **Adjusted EBITDA (Attributable to Controlling Interests)** | **$227.7** | **$220.4** | **$701.8** | **$689.1** | Reconciliation of Net Income Attributable to Controlling Interests to Economic Net Income (Attributable to Controlling Interests) and Economic EPS (Millions of USD, except per share data) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :---------------------------------------------------------------------------------------------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net Income Attributable to Controlling Interests | $128.4 | $112.6 | $387.3 | $368.0 | | Amortization and Impairment of Intangible Assets | $35.6 | $41.9 | $111.7 | $116.9 | | Deferred Taxes Related to Intangible Assets | $12.0 | $12.7 | $51.9 | $41.2 | | Other Economic Items | $(7.5) | $(0.8) | $(26.4) | $(9.2) | | **Economic Net Income (Attributable to Controlling Interests)** | **$168.5** | **$166.4** | **$524.5** | **$516.9** | | Weighted-Average Shares Outstanding (Diluted) | 44.3 | 43.5 | 44.8 | 47.8 | | Assumed Issuance of Shares to Settle Redeemable Non-Controlling Interests | $0.0 | $(2.3) | $0.0 | $(5.7) | | Assumed Issuance of Convertible Junior Subordinated Securities Shares | $(2.1) | $(1.7) | $(2.1) | $(1.9) | | **Weighted-Average Shares Outstanding (Adjusted Diluted)** | **42.2** | **39.5** | **42.7** | **40.2** | | **Economic Earnings Per Share** | **$4.00** | **$4.21** | **$12.28** | **$12.85** | [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, cash flow activities, future cash uses for investments, share repurchases, debt, and distributions - The company creates long-term value by investing in new and existing affiliates and centralized capabilities, and returns excess capital to shareholders through share repurchases. As of September 30, 2022, cash and cash equivalents totaled **$622.9 million**. The company anticipates future primary cash uses to include investments, share repurchases, debt repayment, and distributions to affiliate equity holders[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - The **$240 million** in cash and EQT ordinary shares from the BPEA equity sale will be used for transaction-related fees, taxes, debt repayment, share repurchases, investments, and other general corporate purposes[208](index=208&type=chunk) Cash Flow Activities from Operating, Investing, and Financing (Millions of USD) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | | :---------------- | :-------------------- | :-------------------- | | Operating Cash Flow | $897.3 | $797.4 | | Investing Cash Flow | $(177.8) | $(266.6) | | Financing Cash Flow | $(625.5) | $(779.1) | - For the nine months ended September 30, 2022, cash flow from operating activities was **$797.4 million**, cash outflow from investing activities was **$266.6 million**, and cash outflow from financing activities was **$779.1 million**, primarily for share repurchases, distributions to non-controlling interests, and repurchases of convertible junior subordinated securities[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk) - As of September 30, 2022, the current redemption value of affiliate equity interests was **$512 million**. The company paid **$37 million** for affiliate equity purchases and received **$15.2 million** for affiliate equity issuances during the nine months ended September 30, 2022. Net affiliate equity purchases are estimated to be approximately **$15 million** for the remainder of 2022[214](index=214&type=chunk) - The company's Board of Directors has authorized a share repurchase program, with **5.8 million** shares available for repurchase as of the October 2022 authorization. In the third quarter of 2022, the company repurchased **0.6 million** shares of common stock at an average price of **$125.13** per share. For the nine months ended September 30, 2022, the company repurchased **2.5 million** shares of common stock at an average price of **$135.73** per share[215](index=215&type=chunk)[234](index=234&type=chunk) Carrying Value of Outstanding Debt (Millions of USD) | Debt Type | Dec 31, 2021 | Sep 30, 2022 | | :--------------- | :------------- | :------------- | | Senior Bank Debt | $350.0 | $350.0 | | Senior Notes | $1,098.0 | $1,098.5 | | Junior Subordinated Notes | $765.8 | $765.9 | | Convertible Junior Subordinated Securities | $299.5 | $341.7 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This chapter states no material changes occurred in market risk disclosures for the three months ended September 30, 2022, referring to the 2021 Form 10-K for further details - There were no material changes to the company's quantitative and qualitative disclosures about market risk for the three months ended September 30, 2022[229](index=229&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) This chapter confirms the effectiveness of disclosure controls and procedures, evaluated under CEO and CFO supervision, with no material changes in internal controls during the quarter - As of September 30, 2022, the company's disclosure controls and procedures were deemed effective, providing reasonable assurance that information is timely recorded, processed, summarized, and reported. No material changes in internal control occurred during the quarter[230](index=230&type=chunk)[231](index=231&type=chunk) PART II—OTHER INFORMATION [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This chapter discloses the company's common stock repurchase activities during Q3 2022, including the number of shares, average price, and remaining shares authorized for repurchase Issuer Purchases of Equity Securities | Period | Total Number of Shares Purchased | Average Price Per Share | Total Number of Shares Purchased Under Publicly Announced Plans or Programs | Average Price Per Share | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs | | :----------------- | :----------- | :----------- | :------------------------------- | :----------- | :--------------------------------- | | Jul 1-31, 2022 | 139,279 | $120.48 | 139,279 | $120.48 | 3,399,191 | | Aug 1-31, 2022 | 214,895 | $133.65 | 214,895 | $133.65 | 3,184,296 | | Sep 1-30, 2022 | 285,236 | $121.00 | 285,236 | $121.00 | 2,899,060 | | **Total** | **639,410** | **$125.13** | **639,410** | **$125.13** | | - As of the October 2022 authorization, **5.8 million** shares remained available for repurchase under the company's share repurchase program[234](index=234&type=chunk) [Item 5. Other Information](index=45&type=section&id=Item%205.%20Other%20Information) This chapter states the Board revised and restated the company's bylaws to comply with recent SEC amendments regarding proxy card requirements for shareholder director nominations - The company's Board of Directors revised and restated the company's bylaws to comply with recent SEC amendments regarding proxy card requirements, specifically concerning the procedures and information required for shareholders to submit director nominations under Rule 14a-9[235](index=235&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This chapter lists all exhibits filed with this quarterly report, including revised bylaws, CEO/CFO certifications, and financial statements in XBRL format - Exhibits include the revised bylaws, certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, and consolidated statements of income, comprehensive income, balance sheets, changes in equity, cash flows, and notes to financial statements in XBRL format[237](index=237&type=chunk)

[PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial information for the company, including financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Affiliated Managers Group, Inc. for Q2 2022, including income, comprehensive income, balance sheets, equity changes, and cash flows [Consolidated Statements of Income](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Consolidated revenue increased to **$604.1 million** for Q2 2022, with diluted EPS rising to **$2.68**, while six-month net income to controlling interest slightly decreased Consolidated Statements of Income (in millions, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Consolidated Revenue** | $604.1 | $586.3 | $1,211.4 | $1,145.4 | | **Total Consolidated Expenses** | $400.6 | $389.9 | $795.7 | $768.4 | | **Net Income** | $174.0 | $184.2 | $392.6 | $398.2 | | **Net Income (controlling interest)** | $109.4 | $109.0 | $255.4 | $258.9 | | **Earnings Per Share (basic)** | $2.83 | $2.62 | $6.52 | $6.15 | | **Earnings Per Share (diluted)** | $2.68 | $2.55 | $6.10 | $5.96 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Comprehensive income attributable to controlling interest significantly decreased to **$56.9 million** for Q2 2022, primarily due to foreign currency translation losses Consolidated Statements of Comprehensive Income (in millions) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Net Income** | $174.0 | $184.2 | $392.6 | $398.2 | | **Other Comprehensive Income (Loss)** | $(74.0) | $7.9 | $(85.8) | $32.2 | | **Comprehensive Income** | $100.0 | $192.1 | $306.8 | $430.4 | | **Comprehensive Income (controlling interest)** | $56.9 | $118.0 | $197.6 | $292.4 | [Consolidated Balance Sheets](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Total assets decreased to **$8.47 billion** as of June 30, 2022, primarily due to reduced cash, while total liabilities also decreased Consolidated Balance Sheet Highlights (in millions) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | $8,468.7 | $8,876.4 | | Cash and cash equivalents | $606.8 | $908.5 | | Goodwill | $2,660.0 | $2,689.2 | | **Total Liabilities** | $4,277.1 | $4,491.9 | | Debt | $2,534.3 | $2,490.4 | | **Total Stockholders' Equity** | $2,741.0 | $2,786.4 | | **Total Liabilities and Equity** | $8,468.7 | $8,876.4 | [Consolidated Statements of Cash Flows](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Operating cash flow decreased to **$506.5 million** for the six months ended June 30, 2022, with significant cash used in financing activities, leading to a **$301.7 million** net decrease in cash Consolidated Statements of Cash Flows (in millions) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | **Cash flow from operating activities** | $506.5 | $550.9 | | **Cash flow used in investing activities** | $(172.0) | $(170.7) | | **Cash flow used in financing activities** | $(616.2) | $(642.0) | | **Net decrease in cash and cash equivalents** | $(301.7) | $(257.9) | | **Cash and cash equivalents at end of period** | $606.8 | $777.9 | [Notes to the Consolidated Financial Statements](index=10&type=section&id=NOTES%20TO%20THE%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Notes detail accounting policies, including ASU 2020-06 adoption, investments, debt structure, and the pending sale of the company's interest in Baring Private Equity Asia - Effective January 1, 2022, the company adopted ASU 2020-06, which changed the accounting for its junior convertible securities to be wholly classified as debt, resulting in a **$101.5 million** increase in Debt and a **$4.5 million** increase in Retained Earnings[39](index=39&type=chunk) - The company agreed to sell its equity interest in Baring Private Equity Asia (BPEA) to EQT AB, expecting to receive **$240.0 million** in cash and **28.68 million** EQT ordinary shares, with the transaction expected to close in Q4 2022[106](index=106&type=chunk) - As of June 30, 2022, the company had total debt of **$2.53 billion**, consisting of senior bank debt, senior notes, junior subordinated notes, and junior convertible securities[81](index=81&type=chunk) - The company has unfunded commitments of **$146.1 million** to co-invest in certain Affiliate sponsored investment products as of June 30, 2022[93](index=93&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2022 financial performance, including **$691 billion** AUM, revenue and expense drivers, non-GAAP measures, liquidity, and the pending BPEA sale [Executive Overview and Operating Performance](index=28&type=section&id=Executive%20Overview%20and%20Operating%20Performance) Aggregate assets under management decreased to **$690.9 billion** as of June 30, 2022, primarily due to market changes, alongside strategic investments and the pending BPEA sale - Aggregate assets under management were approximately **$691 billion** as of June 30, 2022[145](index=145&type=chunk) - The company agreed to sell its interest in Baring Private Equity Asia (BPEA) to EQT, expecting to receive **$240.0 million** in cash and **28.68 million** EQT ordinary shares, with the transaction expected to close in Q4 2022[147](index=147&type=chunk) AUM Roll-Forward by Strategy - Year to Date (in billions) | Strategy | Dec 31, 2021 | Net Client Flows | Market Changes | Other | June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | :--- | | Alternatives | $238.2 | $12.7 | $1.1 | $(8.2) | $243.8 | | Global Equities | $277.5 | $(21.5) | $(48.7) | $(6.2) | $201.1 | | U.S. Equities | $170.7 | $(4.1) | $(31.3) | $(1.0) | $134.3 | | Fixed Income & Multi-Asset | $127.4 | $(0.7) | $(13.9) | $(1.1) | $111.7 | | **Total** | **$813.8** | **$(13.6)** | **$(92.8)** | **$(16.5)** | **$690.9** | [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Consolidated revenue for Q2 2022 increased to **$604.1 million** driven by performance-based fees, while equity method income and investment income declined due to lower performance fees and unrealized losses - Consolidated revenue for Q2 2022 increased by **3%** YoY to **$604.1 million**, mainly due to a **$42.3 million** (**7%**) increase in performance-based fees from illiquid alternative strategies[172](index=172&type=chunk) - Equity method revenue for Q2 2022 decreased by **4%** YoY to **$575.5 million**, as a **$45.5 million** drop in performance-based fees from liquid alternatives offset a **$21.7 million** rise in asset-based fees[183](index=183&type=chunk) - Investment and other income decreased by **$43.1 million** in Q2 2022 compared to Q2 2021, primarily due to unrealized losses on Other Investments (**$28.3 million**) and Marketable Securities (**$12.0 million**)[190](index=190&type=chunk) - Income tax expense for Q2 2022 decreased **46%** to **$38.0 million**, largely because a **$25.1 million** deferred tax expense from a UK tax rate change in Q2 2021 did not recur[191](index=191&type=chunk) [Supplemental Financial Performance Measures](index=38&type=section&id=Supplemental%20Financial%20Performance%20Measures) Non-GAAP measures show Adjusted EBITDA and Economic Net Income (controlling interest) decreased for Q2 2022, while Economic Earnings Per Share remained flat at **$4.03** Reconciliation to Non-GAAP Measures (in millions, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net income (controlling interest) | $109.4 | $109.0 | | **Adjusted EBITDA (controlling interest)** | **$213.4** | **$227.3** | | **Economic net income (controlling interest)** | **$160.5** | **$171.2** | | **Economic earnings per share** | **$4.03** | **$4.03** | [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company ended Q2 2022 with **$606.8 million** in cash, utilizing funds for share repurchases and Affiliate investments, while maintaining a **$1.25 billion** revolving credit facility - Cash and cash equivalents were **$606.8 million** as of June 30, 2022[205](index=205&type=chunk) - During the six months ended June 30, 2022, the company repurchased **1.9 million** shares of its common stock for **$264.6 million** (net of proceeds from issuances)[31](index=31&type=chunk)[215](index=215&type=chunk) - The company has a **$1.25 billion** senior unsecured revolving credit facility, which had no outstanding borrowings as of June 30, 2022[218](index=218&type=chunk) - Following the closing of the BPEA sale, the company expects to use approximately **60%** of gross proceeds for growth investments and share repurchases over time[207](index=207&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes occurred in the company's quantitative and qualitative market risk disclosures for the quarter ended June 30, 2022 - There were no material changes to the company's market risk disclosures for the quarter ended June 30, 2022[228](index=228&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[229](index=229&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[230](index=230&type=chunk) [PART II—OTHER INFORMATION](index=43&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section provides additional information, including details on equity security repurchases and a list of exhibits filed with the quarterly report [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **621,810** shares at an average price of **$128.75** during Q2 2022, with **3.5 million** shares remaining available for repurchase Issuer Purchases of Equity Securities (Q2 2022) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2022 | 264,213 | $133.44 | | May 2022 | 131,435 | $125.67 | | June 2022 | 226,162 | $125.07 | | **Total** | **621,810** | **$128.75** | - As of June 30, 2022, there were **3.5 million** shares available for repurchase under the company's outstanding share repurchase programs[233](index=233&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including CEO/CFO certifications and XBRL financial data - The exhibits filed with this report include CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, and financial data in XBRL format[235](index=235&type=chunk)

Financial Data and Key Metrics Changes - Economic earnings per share for Q2 2022 were $4.03, consistent with the same quarter last year, despite challenging market conditions [18][23] - Net client cash outflows totaled $11 billion, with $6 billion in outflows when excluding certain quantitative strategies, primarily due to redemptions in global equities [18][21] - Adjusted EBITDA for Q2 was $213 million, down 6% year-over-year, mainly driven by lower performance fee earnings [22][23] Business Line Data and Key Metrics Changes - Alternatives businesses saw strong performance with $6 billion in net inflows, led by private markets with $5 billion [19] - Liquid alternatives attracted approximately $1 billion in net inflows, reflecting a shift in investor behavior towards diversification [20] - Active equities faced challenges with net outflows of $9.8 billion, particularly in growth strategies, while U.S. equities experienced $1.7 billion in outflows [21] Market Data and Key Metrics Changes - The market environment has shifted towards increased volatility, leading to a reduction in risk among investors [6][8] - There is a notable uptick in industry flows into liquid alternatives, indicating a change in client behavior towards seeking uncorrelated return streams [9][10] Company Strategy and Development Direction - The company is focused on investing in areas of secular growth, including private markets, liquid alternatives, wealth management, Asia, and ESG [13][30] - AMG's unique partnership model allows for alignment with independent asset management firms, enhancing growth opportunities [12][14] - The company aims to maintain a disciplined capital allocation strategy while returning excess capital to shareholders through share repurchases [15][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to generate earnings growth in 2022 and beyond, despite market challenges [26][62] - The current environment is seen as an opportunity to capitalize on high-quality investment opportunities, particularly in periods of market dislocation [12][30] - There is an expectation for continued strength in performance fee earnings due to the diversity of strategies and strong investment performance [26][39] Other Important Information - The company has a strong balance sheet and plans to repurchase at least $400 million of shares for the full year [29][60] - The Baring transaction is expected to close by year-end, providing additional capital for growth investments and share repurchases [29][60] Q&A Session Summary Question: Outlook for the second half of the year and performance fee numbers - Management indicated confidence in performance fee earnings due to the breadth and excellence of performance across the business, not tied to contractual components [32][35][41] Question: Update on the M&A pipeline - The current pipeline reflects growth strategies in areas of secular growth, with independent firms increasingly seeking partnerships for support [44][48][50] Question: Capital allocation strategy in light of investment opportunities - Management plans to balance investments in new affiliates with returning capital to shareholders, maintaining a strong capital position [52][56][59]

Financial Data and Key Metrics Changes - AMG reported economic earnings per share of $4.65, reflecting a 9% year-over-year increase driven by growth in management fee earnings and capital deployment [4][18] - Adjusted EBITDA for the first quarter was $255 million, a 3% increase year-over-year [16][18] - Net client cash inflows, excluding certain quantitative strategies, were $2.7 billion for the quarter [18] Business Line Data and Key Metrics Changes - In alternatives, AMG reported net inflows of $6 billion, with $4 billion coming from private market flows [18] - Liquid alternatives generated $2 billion of inflows as clients sought uncorrelated return streams [19] - Global equities experienced net outflows of $3 billion, with strong sales activity but offset by redemptions in growth strategies [20] Market Data and Key Metrics Changes - The market environment for asset management has shifted, with a pronounced resurgence in value performance benefiting affiliates like Yacktman and EIG [6][7] - ESG strategies are being tested, but demand remains strong for established managers like Boston Common and Parnassus [8] - The company noted a fundamental shift in client behavior towards active management in response to geopolitical tensions and inflation [6][30] Company Strategy and Development Direction - AMG's strategy focuses on diversifying its business and enhancing its position through strategic transactions, such as the merger of Baring with EQT [9][10] - The company aims to capitalize on opportunities in high-demand areas, including private markets and liquid alternatives [12][15] - AMG's partnership model is designed to align with the long-term strategic goals of its affiliates, enhancing their growth potential [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to navigate the changing market environment and capitalize on opportunities for growth [15][27] - The company anticipates that the ongoing rotation within the industry will present new opportunities for high-quality active managers [5][6] - Management highlighted the importance of maintaining a strong balance sheet to support growth investments and return capital to shareholders [25][26] Other Important Information - AMG plans to allocate approximately 60% of the proceeds from the Baring transaction towards growth investments and share repurchases [25][70] - The company has repurchased $185 million of shares in the first quarter and targets $400 million for the full year, subject to market conditions [26][70] Q&A Session Summary Question: Changes in Investor Behavior - Management noted that the market environment is favorable for active management, with clients increasingly taking an active approach to managing exposures [30][31] Question: Deferred Payments and Cash Flow - Management indicated that deferred payments from transactions are relatively modest and structured to align with performance [42][44] Question: Decline in EBITDA and Future Investments - Management explained that the expected decline in EBITDA for the second quarter is primarily due to market conditions, with strong performance in absolute return strategies expected to drive future growth [46][51] Question: Non-U.S. Strategies and Currency Impact - Management acknowledged modest headwinds from currency impacts but emphasized strong long-term performance in non-U.S. strategies [58][60] Question: Accretion Timeline and Capital Allocation - Management detailed plans for capital allocation post-Baring transaction, focusing on growth initiatives and share repurchases while maintaining a disciplined approach [69][71]

Financial Data and Key Metrics Changes - AMG generated over $1 billion of EBITDA, up 33% year-over-year, and record economic earnings per share of $18.28, representing annual growth of 37% [6][18] - Adjusted EBITDA for Q4 was $357 million, growing 40% year-over-year, while economic earnings per share totaled $6.10, up 45% year-over-year [18][23] - For the full year, adjusted EBITDA was $1.06 billion and economic earnings per share grew more than 30% compared to the prior year [18][27] Business Line Data and Key Metrics Changes - In alternatives, net inflows totaled $12 billion, driven by strength across private markets and liquid alternatives [19] - Private markets saw net inflows of $9 billion for the quarter and nearly $25 billion for the full year, reflecting strong fundraising levels [20] - Liquid alternative strategies generated significant returns and performance fees, with strong flow trends continuing for Capula and Garda [11][20] Market Data and Key Metrics Changes - Global equities experienced net outflows of $8 billion, primarily due to two large institutional redemptions [21][63] - US equities reported net outflows of $1 billion, reflecting Q4 seasonality, but long-term investment performance remains strong [22] - Multi-asset and fixed income generated inflows of $1.5 billion for the quarter and $4 billion for the full year [22] Company Strategy and Development Direction - AMG is focusing on fast-growing areas such as private markets, liquid alternatives, Asia, wealth management, and ESG, which are well positioned for strong growth [8][14] - The company aims to reshape its business in favor of these growth areas, enhancing long-term earnings power [10][15] - AMG's partnership approach is resonating with high-quality partner-owned investment firms, positioning the company favorably in the current transaction environment [16][42] Management's Comments on Operating Environment and Future Outlook - Management noted that the investment environment has fundamentally changed, with elevated inflation and rising interest rates necessitating an active approach to investing [9][10] - The company is confident in its ability to execute on new investment opportunities, given a favorable transaction environment and strong competitive position [16][44] - AMG expects to continue to invest in high-quality new affiliates and growth opportunities at existing affiliates, enhancing its growth profile over time [16][53] Other Important Information - AMG repurchased $510 million of shares in 2021, reducing shares outstanding by 8% for the year, and plans to repurchase approximately $400 million of shares in 2022 [28] - The company deployed more than $1 billion of capital into growth investments in 2021, with a focus on private markets and sustainable investing firms [27][28] Q&A Session Summary Question: Update on Systematica and future capital usage - Management expressed excitement about the investment in Systematica, highlighting its strong performance and growth potential [32][34] - The company plans to continue recycling equity across generations and expects to invest $100 million to $150 million annually in affiliate equity repurchases [37] Question: Competitive landscape in private markets - Management emphasized AMG's unique partnership solution, which supports independent firms while allowing them to maintain operational independence [41][42] - The company is focused on long-term secular trends in private markets, liquid alternatives, ESG, and Asia [44] Question: Capital allocation and buyback strategy - Management provided a framework for earnings guidance and capital allocation, indicating a disciplined approach to investments and share repurchases [49][53] - The company has a robust pipeline for new investments and is committed to returning capital to shareholders while pursuing growth opportunities [54][55]