Affiliated Managers Group Inc (AMG) 2006 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Affiliated Managers Group first quarter results conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. If anyone needs assistance at any time during the conference, please press the star followed by the zero. As a reminder, this conference is being recorded Wednesday, April 26, 2006. I'd now like to turn the conference over to Brett Perryman, Vice President of Corporate Communications. Please go ahead, Ms. Perryman.

Thank you, and thank you all for joining Affiliated Managers Group to discuss our results for the first quarter of 2006. By now, you should have received the press release we issued. However, if anyone needs a copy, please contact us at 617-747-3300 and we'll fax you one immediately following the call.

In this conference call, certain matters discussed will constitute forward-looking statements. Actual results could differ materially from those projected due to a number of factors, including but not limited to those referenced in the Company's Form 10-K and other filings we make with the SEC from time to time. In this call, the investment performance of certain products will be discussed and the benchmarks are deemed by AMG to be the appropriate benchmark. AMG will provide on its website a replay of the call and a copy of our announcement of our results for this quarter as well as a reconciliation of any non-GAAP financial projections to the most directly comparable GAAP financial measure. You can access this information at www.amg.com.

With us on the line to discuss the Company's results for the quarter are Sean Healey, President and Chief Executive Officer, Nate Dalton, Executive Vice President in Charge of Affiliate Development, and Darrell Crate, Executive Vice President and Chief Financial Officer. And now I'd like to turn the call over to Sean Healey. Sean?

Thank you, Brett, and good morning everyone, and welcome to AMG's conference call to discuss our financial and operating results for the first quarter of 2006. We're off to an excellent start to the year as our assets under management grew by 10% or 19 billion in the quarter, including net client cash flows of 5.8 billion. These net flows added approximately 10.4 million to our annualized EBITDA. Our results for the quarter reflect a continued acceleration of our organic growth. Since the first quarter of 2005, we've generated internal growth in assets under management of 36% or 47 billion, driven by strong investment performance and net client cash flows, particularly among our larger affiliates. This organic growth is reflected in our earnings as cash net income grew 27% over the first quarter of last year and cash EPS was up 13% over the same period. Relative growth in cash EPS was dampened by the increase in share count this past quarter as a result of a significant rise in our stock price. While we're obviously not unhappy about the stock price increase, Darrell will talk more in a moment about steps we're taking to manage our share count, especially through repurchases.

Our results this quarter came against the backdrop of a favorable equity market environment but also reflect relative out-performance and strong net flows by our affiliates, especially those participating in fast growing areas such as international equities and alternative products. Highlights in the international equities area, which contributes 35% of our EBITDA, included the results of Genesis, an emerging markets equities manager, which continued its outstanding track record of investment performance, as well as solid results and strong flows at Canadian Manager Boyson and in AQR's long only international equity product.

Results from our alternative products which contribute 15% of our EBITDA were also very strong. Through the ongoing success of AQR and First Quadrant, we've meaningfully expanded our alternative product offerings and remain very well positioned through two of the industry's premier quantitative managers. Both AQR and First Quadrant continue to produce outstanding growth as assets under management at each of these firms grew more than 10% in the quarter.

We're also pleased with our affiliate's results in domestic equity products. In the value area, Third Avenue had excellent investment performance and strong net client cash flows, particularly in its flagship Third Avenue Value Fund. Among our larger affiliates in the growth area, Friess had an outstanding quarter as it outperformed its benchmarks across all its major products and Times Square had strong net client cash flows and solid performance, particularly in its mid-cap products.

In addition to the growth of our existing affiliates, we continue to make progress in executing our strategy of generating growth through accretive investments in new affiliates. While the timing of transactions is inherently difficult to predict or manage, we have a strong pipeline of relationships with high quality mid-sized firms and remain confident in our ability to produce meaningful incremental growth through investments and attractive new affiliates.

Finally, as Darrell will discuss in greater detail, in early April, we completed the offering of 300 million of convertible trust preferred securities. This transaction allowed us to issue equity at roughly a 50% premium and lower our cost of capital and then use a substantial portion of the proceeds to repurchase approximately 2.1 million shares of our stock.

In sum, we're very pleased with the results of the first quarter of 2006 and with our business momentum heading into the second quarter. With that, I'll turn to Nate.

Thanks, Sean. Good morning, everyone. While I'll focus our markets and our channel, I'd like to begin with a couple of broad scenes. First, as Sean mentioned, we are extremely pleased with our organic growth for the quarter, both in terms of investment performance and net client cash flows, and broadly across the group there were many success stories. Having said that, I would emphasize that once again our largest affiliates really distinguished themselves under conditions [inaudible].

To discuss our results in detail, I'll begin with the institutional channel. It had an outstanding quarter with very strong net inflows totaling approximately 4.4 billion. A couple of comments on these flows. We remarked in the past that our institutional flows are inherently more lumpy than flows in our other channels and some of the mandates are quite large and can have lower fees. For example, our institutional flows this quarter included a single flow that was roughly $2 billion with a comparatively low basis point fee, not surprising given the size of the mandate.

Having said that, I want to emphasize that we remain very optimistic about our pipeline in the institutional channel as the favorable trends we've been describing continue to apply. For example, the international equity markets remained stronger in the first quarter and we continue to see significant demand. We remain well positioned for growth in this area through several of our affiliates including AQR. Product outperformed its benchmark by 220 basis points during the quarter and by more than 300 basis points for each of the one, three and five-year period. Emerging markets manager, Genesis, also generated strong net client cash flows and continued significant relative outperformance. I should note that Genesis also recently reopened its flagship emerging markets product and also recently launched an emerging markets small companies product.

Now in addition to these, we have a number of other attractive international and global products including Tweedy Browne and Third Avenue.

While international equities was an area of real growth for us, the most significant story in the first quarter was the continued outstanding performance by our quantitative managers, AQR and First Quadrant, both in terms of investment performance as well as client cash flows. Investment performance for these firms remain good in many of their largest alternative products and also in many of their long only equity products. In addition to their strong positions due to their relative performance, I would reiterate that we see some very positive macro trends for these firms as the level of institutional demand for their quantitative long only and alternative products continues to accelerate.

Couple of highlights on the domestic equity side with the institutional channel. We have good results this quarter in many of our largest domestic growth equity products. For example, Friess Associates extended its outstanding long-term track record as it meaningly outperformed its benchmarks for the quarter with each of its small, mid-large and large cap separate account products having outperformed its benchmark by 400 basis points or more for the quarter to date, one, three and five-year periods. We also saw good performance in the channel among growth managers Essex, Frontier, Renaissance and Times Square. In the value area, we have good results as well with both Systematic and Third Avenue generating solid performance and positive cash flows.

Turning to the mutual fund channel. Flows in the first quarter were very strong, $1.2 billion in total, returning to the trend we had for most of last year. We saw particularly strong flows at Third Avenue, Friess and Times Square. A couple of notes on these flows. First, while Third Avenue has temporarily closed several of their products to put the cash rays to work, they continue to generate significant positive flows through those products that remain open. And second, the flows for each of Third Avenue, Friess and Times Square were augmented by our managers platform, especially those of the Friess Brandywine Fund.

Now turning to performance of some of our largest mutual funds. As was the case in the institutional area, Friess had an outstanding quarter and continues to build on the positive long-term performance trends in the mutual fund family. For example, the Brandywine Fund outperformed its benchmark by over 500 basis points for the quarter and is ahead by more than 900 basis points for the trailing one year period. Third Avenue's flagship, the Value Fund, posted similarly strong trends this quarter outperforming its benchmark by 250 basis points and was up by more than 650 basis points for the one-year period. Tweedy Browne's highly regarded Global Value Fund was up over 8% and roughly in line with the hedged EP benchmarks and their long term track record remains very strong.

Turning to the high net worth channel. We had net inflows of approximately 285 million. This is our third straight quarter of positive net client cash flows in the channel and fourth quarter of sequential improvement as our manager's platform is driving increasing flows to several of our affiliates, most notably Renaissance. We also continue to see strong flows at our Canadian affiliates. With respect to Managers more broadly, the platform continues to gain momentum. Beyond simply increasing distribution, we are now also beginning to look at ways to use managers to drive some development for the retail market. To give a specific example, last quarter we launched a managers global alternative fund managed by First Quadrant. This brings many of the attributes of First Quadrant's multi-strategy global macro product to bear in a mutual fund form for the first time. Now with that, I'll turn it over to Darrell.

Thanks, Nate. Good morning, everyone. As you saw, we reported cash earnings per share of $1.27 for the first quarter. GAAP earnings were $0.81 a share.

Now turning to some of the financial details. The ratio of our EBITDA contribution to end of period assets under management was 17.9 basis points in the first quarter, a decrease from 21.8 basis points in the fourth quarter largely due to the fourth quarter recognition of most of our annual performance fees. We expect this ratio to be approximately 17.7 in the second quarter and to remain at a similar level in the third quarter. This ratio will likely increase in the fourth quarter as our affiliates again will recognize annual performance fees at the end of the calendar year.

Holding company expenses, including accruals for equity based compensation, were 12.4 million for the quarter and we expect holding company expenses to modestly decline to 12 million per quarter through the end of the year.

With regard to taxes, our tax rate was 37% for the first quarter and we expect it to remain at this level for the remainder of 2006. Our cash tax rate was 24.7%. We expect this rate to decrease to 23.2% in the second quarter as we realized some of the tax benefits associated with our recent issuance of convertible trust preferred securities which we'll talk more about in a moment. Total intangible related deferred taxes were 6.9 million for the first quarter.

Amortization for the quarter was 9.2 million, including 2.3 million of amortization from affiliates accounted for using the equity method. The earnings from equity method affiliates, which include AQR and two of our Canadian affiliates, are included in the income from equity method investments line on the income statement, all net of amortization.

Depreciation for the quarter was 1.9 million with 1.3 million of that amount attributable to affiliate depreciation. As you recall, affiliate depreciation is the non-cash charge, including cash net income, as the replenishment of these depreciated assets is paid by the affiliates and not AMG shareholders.

Stockholders' equity was 817 million. Interest expense was 11.5 million for the first quarter. We anticipate that our interest expense will increase to approximately 15 million in the second quarter of 2006.

Pausing here for a moment, the increase in interest expense is related to our issuance of 300 million in convertible trust preferred securities at the beginning of the second quarter. These securities, which have a conversion price of $150, carry a coupon of 5.1%, but like our Cobras, generate a tax deduction at a rate higher than the cash payment. In this case, at an annual rate of 7.5%. This has the effect of increasing our deferred taxes and results in an after-cash--after-tax cash cost of about 2%. As you know, we do not include the deferred tax benefits from our convertible securities in the calculation of our cash earnings. Although I would note that these deductions generate approximately $10 million of additional cash annually, which we can put to work executing our growth strategy.

In addition to lowering our cost to capital through the convertible trust transaction, we took steps to manage the increase in our share count by using a substantial portion of the proceeds to repurchase approximately 2.1 million shares of our stock. The treasury stock method share count in the quarter was 41.7 million, which was higher than our guidance at the beginning of the year, as a result of the 33% increase in our stock price during the quarter.

In addition to repurchasing stock, another step we have taken to mitigate future dilution was the purchase of a series of forward purchase contracts on AMG stock which began to take effect in the second quarter of 2007. These contracts will significantly reduce further increases in our share count from the convertibles under the treasury stock method.

Looking forward, and taking each of these steps into consideration, we would expect the weighted average share count to be 41 million, although this obviously will depend on the stock price.

Now turning to guidance for the remainder of 2006. Notwithstanding the increase in share count, we are maintaining the guidance we gave last quarter as we expect our cash earnings per share to be in the range of $5.50 to $5.75. This assumes 2% quarterly growth in markets. Our annual guidance also assumes an earnings pattern similar to the one we experienced in 2005 where we recognized a meaningful amount of the earnings from alternative products and performance fees in the fourth quarter. Our guidance does not include additional earnings from investments and new affiliates and is based on current expectations about affiliate growth rates, performance and the mix of affiliate contributions to our earnings. Of course, substantial changes in the equity markets and the earnings contributions of our affiliates would impact these expectations. Now, we would be happy to answer some questions.

Ladies and gentlemen, at this time we'll begin the question-and-answer session. [OPERATOR INSTRUCTIONS] Our first question comes from Bill Katz with Buckingham Research. Please go ahead, sir.

Thanks very much. I was trying to keep up, you guys give a lot of information, so I apologize if I go back on something. Just a couple questions. Sean, you've sort of said now for maybe a rolling 3 or 4 quarter period here that the pipeline is strong for deals and yet we haven't seen one. Particularly when you talk this forcefully, deals tend to happen relatively quickly. I'm just sort of curious now. I know you don't want to give specific guidance here, but are we at a point now where the market is starting to gain some momentum that maybe the pipelines have been extended?

Well, I think, as I said last quarter, and again this quarter, we do think the pipeline is strong. We feel very good about the relationships that we have built and are working with, with a group of very high quality, mid-sized firms. The pipeline currently, I would say, as is typically the case, includes with one or two exceptions, involving strategic divestitures that are in banker driven prophecies. It mostly continues to be self-generated, one on one negotiated transactions, discussions with firms, and those are just very tough to time, and it doesn't mean that they're going away if some time passes before the conversations begin and a transaction ensues. It just means that it's taking longer and that's been very familiar part of our history. I think last quarter I said that we thought it was good pipeline, expected it to be more back-end loaded. I'd still say that's the case. But again, it's not something, the way we do it, it is not something we can time precisely.

Okay. Second question, just sort of curious, in given the elevated share count, I guess the way I'm thinking about what your discussion on the guidance numbers here, 450 to 475, I'm sorry, 550 to 575, are you relying a little bit more on performance fees to hit that consensus number at this point in light of the step-up in the share count, perhaps taking away from some of the potential upside leverage as you look through the year?

No, there's been no change in our perception of the performance of the business for the year and that's why we're holding our guidance where it is. We'll continue to, of course, realize performance fees in the fourth quarter, as has always been our expectation, and we feel good that that will be in a pattern similar to what we experienced in 2005.

Okay, and just sort of final question. Darrell, I wasn't keeping up quite enough with your comments. Could you sort of review again what you're doing on the forward purchase contract, and just the timing around that, and is there any explicit costs we need to consider between now and then as it relates to that setup?

Yes. There's no ongoing costs for these contracts. What we've done is purchased a series of contracts starting in the second quarter of 2007, and these are essentially buying back the call option that was embedded in our securities, such that we will receive payments from counter parties that would offset any share appreciation, or offset the share count increases that would be--that are embedded in these convertibles related to share price increase. So of course the effect of that is that we would--we would see less of an effect of the convertibles on share count in second quarter, third quarter and fourth quarter of next year. And as you know, the floating rate convertible is, we're able to convert that in February of 2008.

Okay. Just so I understand the math and the weighted average guidance of 41 million shares for the rest of this year, that in theory would carry through to next year?

Again, dependent upon the stock price, but we're clearly trying to communicate that we have taken steps, which meaningfully mitigate share count increases relative to the convertibles in our capital structure. So with a very strong growth in the business, and taking some of these steps, not only the convertible trust preferred issuance, but buying these options into 2007, I think we've meaningfully contained share count growth for the long term.

Okay. Thank you.

Cynthia Mayer with Merrill Lynch. Please go ahead.

Morning. Just as a follow to that, if you were to somehow reverse and cancel the forward purchase agreements, would there be any cost to that?

No, there would only be a gain. We purchased these contracts when the stock was in the mid-90's, so and--and it's just us owning call options on the stock.

Okay. Great. Just a couple of small questions. The SG&A went down sequentially and I'm just wondering if there's anything in particular to that. I know that obviously there is a holding company that is probably a combination of things. But is there any one thing that stands out?

No, just compared to fourth quarter, there was a reallocation from SG&A to minority interests related to deferred compensation programs that were set up at affiliates. Again, it's the dollars that are at our affiliates for the revenue share agreement, and that they--there is a one affiliate in particular that performed quite well last year, took some of its charges and decided to set up a deferred compensation plan. That was about $10 million and influenced the SG&A number and the minority interest number. But the first quarter number that you see is much more representative of the business going forward.

Okay. Great. And can you talk a little bit about the managers platform and can you quantify the flows brought in through that and whether that looks changed at all?

Sure, this is Nate. Just to step back for one second, managers platform is the platform we launched the beginning of last year to bring affiliate product into the retail market. When we launched it at the beginning of last year, we were talking about doing 1 billion in growth flows for last year and we achieved that. I think what we've been saying is that for this year, we're looking at 1.5 billion to 2 billion in net flows and we're still feeling good about that number and on track for that.

Okay. And also obviously flows very strong when you look across the range of affiliates you have, are there any products you see that might be closed?

We do have some products that are closed. I think in this quarter there are no--there were no new significant closes. There were a few recent opens that I mentioned, Genesis, for example. Looking ahead,sort of same thing we said last quarter, it's a little hard to anticipate exactly when affiliates will have gotten the cash wave put to work and so be in a position to open--open products up again.

But nothing that you know that's closing this quarter?

No, no.

Okay. Great. Thanks.

Sure.

Our next question comes from Laura Kaster with Sandler O'Neill Partners.

Yes. My question is again in the mutual fund flows. In the fourth quarter, they're understated by $200 million. Did most of that come back in the first quarter?

Yes. What we said last quarter was there was a few specific things. One was some money market stuff, that we weren't expecting to reverse. The other was something we were expecting to reverse and it did. It came back not only mutual funds but also little bit in institutional. There was--it was moving from a lower margin mandate to a higher, to reallocate that capacity to higher margin.

Okay. And it looks like once again institutional was the lion's share of your net client inflows. I know it is lumpy and it's not seasonal but would it be reasonable to expect that to remain around 60 to 70% of your net client inflows on a year-over-year basis?

Yes, again, the only way I can really answer that question is sort of the same way we did last quarter, which is what we feel. We look at our institutional presence and there's a lot of breadth to it. Strong pipelines coming from a lot of different firms, a lot of different products. That is the first point. Looking at the remainder of this year, the pipeline continues to look, continues to look good and so it's lots of breadth, good pipelines across a bunch of different firms. It definitely will be lumpy, as you say, but as we look at it, continue to feel good about it.

Okay. I know that is kind of tough to back into performance fees. In the last quarter, I think they were around 25 million. Did you give out that number? Did I miss it?

In the last quarter, you're right. The revenue from performance fees from non-equity method affiliates was 25 million. This quarter there was $0.02 to $0.03 of performance fees in the--in the reported results, and we look forward to fourth quarter for there to be a meaningful amount of performance fees in that number.

Okay, but $0.02 to $0.03 might be a good run rate until we hit fourth quarter?

No, I would say $0.02 to $0.03 this quarter, I would say we have a very limited expectation, $0.01 to $0.02, as has been our--our history over the next couple of quarters. But when I look to fourth quarter, I would say on top of the strong growth of the base business, that there's approximately $0.30 of performance fees that we would expect in the fourth quarter.

Okay. And then one last question. Was there any change in your sales force at managers?

There was some--there were some modest additions on the outside sales, and also on inside sales.

Okay. Great. Thank you.

Our next question comes from Rob Lee with KBW Asset Management. Please go ahead.

Hi, Rob.

Good morning. How are you doing? Couple of quick questions. I just want to make sure I understand it correctly. No change in the guidance even though market performance was I think close to 7% versus the 2% that you embed in guidance. So I guess I should be--I should be thinking of it that the increase in the share count and the convert sort of absorbed a lot of that positive variance?

I think that's probably the best high-level summary. Yes, markets were strong, business was strong, flows that we achieved were a little bit back-ended in the quarter, but certainly the 33% increase in the share--in the stock price caused the share count to be higher. That's why I tried to take a little bit more time to talk about the share count, which we are very sensitive to and we look forward to many more quarters where the stock price appreciates at 30% or higher. And I think we've taken steps that between now and the middle of 2008 put us in a--in a very good position with regard to share counts' influence on our results.

Okay. And as Sean mentioned that, perhaps if there is another deal that happens this year, it is more likely to be sort of back towards the second half of the year. If my numbers are right, I mean, you still have some capital left over from the convert issue. You're obviously generating healthy levels of capital. I mean, in the interim, is there, shall we think of that, do you want to build cash levels? Do you think of reducing some outstanding debt? How shall we think of capital management sort of in the interim?

I think stepping back to, and I believe we've talked about this progressively over the last couple of calls, is that as AMG has grown, and we have more financial flexibility and strength today than we ever have, we're more comfortable having a little bit more leverage in the system and keeping cash balances at a lower level even in the face of a pipeline that we're going to be comfortable executing upon. So as I look to the end of the year, we continue, even though we've purchased a significant number of shares this year, we have close to $0.5 billion of capacity in order to either make new investments, or continue to repurchase shares. But the principal focus, as it always has been, is keeping our cost of capital low, investing those dollars wisely, in order to generate medium to long-term strong growth in our share price.

Okay. Just one last question, I guess it is really more of a request. I appreciate you breaking out the equity method investments for contribution there. I mean, it is very helpful. If it is at all possible maybe in the future to actually break out within assets the asset base that's generating that, that would be I think real helpful for a lot of us.

Sure, sure, sure. Maybe as in our investor presentation, the most significant component of our equity method affiliates is AQR which currently has assets of over $20 billion. But I hear you, and you're not the only one who has made the request, so we'll try to address it in our comments going forward.

I guess the only qualification to that is to restate the importance that we attach and our affiliates attach to not making our affiliates themselves public companies and disclosing the same level of detail about their individual businesses. So we'll have an ongoing sensitivity to specific affiliate disclosures beyond what we've been doing, but we hear the request and we'll work toward finding--striking the right balance.

Great. Thanks, guys.

Our next question comes from David Haas with Fox-Pitt Kelton. Please go ahead.

Good morning.

Good morning.

Hi, David.

I want to make sure I understand the forward purchase contracts specifically. Can you just walk through how they're working? Are you specifically under contract now to purchase shares starting in 2Q '07?

What we've done is purchased, is purchased call options on the stock that would offset the increase in treasury stock method accounting in each of those quarters related to particularly our mandatory convertible, as well as the floating rate convertible. And so we own about 1 million call options on the stock, roughly, and as you look to 2007, we would--we would expect to realize gains from those contracts as the stock price appreciates. As I mentioned, we purchased those when the stock was in a range of 95 to 100, and we feel very good about the prospects of the business going forward, and this is essentially the same as instead of repurchasing, for example, our convertible securities, we're basically just buying a call option that was--that is embedded in each of the convertibles.

Okay. So I understand that they, these are sort of tied to the old convertibles that you--not the most recent preferred that you issued, but if I were to put on sort of an interest cost value for the purchase of the 1 million in call options, you know, that 2% cost of financing for the recent--for the recent deal, how much would that rise? Can I think about it that way?

Oh, my gosh. I would say that it's--I mean, it's hundreds of thousands of dollars for a run rate cost, immaterial to the, to the earnings number.

Okay.

It is a very effective way, without using balance sheet capital, in order to--in order to execute the trade. I mean, as we were--as we were trying to buy this protection, again, feeling bullish about the prospects of the firm, we looked and looked at a series of call options, and the call options, again, a year from now, are those that presented the most attractive value where we were putting forward very little capital and having an opportunity for meaningful benefit in a positive scenario for the stock.

Okay. Thanks very much.

Yes, and maybe I'd just add that as we were looking at this issue, we're cognizant, again, of February '08 being the time when we can call the floating rate convertible at a --in a way that's very attractive to our shareholders and so we're looking to build a bridge between here and there so that investors can have certainty around share counts.

Got you. Okay. Thanks.

Our next question comes from David Chamberman with Imco. Please go ahead.

My question has been answered, thanks.

Thank you, David.

Our next question is a follow-up question from Cynthia Mayer. Please go ahead.

Hi. Thanks. I'm just trying to square the $0.30 in performance fees you expect to the range in guidance. Are you thinking that if you get--if you get the $0.30 that would bring you in at the lower end and the upper end is even more than that?

Well, we give a range and of course we establish ranges around, again a midpoint, begins to feel a little ridiculous to say we believe that earnings for the year are going to be a certain penny amount. But that said, the 30--the $0.30 is how, again, in rough numbers, how we think about getting to the midpoint of that range.

Said differently, Cynthia, we don't want to tighten the range beyond 4% or something. So we'll try to do better as the year goes on, of course, but for now, let's leave it at that.

And I would just step back and how we think about guidance, it's early in the year. We feel very good about these products. Of course, as we look at our portfolio of performance fee products and I think that's a big part of our story over the last two years, the breadth of those products, the diversity or lack of correlated nature among those products. It will be a more important part of our--of our earnings creation over time. If you look compared to last year, that portfolio of products has grown probably 20%, so we have--we have a fair amount of confidence in the ability for that portfolio to generate earnings that are meaningful to our shareholders, but it also, again, feels silly to try and overstate that or over-hype it. But this early in the year, given that they all bill at a time certain that's almost nine months from now.

Great. Thanks a lot.

Our next question comes from Jeff Hopson with AG Edwards. Please go ahead.

Thanks. In regard to the MIG platform, now that you've gained a fair amount of momentum, I'm curious how potentially the addition of new products to that platform could happen over time now that maybe some additional affiliates could see the success or, you know, that you've had.

Nate. You're thinking about it exactly right. I mean, the things that you would see going on at this platform right now, increased sales in separate accounts, trying to focus on the largest opportunities that you've heard us talk a little bit about the increased focus on selling mutual fund product, and the margins associated with that business are little bit better and now you're beginning to see us talk about product development, and I mentioned one that we launched and it is exactly as you described, which is building on the success and momentum, introducing that into the affiliate group, getting additional traction with affiliates, working together on product development, because there is some level of making sure the products you're bringing from the institutional channel into the retail channel are appropriately designed. But all of those things are going on now. So you're thinking about it exactly right.

So is it fair to say that, I mean, you're just still in the early process of really ramping this platform up relative to its potential?

Yes, yes, I think that's fair.

Okay. Great. Thanks.

[OPERATOR INSTRUCTIONS] Mr. Healey, at this time, there are no further questions. Please continue with any closing remarks you may have.

Thank you once again for joining us this morning. I guess to wrap up, we're very pleased with the strength of our results. We're confident in our ability to continue executing our growth strategy and to generate excellent returns for our shareholders. Thank you.

Ladies and gentlemen, this does conclude the Affiliated Managers Group first quarter's results conference call. You may now disconnect and have a pleasant day.