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May 4, 2020, 4:44 p.m. EDT

10-Q: AFFILIATED MANAGERS GROUP, INC.

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(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Operating Performance Measures

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The following table presents our key aggregate operating performance measures:







                                                                    As of and for the Three
                                                                    Months Ended March 31,
        (in billions, except as noted)                                 2019          2020       % Change
        Assets under management                                    $    774.2     $  599.9        (23 )%
        Average assets under management                                 772.6        663.0        (14 )%
        Aggregate fees (in millions)                                  1,252.0      1,253.1          0  %
        


As of and for the three months ended March 31, 2019, assets under management and, therefore average assets under management, include the assets under management of all our consolidated and equity method Affiliates. As of and for the three months ended March 31, 2020, assets under management and, therefore average assets under management, exclude the assets under management of certain Affiliates in which we have repositioned or are repositioning our interests and that are not significant to our operating performance measures or our results of operations. Assets under management is presented on a current basis without regard to the timing of the inclusion of an Affiliate's financial results in our operating performance measures and Consolidated Financial Statements. Average assets under management reflects the timing of the inclusion of an Affiliate's financial results in our operating performance measures and Consolidated Financial Statements. Average assets under management for mutual funds and similar retail investment products represents an average of the daily net assets under management, while for institutional and high net worth clients, average assets under management represents an average of the assets at the beginning or end of each month during the applicable period.

The following charts present information regarding the composition of our assets under management by active, return-oriented strategy and client type as of March 31, 2020:

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(1) Alternatives include illiquid alternative strategies, which accounted for 17% of our assets under management as of March 31, 2020.

(2) Global equities include emerging markets strategies, which accounted for 7% of our assets under management as of March 31, 2020.

The following tables present changes in our assets under management by active, return-oriented strategy and client type for the three months ended March 31, 2020:







        By Strategy - Quarter to Date
                                                                                                  Multi-Asset &
        (in billions)                     Alternatives     Global Equities     U.S. Equities       Fixed Income         Total
        December 31, 2019                $      241.2     $         274.9     $       100.0     $       106.4        $   722.5
          Client cash inflows and
        commitments                               8.7                 8.4               3.4               5.6             26.1
          Client cash outflows                  (11.2 )             (15.2 )            (7.7 )            (5.8 )          (39.9 )
            Net client cash flows                (2.5 )              (6.8 )            (4.3 )            (0.2 )          (13.8 )
          New investments                         3.7                   -                 -                 -              3.7
          Market changes                        (13.1 )             (57.9 )           (22.5 )            (7.4 )         (100.9 )
          Foreign exchange(1)                    (3.0 )              (5.8 )            (0.7 )            (1.7 )          (11.2 )
          Realizations and distributions
        (net)                                    (0.2 )                 -                 -              (0.1 )           (0.3 )
          Other(2)                                  -                (0.1 )               -                 -             (0.1 )
        March 31, 2020                   $      226.1     $         204.3     $        72.5     $        97.0        $   599.9
        By Client Type - Quarter to Date
        (in billions)                              Institutional      Retail       High Net Worth       Total
        December 31, 2019                         $       407.2     $   198.1     $       117.2      $   722.5
          Client cash inflows and commitments              10.7          10.7               4.7           26.1
          Client cash outflows                            (16.3 )       (18.1 )            (5.5 )        (39.9 )
            Net client cash flows                          (5.6 )        (7.4 )            (0.8 )        (13.8 )
          New investments                                   3.7             -                 -            3.7
          Market changes                                  (51.3 )       (36.2 )           (13.4 )       (100.9 )
          Foreign exchange(1)                              (5.9 )        (4.5 )            (0.8 )        (11.2 )
          Realizations and distributions (net)             (0.2 )        (0.1 )               -           (0.3 )
          Other(2)                                         (0.1 )           -                 -           (0.1 )
        March 31, 2020                            $       347.8     $   149.9     $       102.2      $   599.9
        ___________________________
        


(1) Foreign exchange reflects the impact of translating into U.S. dollars the assets under management of our Affiliates whose functional currency is not the U.S. dollar.

(2) Other includes assets under management attributable to product transitions and reclassifications.

Aggregate Fees

Aggregate fees consists of asset and performance based fees. Asset based fees include advisory and other fees earned by our Affiliates for services provided to their clients and are typically determined as a percentage of the value of a client's assets under management. Performance based fees are based on investment performance, typically on an absolute basis or relative to a benchmark, and are recognized when they are earned (i.e., when they become billable to customers and are not subject to claw-back). Performance based fees are generally billed less frequently than asset based fees, and although performance based

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fees inherently depend on investment performance and will vary from period to period, we anticipate performance based fees will be a recurring component of our aggregate fees.

Aggregate fees is generally determined by the level of our average assets under management, the composition of these assets across our active, return-oriented strategies that realize different asset based fee ratios, and performance based fees. Our asset based fee ratio is calculated as asset based fees divided by average assets under management.

Aggregate fees were $1,253.1 million for the three months ended March 31, 2020, an increase of $1.1 million as compared to the three months ended March 31, 2019. The increase in our aggregate fees was due to a $107.6 million or 9% increase from performance based fees, offset by a $106.5 million or 9% decrease from asset based fees. The decrease in asset based fees was due to a 9% decrease in our average assets under management as adjusted to remove Affiliates in which we have repositioned or are repositioning our interests for the period ended March 31, 2019. This decline, which was principally in our alternative strategies and global equity strategies, was primarily due to declines in the financial markets as a result of COVID-19 as well as net client cash outflows.







        Financial and Supplemental Financial Performance Measures
        The following table presents our key financial and supplemental financial
        performance measures:
                                                                     For the Three Months Ended
                                                                             March 31,
        (in millions)                                                   2019             2020        % Change
        Net loss (controlling interest)                            $   (200.8 )       $   (15.6 )      (92 )%
        Adjusted EBITDA (controlling interest)(1)                       215.6             200.4         (7 )%
        Economic net income (controlling interest)(1)                   169.0             151.3        (10 )%
        ___________________________
        


(1) Adjusted EBITDA (controlling interest) and Economic net income (controlling interest) are non-GAAP performance measures and are discussed in "Supplemental Financial Performance Measures."

Adjusted EBITDA (controlling interest) is an important supplemental financial performance measure for management as it provides a comprehensive view of our share of the financial performance of our business. While aggregate fees increased $1.1 million in the three months ended March 31, 2020, our Adjusted EBITDA (controlling interest) decreased $15.2 million or 7%, primarily due to a decline in earnings at certain Affiliates in which we share in revenue less agreed-upon expenses and the recognition of performance fees at Affiliates in which we hold less of an economic interest. These decreases were partially offset by a $5.8 million increase in Investment and other income attributable to the controlling interest.

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The following table presents our consolidated Affiliate average assets under management and Consolidated revenue:

May 04, 2020

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