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Date

Thursday, July 31, 2025, at 11 a.m. ET

Call participants

  • Chief Executive Officer — Jay Horgen
  • Chief Financial Officer — Deva Ritchea
  • Chief Strategy and Corporate Development Officer — Tom Wojcik
  • Head of Investor Relations — Patricia Figueroa

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Takeaways

  • Economic earnings per share— Economic earnings per share (non-GAAP) were $5.39, reflecting a 15% year-over-year increase in economic earnings per share (non-GAAP), with the rise boosted by share repurchases completed over the last eighteen months.
  • Net client cash flows— More than $8 billion in net inflows, led by a record quarter for alternative strategies.
  • Alternative assets under management (AUM)— Approximately $55 billion in new alternatives AUM was added in the first six months of 2025, representing a 20% increase in total alternative AUM to $331 billion as of July 31, 2025.
  • Contribution from alternatives— Alternatives now account for more than 55% of EBITDA on a run-rate basis as of Q2 2025.
  • Private markets AUM— $150 billion in private markets assets under management as of June 2025, up 50% in private markets AUM since 2022, driven by high-teens organic growth, and the addition of seven new private markets affiliates since 2022.
  • Liquid alternatives inflows— Nearly $12 billion in net inflows, with about $20 billion in net new flows over the past year into tax-managed liquid alternative strategies for U.S. wealth clients.
  • Net outflows in active equities— Outflows of $11 billion from active equities.
  • Adjusted EBITDA— Adjusted EBITDA was $220 million, up 1% year-over-year, includes $5 million in net performance fee earnings.
  • Fee-related earnings (FRE)— Fee-related earnings (non-GAAP) grew 4% year-over-year, attributed to higher average AUM and alternative strategies' organic growth, offset in part by equity outflows.
  • Share repurchases— $100 million repurchased, bringing year-to-date repurchases to $273 million as of the end of Q2 2025; full-year 2025 repurchase expectation is approximately $400 million, subject to market conditions.
  • Peppertree sale proceeds— Approximately $260 million in pretax proceeds received in Q3 2025, which closed on July 1.
  • Third-quarter guidance— Adjusted EBITDA projected between $230 million and $240 million for Q3 2025, economic earnings per share (non-GAAP) of $5.62-$5.87 for Q3 2025, assuming an adjusted weighted average share count of 29.4 million for Q3 2025.
  • New partnerships— Four partnerships announced in 2025—Northbridge, Verition, Qualitas Energy, and Montefiore—in alternatives.
  • AQR AUM growth— AQR assets under management increased from $100 billion to $143 billion over the eighteen months since 2024, bolstered by more than $20 billion in net inflows to liquid alternatives year-to-date in 2025.
  • Pantheon AUM milestone— Pantheon’s private markets assets grew to $85 billion since partnering in 2010, supported by success in secondaries and wealth channel products.
  • Capital commitments— Nearly $1.2 billion allocated across growth investments and share repurchases in 2025.
  • Debt and liquidity— Maintained leverage at recent historical levels through the first half of 2025, with long-dated debt and access to a $1.25 billion revolver.

Summary

Affiliated Managers Group(AMG -1.02%) delivered a record-setting Q2 2025, characterized by accelerated organic growth, significant expansion in alternatives, and the largest period of new investment activity in its history. New alternative strategies drove prominent inflows, leading to a diversification of earnings away from traditional equities and into higher-fee, longer-duration, performance-fee eligible business lines.

  • Management anticipates a “meaningful increase to our full-year economic earnings per share (non-GAAP) in 2026,” due to the full impact of new affiliate partnerships and ongoing alternative AUM growth.
  • The Peppertree stake sale more than doubled AMG’s original investment; the transaction closed on July 1, 2025.
  • A distinctive business model evolution is underway, as alternatives are expected to reach two-thirds of EBITDA within approximately three years, while traditional equity exposure declines.
  • CEO Horgen stated, “we are in the most active period of new investments that we've been in more than a decade,” indicating strong M&A and partnership momentum.
  • Operational flexibility is underscored by continued capital return to shareholders, alongside ongoing acquisitions and new affiliate investments.

Industry glossary

  • Alternative assets/alternatives: Non-traditional investments, including private equity, private credit, infrastructure, and liquid alternative strategies, that typically offer distinct return profiles and fee structures compared to equities or fixed income.
  • Liquid alternatives: Investment strategies offering hedge-fund-like exposures in vehicles with daily or periodic liquidity, such as mutual funds and ETFs, often focused on risk management, absolute return, or tax-aware solutions.
  • Private markets: Investment strategies focused on products not available on public exchanges, such as private equity or private credit, typically with longer lockup periods and performance fee opportunities.
  • Fee-related earnings (FRE): Operating profits generated from management fees, excluding performance-based compensation (e.g., carried interest or performance fees).
  • Performance fees: Revenues earned by asset managers when investments outperform specified benchmarks or achieve threshold returns, generally associated with alternative strategies.
  • SMAs: Separately managed accounts; investment accounts managed on behalf of a single investor, offering customized portfolio management.
  • Evergreen vehicles: Investment vehicles designed for ongoing capital commitment and redemption, rather than fixed vintage funds, to provide liquidity and long-term exposure.
  • Drawdown funds: Private capital vehicles in which capital is called from investors over time, as needed for investments, rather than invested all at once.
  • Net IRR, MOIC, DPI: Metrics specific to private equity performance—Net internal rate of return (annualized return after fees/expenses), multiple on invested capital (total value divided by invested capital), and distributions to paid-in (capital returned to investors as a multiple of paid-in capital).

Full Conference Call Transcript

Jay Horgen: Good morning, everyone. It has been an exciting and very busy 2025 for Affiliated Managers Group, Inc. so far. In the second quarter, we reported strong results with year-over-year growth of 15% in economic earnings per share and more than $8 billion in net client cash flows, driven by another record quarter of inflows into alternative strategies. From an organic growth perspective, 2025 was our strongest quarter in twelve years, reflecting the ongoing execution of our strategy to allocate our capital and resources to areas of secular growth. In addition, our results this quarter showcase the accelerating pace of our ongoing business evolution toward a greater contribution from in-demand strategies, both private markets and liquid alternatives.

We expect our results going forward to continue to benefit from this increasingly attractive business profile. In 2025, Affiliated Managers Group, Inc. has added approximately $55 billion in alternative assets under management, increasing our total alternative AUM by 20% in just six months, including a record $33 billion in net inflows into alternatives and four new partnerships with affiliates operating in private markets and liquid alternative strategies. Today, more than 15 affiliates manage $331 billion in alternative AUM, contributing approximately 55% of our EBITDA on a run-rate basis.

As we look ahead, given the substantial growth in alternative AUM this year and the addition of new affiliates, together with the positive impact of our ongoing allocation of capital to share repurchases, we anticipate a meaningful increase to our full-year economic earnings per share in 2026. Stepping back, we are seeing several compelling trends that we expect will drive further growth across a number of our affiliates managing alternative strategies. In particular, these tailwinds include the acceleration of alternative flows into the wealth channel, driven by growing demand for secondary strategies across private equity, private credit, and infrastructure, and new strategies in liquid alternatives designed to deliver superior after-tax outcomes for high-net-worth investors.

Two of Affiliated Managers Group, Inc.'s largest and longstanding affiliates, Pantheon and AQR, are capitalizing on these trends by leveraging their scale, innovative cultures, and differentiated expertise. Their strong organic growth is having a pronounced impact on Affiliated Managers Group, Inc.'s business profile and earnings, with each affiliate expected to be a double-digit contributor to Affiliated Managers Group, Inc.'s earnings this year. In addition, Affiliated Managers Group, Inc.'s strategic engagement and collaboration on capital formation initiatives will enable many of our new and existing affiliates to access the full potential of the rapidly expanding opportunity in the wealth marketplace.

Turning to new affiliate investments, we completed our investment in Verition in the second quarter, and we recently announced a new partnership with Montefiore, a leading European private equity firm focused on mid-cap companies in the services sector, with a track record of delivering exceptional returns for clients over the past two decades. Through its differentiated value-added approach, which focuses on accelerating profitable and sustainable growth by closely collaborating with management teams, Montefiore has successfully scaled portfolio companies from local players into sector leaders across Europe. The firm has excellent forward prospects, and Affiliated Managers Group, Inc.'s strategic partnership solutions can magnify the firm's long-term success as it continues to execute its European expansion strategy.

More broadly, we are in the midst of one of the most active periods of new investment activity in Affiliated Managers Group, Inc.'s history, having announced four new partnerships with Northbridge, Verition, Qualitas Energy, and Montefiore so far in 2025, each underscoring the ongoing demand for Affiliated Managers Group, Inc.'s differentiated partnership approach, our unique ability to source new opportunities, and our focus on investing in areas of secular growth. Looking ahead, our new investment pipeline remains strong, with active ongoing dialogue with prospective new affiliates operating in both private markets and liquid alternatives.

We also completed the sale of Affiliated Managers Group, Inc.'s minority stake in Peppertree, more than doubling our initial investment and further demonstrating our ability to create shareholder value by maintaining alignment with our partners and supporting our affiliates' long-term strategic goals. We were very pleased that the Peppertree partnership culminated in an excellent outcome for all parties, and the significant gain highlights the embedded value of our private markets businesses. Each element of our growth strategy, including investing in new affiliate partnerships, investing in our existing affiliates, and investing in Affiliated Managers Group, Inc.'s capabilities that magnify our affiliate success, is driving the evolution of our distinctive business profile toward greater participation in secular growth areas.

Given our strong capital position and diversified business profile, we have ample flexibility to continue to execute on these growth opportunities while simultaneously returning capital through share repurchases. Finally, as you can see from our excellent results in the second quarter and for 2025, Affiliated Managers Group, Inc.'s business momentum has accelerated as a result of the disciplined and continuous execution of our strategy. Yet, as we look forward, we believe that the long-term impact of our strategy execution is only just beginning to materialize, and we see meaningful potential for substantial value creation ahead for all shareholders. With that, I'll turn it over to Tom.

Tom Wojcik: Thank you, Jay. Good morning, everyone. In 2019, we set forth a strategy to evolve our business mix towards secular growth areas, with a primary focus on alternative asset classes. Our strong results demonstrate that our strategy is working and underscore the growth potential of Affiliated Managers Group, Inc.'s differentiated model as well as the unique value proposition of independent partner-owned firms. Affiliated Managers Group, Inc. delivered more than $8 billion in net client cash inflows in the second quarter, powered by record net flows in alternatives and rapidly growing client demand for a number of illiquid alternative strategies.

Our strong net inflows into alternatives more than offset $11 billion in outflows in active equities, reflecting industry and near-term performance headwinds in multi-asset and fixed income strategies. I'd like to spend a few minutes talking about alternatives and the strength that we are seeing in this area as a result of executing our growth strategy over the past six years. Our private markets affiliates raised $8 billion in the quarter, reflecting investors' conviction in our affiliates' specialized investment strategies and the impact of ongoing secular growth trends.

These trends include the increasing role of private market solutions in investor portfolios, benefiting firms like Pantheon, and the significant opportunity we see ahead of us in private markets in the U.S. wealth channel. Since 2022, Affiliated Managers Group, Inc.'s private markets AUM has grown by 50% and now stands at $150 billion, driven by high-teens organic growth and the addition of seven private markets affiliates through new investment partnerships, three of which have been announced thus far in 2025. Earlier this week, we announced a new partnership with Montefiore.

With a twenty-year track record of consistently delivering top-tier returns, Montefiore has become one of Europe's best-performing private equity managers with strong net IRRs, an attractive MOIC profile, and compelling DPI across vintages. The firm has raised six funds as part of its flagship series, launched two additional complementary strategies, and today manages $5 billion in assets. Montefiore's two-decade track record positions the firm for future success, and we are excited to welcome our new partners to Affiliated Managers Group, Inc. In liquid alternatives, our affiliates' value proposition is increasingly resonating with clients, and this quarter generated nearly $12 billion in net inflows, driven primarily by tax-aware solutions and supported by positive contributions across a number of affiliates.

This is now the second consecutive quarter of strong flows we've seen in this category, and client demand remains substantial on a forward-looking basis. Over the past year, our affiliates have generated approximately $20 billion in net new flows into tax-managed liquid alt strategies serving U.S. wealth clients. This innovative breakthrough speaks to the entrepreneurial spirit of independent firms like AQR, which has a long history of developing new strategies to meet the ever-evolving needs of clients, and we see significant opportunities ahead. More broadly, Affiliated Managers Group, Inc.'s diverse group of affiliates managing liquid alternative strategies comprises firms with excellent long-term track records across both beta-sensitive and absolute return strategies.

With the completion of our investment in Verition, one of the industry's premier multi-manager businesses, we have further enhanced the diversification and stability of our earnings profile. Taking private markets and liquid alternatives together, since 2022, we've grown assets under management from alternative strategies by $110 billion or approximately 20% per year. That growth has been fueled by a combination of new partnerships and strong organic growth, aided by innovation, excellent investment performance, and Affiliated Managers Group, Inc.'s product development and distribution capabilities.

Given that a significant portion of the growth we're seeing in alternatives is coming with a combination of longer expected duration and, in many cases, the ability to earn performance fees, the EBITDA impact from the growth we are experiencing can be meaningful. Affiliated Managers Group, Inc. partners with our affiliates to magnify their long-term success, including through product development and capital formation initiatives. As the U.S. wealth landscape evolves, we continue to collaborate with our affiliates to develop and offer high-quality, innovative investment solutions in vehicles and wrappers that meet the needs of clients, such as SMAs, limited liquidity evergreen vehicles, and drawdown funds for alternatives. Now, with the filing to register the Affiliated Managers Group, Inc.

GW&K muni income ETF and recent launches at both Parnassus and Tweedy Brown active ETFs as well, Affiliated Managers Group, Inc.'s entry into active ETFs marks a milestone in the ongoing expansion of our U.S. wealth platform by connecting them with a wider range of U.S. wealth clients and enhancing clients' access to our affiliates' differentiated investment capabilities. Our ongoing investments across product development, distribution, talent, technology infrastructure, and marketing and education programs designed to drive lasting client engagement together underscore our commitment to building a scalable and enduring wealth business on behalf of our affiliates at Affiliated Managers Group, Inc.

Importantly, the success that we are having in the wealth channel is resonating not only with clients and existing Affiliated Managers Group, Inc. affiliates but also with new investment prospects. As accessing this attractive market requires scale and is difficult, if not impossible, for independent firms to do on their own, as we continue to invest in new partnerships with alternative firms, we look forward to collaborating with additional affiliates to broaden their reach and expand their platforms.

We have strategically evolved our business profile towards secular growth areas by investing in new affiliates, investing in our existing affiliates, and investing in our own strategic capabilities, growing the contribution from alternatives to Affiliated Managers Group, Inc.'s earnings from approximately one-third five years ago to more than half today. As we continue to execute our strategy, we expect the contribution from alternatives to further increase, enhancing our long-term organic growth profile and our earnings profile. With that, I'll turn the call over to Deva to discuss our second-quarter results and guidance.

Deva Ritchea: Thank you, Tom, and good morning, everyone. As Jay and Tom described, 2025 has been one of the most active periods in Affiliated Managers Group, Inc.'s history, and in terms of capital allocation, we have committed nearly $1.2 billion in capital across growth investments and share repurchases. Our business continues to generate strong momentum, demonstrated by improving organic growth, increasing assets under management, and the continued evolution of our business composition towards greater participation in areas of secular growth. These factors, coupled with the strength of our balance sheet and the underlying health and diversity of our business, enabled us to successfully execute our growth strategy during 2025.

We are well-positioned to continue as we head into the second half of the year. I will start with the results for the quarter before covering the positive impact of this capital activity on the forward earnings power of our business and conclude with a discussion of our balance sheet. In the second quarter, we reported adjusted EBITDA of $220 million, which grew 1% year-over-year and included $5 million in net performance fee earnings. Fee-related earnings, which exclude net performance fees, grew 4% year-over-year, driven primarily by higher average AUM resulting from the positive impact of investment performance over the period and organic growth in our alternative strategies, partially offset by outflows from fundamental equity strategies.

Economic earnings per share of $5.39 grew 15% year-over-year, which incrementally benefited from significant share repurchases over the last eighteen months. Now moving to third-quarter guidance, we expect adjusted EBITDA to be in the range of $230 million and $240 million based on current AUM levels, reflecting our market blend, which was up 1% quarter-to-date as of July 30, and including seasonably lower net performance fees of up to $10 million. This guidance includes a full quarter of FRE contribution from Verition, the final quarter of Peppertree contribution, and no impact from our recently announced investments in Qualitas Energy and Montefiore, both of which are expected to close before year-end.

Both Qualitas and Montefiore are within our typical size range for new investments, between $100 million and $250 million, and are expected to be modestly accretive to earnings in 2026, with meaningful forward growth potential as they continue to scale and generate carried interest. We expect third-quarter economic earnings per share to be between $5.62 and $5.87, assuming an adjusted weighted average share count of 29.4 million for the quarter. Q3 EBITDA and economic earnings per share guidance do not include any book gain from the Peppertree transaction.

It is important to note that our four new investments will only have a partial year impact on our 2025 earnings, and as a result, we expect a step-up in earnings for 2026 as we experience the full-year impact of these new partnerships, as well as the growth at our existing affiliates managing alternative strategies this year. We will provide more details around 2026 earning expectations in the coming quarters. Finally, turning to the balance sheet and capital allocation, with our new investment and seed activity through the first half of the year, we continue to maintain leverage at recent historical levels.

Given our annual cash generation and embedded growth in our business, we expect greater flexibility on leverage levels as we scale. Importantly, this robust level of deployment activity does not limit our ability to continue to repurchase shares or complete further growth investments as attractive opportunities materialize. Our balance sheet remains in a strong position to execute against our opportunities, with long-dated debt, significant capacity from ongoing cash generation, and access to our $1.25 billion revolver. Additionally, we received pretax proceeds of approximately $260 million from the sale of our stake in Peppertree, which closed on July 1, further enhancing our flexibility. We repurchased approximately $100 million in shares in the second quarter, bringing year-to-date repurchases to $273 million.

For the full year 2025, we expect to repurchase approximately $400 million, subject to market conditions and new investment activity. As Jay and Tom highlighted, we are really excited about the momentum building in our business today, as we are experiencing record levels of alternative inflows and near-record levels of new investment activity. Looking ahead, we remain well-positioned to execute our growth strategy within our disciplined capital allocation framework to create meaningful long-term shareholder value. Now we are happy to take your questions. Thank you. The floor is now open for questions. Our first question today is coming from Dan Fannon of Jefferies. Please go ahead.

Dan Fannon: Great. Thanks. Good morning. Jay, you mentioned the contribution from EBITDA from AQR and Pantheon this year, I think, being double digits. So I was hoping to get some context around that in terms of what that's been, say, a year ago. And then as you think about management fees versus the potential for performance fees, what does that incorporate? Or what does that mix?

Jay Horgen: Yes. Thanks, Dan. And thanks for your question. You did hear me right. We do expect both Pantheon and AQR to be double-digit contributors to our earnings this year. Over the years, both of them have been significant contributors to our earnings. In particular, I would say Pantheon has been relatively consistent. But given the tailwinds that they're experiencing on an organic growth basis, they're growing pretty significantly. AQR has had in the past been, as everyone knows on the call, a pretty significant contributor to our earnings. They're back to being a pretty significant contributor to our earnings, and we see them growing very significantly as well.

Maybe I'll give a little bit of detail, and I can ask Deva to help me as well, just on AQR in particular. I would say there, before I comment specifically on it, maybe I'll reference my prepared remarks on the compelling trends that we're seeing around organic flows in the wealth channel. That's positively impacting both of those affiliates. One of the more notable trends is the client demand acceleration for tax-aware solutions, where AQR has emerged as a clear market leader.

If you're not as familiar with this, for high-net-worth individuals, the shift in focus to after-tax returns from the historical convention of evaluating on a pre-tax basis is a trend in the wealth space, and we believe it's kind of a game-changer to evaluate it on an after-tax basis. We see this as a significant tailwind. Wealth will need to focus on the impact of a given strategy on their clients' tax profiles, given that taxes disrupt compounding. This shift in focus amongst advisors and high-net-worth investors is really in the early innings, and it really benefits AQR. Why? Because AQR has been an innovator for a long time in liquid alternatives, more than twenty years now.

Their firm's ability to bring new strategies and products to market is among the best in the industry. Over the last few years, AQR has been building one of the industry's leading capabilities in this tax-aware solutions investing business. It's developed an entire suite of products, including separate accounts, limited partnerships, and now mutual funds. These strategies, to your point, your question, I should say, they generate higher management fees than their average fee rate. Many of them, because they're liquid alternatives, generate performance fees. So we have both an increased management fee opportunity and an increased performance fee opportunity. Maybe more broadly, these assets are part of an entire wealth program. The state program.

So they tend to be stickier in terms of duration than your average assets. Given this momentum, I wanted to make sure that we called it out, and that's why we gave that extra disclosure. To put it in perspective, AQR has grown its AUM in the last eighteen months from 2024 from $100 billion to $143 billion. A significant portion is coming from the liquid alts in this space as well as strong investment performance. Maybe I'm going to let Deva give a bit more detail on the TaxAware business because it is a major trend for us.

Deva Ritchea: Great. Thanks, Jay. So I can give a little bit more detail as to what we've seen with AQR and what's been driving that. Liquid alternatives net inflows in 2025 were really driven by AQR, which has had more than $20 billion of positive net flows into liquid alts year-to-date. AQR continues to focus on growing these products, which have had excellent performance and have been building strong momentum with investors and distribution channels. As of June 2025, AQR manages about, say, north of $30 billion in long-short tax-aware AUM. Currently, the largest and fastest-growing element of this is their Flex Series, which was launched in 2022 and has grown quickly to north of $20 billion AUM.

There's significant capacity to grow from here. FlexSeries charges a management fee consistent with liquid alternative products, which can really tailor volatility that fits the client goals. Their long-short commingled product has both management fee and performance fee eligibility. AQR's growth over the last five years has really been anchored by excellent performance and innovation. As a result, they've generated performance fees, attracted significant capital from clients, and scaled their products by employing disciplined expense management. Importantly, this growth has shifted their business profile to being much more absolute return-oriented and less beta-sensitive.

Given the combination of these trends, the organic growth profile, higher fee rates on inflows, and strong performance, that's how we're getting to AQR's overall contribution being in the double digits for 2025. Maybe just to bring this back to the original question as well, both Pantheon and AQR are large FRE contributors. Both have some of that performance fee capability as well, but I would say a large portion of that is driven on the FRE side.

Jay Horgen: Yes. Thanks, Deva. Dan, I'm going to go ahead and just expand it and talk about Pantheon because that was part of your question as well. Pantheon is an equally attractive growth story. Since we established the partnership with Pantheon in 2010, it has grown from about $25 billion in private markets assets to $85 billion. But the more important story here, I think, is over that time, the partnership, the partners, and Affiliated Managers Group, Inc. catalyzed the firm's transformation into a leading secondaries investor across multiple asset classes, which includes private equity, infrastructure, and credit. The firm today has a leading market position in the secondary space and a leading market position in the wealth channel for semi-liquids.

Those two tailwinds are really driving their business. Therefore, their growth has accelerated, with both the revenue and the profits growing mid-teens or higher in some cases. We're very excited about their contribution to Affiliated Managers Group, Inc. as well. What I think is unique about Pantheon is their ethos is really an investment-led organization in the secondaries market. They do have significant scale, and so they're capitalizing on that scale. As GPs and LPs look for ongoing liquidity in the market, they're able to provide it through their secondary funds. You've heard Tom say many times as well that Pantheon and Affiliated Managers Group, Inc. have collaborated along the lines of many products now in the wealth space.

The original PPEX, which is the Affiliated Managers Group, Inc. Pantheon Fund, is significant today. It's $6 billion. The PSEC, which is the Credit Secondaries Fund, is growing, and they've recently launched the PBILD, which is the infrastructure fund. So very excited about the opportunities here. Maybe I'll just end by saying that both AQR and Pantheon have the opportunity for revenue growth that is both management fee and performance fee, as Deva said, but incrementally higher fee than even their historical averages. They also have the opportunity for operating leverage as both of them are at scale.

In both cases now, Affiliated Managers Group, Inc. does participate in that profit growth, so we could see significant growth rates out of both firms. Thanks, Dan.

Patricia Figueroa: Thank you. The next question is coming from Alex Blostein of Goldman Sachs. Please go ahead.

Alex Blostein: Hi, thanks. Good morning. I wanted to build on that AQR discussion for a couple more minutes, and thank you for all the incremental color. It's an important part of the story. When you think about the $30 billion in tax-advantaged strategies, and I heard you talk about capacity a bit, maybe walk us through in a bit more detail how you're thinking about capacity constraints for something that's growing so quickly.

While I totally agree that the end market demand for a product like this appears quite robust, I was wondering if you could also speak to the competitive advantage AQR might have in this area that could sort of help them sustain their moat, so to speak, in this business relative to other potential incoming competitors?

Jay Horgen: Yeah. So, thank you, Alex, for your question. I think we'll try to give you a sense for it. Obviously, speaking directly towards affiliate-related items is more difficult for us just as part of our own model. We try not to get too deep into it. But you're right, it is an important growth driver. So let's see, Tom and I will give you some information here, I think, that could be helpful. Maybe just I'm going to start with just their competitive advantages, and then maybe Tom can help me a bit on the capacity and just how to think about growth from here more than that. As you know, AQR is an innovator. They've always been an innovator.

They're particularly good at it. I think to some extent their ability to innovate and also have robust trading and risk systems to be able to offer liquid alternatives into the wealth channel has been something that they've been good at for fifteen years now. I think the element of having that level of risk management and robust systems really there's only a finite number of firms in the world that could even attempt to do what they're doing. So there's a bit of a moat just right there.

Given that there are three years now into being very focused on outcomes for wealth advisors on an after-tax basis, specifically around both market-neutral and index-oriented sort of S&P-oriented products that go long-short, they have got a very big first-mover advantage in addition to their robust systems. We're very excited about the leading position that they have today. Again, they continue to innovate in addition to offering separate accounts and alternative products that they've had in the past. They've recently come out with the Fusion series, which is a mutual fund long-only tax-aware product. They continue to innovate even as we stand today, which very few firms can do.

When we look at the growth from here, we do think that the growth is significant. Maybe I'll turn it to Tom to just how we think about it more generally.

Tom Wojcik: Thanks, Jay, and thanks, Alex, for the question. There are a lot of different flavors, as Jay talked about, and also a number of factors that certainly contribute to what capacity looks like. But I'd say there's a tremendous amount of runway from here. Also, I think you have to think about AQR a bit. Right? It's a very large, diverse, well-resourced, incredibly innovative firm. Certainly, they see the opportunity ahead of them. They're understanding the demand trends and just how quickly this has turned into such an exciting opportunity. So they're very focused on building here for the future.

Not only building the appropriate level of investment capacity, which again is something they've been in the business of doing for decades, but also, importantly, building the appropriate operational capacity, the appropriate distribution capacity. So I think we've got a lot of runway from here, and ultimately, AQR is very focused on making sure that they're able to put this product in front of their clients and really provide a solution that, to Jay's point, on the competitive dynamics, we and they and ultimately their clients believe is very advantaged relative to other offerings in the market.

Patricia Figueroa: Thank you. The next question is coming from Bill Katz of TD Cowen. Please go ahead.

Bill Katz: Okay. Thank you very much for taking the questions and all the color this morning as well. Maybe just some big picture kind of questions maybe integrated to each other. I wonder if you could talk a little bit about just like portfolio management now as you continue to scale your affiliates. I appreciate you continue to migrate into the faster growth area of alternatives. Is there an opportunity to accelerate that by potentially disposing of anything on the attritional side with, I think, lead indicates they're probably not good? Just relative to the Alts platform. Then as you just think about buybacks, your share count is getting rather small rather quickly.

Is there any sort of natural limit here in terms of how low you want to let that go? Thank you.

Jay Horgen: Yes, Bill. Thanks for your questions. Let's see, we might divvy this up amongst the three of us. I'll start with the sort of the overall strategy question that you've asked us. I'm going to ask Tom to help me on that, and then maybe Deva, you can talk about the buybacks for us. So give you some time to think about that. Maybe just on the strategy point, we have been allocating really for some time now. I think Tom said it in his prepared remarks, six years now, we decided as a firm to allocate our capital and resources towards areas of secular growth.

We spend a lot of time understanding where we think secular growth is in the market and trying to invest to continue to evolve Affiliated Managers Group, Inc. to the areas of highest growth and return. I do think that we've done that successfully. So in addition to the two affiliates that we were just talking about, we've invested in over 10 private markets and liquid alternatives firms over this period of time. Those firms themselves are growing as well. So we've got growth kind of in that segment, which is why we're at more than 55% of our EBITDA now.

On a run-rate basis in alternatives, and we see those continuing to grow, and we are in the most active period of new investments that we've been in more than a decade. We see ourselves adding more private markets and liquid alternatives firms. The natural, I think, evolution here really over the medium term, I'll say three years, is to get to something that looks like two-thirds of our business in alternatives, both kind of equal-weighted is our estimate between private markets and liquid alternatives. We kind of like that mix, right, because one of the benefits of having liquid alternatives sit side by side with long-only sitting side by side with private markets is they're complementary.

In fact, in some cases, they diversify us in a way that lets us invest through a market cycle. If you remember in 2022, our liquid alternatives businesses really performed well, lots of performance fees, and it offset what other asset managers experienced that year, which was a downdraft or drawdown in the markets. This year, with markets near all-time highs, we're experiencing tremendous cash flow from our long-only businesses, and we redeployed that cash capital into most of that capital is going into private markets and liquid alternatives. So this is an evolution. Accelerating that natural evolution for us really has to one start with are we constrained in any way to make new investments, and we're not.

Do we have a very strong diverse group of long-only affiliates? We do. Frankly, I think the balance of all three is really unique. It makes Affiliated Managers Group, Inc. differentiated in the marketplace, allows us to continue to grow our business. Tom, maybe I'll see if I've I'll turn it to you to maybe talk a bit more about this, and then we can have Deva talk about repurchases.

Tom Wojcik: Yes. Thanks, Jay, and thanks, Bill, for your question. I think you nailed the strategy side of it and also the differentiation side, which I think are all really important points. Bill, I'll maybe just make one other point. As you know and those of us who have those who followed us for a long time know, we certainly don't run our business like a securities portfolio. These are human capital-driven partnerships. That's extremely important to us. So we really don't think about trading in and out of our affiliates.

We think about the fact that when we come to market and enter a new partnership, we're really committing on behalf of that business, on behalf of that group of partners, a willingness to be a permanent partner to those businesses. Very importantly, we don't have the unilateral right to ever sell an affiliate or sell our stake in an affiliate. That's an important part of our value proposition, and it also really differentiates us from others in the market who are taking stakes in asset management businesses. We don't view ourselves as taking stakes in businesses. We view ourselves as partnering with the leadership teams and with generation one, generation two, etcetera.

When you see something like a bearing or a veritable or a pepper tree, that's being driven by the affiliate. They are making a choice to ultimately move in a direction that they think is in the best interest of their clients and ultimately the best interest of their business. We try to be a very supportive partner in those cases. I think we're always sort of long the option, and our affiliates are always long the option. Those types of opportunities presenting themselves, industry changing over time, circumstances changing over time, but I wouldn't think about us actively managing our portfolio in the way that you asked the question.

Deva Ritchea: Great. Thanks for that. Let me take the one around the buyback situation. First, let me take a step back and describe a little bit how we thought about the repurchases in general and our history over the past five years. We generate about a billion dollars in cash flow that we're able to utilize to make growth investments, and also you've seen us use a fair bit of that to repurchase shares. I'd say over the last five years, about 60% of that has been deployed into share repurchases and about 40% of that into new investment opportunities.

Although you've seen that shift this year where we've deployed nearly $900 million of capital into growth investments, and you've heard our guidance to repurchase about $400 million of shares this year. We also had changed our tone that we wanted it to be more balanced on a go-forward period. It's hard for us to talk about it in a single-year period, but over a multi-year period, we really think about a very balanced approach to our capital allocation process. If you think about the specific question in terms of the natural limit of share count, we obviously continue to monitor our liquidity. Our stock is trading well. We see ample liquidity in that.

We think that the repurchases are a really nice tool for us to return capital to shareholders, with some flexibility that allows us to be really opportunistic on the new investment framework. Obviously, we'll continue to assess what that looks like over time. But from where we're sitting today, we think it's a really great tool for our shareholders in our capital allocation process.

Patricia Figueroa: Thank you. The next is coming from Brian Bedell of Deutsche Bank. Please go ahead.

Brian Bedell: Great. Thanks. Good morning. Thanks for taking my question. Maybe just to go to the private market fundraising side. A really strong quarter. I know this area can be more volatile in terms of its magnitude of fundraising. Can you maybe talk about any conviction around the fundraising levels being having, I guess, more consistency over time as your portfolios mature? You have now $150 billion of AUM. Maybe some color around the composition of the fundraising in the quarter, between assets moving into fee-paying AUM like as deployed, for example, or absolute fundraising?

Jay Horgen: Well, good morning, Brian, and thanks for your question. I'm going to let Tom take that one.

Tom Wojcik: Thanks, Jay, and thanks, Brian. Maybe I'll kind of take a step back and just talk about our overall organic growth profile and kind of what we're seeing in the business? Then I'll provide some more details specifically around private markets. Really, if you think about a high-level framework in terms of what's driving organic growth trends, it kind of comes down to three things. The first is really the alignment of our overall AUM base with client demand trends today. That's sort of the baseline that we're working from. Then second, how does that AUM mix change over time?

It can change through the relative growth rates across asset classes and affiliates, as well as the investments that Affiliated Managers Group, Inc. is making to form new partnerships in growth areas as part of our strategy. Third and finally is, how are we enhancing flows at our affiliates through our own product development, distribution, and capital formation? Those were kind of the three guiding elements that inform the strategy that we put into place several years ago. Our execution on that strategy has made a real meaningful impact on where we stand today and our trajectory for the future. Brian, to your question, private markets are driving a substantial part of that.

On that first point that I made, alignment of AUM with secular trends. If you just go back a few years to 2021, at that time, about 55% of our AUM was in long-only equity. About 30% was in alternatives. Today, the long-only side is about 40% of AUM. So it's come down from 55% down to 40%. On the alternative side, a combination of liquid alternatives and private markets, that's grown from 30% in 2021 to 45% today. The alignment of our overall business with client demand trends has changed, and it's changed materially.

Effectively, what that means is the baseline in terms of where we grow from here and the growth characteristics embedded in our business are just in a much better place than it was several years ago. That kind of takes me to the second and third points that I started with, which kind of tell you both how we got here and also where we're headed. Our last nine new investment partnerships have all been in alternatives. That dates back to late 2021. Again, Brian, to your question, eight of those nine have been in private markets, and, of course, that's been very intentional as a focus of our strategy.

Also, over that same time period, significantly more than 100% of our net flows have been in alternatives. You've seen that piece of the business also growing organically significantly faster than our overall business. In the same time frame, we've managed to grow the private market AUM on our U.S. wealth platform from a billion to now more than $7 billion. That's another driver, Brian, to your question around consistency and visibility into flows continuing to grow going forward.

You're seeing the cumulative impact of all of those things on our business mix evolution, in terms of the AUM, on our fee rate, which continues to increase, on the contribution of our EBITDA that's coming from alternatives and coming from private markets, on gross sales and net flow trends, and ultimately on the EBITDA impact of those flows going forward as well. Maybe just to hit a couple of your questions on private markets specifically, this past quarter, we raised about $8 billion. Those flows were led by another strong quarter at Pantheon, and Jay talked a lot about some of the tailwinds that we're seeing there. We also saw positive contributions from Comvest, Ara, and EIG.

When you see the diversity and where those flows are coming from, in this case, this quarter across private market solutions, credit strategies, private equity, infrastructure, we really have a number of different engines that are firing in terms of where we're seeing growth in private markets overall. Maybe the other thing it's worth spending a moment on, and I'll turn it over to Deva to walk us through that, is what's the impact that these flows are having? In particular, some of the growth we're seeing in alternatives overall, but private markets specifically, on our EBITDA growth opportunity going forward.

Deva Ritchea: I think we may have lost Deva there for a second. Sorry about that. Yes.

Deva Ritchea: I apologize. So Tom, just building on your answer there, given that overall evolution of the business profile that you just talked about, with greater participation in alternatives, particularly around private markets, the impact of our growth on the EBITDA basis that we're seeing is expected to be meaningful. Most importantly, we've seen an improvement in asset-based net flows as we move from a business that was shrinking organically around 10% a year to a business today on an LTM basis that's near flat and grew about 5% annualized this quarter. Of course, that turnaround is the biggest driver.

When you then drill down further on the changes at the asset class level that we've seen, we've really seen a bifurcation of strong organic growth on the alternative side and headwinds on the traditional side. The growth in alternatives is moving the business towards higher fee and longer lock strategies that in many cases have future performance fee and carry potential. While the outflows have been more isolated to lower fee open-ended equity funds that Affiliated Managers Group, Inc. tends to own a little bit more of, so you do have some offsetting factors here.

All that being said, as we continue to execute on our growth strategy and build significant exposure to areas of secular growth, the top-line momentum is beginning to flow through to EBITDA more clearly, and you're seeing some of that in the guidance that I gave for the third quarter.

Patricia Figueroa: Thank you. Our final question today is coming from Patrick Davitt of Autonomous Research. Please go ahead.

Patrick Davitt: Hey, good morning, guys. Most of my specific questions have been asked. So I have a higher-level question just on client discussions and allocations. Obviously, the chatter on this has died down since April, but still hearing large European institutions talk about reallocating to European managers from U.S. managers or simply cutting U.S. exposure, either because of concerns around commitments to ESG and or frustration with the administration's policies. Did you see any of that in your 2Q flow trends? Are you hearing more of that in your discussions with European clients? Thank you.

Jay Horgen: Yeah, thanks for your question, Patrick. Maybe Tom, you could start with that one.

Tom Wojcik: Sure. Patrick, thanks for your question. I think you embedded some of this in your question, but, obviously, the world is moving quickly. Trends that were in place in April seem quite different sitting here staring down August. I do think, Jay mentioned this a bit when he talked about our overall strategy and the importance of diversification. One of the great things about Affiliated Managers Group, Inc. is that we are broadly diversified across asset class geography. Actually, two of the new investments that we've announced most recently are domiciled in Europe in Montefiore and Qualitas in the private equity space and the infrastructure space respectively.

We see certainly the dominance that we've seen in markets in the U.S. over the course of the past many years, perhaps equalizing a bit. We've seen a lot of trends in markets overall in Europe and in Asia that seem to be more positive. As we think about our business and conversations that we're having with clients, we really like to think about the fact that we have the ability to cover the globe in a variety of different ways, and we're participating in those trends in a variety of ways as well. I wouldn't say that we've seen the specific trend that you talked about influencing our second-quarter numbers.

It felt to us like some of that was more commentary-based and people asking questions in terms of what is the world going to look like as some of the geopolitical and economic things play out over the course of the coming years. We didn't really see it necessarily show up dramatically in our second quarter, but definitely a trend that we continue to watch.

Jay Horgen: Yes. I concur with Tom's comments. When you think about the investor behavior, there are so many different cross-currents here. I just think that at this point, we haven't really seen much movement within our affiliates. We are well-positioned, as Tom said. I just know that Pantheon has historically been more of a European client-centric UK-based entity. We also have Forbian in Europe and a number of other managers, Long Only and others in Europe. We've got a really good position to the extent that European investors only want European managers. But I think at the moment, we're not really seeing that really impact our business.

Maybe one last thing, if I may, just before we wrap up, I do want to restate from my prepared remarks that this has been an incredibly productive period for Affiliated Managers Group, Inc. Really an output of our strategy that we've been executing over the last six years. Affiliated Managers Group, Inc.'s organic flow profile and the EBITDA contribution from that flow profile driven by alternatives, it's been improving for some time now. The $8 billion inflows this quarter illustrate the building momentum that we're seeing. Our strategic engagement with affiliates, collaborating with them to magnify their long-term success, has generated meaningful results at places like Pantheon, AQR, Artemis, Convest, Garda, and many others.

We're working on business development initiatives to enhance the value for all stakeholders, including Affiliated Managers Group, Inc. We're very excited about our progress there. I also mentioned that this has been one of the most active years in terms of new investment activity in our history. We've announced four new partnerships. We have a robust pipeline. We also had a successful combination of a partnership with Peppertree, which realized a significant return for us, which we can redeploy into our opportunity set. All of this activity, the organic growth, the EBITDA contribution, the new investments, it's going to have an effect on 2025, but it's really going to impact 2026, and Deva mentioned that in her prepared remarks.

We see a step-up in our earnings going into 2026. Today, I'm very excited to report that more than 55% of our EBITDA on a run-rate basis is in alternatives, and we see that increasing to something like two-thirds in just a few years. We believe we are going to continue to see sustained organic growth firm-wide and new investments in these areas. I think you also heard Deva say finally that capital allocation is critical for us. We're very disciplined in our allocation. We'd like to orient ourselves towards growth investments. It has also resulted in repurchases of $273 million year-to-date and nearly $1 billion over the last eighteen months.

We think that's additive to compounding for our shareholders over time. I'll just leave us where we started, which is I'm very excited about this year, and I'm very excited about our future. As we continue to drive the business towards areas of secular growth, there's just a lot to be excited about here at Affiliated Managers Group, Inc. Thank you for participating today.

Patricia Figueroa: Ladies and gentlemen, this brings us to the end of today's conference call. We would like to thank you for your participation. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.