AFFILIATED MANAGERS GROUP INC

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The following executive overview, which summarizes the significant trends affecting our results of operations and financial condition, as well as the remainder of this Management’s Discussion and Analysis of Financial Condition and Results of Operations of Affiliated Managers Group, Inc. and its subsidiaries, should be read in conjunction with the “Forward-Looking Statements” section set forth in Part I, the “Risk Factors” section set forth in Item 1A of Part I and with our Consolidated Financial Statements and the notes thereto contained elsewhere in this Annual Report on Form 10-K, and in any more recent filings with the SEC.

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The following executive overview, which summarizes the significant trends affecting our results of operations and financial

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Our discussion and analysis of the key operating performance measures and financial results for fiscal year 2023 compared to fiscal year 2022 is included herein. For discussion and analysis of fiscal year 2022 compared to fiscal year 2021, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 17, 2023.

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Our discussion and analysis of the key operating performance measures and financial results for fiscal year 2024

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AMG is a strategic partner to leading independent investment firms globally. Our strategy is to generate long-term value by investing in a diverse array of high-quality independent partner-owned firms, referred to as “Affiliates,” through a proven partnership approach, and allocating resources across our unique opportunity set to the areas of highest growth and return. With their entrepreneurial, investment-centric cultures and alignment of interests with clients through direct equity ownership by firm principals, independent firms have fundamental competitive advantages in offering unique return streams to the marketplace. Through AMG’s distinctive approach, we enhance these advantages to magnify the long-term success of our Affiliates and actively support their independence. Our innovative model enables each Affiliate’s management team to retain autonomy and significant equity ownership in their firm, while they leverage our strategic capabilities and insight, including growth capital, product strategy and development, capital formation, and incentive alignment and succession planning. As of December 31, 2023, our aggregate assets under management were approximately $673 billion across a diverse range of private markets, liquid alternatives, and differentiated long-only investment strategies.

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AMG is a strategic partner to leading independent investment firms globally. Our strategy is to generate long-term value

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In the third quarter of 2023, we completed a minority investment in Forbion Group Holding B.V., a private markets firm focused on investing in high-quality life sciences companies, and in the fourth quarter of 2023, we completed a minority investment in Ara Partners Group, LLC, a private markets firm specializing in industrial decarbonization. Following the close of the transactions, Affiliate management continues to hold a significant majority of the equity of the businesses and directs the day-to-day operations.

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transaction, NorthBridge partners continue to hold a significant majority of the equity of the firm and direct its day-to-day

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Under accounting principles generally accepted in the U.S. (“GAAP”), we are required to consolidate certain of our Affiliates and use the equity method of accounting for others. Whether we consolidate an Affiliate or use the equity method of accounting, we maintain the same innovative partnership approach and provide support and assistance in substantially the same manner for all of our Affiliates. Furthermore, all of our Affiliates are investment managers and are impacted by similar marketplace factors and industry trends. Therefore, our key aggregate operating performance measures are important in providing management with a more comprehensive view of the operating performance and material trends across our entire business.

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Under accounting principles generally accepted in the U.S. (“GAAP”), we are required to consolidate certain of our

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Assets under management, and therefore average assets under management, include the assets under management of our consolidated and equity method Affiliates. 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 investment products generally represents an average of the daily net assets under management, while for institutional and high net worth clients, average assets under management generally represents an average of the assets at the beginning or end of each month during the applicable period.

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Assets under management, and therefore average assets under management, include the assets under management of our

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Aggregate fees consist of the total asset- and performance-based fees earned by all of our consolidated and equity method Affiliates. For certain of our Affiliates accounted for under the equity method, we report the Affiliate’s aggregate fees one quarter in arrears. Aggregate fees are provided in addition to, but not as a substitute for, Consolidated revenue or other GAAP performance measures.

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Aggregate fees consist of the total asset- and performance-based fees earned by all of our consolidated and equity method

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

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(2)Foreign exchange reflects the impact of translating the assets under management of our Affiliates whose functional

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The following tables present performance of our investment strategies, where available, measured by the percentage of assets under management ahead of their relevant benchmark:

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The following tables present performance of our investment strategies, where available, measured by the percentage of

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(1)Past performance is not indicative of future results. Performance and AUM information is as of December 31, 2023 and is based on data available at the time of calculation. Product returns are sourced from Affiliates while benchmark returns are generally sourced via third-party subscriptions.

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(1)Past performance is not indicative of future results. Performance and AUM information is as of December 31, 2024 and is

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(4)For private markets products, performance is reported as the percentage of assets that have outperformed benchmarks on a since-inception internal rate of return basis. Benchmarks utilized include a combination of public market equivalents, peer medians, and absolute returns where benchmarks are not available. For purposes of investment performance comparisons, the latest vintage comparison includes the most recent vehicles and strategies (traditional long-duration investment funds, customized vehicles, and other evergreen vehicles and product structures) where meaningful performance is available and calculable. In order to illustrate the performance of our private markets product category over a longer period of history, the last three vintages comparison incorporates the latest vintage vehicles and the prior two vintages for traditional long-duration investment funds, as well as additional vehicles and strategies launched during the equivalent time period as the last three vintages of traditional long-duration investment funds. Due to the nature of these investments and vehicles, reported performance is typically on a three- to six-month lag basis.

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(2)For private markets products, performance is reported as the percentage of assets that have outperformed benchmarks on a

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(2)For liquid alternative, global equity, and U.S. equity products, performance is reported as the percentage of assets that have outperformed benchmarks across the indicated periods, and excludes market-hedging products. For purposes of investment performance comparisons, products are an aggregation of portfolios (separate accounts, investment funds, and other products) that each represent a particular investment objective, using the most representative portfolio for the performance comparison. Performance is presented for products with a three-, five-, and/or ten-year track record and is measured on a consistent basis relative to the most appropriate benchmarks. Benchmark appropriateness is generally reviewed annually to reflect any changes in how underlying portfolios/mandates are managed. Product and benchmark performance is reflected as total return and is annualized. Reported product performance is gross-of-fees for institutional and high-net-worth separate accounts, and generally net-of-fees across retail funds and other commingled vehicles such as hedge funds.

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(3)For liquid alternative and equity products, performance is reported as the percentage of assets that have outperformed

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(3)Multi-asset and fixed income products are mainly our wealth management and solutions offerings. These investment products are primarily customized toward wealth preservation, estate planning, and liability and tax management, and therefore are typically not measured against a benchmark.

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(4)Multi-asset and fixed income products are mainly our wealth management and solutions offerings. These investment

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Aggregate fees consist of asset- and performance-based fees of our consolidated and equity method Affiliates. 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, generally inclusive of uncalled commitments. Asset-based fees are generally impacted by the level of average assets under management and the composition of these assets across our strategies with different asset-based fee ratios. Our asset-based fee ratio is calculated as asset-based fees divided by average assets under management.

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Aggregate fees consist of asset- and performance-based fees of our consolidated and equity method Affiliates. Asset-based

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In some cases, if product returns exceed certain performance thresholds, we will participate in performance-based fees. Performance-based fees are based on investment performance, typically on an absolute basis or relative to a benchmark or hurdle rate, and are generally recognized when it is improbable that there will be a significant reversal in the amount of revenue recognized. Performance-based fees are generally billed less frequently than asset-based fees and will vary from period to period because they inherently depend on investment performance. As of December 31, 2023, approximately 27% of our total assets under management could potentially earn performance-based fees. These percentages were approximately 12% and 48% of our assets under management for our consolidated Affiliates and Affiliates accounted for under the equity method, respectively. We anticipate performance-based fees will be a recurring component of our aggregate fees; however we do not anticipate these fees to be a significant component of our Consolidated revenue as these fees are predominately earned by our Affiliates accounted for under the equity method.

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In some cases, if product returns exceed certain performance thresholds, we will participate in performance-based fees.

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Aggregate fees were $5,066.6 million in 2023, a decrease of $493.9 million or 9% as compared to 2022. The decrease in our aggregate fees was due to a $348.7 million or 6% decrease from asset-based fees and a $145.2 million or 3% decrease from performance-based fees, primarily in our liquid alternative strategies. The decrease in asset-based fees was principally due to a decrease in our average assets under management, primarily in our global equity strategies, and the impact of the BPEA Transaction. These decreases were partially offset by changes in the composition of our assets under management.

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from performance-based fees, primarily in our liquid alternative strategies. The increase in asset-based fees was principally due

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

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(1)Adjusted EBITDA (controlling interest) and Economic net income (controlling interest) are non-GAAP performance

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Net income (controlling interest) decreased $473.0 million or 41% in 2023. This decrease was primarily due to a $508.8 million decrease in Affiliate Transaction gains and the impact of a $58.1 million decrease in Equity method income (net). These decreases were partially offset by a $169.1 million decrease in Income tax expense attributable to the controlling interest.

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Net income (controlling interest)decreased $161.3 million or 24% in 2024. This decrease was primarily due to the

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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. Adjusted EBITDA (controlling interest) decreased $118.1 million or 11% in 2023, primarily due to a $493.9 million or 9% decrease in aggregate fees. Adjusted EBITDA (controlling interest) decreased more than aggregate fees on a percentage basis primarily due to the recognition of performance-based fees earned by Affiliates in which we hold less of an economic interest.

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Adjusted EBITDA (controlling interest) is an important supplemental financial performance measure for management as it

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We believe Economic net income (controlling interest) is an important supplemental financial performance measure because it represents our performance before non-cash expenses relating to our acquisition of interests in Affiliates and improves comparability of performance between periods. Economic net income (controlling interest) decreased $79.4 million or 10% in 2023 primarily due to a $118.1 million or 11% decrease in Adjusted EBITDA (controlling interest).

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We believe Economic net income (controlling interest) is an important supplemental financial performance measure

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The following discussion includes the key operating performance measures and financial results of our consolidated and equity method Affiliates. Our consolidated Affiliates’ financial results are included in our Consolidated revenue, Consolidated expenses, and Investment and other income, and our share of our equity method Affiliates’ financial results is reported, net of intangible amortization and impairments, in Equity method income (net).

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The following discussion includes the key operating performance measures and financial results of our consolidated and

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Our Consolidated revenue is derived from our consolidated Affiliates, primarily from asset-based fees from investment management services. For these Affiliates, we typically use structured partnership interests in which we contractually share in the Affiliate’s revenue without regard to expenses. Consolidated revenue is generally determined by the level of our consolidated Affiliates’ average assets under management and the composition of these assets across our consolidated Affiliates’ investment strategies with different asset-based fee ratios and performance-based fees.

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Our Consolidated revenue is derived from our consolidated Affiliates, primarily from asset-based fees from investment

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Selling, general and administrative expenses decreased $27.3 million or 7% in 2023, primarily due to a $26.0 million decrease in distribution and investment-related expenses principally as a result of a decrease in average assets under management on which these expenses are incurred.

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increase in distribution and investment-related expenses, principally as a result of the increase in average assets under

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Interest expense increased $9.4 million or 8% in 2023, primarily due to a $12.1 million increase resulting from higher interest rates on our senior unsecured term loan facility (the “term loan”). This increase was partially offset by a $2.9 million decrease resulting from repurchases of our junior convertible securities in the first half of 2022.

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decrease due to the repayment of our senior unsecured term loan facility (the “term loan”).

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There were no significant changes in Depreciation and other amortization in 2023.

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There were no significant changes to Depreciation and other amortization in 2024.

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Other expenses (net) increased $11.1 million or 32% in 2023, primarily due to a $13.0 million increase in expenses related to changes in the values of contingent payment obligations.

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Other expenses (net)decreased $5.5 million or 12% in 2024, primarily due to a $2.7 million decrease in expenses related to

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When we do not own a controlling equity interest in an Affiliate, but have significant influence, we account for our interest in the Affiliate under the equity method. Our share of earnings or losses from Affiliates accounted for under the equity method, net of amortization and impairments, is included in Equity method income (net). For certain of our Affiliates accounted for under the equity method, we report the Affiliate’s financial results in our Consolidated Financial Statements one quarter in arrears.

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When we do not own a controlling equity interest in an Affiliate, but have significant influence, we account for our interest

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For a majority of these Affiliates, we use structured partnership interests in which we contractually share in the Affiliate’s revenue less agreed-upon expenses. We also use structured partnership interests in which we contractually share in the Affiliate’s revenue without regard to expenses.

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For a majority of these Affiliates, we use operating structures where we contractually share in the Affiliate’s revenue less

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Our equity method revenue is derived primarily from asset- and performance-based fees from investment management services. Equity method revenue incorporates the total asset- and performance-based fees earned by all of our Affiliates accounted for under the equity method and is generally determined by the level of our equity method Affiliate average assets under management and the composition of these assets across our strategies with different asset-based fee ratios and performance-based fees. Our Affiliates accounted for under the equity method manage a greater proportion of assets subject to performance-based fees than our consolidated Affiliates and, as a result, equity method revenue will generally have more performance-based fees than Consolidated revenue.

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Our equity method revenue is derived primarily from asset- and performance-based fees from investment management

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The following table presents equity method Affiliate average assets under management and equity method revenue, as well as equity method earnings, equity method intangible amortization, and equity method intangible impairments, which in aggregate form Equity method income (net):

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The following table presents equity method Affiliate average assets under management and equity method Affiliate

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(1)Percentage change is not meaningful.

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(1)Percent change is not meaningful.

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Equity method earnings decreased $121.6 million or 24% in 2023, while equity method revenue decreased $222.1 million or 7%. Equity method earnings decreased more than equity method revenue on a percentage basis primarily due to the recognition of performance-based fees earned by Affiliates in which we hold less of an economic interest.

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method revenue. Equity method earnings increased more than equity method revenue on a percentage basis primarily due to an

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Equity method intangible amortization decreased $23.1 million or 21% in 2023, primarily due to a $22.9 million decrease in amortization expense due to a decrease in actual and expected client attrition for certain definite-lived acquired client relationships and an $8.4 million decrease due to the BPEA Transaction. These decreases were partially offset by an $8.2 million increase in amortization expense due to investments in new Affiliates.

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amortization expense due to investments in new Affiliates and a $17.9 million increase in amortization expense due to a

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Equity method intangible impairments decreased $40.4 million or 81% in 2023. See Note 9 of our Consolidated Financial Statements.

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Equity method intangible impairments increased $30.3 million in 2024. See Note 8 of our Consolidated Financial

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In the fourth quarter of 2022, we completed the sale of our equity interest in Baring Private Equity Asia (“BPEA”) to EQT AB (“EQT”), a public company listed on Nasdaq Stockholm (EQT.ST), (the “BPEA Transaction”) in connection with the strategic combination of BPEA and EQT. Pursuant to the terms of the Securities Purchase and Merger Agreement with EQT, under which we and each of the other owners agreed to sell our respective equity interests in BPEA, we received $223.6 million in cash, net of transaction costs, and 28.68 million EQT ordinary shares (25% of which were subject to a six-month lock-up, which expired in April 2023), and other investments. Our gain on the transaction was $641.9 million.

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Baring Private Equity Asia ("BPEA") to EQT AB ("EQT"), a public company listed on the Nasdaq Stockholm (EQT.ST) (the

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For the years ended December 31, 2022, and 2023, we recorded gains of $641.9 million on the BPEA Transaction and $133.1 million on the Veritable Transaction, respectively. See Notes 8 and 9 of our Consolidated Financial Statements.

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quarter of 2022, and$133.1 million on the Veritable Transaction, respectively. See Notes 7 and 8 of our Consolidated

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Investment and other income increased $6.8 million or 6% in 2023, primarily due to a $29.2 million net increase in realized and unrealized gains on Other investments and a $21.1 million increase in interest income. These increases were partially offset by a $38.9 million net decrease in realized and unrealized gains on Investments in marketable securities.

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realized and unrealized gains on investments in marketable securities.

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Our Consolidated expenses are primarily attributable to the non-controlling interests of our consolidated Affiliates.

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attributable to the non-controlling interests.

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The following table presents Net income, Net income (controlling interest) and Net income (non-controlling interest):

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The following table presents Net income, Net income (non-controlling interests), and Net income (controlling interest):

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As supplemental information, we provide non-GAAP performance measures of Adjusted EBITDA (controlling interest), Economic net income (controlling interest), and Economic earnings per share. Management utilizes these non-GAAP performance measures to assess our performance before our share of certain non-cash expenses and to improve comparability between periods. In the first quarter of 2023, we updated the definitions of Adjusted EBITDA (controlling interest) and Economic net income (controlling interest) to reflect AMG's strategic evolution, including our increased allocation of capital toward private markets and liquid alternatives. To align with the economic impact of these capital allocation decisions, the updated definitions of Adjusted EBITDA (controlling interest) and Economic net income (controlling interest): (i) include only the realized economic gains and losses on seed capital, general partner commitments, and other strategic investments and (ii) exclude any unrealized gains and losses on strategic investments (consistent with the existing treatment of seed capital and general partner commitments). We have retroactively applied this definition change to prior periods.

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Financial Statements), we provide non-GAAP performance measures of Adjusted EBITDA (controlling interest), Economic net