AFFILIATED MANAGERS GROUP, INC. (Form: 10-K, Received: 02/23/2018 16:44:55)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________________________

FORM 10-K



(Mark One)
ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number 001-13459

__________________________________________________________________________

Affiliated Managers Group, Inc.

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)		04-3218510 (IRS Employer Identification Number)
777 South Flagler Drive, West Palm Beach, Florida, 33401 (Address of principal executive offices)

(800) 345-1100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Common Stock ($0.01 par value)		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

____________________________________________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ý	Accelerated filer o	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý

At June 30, 2017, the aggregate market value of the common stock held by non-affiliates of the registrant, based upon the closing price of $165.86 on that date on the New York Stock Exchange, was $ 9,252,014,628 . There were 54,496,210 shares of the registrant’s common stock outstanding on February 21, 2018.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held on or about June 12, 2018 are incorporated by reference into Part III.

Table of Contents

FORM 10-K

TABLE OF CONTENTS



PART I
Item 1.	Business	1
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	15
Item 2.	Properties	15
Item 3.	Legal Proceedings	15
Item 4.	Mine Safety Disclosures	15
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 8.	Financial Statements and Supplementary Data	35
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	73
Item 9A.	Controls and Procedures	73
Item 9B.	Other Information	73
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	74
Item 11.	Executive Compensation	74
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	74
Item 13.	Certain Relationships and Related Transactions and Director Independence	74
Item 14.	Principal Accountant Fees and Services	74
PART IV
Item 15.	Exhibits, Financial Statement Schedules	75
Item 16.	Form 10-K Summary	75

Table of Contents

PART I

Forward-Looking Statements

Certain matters discussed in this Annual Report on Form 10-K, in our other filings with the U.S. Securities and Exchange Commission (the “SEC”), in our press releases and in oral statements made with the approval of an executive officer may constitute“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources and other non-historical statements, and may be prefaced with words such as “outlook,” “guidance,” “believes,” “expects,” “potential,” “preliminary,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “projects,” “intends,” “plans,” “estimates,” “pending investments,” “anticipates” or the negative version of these words or other comparable words. Such statements are subject to certain risks and uncertainties, including, among others, the factors discussed under the caption “Item 1A. Risk Factors.”

These factors (among others) could affect our financial performance and cause actual results to differ materially from historical earnings and those presently anticipated and projected. Forward-looking statements speak only as of the date they are made, and we will not undertake and we specifically disclaim any obligation to release publicly the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of events, whether or not anticipated. In that respect, we caution readers not to place undue reliance on any such forward-looking statements.


Item 1.	Business

We are a global asset management company with equity investments in leading boutique investment management firms, which we refer to as our “Affiliates.” Our innovative partnership approach allows each Affiliate’s management team to own significant equity in their firm and maintain operational autonomy. Our strategy is to generate shareholder value through the growth of existing Affiliates, as well as through investments in new Affiliates and additional investments in existing Affiliates. In addition, we provide centralized assistance to our Affiliates in strategic matters, marketing, distribution, product development and operations. As of December 31, 2017 , our aggregate assets under management were $836.3 billion in more than 550 investment products across a broad range of active return-oriented strategies.

We hold meaningful equity interests in each of our Affiliates and each Affiliate’s management team retains a significant equity interest in their own firm. Affiliate management equity ownership (along with our long-term ownership) aligns our interests, enhances Affiliate management equity incentives and preserves the opportunity for Affiliate management to participate directly in the long-term future growth of their firms. Our innovative partnership approach provides Affiliate management with a degree of liquidity and financial diversification while ensuring that our Affiliates maintain operational autonomy in managing their business, thereby preserving their unique entrepreneurial culture and independence.

Given our long-term partnership approach, we address the ongoing succession planning issues facing the Affiliate’s principal owners as they transition incentives to future generations by facilitating the transfer of equity over time to the next generation of Affiliate management. In certain cases, we do not have an obligation to repurchase Affiliate equity interests, but we may make additional investments to further facilitate Affiliate ownership transition.

Although we invest in boutique investment management firms that we anticipate will grow independently, given our partnership approach, we enhance our Affiliates’ growth prospects by providing access to the resources and scale of a global asset management company.

We are focused on investing in investment management firms around the world managing active return-oriented strategies, including traditional, alternative and wealth management firms. We identify high-quality boutique firms based on our thorough understanding of the asset management industry, and we have developed long-term relationships with a significant number of these firms. Within our target universe, we seek strong and stable boutiques that offer active return-oriented strategies, such as alternative strategies and global equities strategies. These boutiques are typically characterized by a strong multi-generational management team, entrepreneurial culture and commitment to building long-term success.

We anticipate that we will continue to have significant investment opportunities across the global asset management industry, most often in independent investment management firms, and will continue to have investment opportunities resulting from subsidiary divestitures, secondary sales and other special situations. In addition, we also have the opportunity to make additional investments in our existing Affiliates. We are well-positioned to execute upon these investment opportunities through our established process of identifying and cultivating investment prospects, our broad industry relationships and our substantial experience and expertise in structuring and negotiating transactions. We have a strong global reputation as an

Table of Contents

outstanding partner to our Affiliates, and we are widely recognized in the marketplace as providing innovative solutions for the succession and strategic needs of boutique investment management firms.

Investment Management Operations

Through our Affiliates, we provide a comprehensive and diverse range of active return-oriented strategies. As of December 31, 2017, we managed $836.3 billion in traditional and alternative strategies in more than 550 investment products across investment styles, asset classes and geographies. Our traditional strategies include global equities, emerging markets equities, U.S. equities and multi-asset and other strategies. Our alternative strategies include fixed income and equity relative value, systematic diversified, private equity and real assets and other alternative strategies. The following chart provides information regarding our traditional and alternative active return-oriented strategies as of December 31, 2017.

Institutional, Retail and High Net Worth Clients

Through our Affiliates, we provide a comprehensive and diverse range of active return-oriented strategies designed to assist institutional, retail and high net worth clients worldwide in achieving their investment objectives. We manage disciplined and focused investment strategies that address the specialized needs of institutional clients, including foundations and endowments, defined benefit and defined contribution plans for corporations and municipalities, and multi-employer plans. Through our retail distribution platform and the retail distribution efforts of our Affiliates, we provide boutique investment management expertise to retail investors through advisory and sub-advisory services to active return-oriented mutual funds, Undertakings for the Collective Investment of Transferable Securities (“UCITS”) and other retail products. Our investment management services to retail investors are distributed globally through various intermediaries, including independent investment advisors, retirement plan sponsors, broker-dealers, major fund marketplaces, separately managed accounts (“SMAs”), including unified managed accounts (“UMAs”), and bank trust departments. We also provide investment management and customized investment counseling and fiduciary services to high net worth individuals, families and charitable foundations, and to individually managed accounts via intermediaries, including brokerage firms or other sponsors.

Global Distribution

Our Affiliates’ investment services and products are distributed by sales and marketing professionals that develop new business through direct sales efforts and established relationships with consultants and intermediaries around the world. Our global distribution platform operates in key markets to extend the reach of our Affiliates’ own business development efforts and provide the necessary resources and expertise to ensure that our Affiliates’ products and services are responsive to the evolving demands of the global marketplace. We have offices in Sydney, serving investors in Australia and New Zealand; London, serving investors in the UK and continental Europe; Zurich, serving investors in Switzerland; Dubai, serving investors in the Middle East; and Hong Kong, serving investors in Asia.

We also have retail distribution platforms in the U.S. and Ireland. AMG Funds, our U.S. retail distribution platform, provides access to the investment services of our Affiliates and independent fund managers. For non-U.S. investors, our Irish UCITS platform provides access to certain of our Affiliates’ investment services through a family of UCITS funds.

Our Innovative Structure and Relationship with Affiliates

Table of Contents

We establish and maintain long-term partnerships with the management equity owners of our Affiliates, and believe that Affiliate management equity ownership (along with our long-term ownership) aligns our and our Affiliates’ interests, enhances Affiliate management equity incentives and preserves the opportunity for Affiliate management to participate directly in the long-term future growth of their firms. Our innovative partnership approach allows each Affiliate’s management team to retain sufficient equity in their firm to address their particular needs. Affiliate management equity ownership also provides Affiliate management with a degree of liquidity and financial diversification while ensuring, by providing investment and operational autonomy in managing their businesses, that our Affiliates maintain their unique entrepreneurial culture and independence. Although the equity structure of each Affiliate investment is tailored to meet the needs of management equity owners of the particular Affiliate, in all cases, we maintain a meaningful equity interest in the Affiliate, with a significant equity interest retained by Affiliate management.

Each of our Affiliates operates through distinct entities, typically organized as limited liability companies or limited partnerships (or equivalent non-U.S. forms), which affords us the flexibility to design a separate operating agreement for each Affiliate that reflects our customized arrangements with respect to governance, economic participation, equity incentives and the other terms of our relationship. In each case, the operating agreement provides for a governance structure that gives Affiliate management the authority to manage and operate the business on a day-to-day basis. The operating agreement also reflects the specific terms of our economic participation in the Affiliate, which, in each case, uses a “structured partnership interest” to ensure alignment of our economic interests with those of Affiliate management.

When we own a controlling interest in an Affiliate, we typically use structured partnership interests in which we share in the Affiliate’s revenue without regard to expenses. For these Affiliate investments, a set percentage of revenue is allocated to fund operating expenses, including compensation (the “Operating Allocation”), while the remaining revenue (the “Owners’ Allocation”) is allocated to us and Affiliate management in proportion to our respective ownership interests. We and Affiliate management, therefore, participate in any increase or decrease in revenue through the Owners’ Allocation, and Affiliate management also participates in any increase or decrease in margin through the Operating Allocation. We consolidate these Affiliates’ financial results into our Consolidated Financial Statements.

Exhibit 1 (Typical Structured Partnership Interest)

When we do not own a controlling interest in an Affiliate, but have significant influence, we account for our interest in the Affiliate under the equity method. For these Affiliates, we use structured partnership interests in which our share of the Affiliate’s earnings or losses is contractually calculated, allocated and distributed using a formula whereby our share is based on a percentage of the Affiliate’s revenue less certain agreed-upon expenses. This type of partnership interest allows us to benefit from any increase in revenue or any decrease in the expenses that are included in the calculation, but also directly exposes us to any decrease in revenue or any increase in such expenses. We also use structured partnership interests in which our share of the Affiliate’s earnings or losses is contractually calculated, allocated and distributed using a formula whereby our share is based on a percentage of the Affiliate’s revenue without regard to expenses. In this type of partnership interest, our contractual share of revenue generally has priority over distributions to Affiliate management. We do not consolidate Affiliates accounted for under the equity method into our Consolidated Financial Statements. Instead, our share of earnings from these Affiliates, net of amortization and impairments, is included in Income from equity method investments in our Consolidated

Table of Contents

Statements of Income, and our interest in these Affiliates is reported in Equity method investments in Affiliates in our Consolidated Balance Sheets.

Whether we consolidate an Affiliate’s financial results or use the equity method of accounting, we maintain the same partnership approach and provide support and assistance in substantially the same manner for all Affiliates. From time to time, we may change the structure of our interest in an Affiliate in order to better support the Affiliate’s growth strategy.

Competition

Our Affiliates compete with a large number of domestic and foreign investment management firms, as well as with subsidiaries of larger financial organizations. These firms may have significantly greater financial, technological and marketing resources, captive distribution and assets under management, and many of these firms offer an even broader array of products and services in particular investment strategies. Certain of our Affiliates offer their investment management services to the same client types and, from time to time, may compete with each other for clients. In addition, there are relatively few barriers to entry for new investment management firms, especially for those looking to provide investment management services to institutional and high net worth investors. We believe that the most important factors affecting our Affiliates’ ability to compete for clients are the:


•	investment performance track records, investment style, discipline and reputation of our Affiliates and their management teams;


•	depth and continuity of client relationships;


•	diversity of products and level of client service offered;


•	changes in investor preferences, such as the recent growth in passively-managed products;


•	maintenance of strong business relationships with major intermediaries;


•	continued development, either organically or through new investments, of investment strategies to meet the changing needs and risk tolerances of investors; and


•	continued success of our global distribution platform.

The relative importance of each of these factors can vary depending on client type, and the investment management service involved, as well as general market conditions. An Affiliate’s ability to retain and increase assets under management could be adversely affected if client accounts underperform in comparison to relevant benchmarks or peer groups, or if key personnel leave an Affiliate. The ability to compete with other investment management firms also depends, in part, on the relative attractiveness of our or our Affiliate’s active return-oriented investment strategies, market trends, fees or a combination of these factors.

We compete with a number of acquirers of and investors in investment management firms, including other investment management companies, private equity firms, sovereign wealth funds and larger financial organizations. We believe that the most important factors affecting our ability to compete for future investments are the:


•	degree to which target firms view our investment model, purchase price, equity incentive structures and access to economies of scale as preferable (financially, operationally or otherwise) to acquisition or investment arrangements offered by others; and


•	reputation and performance of our Affiliates, by which target firms may judge us and our future prospects.

Government Regulation

Our and our Affiliates’ businesses are subject to complex and extensive regulation by various regulatory authorities and exchanges in jurisdictions around the world, including those summarized below. These regulations may change from time to time, including as a result of political developments in the U.S. and the other jurisdictions in which we and our Affiliates operate. Our or our Affiliates’ businesses may be subject to inquiries by regulatory authorities, and these regulatory authorities may also conduct examinations or inspections of our operations or those of our Affiliates with or without notice. Any determination of a failure to comply with laws, rules or regulations could result in disciplinary or enforcement action, fines, suspensions, or revocation or limitation of business activities or registration. See “Item 1A. Risk Factors.”

Table of Contents

AMG Funds is an adviser registered with the SEC under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and sponsors approximately 65 U.S. mutual funds registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), that in aggregate form the AMG Funds complex. AMG Funds serves as the investment manager and/or administrator for the AMG Funds complex, which includes Affiliates and unrelated investment managers as sub-advisers. A number of our Affiliates also serve as advisers or sub-advisers to mutual funds sponsored by them or by third parties. Mutual funds and their advisers are regulated by the SEC, and the SEC has adopted regulations under the Advisers Act and the Investment Company Act that govern the operations of mutual funds. The Advisers Act imposes numerous obligations on registered investment advisers, including fiduciary duties, recordkeeping requirements, operational requirements and compliance and disclosure obligations. The Investment Company Act imposes additional obligations on fund advisers, including investment restrictions and other governance, compliance, reporting and fiduciary obligations relating to the management of mutual funds.

Outside of the U.S., Affiliated Managers Group Limited (“AMG Limited”) is regulated by the Financial Conduct Authority in the UK, and is authorized as a promoter in Ireland by the Central Bank of Ireland. AMG Limited serves as the promoter for our Irish UCITS platform, which sponsors UCITS funds managed by Affiliates and marketed by AMG Limited in Europe. AMG Limited’s subsidiary, AMG (Switzerland) AG, is regulated by the Swiss Financial Market Supervisory Authority (“FINMA”) as a distributor of collective investment schemes to qualified investors. AMG Limited’s branch, AMG Limited (Dubai), is regulated as a representative office by the Dubai Financial Services Authority. Affiliated Managers Group (Hong Kong) Limited is regulated by the Securities and Futures Commission in Hong Kong, and Affiliated Managers Group Pty Ltd is regulated by the Australian Securities and Investments Commission in Australia. Our ability to transact business in these countries, and to conduct cross border activities, is subject to the continuing availability of regulatory authorization.

Our Affiliates’ investment management operations are also subject to regulation by U.S. and non-U.S. authorities and exchanges, which impose a broad array of requirements on the conduct of business. The majority of our Affiliates are registered as investment advisers under the Advisers Act, which obligates them to act as fiduciaries for their clients. Many of our Affiliates are also subject to non-U.S. regulatory oversight and the standards of conduct of the other jurisdictions in which they do business. We have Affiliates domiciled in a number of jurisdictions, and these Affiliates are subject to regulation under the laws, rules and regulations of and supervision by governmental authorities in each of these jurisdictions. Our Affiliates also offer their products and services in many countries around the world and are subject to various requirements relating to such activities. Many of our Affiliates sponsor registered and unregistered funds in the U.S. and in other jurisdictions, and are subject to regulatory requirements in those jurisdictions and in the jurisdictions where those funds may be offered. Our Affiliates invest in publicly-traded securities of issuers across the globe and are subject to requirements in numerous jurisdictions for reporting of beneficial ownership positions and other requirements. Virtually all aspects of the asset management business, including investment strategies and trading, product-related sales and distribution activities, are subject to regulation. These laws, rules and regulations are primarily intended to protect the clients of asset managers and generally grant supervisory agencies and regulatory bodies broad administrative powers, including the power to set minimum capital requirements and to impose fines or limit or restrict an investment adviser from conducting its business in the event of a failure to comply with such laws, rules and regulations.

We and our Affiliates are also subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and related regulations, with respect to their retirement plan clients. ERISA imposes duties on persons who are fiduciaries under ERISA, and prohibits certain transactions involving related parties to a retirement plan. The U.S. Department of Labor administers ERISA and regulates investment advisers who service retirement plan clients, and has been increasingly active in proposing and adopting additional regulations applicable to the asset management industry, including a new rule extending the application of the fiduciary duty to brokers and other intermediaries in the context of retirement advice.

We and certain of our Affiliates are also members of the National Futures Association (“NFA”) and are regulated by the U.S. Commodity Futures Trading Commission (“CFTC”) with respect to the management of mutual funds and other products that utilize futures, swaps or other derivative products. The NFA is a self-regulatory organization in the U.S. with broad authority to conduct examinations and investigations of its members, which can result in censure, fine, suspension or expulsion of an NFA member, its officers or registered employees.

In addition, we and certain of our Affiliates are registered broker-dealers and members of the Financial Industry Regulatory Authority (“FINRA”), for the purpose of distributing funds or other asset management products. These broker-dealers are subject to net capital rules that mandate that they maintain certain levels of capital. FINRA has adopted extensive regulatory requirements relating to sales practices, registration of personnel, compliance and supervision, and compensation and disclosure. FINRA and the SEC conduct periodic examinations of member broker-dealers. The SEC, FINRA and state securities commissions may also conduct administrative proceedings that can result in censure, fine, suspension or expulsion of

Table of Contents

a broker-dealer, its officers or registered employees. We and our Affiliates may also be subject to regulatory capital requirements, including those of federal, state and non-U.S. regulatory agencies.

Due to the extensive laws and regulations to which we and our Affiliates are subject, we must devote substantial time, expense and effort to remaining current on, and to address, legal and regulatory compliance matters. We have established compliance programs for each of our operating subsidiaries, and each of our Affiliates has established a compliance program to address regulatory compliance requirements for its operations. We and our Affiliates have experienced legal and compliance professionals in place to address these requirements, and have relationships with various legal and regulatory advisors in each of the countries where we and our Affiliates have business interests.

Employees and Corporate Organization

As of December 31, 2017 , we had approximately 4,400 employees, the substantial majority of which were employed full-time by our Affiliates. Neither we nor our Affiliates are subject to any collective bargaining agreements, and we believe that our and our Affiliates’ labor relations are good. We were formed in 1993 as a corporation under the laws of the State of Delaware.

Our Web Site

Our web site is www.amg.com . Our web site provides information about us, and, from time to time, we may use it as a distribution channel of material company information. We routinely post financial and other important information regarding the Company in the Investor Relations section of our web site and we encourage investors to consult that section regularly. The Investor Relations section of our web site also includes copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including exhibits, and any amendments to those reports filed or furnished with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We make these reports available through our web site as soon as reasonably practicable after our electronic filing of such materials with, or the furnishing of them to, the SEC. The information contained or incorporated on our web site is not a part of this Annual Report on Form 10-K.

Table of Contents


Item 1A.	Risk Factors

We and our Affiliates face a variety of risks that are substantial and inherent in our businesses, including those related to markets, liquidity, credit, operational, legal and regulatory risks. The following are some of the more important factors that could affect our and our Affiliates’ businesses. Certain statements in “Risk Factors” are forward-looking statements. See “Forward-Looking Statements.”

Our financial results depend on the receipt of asset and performance based fees by our Affiliates, and are impacted by changes in our total assets under management as well as the relative levels of assets under management among our Affiliates.

Our financial results depend on the receipt of asset and performance based fees by our Affiliates. Asset based fees are primarily based on a percentage of the value of assets under management, and vary with the nature of the account or product managed. In certain instances, our Affiliates are paid fees based on investment performance on an absolute basis or relative to a benchmark and, as such, are directly dependent upon investment results that may vary substantially from year to year. The total level of our assets under management generally or with particular Affiliates could be adversely affected by conditions outside of our control, including:


•	a decline in market value of such assets, including due to exchange rate fluctuations, or declines in the capital markets and in the equity markets in particular;


•	changes in investor risk tolerance or investment preferences, such as the recent growth in passively-managed products, which could result in investor allocations away from active return-oriented strategies offered by our Affiliates;


•	our Affiliates’ ability to maintain existing client relationships and fee structures;


•	our or our Affiliates’ ability to market products and services, which may be impacted by volatility in the capital markets or in the prices of securities;


•	our ability to market products and services available through AMG Funds;


•	unanticipated changes in currency exchange rates, interest rates, inflation rates or the yield curve;


•	global economic conditions, which may be exacerbated by changes in the equity or debt marketplaces;


•	financial crises, political or diplomatic developments, war, terrorism or natural disasters; and


•	other factors that are difficult to predict.

A reduction in our assets under management would adversely affect the fees payable to our Affiliates and, ultimately, our results of operations and financial condition. Further, our structured partnership interests are tailored to meet the needs of each Affiliate and are, therefore, varied, and our revenue and profitability may be adversely affected by changes in the relative performance and the relative levels of assets under management among our Affiliates, independent of overall effective fee rates and our total level of assets under management. Additionally, certain Affiliates contribute significantly to our results of operations and, therefore, changes in the assets under management at such Affiliates could have a disproportionate adverse impact on our results of operations.

Our growth strategy depends upon the continued growth of our existing Affiliates and upon making investments in new boutique investment management firms or additional investments in existing Affiliates.

Our Affiliates may not maintain their respective levels of performance or contribute to our growth at their historical or currently anticipated levels. Also, our Affiliates may be unable to carry out their management succession plans, which may adversely affect their operations and revenue streams and thus our results of operations.

Our continued success in investing in boutique investment management firms will depend upon our ability to find suitable firms in which to invest or make additional investments in existing Affiliates, our ability to negotiate agreements with such firms on acceptable terms and our ability to raise the capital necessary to finance such transactions. In addition, our investments involve a number of risks, including the existence of unknown liabilities that may arise after making an investment. We cannot be certain that we will be successful in making investments in such firms or that they will have favorable operating results following our investment, which could have an adverse effect on our financial condition and results of operations.

Table of Contents

Historically, equity markets and our common stock have been volatile.

The market price of our common stock has experienced and may continue to experience volatility, and the broader equity markets have experienced and may again experience significant price and volume fluctuations. In addition, our announcements of our financial and operating results or other material information, including changes in net client cash flows and assets under management, changes in our financial guidance or our failure to meet such guidance, changes in general conditions in the economy or the financial markets and other developments affecting us, our Affiliates or our competitors, as well as geopolitical, regulatory, economic, and business factors unrelated to us, could cause the market price of our common stock to fluctuate substantially.

If our or our Affiliates’ reputations are harmed, we could suffer losses in our business and financial results.

Our business depends on earning and maintaining the trust and confidence of our Affiliates and our stockholders, and on our and our Affiliates’ reputations among existing and potential clients. Our and our Affiliates’ reputations are critical to our business and could be impacted by events that may be difficult or impossible to control, and costly or impossible to remediate. For example, alleged or actual failure by us, our Affiliates or our respective employees to comply with applicable laws, rules or regulations, errors in our public reports, threatened or actual litigation against us, any of our Affiliates or our respective employees, cyber-attack or data breach incidents, or the public announcement and potential publicity surrounding any of these events, even if satisfactorily addressed or if no violation or wrongdoing actually occurred, could adversely impact our or our Affiliates’ reputations, our relationships with our Affiliates and our ability to negotiate agreements with new investment management firms, any of which could have an adverse effect on our financial condition and results of operations.

Our and our Affiliates’ businesses are highly regulated.

Our and our Affiliates’ businesses are subject to complex and extensive regulation by various regulatory and self-regulatory authorities and exchanges in jurisdictions around the world, which, for our Affiliates and AMG Funds, include those applicable to investment advisers, as detailed in “Government Regulation” in Item 1. These laws, rules and regulations impose requirements, restrictions and limitations on our and our Affiliates’ businesses, and compliance with these laws, rules and regulations can result in significant expense. Further, this regulatory environment may be altered without notice by new laws or regulations, revisions to existing laws or regulations or new or revised interpretations, guidance or enforcement priorities. Any determination of a failure to comply with applicable laws, rules or regulations could expose us or our Affiliates to civil liability, criminal liability or disciplinary or enforcement action, with penalties that could include the disgorgement of fees, fines, sanctions, suspensions, termination of adviser status or censure of individual employees or revocation or limitation of business activities or registration, any of which could have an adverse impact on our stock price, financial condition and results of operations. Further, if we or any of our Affiliates were to fail to comply with applicable laws, rules or regulations or be named as a subject of an investigation or other regulatory action, the public announcement and potential publicity surrounding any such investigation or action could have an adverse effect on our stock price and result in increased costs, even if we or our Affiliates were found not to have violated such laws, rules or regulations.

Globally, recent regulatory proposals have called for more stringent oversight of the financial services industry in which we and our Affiliates operate. Such proposals, if adopted, could adversely affect our and our Affiliates’ businesses, increase compliance costs, require that we or our Affiliates curtail operations or investment offerings or impact our and our Affiliates’ access to capital and the market for our common stock. For example, in the U.S., recent rulemaking by the SEC has created additional reporting requirements for advisers and funds, and additional requirements for mutual funds in the areas of liquidity management. In addition, U.S. Department of Labor regulations that became effective in 2017 have extended the application of fiduciary duty standards under ERISA to brokers and other intermediaries in the context of retirement advice, which impacts the way retirement products are sold and could negatively impact the distribution of Affiliate products. The SEC has announced its intention to propose fiduciary rulemaking that could alter current requirements for advisors or further impact the ability of brokers and other intermediaries to distribute our Affiliates’ products.

Our and our Affiliates’ businesses may also be impacted by financial services reform initiatives enacted or under consideration by the European Union. For example, regulators continue to consider whether asset managers or funds, or certain asset management products or activities, should be designated as “systemically important,” and, therefore, subject to additional regulation. The European Union has also instituted the revised Markets in Financial Instruments Directive (“MiFID II”), which requires the unbundling of research and execution charges for trading and which may result in increased costs for us and our Affiliates. We and certain of our Affiliates will also be impacted by the European Union’s new General Data Protection Regulation, effective May 2018, which will expand data protection rules for individuals within the European Union and for personal data exported outside the European Union, and any determination of a failure to comply with such regulation could result in significant fines. Our and our Affiliates’ businesses may also be impacted by the terms of the UK’s exit from the European Union, which could impact our or our Affiliates’ ability to conduct operations pursuant to a European passport.

Table of Contents

These new laws, rules and regulations could limit our and our Affiliates’ businesses, result in increased compliance costs and expenses and expose us and our Affiliates to potential fines and penalties.

Our and our Affiliates’ international operations are subject to foreign risks, including political, regulatory, economic and currency risks.

We and certain of our Affiliates operate offices or advise clients outside the U.S., and a number of our Affiliates are based outside the U.S. Accordingly, we and certain of our Affiliates are subject to risks inherent in doing business internationally, in addition to the risks our businesses face more generally. These risks may include changes in applicable laws and regulatory requirements, difficulties in staffing and managing foreign operations, longer payment cycles, difficulties in collecting investment advisory fees receivable, different (and in some cases less stringent) legal, regulatory and accounting regimes, political instability, fluctuations in currency exchange rates, expatriation controls, expropriation risks and potential adverse tax consequences. In the UK, for example, our and our Affiliates’ businesses may be impacted by the terms of the UK’s exit from the European Union. In addition, we and certain of our Affiliates are required to maintain minimum levels of capital, and such capital requirements may be increased from time to time, which may have the effect of limiting withdrawals of capital, repayment of intercompany loans and payment of distributions to us by these Affiliates. These or other risks related to our and our Affiliates’ non-U.S. operations may have an adverse effect on our business, financial condition and results of operations.

Failure to comply with applicable laws, rules, regulations, codes, directives, notices or guidelines in any jurisdiction outside of the U.S. could result in a wide range of penalties and disciplinary actions, including fines, censures and the suspension or expulsion from a particular jurisdiction or market or the revocation of licenses, any of which could adversely affect our or our Affiliates’ reputations and operations. Regulators in jurisdictions outside of the U.S. could also change their policies, regulations or laws in a manner that might restrict or otherwise impede the ability to offer our Affiliates’ investment products and services in their respective markets, or we or our Affiliates may be unable to keep up with, or adapt to, the ever-changing, complex regulatory requirements in such jurisdictions or markets, which could further negatively impact our business.

Changes in tax laws, including the recent changes in U.S. tax laws, or exposure to additional tax liabilities could have an adverse impact on our business, financial condition and results of operations.

We are subject to income taxes as well as non-income-based taxes in the U.S. and certain foreign jurisdictions. Tax laws, regulations and administrative practices in these jurisdictions may be subject to significant change, with or without notice, and significant judgment is required in estimating and evaluating our tax provision and accruals. Our effective tax rates could be affected by a change in the mix of earnings in countries with differing statutory tax rates, as well as changes in foreign currency exchange rates, changes to our existing business and changes in relevant tax, accounting or other laws, regulations, administrative practices and interpretations. In December of 2017, changes in U.S. tax laws were enacted, which significantly revised U.S. corporate income tax by, among other things, lowering corporate income tax rates, implementing a modified territorial tax system and imposing a one-time transition tax on deemed repatriated foreign earnings and profits. See Note 22 of the Consolidated Financial Statements. Although we expect these changes to result in an ongoing net benefit to our results of operations, primarily due to lower U.S. tax rates, the legislation is unclear in some respects and the U.S. Treasury Department, as well as state tax authorities and the Financial Accounting Standards Board, have yet to implement regulations, rules and accounting standards, as applicable, and could issue further interpretations and guidance, the timing and substance of which is uncertain. This legislation could also be subject to potential amendments and technical corrections, which could have retroactive effect. Further, a portion of our earnings are earned outside the U.S., and the foreign government agencies in jurisdictions in which we do business continue to focus on the taxation of multinational companies, and could implement changes to their tax laws in response to the changes in U.S. tax laws or otherwise. Any changes to U.S. or foreign tax laws, regulations, accounting standards or administrative practices, or the release of additional guidance, interpretations or other information relating to the recent U.S. tax legislation or otherwise, could impact our estimated effective tax rate and overall tax expense, as well as our earnings estimates, and could result in adjustments to our treatment of deferred taxes, including the realization or value thereof, or in unanticipated additional tax liabilities, any of which could have an adverse effect on our business, financial condition and results of operations.

In addition, we are subject to ongoing tax examinations by certain tax authorities in the U.S., and may be subject to future tax examinations by tax authorities in the U.S. and in certain foreign jurisdictions. We regularly assess the likely outcomes of these examinations in order to determine the appropriateness of our tax provision; however, tax authorities may disagree with certain positions we have taken and may assess additional taxes and/or penalties and interest. The uncertainties relating to the recent changes in U.S. tax laws may increase the potential for this to occur, and we could have disagreements with the U.S. Internal Revenue Service on tax returns based on certain filing positions. There can be no assurance that we will accurately predict the outcomes of these examinations and the actual outcomes could have an adverse impact on our financial condition and results of operations.

Table of Contents

Our Affiliates’ autonomy limits our ability to alter their management practices and policies, and we may be held responsible for liabilities incurred by certain of our Affiliates.

Although our agreements with Affiliates typically give us the authority to control and/or vote with respect to certain of their business activities, we generally are not directly involved in managing our Affiliates’ day-to-day activities, including investment management operations, fee levels, marketing, product development, client relationships, employee matters, compensation programs and compliance activities. As a consequence, our financial condition and results of operations may be adversely affected by problems stemming from the day-to-day operations of our Affiliates, where weaknesses or failures in internal processes or systems, legal or regulatory matters, or other operational challenges could lead to a disruption of our Affiliates’ operations, liability to their clients, exposure to claims or disciplinary action or reputational harm.

Some of our Affiliates are limited liability companies or limited partnerships (or equivalent non-U.S. forms) of which we, or entities controlled by us, are the general partner or managing member. Consequently, to the extent that any of these Affiliates incur liabilities or expenses that exceed their ability to pay for them, we may be directly or indirectly liable for their payment. Similarly, an Affiliate’s payment of distributions to us may be subject to claims by potential creditors, and an Affiliate may default on distributions that are payable to us. In addition, with respect to each of these Affiliates, we may be held liable in some circumstances as a control person for the acts of the Affiliate or its employees. Our Affiliates also may face various claims, litigation or complaints from time to time and we cannot predict the eventual outcome of such matters, some of which may be resolved in a manner unfavorable to us or our Affiliates, or whether any such matters could become material to a particular Affiliate or us in any reporting period. While we and our Affiliates maintain errors and omissions and general liability insurance in amounts believed to be adequate to cover potential liabilities, we cannot be certain that we or our Affiliates will not have claims or related expenses that exceed the limits of available insurance coverage, that the insurers will remain solvent and will meet their obligations to provide coverage or that insurance coverage will continue to be available to us and our Affiliates with sufficient limits and at a reasonable cost. A judgment in excess of available insurance coverage could have an adverse effect on our financial condition and results of operations.

We may be involved in legal proceedings and regulatory matters from time to time, any one or combination of which could have an adverse effect on our reputation, financial condition and results of operations.

From time to time in the ordinary course of business, we may be subject to various legal matters, including litigation, regulatory inquiries and administrative proceedings, which could, whether with or without merit, be time consuming and expensive to defend and could divert management’s attention and resources. While we maintain insurance in amounts we believe to be adequate to cover potential liabilities, we cannot be certain that we will not have claims or related expenses that exceed the limits of available insurance coverage or that such coverage will continue to be available to us with sufficient limits and at a reasonable cost. The public announcement and potential publicity surrounding any legal proceedings or regulatory matters, as well as any judgments, findings, settlements or allegations of wrongdoing, could adversely affect our reputation, current and future business relationships, financial condition and results of operations.

The agreed-upon expense allocation under our structured partnership interests in which we share in the Affiliate’s revenue without regard to expenses may not be large enough to pay for all of the respective Affiliate’s operating expenses.

In the case of our structured partnership interests in which we share in the Affiliate’s revenue without regard to expenses, the Affiliate allocates a specified percentage of its revenue to us, while using the remainder of its revenue for operating expenses and for distributions to Affiliate management. In this type of partnership interest, our agreed allocations may not anticipate changes in the revenue and operating expense base of the Affiliate, and the revenue remaining after our specified share of revenue is allocated to us may not be large enough to cover all of the Affiliate’s operating expenses. While our distributions generally have priority, we may elect to defer or forgo the receipt of our share of the Affiliate’s revenue to permit the Affiliate to fund such operating expenses, with the aim of maximizing the long-term benefits. We cannot be certain that any such deferral or forbearance would be of any greater long-term benefit to us, and such a deferral or forbearance may have an adverse effect on our near- or long-term financial condition and results of operations. Further, unanticipated changes in revenue, operating expenses or other commitments could leave the Affiliate with a shortfall in remaining funds for distribution to us or to Affiliate management, which may have an adverse effect on our financial condition generally and on our results of operations for the applicable reporting period.

When our structured partnership interest is calculated by reference to the Affiliate’s revenue less certain agreed-upon expenses, we have direct exposure to fluctuations in revenue and operating expenses.

In the case of our structured partnership interests that are calculated by reference to an Affiliate’s revenue less certain agreed-upon expenses, we benefit from any increase in revenue or any decrease in the expenses that are included in the calculation, but are also directly exposed to any decrease in revenue or any increase in such expenses, which we may not anticipate and which could be significant. Further, the impact of such decreases and increases in revenue or expenses at these

Table of Contents

Affiliates on our earnings and our stock price could increase if the portion of our earnings derived from such Affiliates increases. Additionally, we may elect to defer or forgo the receipt of our share of the Affiliate’s revenue, or to adjust the agreed-upon expenses allocated to us, to permit the Affiliate to fund expenses in light of unanticipated changes in revenue or operating expenses, with the aim of maximizing the long-term benefits. We cannot be certain that any such deferral or forbearance would be of any greater long-term benefit to us, and such a deferral or forbearance may have an adverse effect on our near- or long-term financial condition and results of operations.

We may restructure our relationships with Affiliates, and cannot be certain that any such restructurings will benefit us in the near- or long-term.

From time to time, we may restructure our relationships with our Affiliates, which could, among other things, include changes to our structured partnership interests, including the calculation of our share of revenue and/or operating expenses. Such restructurings may be done in order to address an Affiliate’s succession planning, changes in its operating expense base, strategic planning or other developments. Any restructuring of our interest in an Affiliate may result in additional investments from us or a reduction of our interest in the Affiliate, and could impact our share of the Affiliate’s revenue and/or operating expenses. In addition, certain of our equity method Affiliates have customary rights in certain circumstances to sell a majority interest in their firm to a third party and to cause us to participate in such sale. Any such changes could have an adverse impact on our financial condition and results of operations.

Our industry is highly competitive.

Our Affiliates compete with a broad range of domestic and foreign investment management firms, including public, private and client-owned investment advisors, firms managing passively-managed products, as well as other firms managing active return-oriented strategies, firms associated with securities broker-dealers, financial institutions, insurance companies, private equity firms, sovereign wealth funds and other entities. This competition may reduce the fees that our Affiliates can obtain for investment management services. We believe that our Affiliates’ ability to compete effectively with other firms depends upon our Affiliates’ strategies, investment performance, reputations, market trends, fee structures and client-servicing capabilities, and the marketing and distribution of their investment strategies, among other factors. See “Competition” in Item 1. Our Affiliates may not compare favorably with their competitors in any or all of these categories. From time to time, our Affiliates may also compete with each other for clients. Our Affiliates represent a diverse group of boutique investment management firms with predominantly active return-oriented strategies, rather than passively-managed products, which typically carry lower fee rates. Changes in investor risk tolerance or investment preferences, such as the recent growth in passively-managed products, could result in investor allocation away from active return-oriented strategies.

The market for acquisitions of interests in boutique investment management firms is highly competitive. Many other public and private financial services companies, including commercial and investment banks, private equity firms, sovereign wealth funds, insurance companies and investment management firms, which may have significantly greater resources than we do, also invest in or buy boutique investment management firms. Further, our innovative partnership approach with our Affiliates is designed to provide enhanced incentives for management owners while enabling us to protect our interests, including through structured partnership interests and long-term employment agreements with key members of the firm. Target investment management firms may prefer investments in their firms under terms and structures offered by our competitors. We cannot guarantee that we will be able to compete effectively with such companies, that new competitors will not enter the market or that such competitors will not make it more difficult or not feasible for us to maintain existing investments or to make new investments in boutique investment management firms.

The failure to consummate announced investments in new investment management firms could have an adverse effect on our financial condition and results of operations.

Consummation of our announced investments is generally subject to a number of closing conditions, contingencies and approvals, including but not limited to obtaining certain consents of the investment management firms’ clients and applicable regulatory approvals. In the event that an announced transaction is not consummated, we may experience a decline in the price of our common stock to the extent that the then-current market price reflects a market assumption that we will complete the announced transaction. In addition, the fact that a transaction did not close after we announced it publicly may negatively affect our prospects and our ability to consummate transactions in the future. Finally, we must pay costs related to these investments, including transaction fees, even if the investments are not completed, which may have an adverse effect on our financial condition and results of operations.

Table of Contents

We expect that we will need to raise additional capital in the future, and existing or future resources may not be available to us in sufficient amounts or on acceptable terms.

While we believe that our existing cash resources and cash flow from operations will be sufficient to meet our working capital needs for normal operations for the foreseeable future, our continuing acquisitions of interests in new boutique investment management firms and additional investments in existing Affiliates may require additional capital. Further, we are contingently liable to make additional purchase payments (of up to $188.2 million through 2019) upon the achievement of specified financial targets in connection with certain of our prior acquisitions. As of December 31, 2017 , we expected to make payments of $10.2 million ($8.2 million in 2018) to settle such obligations. We also have committed to co-invest in certain investment partnerships, which commitments may be called in future periods.

Subject to certain limitations, when we own a controlling interest in an Affiliate, we generally provide the Affiliate equity holders the conditional right to put equity interests to us over time. Because these obligations are conditional and dependent upon the individual equity holder’s decision to sell his or her equity, it is difficult to predict the frequency and magnitude of these repurchases (our Redeemable non-controlling interests balance at December 31, 2017 was $811.9 million ). We may also call all or a portion of these equity interests upon, among other events, the termination of an equity holder’s employment, although these rights may be limited or suspended in certain circumstances. In addition, in connection with an investment in an Affiliate accounted for under the equity method, we entered into an arrangement with a minority owner of the Affiliate that gives such owner the right to sell a portion of its ownership interest in the Affiliate to us annually beginning in the fourth quarter of 2018. The purchase price of these conditional purchases will be at fair market value on the date of the transaction. These obligations may require more cash than is then available from operations. Thus, we may need to raise capital by making additional borrowings or by selling shares of our common stock or other equity or debt securities, or to otherwise refinance a portion of these obligations.

As of December 31, 2017 , we had outstanding senior debt and convertible securities of $2.0 billion. Our level of indebtedness may increase if we fund one or more future investments through borrowings. This additional indebtedness could increase our vulnerability to general adverse economic and industry conditions and would require us to dedicate a greater portion of our cash flow from operations to payments on our indebtedness.

The financing activities described above could increase our interest expense, decrease our net income (controlling interest) or dilute the interests of our existing stockholders. In addition, our access to further capital, and the cost of capital we are able to access, is influenced by a number of factors, including the state of global credit and equity markets, interest rates, credit spreads and our credit ratings. We are rated A3 by Moody’s Investors Service and A- by S&P Global Ratings. The rating agencies could decide to modify their outlook or downgrade our ratings or the entire investment management industry, thereby making it difficult to access capital markets. In addition, a reduction in our credit rating could increase our borrowing costs.

Our debt agreements impose certain covenants relating to the conduct of our business, including financial covenants under our credit facilities, and, if amounts borrowed or outstanding under these agreements were subject to accelerated repayment, we may not have sufficient assets or liquidity to repay such amounts in full.

Our credit facilities require us to maintain specified financial ratios, including a maximum leverage ratio and a minimum interest coverage ratio, and also contain customary affirmative operating covenants and negative covenants that, among other things, place certain limitations on our and our subsidiaries’ ability to incur debt, merge or transfer assets and on our ability to create liens. The indentures governing our senior notes also contain restrictions on our ability to merge or transfer assets and on our ability to create liens. The breach of any covenant (either due to our actions or, in the case of financial covenants, due to a significant and prolonged market driven decline in our operating results) could result in a default under the applicable debt agreement. In the event of any such default, lenders that are party to the credit facilities could refuse to make further extensions of credit to us. Further, in the event of certain defaults, amounts borrowed under the credit facilities and/or outstanding under the senior notes, together with accrued interest and other fees, could become immediately due and payable. If any indebtedness under the credit facilities or the indentures governing the senior notes was subject to accelerated repayment, we may not have sufficient liquid assets to repay such indebtedness in full.

We have substantial intangibles on our balance sheet, and any impairment of our intangibles could adversely affect our financial condition and results of operations.

At December 31, 2017 , our total assets were $8.7 billion, of which $4.1 billion were intangible assets, and $3.3 billion were equity method investments in Affiliates, an amount primarily composed of intangible assets. Determining the value of intangible assets, and evaluating them for impairment, requires management to exercise judgment. Our intangible assets may become impaired as a result of any number of factors, including changes in market conditions, losses of investment management contracts or declines in the value of managed assets. We cannot be certain that we will realize the value of such

Table of Contents

intangible assets. An impairment of our intangible assets or an other-than-temporary decline in the value of our equity investments could adversely affect our financial condition and results of operations.

We and our Affiliates rely on certain key personnel and cannot guarantee their continued service.

We depend on the efforts of our executive officers and our other officers and employees. Our executive officers, in particular, play an important role in the stability and growth of our existing Affiliates and in identifying potential investment opportunities. We generally do not have employment agreements with our executive officers, although each has a significant deferred equity interest in the Company and is subject to non-solicitation and non-competition restrictions that may be triggered upon their departure. However, there is no guarantee that these officers will remain with the Company.

In addition, our Affiliates depend heavily on the services of key principals who, in many cases, have managed their firms for many years. These principals often are primarily responsible for their firm’s investment decisions. Although we use a combination of economic incentives, transfer restrictions and, in some instances, non-solicitation, non-competition and employment agreements in an effort to retain key management personnel, there is no guarantee that these principals will remain with their firms. Since certain Affiliates contribute significantly to our revenue, the loss of key management personnel at these Affiliates could have a disproportionately adverse impact on our business, financial condition and results of operations.

Investment management contracts are subject to termination on short notice.

Through our Affiliates, we derive almost all of our asset and performance based fees from clients pursuant to investment management contracts. While certain Affiliates’ private equity and alternative products have long-term commitment periods, many of our Affiliates’ investment management contracts are terminable by the client without penalty upon relatively short notice (typically not longer than 60 days). We cannot be certain that our Affiliates will be able to retain their existing clients or attract new clients. If clients terminate their investment management contracts or withdraw a substantial amount of funds, it is likely to harm our results of operations. In addition, investment management contracts with mutual funds are subject to annual approval by each fund’s board of directors.

Our or our Affiliates’ controls and procedures and risk management policies may be inadequate, fail or be circumvented, and procedures may be inadequate, and operational risk could adversely affect our or our Affiliates’ reputation and financial position.

We and our Affiliates have adopted various controls, procedures, policies and systems to monitor and manage risk in our and their businesses. While we currently believe that our and our Affiliates’ operational controls are effective, we cannot provide assurance that those controls, procedures, policies and systems will always be adequate to identify and manage the internal and external risks in our and our Affiliates’ various businesses. Furthermore, we or our Affiliates may have errors in business processes or fail to implement proper procedures in operating our or their businesses, which may expose us or our Affiliates to risk of financial loss or failure to comply with regulatory requirements. We and our Affiliates are also subject to the risk that employees or contractors, or other third parties, may deliberately seek to circumvent established controls to commit fraud or act in ways that are inconsistent with our or our Affiliates’ controls, policies and procedures. The financial and reputational impact of control failures can be significant.

In addition, our and our Affiliates’ businesses and the markets in which we and our Affiliates operate are continuously evolving. If our or our Affiliates’ risk frameworks are ineffective, either because of a failure to keep pace with changes in the financial markets, regulatory requirements, our or our Affiliates’ businesses, counterparties, clients or service providers or for other reasons, we or our Affiliates could incur losses, suffer reputational damage or be out of compliance with applicable regulatory or contractual mandates or expectations.

Failure to maintain and properly safeguard an adequate technology infrastructure may limit our or our Affiliates’ growth, result in losses or disrupt our or our Affiliates’ businesses.

Our and our Affiliates’ businesses are reliant upon financial, accounting and technology systems and networks to process, transmit and store information, including sensitive client and proprietary information, and to conduct many business activities and transactions with clients, advisors, regulators, vendors and other third parties. The failure to implement, maintain and safeguard an infrastructure commensurate with the size and scope of our and our Affiliates’ businesses could impede productivity and growth, which could adversely impact our financial condition and results of operations. Further, we and our Affiliates rely on third parties for certain aspects of our respective businesses, including financial intermediaries and technology infrastructure and service providers, including brokers, custodians, administrators and other agents, and these parties are also susceptible to similar risks.

Although we and our Affiliates take protective measures and endeavor to modify them as circumstances warrant, computer systems, software, networks and mobile devices, including those of third parties on whom we and our Affiliates rely, may be

Table of Contents

vulnerable to cyber-attacks, data privacy or security breaches, unauthorized access, theft, misuse, computer viruses or other malicious code and other events that could have a security impact. If any such events occur, it could jeopardize confidential, proprietary or other sensitive information of ours, our Affiliates and our respective clients, employees or counterparties that may be stored in, or transmitted through, internal or third-party computer systems, networks and mobile devices, or could otherwise cause interruptions or malfunctions in our and our Affiliates’ operations or those of our respective clients or counterparties, or in the operations of third parties on whom we and our Affiliates rely. The occurrence of any such events could also result in litigation or regulatory action. Despite efforts to ensure the integrity of systems and networks, it is possible that we, our Affiliates or third-party service providers may not be able to anticipate or to implement effective preventive measures against all threats, especially because the techniques used change frequently and can originate from a wide variety of sources. As a result, we or our Affiliates could experience disruption, significant losses, increased costs, reputational harm, regulatory actions or legal liability, any of which could have an adverse effect on our financial condition and results of operations. We or our Affiliates may be required to spend significant additional resources to modify protective measures or to investigate and remediate vulnerabilities or other exposures, and we or our Affiliates may be subject to litigation, regulatory investigations and potential fines, and financial losses that are either not insured against fully or not fully covered through any insurance that we or our Affiliates maintain. Further, recent well-publicized security breaches at other companies have led to enhanced government and regulatory scrutiny of the measures taken by companies to protect against cyber-attacks and data privacy breaches, and may in the future result in heightened security requirements, including additional regulatory expectations for oversight of vendors and service providers.

Provisions in our organizational documents, Delaware law and other factors could delay or prevent a change in control of our company.

Provisions in our charter and by-laws and anti-takeover provisions under Delaware law could discourage, delay or prevent an unsolicited change in control of the Company. These provisions may also have the effect of making it more difficult for third parties to replace our executive officers without the consent of our Board of Directors. Provisions in our charter and by-laws that could delay or prevent an unsolicited change in control include:


•	the ability of our Board of Directors to issue preferred stock and to determine the terms, rights and preferences of the preferred stock without stockholder approval; and


•	the prohibition on the right of stockholders to call meetings or act by written consent and limitations on the right of stockholders to present proposals or make nominations at stockholder meetings.

Delaware law also imposes restrictions on mergers and other business combinations between us and any holder of 15 percent or more of our outstanding common stock. Further, given our long-term partnership approach, which is designed to preserve our Affiliates’ investment and operational autonomy and independence, a change in control may also be viewed negatively by our Affiliates, impacting their relationships with us. Additionally, the disposition of certain of our Affiliates following a change in control could result in the immediate realization of taxes owed on any excess proceeds above our tax basis in the relevant Affiliate, which could impact the valuation a third party may apply to us in a change in control.

These anti-takeover provisions and other factors may inhibit a change in control in circumstances that could give our stockholders the opportunity to realize a premium over the market price of our common stock, and may result in negative impacts on our financial results in periods following a change in control.

The sale or issuance of substantial amounts of our common stock, or the expectation that such sales or issuances will occur, could adversely impact the price of our common stock.

The sale or issuance of substantial amounts of our common stock in the public market could adversely impact its price. In connection with our financing activities, we have issued securities and entered into contracts, including our junior convertible trust preferred securities and equity distribution program, that may result in the issuance of our common stock upon the occurrence of certain events. We also have exercisable options outstanding and unvested restricted stock that have been awarded under our share-based incentive plans. Additionally, we have the right to settle certain Affiliate equity repurchase obligations with shares of our common stock. Moreover, in connection with future financing activities, we may issue additional convertible securities or shares of our common stock, including through forward equity transactions. Any such issuance of shares of our common stock could have the effect of substantially diluting the interests of our current equity holders. In the event that a large number of shares of our common stock are sold or issued in the public market, or the expectation that such sales or issuances will occur, the price of our common stock may decline as a result.

Table of Contents

Our financial results could be adversely affected by the financial stability of other financial institutions.

We and our Affiliates routinely execute transactions with various counterparties in the financial services industry. Historical market volatility highlights the interconnection of the global markets and demonstrates how the deteriorating financial condition of one or more institutions may materially and adversely impact the performance of other institutions. We and our Affiliates may be exposed to credit, operational or other risk in the event that a counterparty with whom we or our Affiliates transact defaults on its obligations, or if there are other unrelated systemic failures in the markets.


Item 1B.	Unresolved Staff Comments

None.


Item 2.	Properties

We conduct our operations around the world using a combination of leased and owned facilities. While we believe we have suitable property resources currently, we will continue to evaluate our property needs and will complement these resources as necessary.

Our principal offices are located at 777 South Flagler Drive, West Palm Beach, Florida; 600 Hale Street, Prides Crossing, Massachusetts; 35 Park Lane, London, England; and 600 Steamboat Road, Greenwich, Connecticut. We also lease offices in Sydney, Australia; Toronto, Canada; Zurich, Switzerland; Hong Kong; and Dubai, United Arab Emirates. In addition, each of our Affiliates leases office space in the city or cities in which it conducts business, as appropriate for their respective business needs from time to time.


Item 3.	Legal Proceedings

Governmental and regulatory authorities in the U.S. and other jurisdictions in which we and our Affiliates operate regularly make inquiries and administer examinations with respect to our and our Affiliates’ compliance with applicable laws and regulations, and from time to time, we and our Affiliates may be parties to various claims, lawsuits, complaints, regulatory investigations and other proceedings in the ordinary course of business, certain of which are described in the notes to our Consolidated Financial Statements.

Currently, there are no such claims, lawsuits, complaints, regulatory investigations or other proceedings against us or our Affiliates that, in our opinion, would have a material adverse effect on our financial position, liquidity or results of operations. However, there is no assurance as to whether any such matters could have a material effect on our or our Affiliates’ financial position, liquidity or results of operations in any future reporting period.


Item 4.	Mine Safety Disclosures

Not applicable.

Table of Contents

PART II


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the New York Stock Exchange (symbol: AMG). The following table sets forth the high and low prices as reported on the New York Stock Exchange since January 1, 2016 for the periods indicated.



	High		Low
2016
First quarter	$	165.10	$	115.97
Second quarter	179.85		131.16
Third quarter	148.70		131.02
Fourth quarter	162.85		130.48
2017
First quarter	$	171.65	$	139.52
Second quarter	169.16		148.81
Third quarter	191.98		166.03
Fourth quarter	207.67		178.87

The closing price for a share of our common stock as reported on the New York Stock Exchange on February 21, 2018 was $189.03. As of February 21, 2018, there were 14 stockholders of record , including banks, brokers and other financial institutions holding shares in omnibus accounts for their customers (in total representing substantially all of the beneficial holders of our common stock).

We declared regular cash dividends of $0.80 per share ($0.20 per share per quarter) during the fiscal year ended December 31, 2017. On January 29, 2018, we announced an increase to our regular cash dividend, with a first-quarter cash dividend of $0.30 per share, payable February 23, 2018 to all holders of record of our common stock as of February 8, 2018. We expect to continue paying quarterly cash dividends, although the declaration of future dividends will be at the discretion of our Board of Directors.

Issuer Purchases of Equity Securities



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Average Price Paid Per Share		Maximum Number of Shares that May Yet Be Purchased Under Outstanding Plans or Programs ⁽²⁾
October 1-31, 2017	72,200	$	186.28	72,200	$	186.28	2,225,072
November 1-30, 2017	277,383	185.36		243,046	185.34		1,982,026
December 1-31, 2017	402,702	201.97		402,702	201.97		1,579,324
Total	752,285	194.34		717,948	194.76

____________________________


⁽¹⁾	Includes shares surrendered, if any, to the Company to satisfy tax withholding and/or option exercise price obligations in connection with stock swap option exercise transactions.

⁽²⁾

Our Board of Directors authorized share repurchase programs in January 2018, January 2017 and May 2015, authorizing us to repurchase up to 3.4 million, 1.9 million and 3.0 million shares of our common stock, respectively, and these authorizations have no expiry. Purchases may be made from time to time, at management’s discretion, in the open market or in privately negotiated transactions, including through the use of derivatives and accelerated share repurchase programs. As of December 31, 2017, we had repurchased all of the shares of the May 2015 authorized amount. As of the January 2018 authorization, there were a total of 5.0 million shares remaining available for repurchase under the January 2018 and January 2017 programs.

Table of Contents

Performance Graph

The following graph compares the cumulative stockholder return on our common stock from December 31, 2012 through December 31, 2017 , with the cumulative total return, during the same period, on the Standard & Poor’s 500 Index and a peer group comprising AllianceBernstein Holding L.P., Ameriprise Financial, Inc., BlackRock, Inc., Eaton Vance Corp., Franklin Resources, Inc., Invesco Ltd., Lazard Ltd., Legg Mason, Inc. and T. Rowe Price Group, Inc. (collectively, the “New Peer Group”). Prior to this year, our peer group (the “Old Peer Group”) also included Waddell & Reed Financial, Inc. and did not include Lazard Ltd. Our peer group was revised in 2017 to reflect companies with global size and scale, as well as market capitalizations, that are more in line with our own. The comparison below assumes the investment of $100 on December 31, 2012 in our common stock and each of the comparison indices and, in each case, assumes reinvestment of all dividends.

Table of Contents


Item 6.	Selected Financial Data

The following table presents selected financial data for the last five years. This data should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements and accompanying notes included elsewhere in this Annual Report on Form 10-K.



	For the Years Ended December 31,
(in millions, except as noted and per share data)	2013		2014		2015		2016		2017
Operating Performance Measures
Assets under management (in billions)	$	537.3	$	620.2	$	611.3	$	688.7	$	836.3
Average assets under management (in billions)	483.8		585.9		623.9		655.6		779.2
Aggregate fees	3,907.4		4,203.1		4,140.1		4,296.3		5,545.8
Financial Performance Measures
Revenue	$	2,188.8	$	2,510.9	$	2,484.5	$	2,194.6	$	2,305.0
Net income (controlling interest)	338.8		433.9		509.5		472.8		689.5
Earnings per share (diluted)	$	6.17	$	7.70	$	9.17	$	8.57	$	12.03
Dividends per share	$	—	$	—	$	—	$	—	$	0.80
Supplemental Financial Performance Measures ⁽¹⁾
Adjusted EBITDA (controlling interest)	$	819.9	$	900.8	$	942.2	$	945.5	$	1,116.2
Economic net income (controlling interest)	549.8		629.2		687.2		703.6		824.4
Economic earnings per share	$	9.94	$	11.18	$	12.47	$	12.84	$	14.60
Balance Sheet Data
Total assets	$	6,300.3	$	7,683.5	$	7,769.4	$	8,749.1	$	8,702.1
Long-term debt	1,365.2		1,880.3		1,879.4		2,109.6		1,854.7
Redeemable non-controlling interests	641.9		645.5		612.5		673.5		811.9
Total equity	3,144.6		3,643.2		3,769.1		4,426.5		4,578.5

__________________________


⁽¹⁾	Adjusted EBITDA (controlling interest), Economic net income (controlling interest) and Economic earnings per share are non-GAAP performance measures and are discussed in “Supplemental Financial Performance Measures” in Item 7.

Table of Contents


Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of Affiliated Managers Group, Inc. and its subsidiaries (collectively, the “Company”) should be read in conjunction with the “Forward-Looking Statements” section set forth in Part I and the “Risk Factors” section set forth in Item 1A of Part I of this Annual Report on Form 10-K and in any more recent filings with the SEC, each of which describes these risks, uncertainties and other important factors in more detail.

Executive Overview

The following executive overview summarizes the significant trends affecting our results of operations and financial condition. This overview and the remainder of this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements of the Company and the notes thereto contained elsewhere in this Annual Report on Form 10-K.

We are a global asset management company with equity investments in leading boutique investment management firms, which we refer to as our “Affiliates.” Our innovative partnership approach allows each Affiliate’s management team to own significant equity in their firm and maintain operational autonomy. Our strategy is to generate shareholder value through the growth of existing Affiliates, as well as through investments in new Affiliates and additional investments in existing Affiliates. In addition, we provide centralized assistance to our Affiliates in strategic matters, marketing, distribution, product development and operations. As of December 31, 2017 , our assets under management were $836.3 billion in more than 550 investment products across a broad range of active return-oriented strategies.

We hold meaningful equity interests in each of our Affiliates and maintain the same partnership approach, provide support and assistance in substantially the same manner, and our operating model is generally the same for all Affiliates. Furthermore, our Affiliates are all impacted by similar marketplace factors and operational trends. Therefore, our aggregate operating measures of assets under management, average assets under management and aggregate fees, which incorporate the assets under management and fees of all of our Affiliates, are important in providing management with a more comprehensive view of the operating performance and material trends across our entire business.

The following table presents our key operating performance measures:



	For the Years Ended December 31,
(in billions, except as noted)	2016		2017		% Change
Assets under management ⁽¹⁾	$	688.7	$	836.3	21	%
Average assets under management ⁽¹⁾	655.6		779.2		19	%
Aggregate fees (in millions) ⁽²⁾	4,296.3		5,545.8		29	%

__________________________

⁽¹⁾

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 Consolidated Financial Statements. Average assets under management provides a more meaningful relationship to our financial and operating results as it reflects the particular billing patterns of Affiliate sponsored products and client accounts and corresponds with the timing of the inclusion of an Affiliate's financial and operating results in our Consolidated Financial Statements.

⁽²⁾

Aggregate fees consists of the total asset and performance based fees earned by all of our Affiliates. Aggregate fees is an operating measure and is provided in addition to, but not as a substitute for, our financial performance measures. In the fourth quarter of 2017, we renamed our operating measure formerly referred to as aggregate revenue to aggregate fees. There was no change in the calculation of this measure.

Assets under Management

Through our Affiliates, we manage active return-oriented strategies, rather than passively-managed products, which typically carry lower fee rates. We continue to see client demand for active return-oriented strategies, particularly in alternative and multi-asset strategies, reflecting continued investor demand for returns that are less correlated to traditional equity and fixed income markets. In addition, we see both U.S. and non-U.S. investors increasing their allocations to global equities strategies. Investor demand for passively-managed products has continued, particularly for the large cap U.S. equity portions of client portfolios, and we have experienced outflows in U.S. equity strategies consistent with this industry-wide trend. We

Table of Contents

expect client demand for alternative, global equities and multi-asset strategies to continue, and believe the best-performing active equity managers (whether global-, regional- or country-specific) will continue to have significant opportunities to grow from net client cash inflows. We believe we are well-positioned to benefit from these trends.

The following charts provide information regarding the composition of our assets under management by active return-oriented strategy as of December 31, 2016 and 2017:

Assets under Management by Strategy

(in billions)

__________________________

⁽¹⁾

Alternatives primarily include assets under management in fixed income, equity relative value, systematic diversified, private equity and real assets, and other alternative strategies. Alternative strategies generate earnings from (i) asset based fees from products subject to lock-ups or similar restrictions, (ii) asset based fees from products not subject to such restrictions and/or (iii) performance fees and carried interest.


⁽²⁾	Global equities include emerging markets strategies, which accounted for 9% of our aggregate assets under management as of December 31, 2016 and 2017.

The following table presents changes in our assets under management by active return-oriented strategy:



(in billions)	Alternatives			Global Equities			U.S. Equities			Multi-asset & Other			Total
December 31, 2016	$	252.4		$	233.9		$	110.1		$	92.3		$	688.7
Client cash inflows and commitments	63.4			35.5			18.3			17.8			135.0
Client cash outflows and realizations	(43.0		)	(40.8		)	(30.9		)	(15.6		)	(130.3		)
Net client cash flows	20.4			(5.3		)	(12.6		)	2.2			4.7
New investments	30.6			1.5			—			3.3			35.4
Market changes	17.6			57.1			18.4			7.1			100.2
Foreign exchange ⁽¹⁾	4.5			6.7			0.3			1.5			13.0
Other	(1.5		)	(0.5		)	(0.1		)	(3.6		)	(5.7		)
December 31, 2017	$	324.0		$	293.4		$	116.1		$	102.8		$	836.3

__________________________


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

Table of Contents

The following charts provide information regarding the composition of our assets under management by client type as of December 31, 2016 and 2017:

Assets under Management by Client Type

(in billions)

The following table presents changes in our assets under management by client type:



(in billions)	Institutional			Retail			High Net Worth			Total
December 31, 2016	$	401.2		$	188.3		$	99.2		$	688.7
Client cash inflows and commitments	62.6			55.4			17.0			135.0
Client cash outflows and realization	(70.6		)	(45.6		)	(14.1		)	(130.3		)
Net client cash flows	(8.0		)	9.8			2.9			4.7
New investments	31.0			1.2			3.2			35.4
Market changes	58.5			29.0			12.7			100.2
Foreign exchange ⁽¹⁾	7.6			4.7			0.7			13.0
Other	(1.7		)	(0.3		)	(3.7		)	(5.7		)
December 31, 2017	$	488.6		$	232.7		$	115.0		$	836.3

_________________________


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

In addition to assets under management, we also report average assets under management. This measure provides a more meaningful relationship to aggregate fees as it reflects both the particular billing patterns of Affiliate sponsored products and client accounts and corresponds with the timing of the inclusion of an Affiliate’s financial and operating results in our Consolidated Financial Statements. Average assets under management were $779.2 billion in 2017, an increase of $123.6 billion or 19% compared to 2016.

Aggregate Fees

Aggregate fees consists of the total asset and performance based fees earned by all of our 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. Performance 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). Our ratio of asset based fees to average assets under management (“asset based fee ratio”) is calculated as asset based fees divided by average assets under management. Our asset based fee ratios may change as a result of new investments, client cash flows, market changes, foreign exchange or changes in contractual fees.

Our aggregate fees are 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 fees. Aggregate fees were $5,545.8 million in 2017, an increase of $1,249.5 million or 29% compared to 2016. The increase in our

Table of Contents

aggregate fees was the result of an increase in asset based fees of $778.4 million or 18% due to a 19% increase in our average assets under management and an increase in performance fees of $471.1 million or 11%.

In 2017, we experienced increases in average assets under management across all of our active return-oriented strategies, and, in particular, our alternative strategies, where average assets under management increased 31%. Assets under management in our alternative strategies increased due to investments in new Affiliates, net client cash inflows, market changes and foreign exchange. Our alternative strategies generally have higher asset based fee ratios than our other strategies, which resulted in an increase in our total asset based fee ratio.

Financial and Supplemental Financial Performance Measures

The following table presents our key financial and supplemental financial performance measures:



	For the Years Ended December 31,
(in millions)	2016		2017		% Change
Net income (controlling interest)	$	472.8	$	689.5	46	%
Adjusted EBITDA (controlling interest) ⁽¹⁾	945.5		1,116.2		18	%
Economic net income (controlling interest) ⁽¹⁾	703.6		824.4		17	%

__________________________


⁽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 before interest, taxes, depreciation, amortization, impairments and adjustments to our contingent payment obligations. Conversely, our most directly comparable GAAP performance measures, Operating income and Income before income taxes, include the non-controlling interest’s share of financial performance.

Our economic interest in Affiliates in which we own a controlling interest is generally greater than in Affiliates in which we do not own a controlling interest. While our aggregate fees increased 29% in 2017, our Adjusted EBITDA (controlling interest) increased $170.7 million or 18% , as we experienced a greater proportion of growth in aggregate fees at Affiliates in which we do not own a controlling interest and, therefore, own less of an economic interest, including our 2016 investments in new Affiliates.

While Adjusted EBITDA (controlling interest) increased $170.7 million or 18% in 2017, our Net income (controlling interest) increased $216.7 million or 46% , primarily due to a provisional one-time net benefit from changes in U.S. tax laws of $194.1 million, partially offset by a $93.1 million expense ($57.4 million net of tax), associated with the impairment of one of our Affiliates accounted for under the equity method.

We consider Economic net income (controlling interest) to be an important measure of our financial performance, as we believe it best represents our performance after tax and before our share of non-cash expenses relating to our acquisition of interests in our Affiliates. Our Economic net income (controlling interest), which excludes impairments and the impact of changes in U.S. tax laws, among other things, increased $120.8 million or 17% in 2017, consistent with the increase in Adjusted EBITDA (controlling interest).

Results of Operations

The following discussion includes the financial results of our consolidated and equity method Affiliates. Our consolidated Affiliates’ financial results are included in our Revenue, Operating expenses and Non-operating (income) and expenses, and our share of our equity method Affiliates’ financial results is reported (net of intangible amortization and impairments) in Income from equity method investments in Operating income.

Revenue

We derive most of our Revenue from asset and performance based fees from investment management services provided by our consolidated Affiliates. Asset based fees include advisory and other fees, which are typically determined as a percentage fee charged on the value of a client’s assets under management. Performance fees are based on investment performance,

Table of Contents

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 fees are generally billed less frequently than asset based fees and, although performance fees inherently depend on investment performance and will vary from period to period, we anticipate performance fees will be a recurring component of our Revenue.

Our Revenue is generally determined by the level of our consolidated Affiliate average assets under management, the composition of these assets across our Affiliate sponsored products and client accounts that realize different asset based fee ratios and performance fees. Consolidated Affiliate average assets under management reflects the particular billing patterns of products and client accounts and, therefore, provides a more meaningful relationship to the asset based fee portion of our Revenue. Our ratio of consolidated Affiliate asset based fees to consolidated Affiliate average assets under management (“consolidated Affiliate asset based fee ratio”) may change as a result of new investments, client cash flows, market changes, foreign exchange rate changes or changes in contractual fees.

The following table summarizes our consolidated Affiliate average assets under management and Revenue:



	For the Years Ended December 31,
(in millions, except as noted)	2015		2016		% Change		2017		% Change
Consolidated Affiliate average assets under management (in billions)	$	396.4	$	373.4	(6	)%	$	406.5	9	%
Revenue	$	2,484.5	$	2,194.6	(12	)%	$	2,305.0	5	%

Our Revenue increased $110.4 million or 5% in 2017, due to a $129.1 million or 6% increase from asset based fees, partially offset by a $18.7 million or 1% decrease from performance fees. The increase in asset based fees was due to a 9% increase in consolidated Affiliate average assets under management where we experienced increases in assets under management, primarily from market changes and foreign exchange, partially offset by net client cash outflows. The increase in asset based fees was partially offset by a 3% decline in our consolidated Affiliate asset based fee ratio. The decline in our consolidated Affiliate asset based fee ratio was due to a change in the composition of our average assets under management between Affiliate sponsored products and client accounts that realize comparatively higher asset based fee ratios and Affiliate sponsored products and client accounts that realize comparatively lower asset based fee ratios.

Our Revenue decreased $289.9 million or 12% in 2016. This decrease was primarily due to a decrease in consolidated Affiliate average assets under management at existing Affiliates, which reduced asset based fees $186.2 million or 7%. This decrease was also the result of a decline in our consolidated Affiliate asset based fee ratio at existing Affiliates, which reduced asset based fees $126.0 million or 5%, including a reduction in asset based fees related to renewal commissions at one of our Affiliates in the UK. The reduction in asset based fees related to renewal commissions was the result of a regulatory change and was offset by a decline in distribution expenses at the Affiliate that reduced our Selling, general and administrative expenses. These decreases were partially offset by an increase in Revenue from the full-year impact of our 2015 investments in new Affiliates of $16.8 million or 1%, as well as an increase in performance fees at existing Affiliates of $5.5 million. The decline in our consolidated Affiliate asset based fee ratio was due to a change in the composition of our average assets under management between Affiliate sponsored products and client accounts that realize comparatively higher asset based fee ratios and Affiliate sponsored products and client accounts that realize comparatively lower asset based fee ratios, as well as the aforementioned decline in renewal commissions.

Operating Expenses

The following table summarizes our consolidated operating expenses:



	For the Years Ended December 31,
(in millions)	2015		2016		% Change		2017		% Change
Compensation and related expenses	$	1,027.7	$	932.4	(9	)%	$	979.0	5	%
Selling, general and administrative	443.8		398.1		(10	)%	373.1		(6	)%
Intangible amortization and impairments	115.4		110.2		(5	)%	86.4		(22	)%
Depreciation and other amortization	18.8		19.5		4	%	20.3		4	%
Other operating expenses (net)	43.8		29.1		(34	)%	40.5		39	%
Total operating expenses	$	1,649.5	$	1,489.3	(10	)%	$	1,499.3	1	%

Table of Contents

Our operating expenses are primarily attributable to the non-controlling interests of our consolidated Affiliates in which we share in revenue without regard to expenses. For these Affiliates, the amount of their operating expenses attributable to the non-controlling interests, including compensation, is generally determined by the percentage of revenue allocated to operating expenses as part of the structured partnership interests in place at the respective Affiliate. Accordingly, increases in revenue generally will increase a consolidated Affiliates’ expenses attributable to the non-controlling interest and decreases in revenue will generally decrease a consolidated Affiliates’ expenses attributable to the non-controlling interest.

Compensation and related expenses increased $46.6 million or 5% in 2017 , primarily due to increases in compensation expenses at Affiliates of $35.0 million or 4% and compensation expenses associated with Affiliate equity transactions of $8.5 million or 1%. These changes primarily relate to the non-controlling interests.

Compensation and related expenses decreased $95.3 million or 9% in 2016 , primarily due to decreases in compensation expenses at existing Affiliates of $78.3 million or 8% and compensation expenses associated with Affiliate equity transactions of $28.7 million or 3%. These decreases were partially offset by an increase in compensation expenses from the full-year impact in 2016 of our 2015 investments in new Affiliates of $7.0 million or 1%. These changes primarily relate to the non-controlling interests.

Selling, general and administrative expenses decreased $25.0 million or 6% in 2017 , primarily due to a 2016 expense recorded by and attributable to Third Avenue Management, LLC in connection with claims relating to the Third Avenue Focused Credit Fund of $15.0 million or 4%, which did not recur in 2017, as well as a $5.8 million or 1% reduction of expenses related to wealth management initiatives and a $5.7 million or 1% reduction in distribution expenses, related to commissions at certain of our Affiliates in the UK.

Selling, general and administrative expenses decreased $45.7 million or 10% in 2016 , primarily due to decreases in sub-advisory and distribution expenses, including renewal commissions, of $57.7 million or 13% at our Affiliates sponsoring retail products. This decrease was partially offset by a reserve of $15.0 million or 3% recorded by and attributable to Third Avenue Management, LLC in connection with a proposed resolution of claims relating to the Third Avenue Focused Credit Fund.

Intangible amortization and impairments decreased $23.8 million or 22% in 2017, due to a $16.0 million or 15% decrease from a change in the pattern of economic benefit for certain assets and a $7.8 million or 7% decrease from certain assets being fully amortized.

Intangible amortization and impairments decreased $5.2 million or 5% in 2016, primarily due to certain assets being fully amortized in 2015, which decreased intangible amortization $13.2 million or 11%, partially offset by increases in intangible amortization of definite-lived assets at existing Affiliates of $5.5 million or 5%.

There were no significant changes in Depreciation and other amortization in 2017 or 2016.

Other operating expenses (net) increased $11.4 million or 39% in 2017 and decreased $14.7 million or 34% in 2016. In 2017, this increase was primarily due to a decrease in net gains on Affiliates’ consolidated investment products of $8.1 million. In 2016, this decrease was primarily due to net gains on Affiliates’ consolidated investment products of $12.5 million.

Income from Equity Method Investments

When we do not own a controlling interest in an Affiliate, but have significant influence, we account for our interest in the Affiliate under the equity method. For these Affiliates, we use structured partnership interests in which our share of the Affiliate’s earnings or losses is contractually calculated, allocated and distributed using a formula whereby our share is based on a percentage of the Affiliate’s revenue less certain agreed-upon expenses. This type of partnership interest allows us to benefit from any increase in revenue or any decrease in the expenses that are included in the calculation, but also directly exposes us to any decrease in revenue or any increase in such expenses. We also use structured partnership interests in which our share of the Affiliate’s earnings or losses is contractually calculated, allocated and distributed using a formula whereby our share is based on a percentage of the Affiliate’s revenue without regard to expenses. In this type of partnership interest, our contractual share of revenue generally has priority over distributions to Affiliate management. Our share of earnings from these Affiliates, net of amortization and impairments, is included in Income from equity method investments in our Consolidated Statements of Income.

Our equity method Affiliates derive most of their revenue from asset and performance based fees from investment management services. Asset based fees include advisory and other fees, which are typically determined as a percentage fee charged on the value of a client’s assets under management. Performance 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 fees are generally billed less frequently than asset based fees and,

Table of Contents

although performance fees inherently depend on investment performance and will vary from period to period, we anticipate performance fees will be a recurring component of our Income from equity method investments.

Equity method revenue incorporates the total asset and performance based fees earned by all our equity method Affiliates. Equity method revenue is an operating measure and is provided in addition to, but not as a substitute for, Income from equity method investments or other financial performance measures. Our equity method revenue is generally determined by the level of our equity method Affiliate average assets under management, the composition of these assets across our Affiliate sponsored products and client accounts that realize different asset based fee ratios and performance fees. Equity method Affiliate average assets under management provides a more meaningful relationship to the asset based fee portion of our equity method revenue, as it reflects the particular billing patterns of products and client accounts and corresponds with the timing of the inclusion of an Affiliate’s financial and operating results in our Consolidated Financial Statements. Our ratio of equity method Affiliate asset based fees to equity method Affiliate average assets under management (“equity method Affiliate asset based fee ratio”) may change as a result of new investments, client cash flows, market changes, foreign exchange rate changes or changes in contractual fees.

Additional investments in new or existing equity method Affiliates will generally impact our financial results in the year of investment and, depending upon the timing, in the following year when the full-year financial results of the investment are reflected in our Consolidated Financial Statements.

The following table summarizes equity method Affiliate average assets under management and equity method revenue, as well as equity method earnings and equity method intangible amortization and impairments, which in aggregate form Income from equity method investments.



	For the Years Ended December 31,
(in millions, except as noted)	2015			2016			% Change		2017			% Change
Operating Performance Measures
Equity method Affiliate average assets under management (in billions)	$	227.5		$	282.2		24	%	$	372.7		32	%
Equity method revenue ⁽¹⁾	$	1,655.6		$	2,101.7		27	%	$	3,240.8		54	%

Financial Performance Measures
Equity method earnings	$	323.2		$	388.0		20	%	$	501.4		29	%
Equity method intangible amortization and impairments	(34.3		)	(59.2		)	73	%	(199.2		)	236	%
Income from equity method investments	$	288.9		$	328.8		14	%	$	302.2		(8	)%

__________________________


⁽¹⁾	Equity method revenue is not derived from and differs from the revenue of our equity method Affiliates reported in Note

13 to our Consolidated Financial Statements, as it does not include the financial impact of any sponsored investment products or entities that may need to be consolidated by our equity method Affiliates under GAAP and it excludes asset and performance based fees of new equity method Affiliates prior to the date of closing of the respective investment.

Our equity method revenue increased $1,139.1 million or 54% in 2017, due to a $649.1 million or 31% increase from asset based revenue and a $490.0 million or 23% increase from performance fees. The increase in asset based revenue was due to a 32% increase in equity method Affiliate average assets under management where we experienced increases in assets under management from investments in new Affiliates, net client cash flows, market changes and foreign exchange. The increase in asset based revenue was also due to a 3% increase in our equity method Affiliate asset based fee ratio due to a change in the composition of our average assets under management between Affiliate sponsored products and client accounts that realize comparatively higher asset based fee ratios and Affiliate sponsored products and client accounts that realize comparatively lower asset based fee ratios. Performance fees increased due to the full-year impact in 2017 of our 2016 investments in new Affiliates and due to increases in performance fees at existing Affiliates.

While equity method revenue increased 54% in 2017, equity method earnings increased $113.4 million or 29% , primarily due to our 2016 investments in new Affiliates, in which we own less of the economic interests.

Equity method intangible amortization and impairments increased $140.0 million in 2017, primarily as a result of a $93.1 million impairment of one of our Affiliates (see “Critical Accounting Estimates and Judgments”) and a $41.0 million increase from the full-year impact in 2017 of our 2016 investments in new Affiliates.

Table of Contents

Our equity method revenue increased $446.1 million or 27% in 2016. This increase was primarily due to an increase in revenue from the full-year impact of our 2015 investments and the partial-year impact of our 2016 investments in new Affiliates of $352.5 million or 21%. The increase was also the result of an increase in equity method Affiliate average assets under management at existing Affiliates, which increased asset based fees $133.3 million or 8%. These increases were partially offset by a decline in our equity method Affiliate asset based fee ratio at existing Affiliates, which reduced asset based fees $21.7 million or 1%, as well as a decrease in performance fees at existing Affiliates of $18.0 million or 1%. The decline in our equity method Affiliate asset based fee ratio was due to a change in the composition of our average assets under management between Affiliate sponsored products and client accounts that realize comparatively higher asset based fee ratios and Affiliate sponsored products and client accounts that realize comparatively lower asset based fee ratios.

While equity method revenue increased 27% in 2016, equity method earnings increased $64.8 million or 20% in 2016, primarily due to our 2015 and 2016 investments in new Affiliates, in which we own less of the economic interests, and an increase in expenses at Affiliates where our structured partnership interest is calculated by reference to the Affiliate’s revenue less certain agreed-upon expenses.

Equity method intangible amortization and impairments increased $24.9 million or 73% in 2016, primarily as a result of a $21.5 million increase from the full-year impact in 2016 of our 2015 investments in new Affiliates and the partial-year impact of our 2016 investments in new Affiliates.

Non-Operating (Income) and Expenses

The following table summarizes non-operating income and expense data:



	For the Years Ended December 31,
(in millions)	2015			2016			% Change		2017			% Change
Investment and other income	$	(15.3	)	$	(33.8	)	121	%	$	(60.0	)	78	%
Interest expense	88.9			89.4			1	%	85.3			(5	)%
Imputed interest expense and contingent payment arrangements	(40.3		)	3.9			N.M. ⁽¹⁾		15.5			N.M. ⁽¹⁾
Income tax expense	263.4			235.6			(11	)%	58.4			(75	)%

__________________________


⁽¹⁾	Percentage change is not meaningful.

Investment and other income increased $26.2 million or 78% in 2017 , due to a $19.5 million increase in the fair value of Affiliates’ investments and a $6.7 million increase in net realized gains.

Investment and other income increased $18.5 million or 121% in 2016 , primarily due to a $11.9 million increase in net realized gains and a $7.0 million increase in the fair value of Affiliates’ investments.

Interest expense decreased $4.1 million or 5% in 2017, primarily due to the redemption of our 6.375% senior unsecured notes due 2042 in August 2017, which decreased Interest expense $5.3 million. There was no significant change in our Interest expense in 2016 as compared to 2015.

Imputed interest expense and contingent payment arrangements increased $11.6 million in 2017, primarily due to a $6.6 million expense on the revaluation of our contingent payment arrangements as compared to a $2.8 million gain recorded in 2016.

Imputed interest expense and contingent payment arrangements decreased $44.2 million in 2016 , primarily due to a $44.7 million gain on the revaluation of our contingent payment arrangements in 2015 as compared to a $2.8 million gain recorded in 2016.

Income tax expense decreased $177.2 million or 75% in 2017, primarily due to a provisional one-time net benefit of $194.1 million from changes in U.S. tax laws, partially offset by an increase in income tax expense due to an increase in Income before income taxes attributable to the controlling interest. The net benefit from changes in U.S tax laws was primarily due to the re-measurement of our deferred tax liabilities associated with our intangible assets and convertible securities.

Income tax expense decreased $27.8 million or 11% in 2016, primarily due to a decrease in Income before income taxes attributable to the controlling interest, as well as the effect of foreign operations.

Table of Contents

Net Income

The previously discussed changes in revenue and expenses had the following effect on Net income:



	For the Years Ended December 31,
(in millions)	2015		2016		% Change		2017		% Change
Net income	$	827.2	$	739.0	(11	)%	$	1,008.7	36	%
Net income (non-controlling interests)	317.7		266.2		(16	)%	319.2		20	%
Net income (controlling interest)	509.5		472.8		(7	)%	689.5		46	%

Supplemental Financial Performance Measures

Adjusted EBITDA (controlling interest)

As supplemental information, we provide a non-GAAP measure to which we refer as Adjusted EBITDA (controlling interest). 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 before interest, taxes, depreciation, amortization, impairments and adjustments to our contingent payment obligations. This non-GAAP performance measure is provided in addition to, but not as a substitute for, Net income (controlling interest) or other GAAP performance measures.

The following table provides a reconciliation of Net income (controlling interest) to Adjusted EBITDA (controlling interest):



	For the Years Ended December 31,
(in millions)	2015			2016		2017
Net income (controlling interest)	$	509.5		$	472.8	$	689.5
Interest expense	88.9			89.4		85.3
Imputed interest expense and contingent payment arrangements ⁽¹⁾	(40.3		)	3.9		15.5
Income taxes ⁽²⁾	257.8			229.2		50.4
Depreciation and other amortization	7.9			7.7		10.1
Intangible amortization and impairments ⁽³⁾	118.4			142.5		265.4
Adjusted EBITDA (controlling interest)	$	942.2		$	945.5	$	1,116.2

__________________________



	For the Years Ended December 31,
(in millions)	2015			2016			2017
Operating cash flow	$	1,213.2		$	1,050.3		$	1,170.4
Investing cash flow	(324.5		)	(1,332.2		)	13.8
Financing cash flow	(857.7		)	200.9			(1,189.7		)



	December 31,
(in millions)	2015		2016		2017
Senior bank debt	$	645.0	$	870.0	$	810.0
Senior notes	944.6		945.1		745.7
Convertible securities	305.2		307.5		309.9



	2024 Senior Notes			2025 Senior Notes
Issue date	February 2014			February 2015
Maturity date	February 2024			August 2025
Potential call date ⁽¹⁾	Any Time			Any Time
Par value (in millions)	$	400.0		$	350.0
Call price ⁽¹⁾	As Defined			As Defined
Stated coupon	4.25		%	3.50		%
Coupon frequency	Semi-annually			Semi-annually



			Payments Due
(in millions)	Total		2018		2019-2020		2021-2022		Thereafter
Contractual Obligations ⁽¹⁾
Senior bank debt	$	810.0	$	—	$	810.0	$	—	$	—
Senior notes	958.5		29.2		58.5		58.5		812.3
Junior convertible securities	874.6		22.2		44.4		44.4		763.6
Leases ⁽²⁾	256.7		37.4		69.2		60.2		89.9
Affiliate equity	49.2		49.2		—		—		—
Transition tax on foreign earnings	22.8		4.5		3.5		5.0		9.8
Total contractual obligations	$	2,971.8	$	142.5	$	985.6	$	168.1	$	1,675.6
Contingent Obligations
Contingent payment obligations ⁽³⁾	$	10.2	$	8.2	$	2.0	$	—	$	—



	For the Years Ended December 31,
	2015			2016			2017
Net income	$	827.2		$	739.0		$	1,008.7
Other comprehensive income (loss):
Foreign currency translation gain (loss)	(93.2		)	(115.3		)	128.0
Change in net realized and unrealized gain (loss) on derivative securities, net of tax	1.9			0.1			(0.8		)
Change in net unrealized gain (loss) on investment securities, net of tax	22.1			(35.2		)	(7.7		)
Other comprehensive income (loss)	(69.2		)	(150.4		)	119.5
Comprehensive income	758.0			588.6			1,128.2
Comprehensive income (non-controlling interests)	(298.4		)	(220.6		)	(337.6		)
Comprehensive income (controlling interest)	$	459.6		$	368.0		$	790.6


⁽¹⁾	For the years ended December 31, 2015, 2016 and 2017, Imputed interest expense and contingent payment arrangements include gains from adjustments to our contingent payment obligations of $44.7 million ($27.8 million net of tax), $2.8 million ($1.7 million net of tax) and expenses from adjustments to our contingent payment obligations of $6.6 million ($4.1 million net of tax), respectively.


⁽²⁾	For the year end December 31, 2017, Income taxes include a provisional one-time net benefit of $194.1 million from changes in U.S tax laws.



	For the Years Ended December 31,
(in millions, except per share data)	2015			2016			2017
Net income (controlling interest)	$	509.5		$	472.8		$	689.5
Intangible amortization and impairments ⁽¹⁾	118.4			142.5			265.4
Intangible-related deferred taxes ⁽²⁾	77.7			84.3			48.8
Other economic items ⁽³⁾⁽⁴⁾	(18.4		)	4.0			14.8
Changes in U.S. tax laws ⁽⁵⁾	—			—			(194.1		)
Economic net income (controlling interest)	$	687.2		$	703.6		$	824.4
Average shares outstanding (diluted)	57.2			57.0			58.6
Assumed issuance of junior convertible securities shares	(2.2		)	(2.2		)	(2.2		)
Dilutive impact of junior convertible securities shares	0.1			—			—
Average shares outstanding (adjusted diluted)	55.1			54.8			56.4
Economic earnings per share	$	12.47		$	12.84		$	14.60


⁽¹⁾	See note (3) to the table in “Adjusted EBITDA (controlling interest).”


⁽²⁾	For the year ended December 31, 2017, we recorded an impairment of one of our Affiliates accounted for under the equity method, which reduced intangible-related deferred taxes by $35.7 million.


⁽³⁾	Other economic items include gains and expenses from adjustments to our contingent payment obligations. See note (1) to the table in “Adjusted EBITDA (controlling interest).”


⁽⁴⁾	During 2015, 2016 and 2017, Other economic items were net of income tax expense of $15.2 million, $1.5 million and $5.8 million, respectively.


⁽⁵⁾	See note (2) to the table in “Adjusted EBITDA (controlling interest).”


⁽¹⁾	The senior notes may be redeemed at any time, in whole or in part, at a make-whole redemption price plus accrued and unpaid interest.


⁽¹⁾	This table does not include liabilities for commitments to co-invest in certain investment partnerships or uncertain tax positions of $98.8 million and $32.4 million , respectively, as we cannot predict when such obligations will be paid.


⁽²⁾	The controlling interest portion is $12.2 million through 2018, $21.9 million in 2019-2020, $18.0 million in 2021-2022 and $21.1 million thereafter.


⁽³⁾	The contingent payment obligations disclosed in the table represent the expected settlement amounts associated with our investments in new Affiliates. The maximum settlement amount through 2018 is $176.2 million, $12.0 million in 2019-2020 and none thereafter.



		Total Stockholders’ Equity
	Shares Outstanding	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Treasury Stock at Cost			Non- controlling Interests			Total Equity
December 31, 2014	55.8	$	0.6	$	763.4		$	31.8		$	2,072.1	$	(240.9	)	$	1,016.2		$	3,643.2
Net income	—	—		—			—			509.5		—			317.7			827.2
Other comprehensive income (loss)	—	—		—			(49.9		)	—		—			(19.3		)	(69.2		)
Share-based compensation	—	—		34.2			—			—		—			—			34.2
Common stock issued under share-based incentive plans	—	—		(131.0		)	—			—		185.0			—			54.0
Tax benefit from share-based incentive plans	—	—		44.5			—			—		—			—			44.5
Shares repurchases	—	—		—			—			—		(366.0		)	—			(366.0		)
Investments in Affiliates	—	—		—			—			—		—			33.8			33.8
Affiliate equity activity:
Affiliate equity expense	—	—		16.9			—			—		—			51.6			68.5
Issuances	—	—		0.1			—			—		—			1.6			1.7
Repurchases	—	—		48.4			—			—		—			(0.4		)	48.0
Changes in Redemption value of Redeemable non-controlling interests	—	—		(81.6		)	—			—		—			—			(81.6		)
Transfers to Redeemable non-controlling interests	—	—		—			—			—		—			(49.5		)	(49.5		)
Capital Contributions by Affiliate equity holders	—	—		—			—			—		—			11.7			11.7
Distributions to non-controlling interests	—	—		—			—			—		—			(431.4		)	(431.4		)
December 31, 2015	55.8	$	0.6	$	694.9		$	(18.1	)	$	2,581.6	$	(421.9	)	$	932.0		$	3,769.1
Net income	—	—		—			—			472.8		—			266.2			739.0
Other comprehensive income (loss)	—	—		—			(104.8		)	—		—			(45.6		)	(150.4		)
Share-based compensation	—	—		39.2			—			—		—			—			39.2
Common stock issued under share-based incentive plans	—	—		(53.8		)	—			—		69.3			—			15.5
Shares repurchases	—	—		—			—			—		(33.4		)	—			(33.4		)
Forward equity	—	—		5.2			—			—		—			—			5.2
Common stock issued under forward equity agreement	2.7	0.0		440.3			—			—		—			—			440.3
Issuance costs and other	—	—		(3.0		)	—			—		—			—			(3.0		)
Affiliate equity activity:
Affiliate equity expense	—	—		10.0			—			—		—			31.2			41.2
Issuances	—	—		(2.8		)	—			—		—			14.7			11.9
Repurchases	—	—		14.9			—			—		—			0.4			15.3
Changes in Redemption value of Redeemable non-controlling interests	—	—		(71.4		)	—			—		—			—			(71.4		)
Transfers to Redeemable non-controlling interests	—	—		—			—			—		—			(42.6		)	(42.6		)
Capital Contributions by Affiliate equity holders	—	—		—			—			—		—			4.7			4.7
Distributions to non-controlling interests	—	—		—			—			—		—			(354.1		)	(354.1		)
December 31, 2016	58.5	$	0.6	$	1,073.5		$	(122.9	)	$	3,054.4	$	(386.0	)	$	806.9		$	4,426.5
Net income	—	—		—			—			689.5		—			319.2			1,008.7
Other comprehensive income (loss)	—	—		—			101.1			—		—			18.4			119.5
Share-based compensation	—	—		40.4			—			—		—			—			40.4
Common stock issued under share-based incentive plans	—	—		(117.6		)	—			—		138.6			—			21.0
Shares repurchases	—	—		—			—			—		(416.3		)	—			(416.3		)



Dividends ($0.80 per share)	—	—		—			—			(45.4		)	—			—			(45.4		)
Issuance costs and other	—	—		0.6			—			—			—			—			0.6
Affiliate equity activity:
Affiliate equity expense	—	—		13.2			—			—			—			36.8			50.0
Issuances	—	—		(0.6		)	—			—			—			3.7			3.1
Repurchases	—	—		40.6			—			—			—			(6.0		)	34.6
Changes in redemption value of Redeemable non-controlling interests	—	—		(241.5		)	—			—			—			—			(241.5		)
Transfers to Redeemable non-controlling interests	—	—		—			—			—			—			(76.8		)	(76.8		)
Capital contributions by Affiliate equity holders	—	—		—			—			—			—			6.3			6.3
Distributions to non-controlling interests	—	—		—			—			—			—			(352.2		)	(352.2		)
December 31, 2017	58.5	$	0.6	$	808.6		$	(21.8	)	$	3,698.5		$	(663.7	)	$	756.3		$	4,578.5



	Available-for-Sale						Trading
	December 31, 2016			December 31, 2017			December 31, 2016			December 31, 2017
Cost	$	66.1		$	18.3		$	34.4		$	48.8
Unrealized Gains	17.6			2.7			6.6			10.3
Unrealized Losses	(1.8		)	(0.4		)	(0.5		)	(1.9		)
Fair Value	$	81.9		$	20.6		$	40.5		$	57.2


4.	Investments in Affiliates and Affiliate Sponsored Investment Products



	December 31, 2016				December 31, 2017
	Unconsolidated VIE Net Assets		Carrying Value and Maximum Exposure to Loss		Unconsolidated VIE Net Assets		Carrying Value and Maximum Exposure to Loss
Affiliates accounted for under the equity method	$	1,047.6	$	2,846.8	$	1,594.4	$	2,765.7



	December 31, 2016				December 31, 2017
	Unconsolidated VIE Net Assets		Carrying Value and Maximum Risk of Loss		Unconsolidated VIE Net Assets		Carrying Value and Maximum Risk of Loss
Affiliate sponsored investment products	$	1,756.6	$	9.4	$	2,154.6	$	10.2



	2024 Senior Notes			2025 Senior Notes
Issue date	February 2014			February 2015
Maturity date	February 2024			August 2025
Potential Call Date ⁽¹⁾	Any Time			Any Time
Par value (in millions)	$	400.0		$	350.0
Call Price ⁽¹⁾	As Defined			As Defined
Stated coupon	4.25		%	3.50		%
Coupon frequency	Semi-annually			Semi-annually



	December 31, 2016				December 31, 2017
	Carrying Value		Principal Amount at Maturity		Carrying Value		Principal Amount at Maturity
Junior convertible securities ⁽¹⁾	$	307.5	$	430.8	$	309.9	$	430.8


⁽¹⁾	The carrying value is accreted to the principal amount at maturity over a remaining life of 20 years.



			Fair Value Measurements
	December 31, 2016		Fair Value Measurements
	December 31, 2016		Level 1		Level 2		Level 3
Financial Assets
Cash equivalents	$	64.1	$	64.1	$	—	$	—
Investments in marketable securities ⁽¹⁾
Trading securities	40.5		40.5		—		—
Available-for-sale securities	81.9		81.9		—		—
Other investments	3.4		3.4		—		—
Foreign currency forward contracts ⁽²⁾	0.6		—		0.6		—
Financial Liabilities ⁽²⁾
Contingent payment arrangements	$	8.6	$	—	$	—	$	8.6
Affiliate equity obligations	12.1		—		—		12.1
Foreign currency forward contracts	0.5		—		0.5		—


⁽¹⁾	Accretion and changes in the expected value of the Company’s contingent payment arrangements and Affiliate equity obligations are recorded in Imputed interest expense and contingent payment arrangements.


⁽²⁾	Includes transfers from Redeemable non-controlling interests and other activity.



	Quantitative Information about Level 3 Fair Value Measurements
	Valuation Techniques	Unobservable Input	Fair Value at December 31, 2016		Range at December 31, 2016	Fair Value at December 31, 2017		Range at December 31, 2017
Contingent payment arrangements	Discounted cash flow	Growth rates	$	8.6	3% - 8%	$	9.4	7% - 8%
		Discount rates			14% - 15%			15% - 16%
Affiliate equity obligations	Discounted cash flow	Growth rates	12.1		4% - 10%	49.2		0% - 11%
		Discount rates			15% - 16%			12% - 16%



	December 31, 2016				December 31, 2017
Category of Investment	Fair Value		Unfunded Commitments		Fair Value		Unfunded Commitments
Private equity ⁽¹⁾	$	137.8	$	92.2	$	156.1	$	98.8
Other funds ⁽²⁾	9.7		—		8.9		—
Other investments ⁽³⁾	$	147.5	$	92.2	$	165.0	$	98.8


⁽¹⁾	The Company uses NAV as a practical expedient one quarter in arrears (adjusted for current period calls and distributions) to determine the fair value. These funds primarily invest in a broad range of private equity funds, as well as making direct investments. Distributions will be received as the underlying assets are liquidated over the life of the funds, which is generally up to 15 years .


⁽²⁾	These are multi-disciplinary funds that invest across various asset classes and strategies, including long/short equity, credit and real estate. Investments are generally redeemable on a daily, monthly or quarterly basis.


⁽³⁾	Fair value attributable to the controlling interest was $59.9 million and $80.1 million as of December 31, 2016 and 2017, respectively.



	December 31, 2016				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value		Fair Value Hierarchy
Senior notes	$	945.1	$	936.0	$	745.7	$	765.2	Level 2
Convertible securities	307.5		466.9		309.9		549.8		Level 2