AMG Third Quarter 2026 Earnings Call - AFFILIATED MANAGERS GROUP INC

Explicit Guidance:

• Q4 2026 Adjusted EBITDA: Expected range of $405 million to $475 million, based on a market blend down 2% quarter-to-date as of November 6.
• Q4 2026 Recurring Fee-Related Earnings: Projected range of $335 million to $345 million, up from $325 million in Q3.
• Q4 2026 Net Performance Fees: Anticipated range of $70 million to $130 million, assuming no material private market catch-up fees.
• Full-Year 2026 Net Performance Fees: Expected total of approximately $145 million to $205 million, with a midpoint in line with the five-year average.
• Q4 2026 Economic Earnings Per Share (EPS): Forecasted between $11.37 and $13.43, assuming an adjusted weighted average share count of 25.1 million.
• 2026 Share Repurchases: Guidance increased to more than $900 million for the full year, subject to market conditions.
• 2026 Share Count Reduction: Anticipated to reduce average economic share count by 10% for the full year and approximately 30% since the start of 2024.

Business-Segment Outlook:

• Alternative Strategies: Expects to continue generating strong organic growth driven by four secular trends: secondary solutions, infrastructure, absolute return strategies, and tax-aware investing; these contributed to $113 billion in net inflows over the last 12 months.
• Private Markets: Projected to maintain strong fundraising momentum; affiliates raised a record $30 billion over the last 12 months (21% organic growth) across secondaries, infrastructure, and specialized strategies (decarbonization, healthcare).
• Liquid Alternatives: Anticipates continued demand for absolute return and tax-aware strategies; tax-aware business is entering a "broad adoption phase" with expectations of net organic growth over the next several years.
• Differentiated Long-Only Equities: Expects continued net outflows consistent with broader industry trends, though pockets of strength remain at affiliates with strong long-term track records.
• Earnings Mix: Forecasts alternatives to continue contributing approximately two-thirds of EBITDA on a run-rate basis as the business shifts from ~35% to nearly 70% of earnings from alternatives.

Market and Competitive Outlook:

• Organic Growth Rate: Management expects to maintain a long-term compound annual growth rate (CAGR) in economic earnings per share of 15% to 20%, with 2026 growth expected to accelerate to approximately 50% (up from >20% in 2025).
• Fee Realization: Anticipates ongoing margin expansion where organic fee growth is expected to run approximately 2x the organic AUM growth rate due to the shift toward higher-fee alternatives and margin ownership at affiliates.
• Asset Management Scale: Expects assets under management (AUM) to continue growing driven by investment performance, organic flows, and new affiliate investments.
• Competitive Position: Believes the unique partnership model and 70% alternative earnings profile provide a durable competitive advantage against independent firms and other institutional partners.

Macro / Industry Outlook:

• Political/Regulatory Impact: Views the recent change in US leadership (midterm elections) as too early to determine specific impacts, but maintains conviction that the four secular growth trends (secondaries, infrastructure, absolute return, tax-aware) possess long-term tailwinds regardless of political shifts.
• Tax Environment: Anticipates that potential increases in long-term tax rates (due to political changes) may increase the value proposition of tax-aware strategies; views the ecosystem as evolving rather than facing headwinds.
• Market Conditions: Expects market conditions and investor sentiment to continue attracting flows to alternative asset classes, particularly long-duration, locked-up vehicles in private markets.
• Valuation: Believes AMG shares remain at an "extremely attractive price," justifying continued aggressive buybacks.

Strategic Initiatives:

• Capital Allocation (5–7 Year Horizon): Expects cumulative free cash flow over the next five to seven years to approximate the company's entire current market capitalization.
• Investment Strategy: Plans to deploy this capital flexibility into new affiliate acquisitions, increased stakes in existing affiliates, and seed investments, alongside continued share repurchases.
• Shareholder Returns: Intends to maintain a policy of no (or negligible) dividend, prioritizing share repurchases to compound earnings and return excess capital.
• Balance Sheet: Leverages a strong position with leverage below historical averages to fund growth investments while returning capital.

Risks and Headwinds to Outlook:

• Market Volatility: Share repurchase activity and valuation benefits are subject to market volatility and price dislocations.
• Regulatory Uncertainty: While long-term trends are viewed as resilient, specific regulatory developments regarding tax-aware strategies (e.g., IRS/Treasury actions) are acknowledged as factors in an evolving ecosystem.
• Investment Performance: Outlook assumes strong investment performance from affiliates; significant underperformance could impact AUM growth and fee-related earnings.
• Macroeconomic Conditions: Guidance assumes a specific market blend; deviations in market performance (e.g., further AUM declines) could impact the realized EBITDA range.
• Client Flows: Any potential slowdown in the four key growth areas (secondaries, infrastructure, absolute return, tax-aware) could reduce organic growth rates.

Management Tone on the Future:

• Confidence Level: High conviction regarding the structural shift to alternatives; describes the transformation as "remarkable" and the current growth rate as "accelerated."
• Strategic Clarity: Emphasizes "disciplined and deliberate capital allocation" as the primary driver of future value creation; explicitly rejects the need for dividends in favor of repurchases.
• Resilience: Expresses strong belief in the durability of the four secular growth trends, stating they have "long-term tailwinds" and will continue to power earnings growth despite short-term political or market fluctuations.
• Growth Trajectory: Confident in achieving >50% earnings growth in 2026, building on the >20% growth seen in 2025.

Miscellaneous:

• Partnership Model: Reaffirmed commitment to the "partnership-centric" model to support independence, which aids in attracting affiliates and maintaining a permanent capital base.
• Pipeline: Maintains a "sizable opportunity" and "strong pipeline" of new affiliate prospects to diversify and enhance earnings power.
• Shareholder Value: Highlights the ability to invest in itself (AMG shares) as a unique opportunity to compound earnings at an attractive valuation.