What changed in this filing

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Item 1. Business

2021-02-19 compared with 2020-02-28 · 62 added, 43 removed, 88 unchanged (54% of the section changed)

We are a global asset management company with equity investments in high-quality boutique investment management firms, which we call our “Affiliates.” Our strategy is to generate long-term value by investing in leading independent active investment managers, through a proven partnership approach, and allocating resources across our unique opportunity set to the areas of highest growth and return.

Through our innovative partnership approach, each Affiliate’s management team retains significant equity ownership in their firm while maintaining operational autonomy.

In addition, we offer centralized capabilities to our Affiliates across a variety of areas, including strategy, marketing and distribution, and product development.

As of December 31, 2019 , our aggregate assets under management were approximately $726 billion, pro forma for a new Affiliate investment which has since been completed, across a broad range of active, return-oriented strategies.

AMG’s Affiliates are successful independent investment firms, typically founded by a group of entrepreneurial partners who have built a specialized, investment-centric culture over time, value their independence, and intend to build an enduring franchise which serves clients across generations of management principals.

Given their long-term investment performance records, our Affiliates are recognized as being among the industry’s leaders in their respective investment disciplines.

Independent firms seeking an institutional partner are attracted to AMG’s unique partnership approach and our global reputation and track record across nearly three decades as a successful and supportive partner to boutique firms around the world.

We hold meaningful equity interests in each of our Affiliates, and typically each Affiliate’s management team retains a significant equity interest in their own firm.

Affiliate management equity ownership (along with AMG’s long-term ownership) aligns our interests and preserves Affiliate management equity incentives, including the opportunity for Affiliate management to participate directly in the long-term future growth and profitability of their firms.

Our innovative partnership approach maintains our Affiliates’ unique entrepreneurial cultures, investment independence, and operational autonomy in managing their businesses.

In certain cases, we invest in our Affiliates by providing growth capital or complementing their own marketing resources with AMG’s proven global distribution capabilities.

We are a leading partner to independent active investment management firms globally.

Our strategy is to generate long-term value by investing in a diverse array of excellent partner-owned investment firms, which we call our “Affiliates,” through a proven partnership approach, and allocating resources across our unique opportunity set to the areas of highest growth and return.

Our innovative partnership approach enables each Affiliate’s management team to own significant equity in their firm while maintaining operational and investment autonomy.

In addition, we offer our Affiliates growth capital, global distribution, and other strategic value-added capabilities, which enhance the long-term growth of these independent businesses and enable them to align equity incentives across generations of principals to build enduring franchises.

As of December 31, 2020, our aggregate assets under management were approximately $716 billion, across a broad range of active, return-oriented strategies.

We generate long-term value by investing in new Affiliates, existing Affiliates, and centralized capabilities through which we can leverage our scale and resources to benefit our Affiliates, and then by returning excess capital to shareholders, primarily through share repurchases.

In partnering with Affiliates, we are focused on investing in leading independent investment firms around the world managing active, return-oriented strategies, including traditional, alternative, and wealth management firms.

Within our target universe, we seek strong and growing firms that offer illiquid and liquid alternative strategies, global equity strategies, US equity strategies and multi-asset and fixed income strategies.

Given their long-term performance records, our Affiliates are recognized as being among the industry’s leaders in their respective investment disciplines.

Through our partnership approach, we hold meaningful equity interests in each of our Affiliates, and typically 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 and preserves Affiliate management equity incentives, including the opportunity for Affiliate management to participate directly in the long-term future growth and profitability of their firms.

In certain cases, we invest in our Affiliates by providing growth capital or complementing their own marketing resources with our proven global distribution capabilities.

We also provide succession planning solutions and advice to our Affiliates, which can include a degree of liquidity and financial diversification along with incentive alignment for next-generation partners.

We take a long-term partnership approach with our Affiliates, which provides stability in facilitating succession planning across generations of Affiliate management principals.

AMG is uniquely able to provide strategic support and expertise across various stages of boutique firms’ growth.

We believe clients recognize that through certain fundamental characteristics of focused boutique managers, especially equity ownership and investment independence, these firms are well-positioned to achieve client investment goals and objectives, especially through alpha generation.

investment approach preserves these essential elements of boutique firms, and in partnering with us, our Affiliates can continue to grow while retaining their independence.

AMG generates long-term value by investing in new Affiliates, investing in existing Affiliates, and investing in centralized capabilities through which we can leverage AMG’s scale and resources to benefit our Affiliates and enhance their long-term growth prospects.

In partnering with Affiliates, we are focused on investing in leading boutique investment management firms around the world managing active, return-oriented strategies, including traditional, alternative, and wealth management firms.

Within our target universe, we seek strong and growing boutiques that offer illiquid and liquid alternative strategies, global equities strategies and multi-asset and fixed income strategies.

We anticipate that the principal owners of boutique investment management firms will continue to seek access to an evolving range of growth and succession solutions.

We are uniquely able to provide strategic support and expertise across various stages of our Affiliates’ growth.

We believe that clients recognize certain fundamental characteristics of focused independent investment managers, especially direct equity ownership by management principals as well as investment and operational independence, as competitive advantages for these firms in achieving client investment goals and objectives, especially through alpha generation.

Our investment approach preserves these essential elements for our Affiliates, and in partnering with us, our Affiliates can continue to grow while retaining their independence.

firms seeking an institutional partner are attracted to our unique partnership approach and our global reputation and track record across nearly three decades as a successful and supportive partner to boutique investment firms around the world.

We anticipate that the principal owners of independent investment firms will continue to seek access to an evolving range of growth and succession solutions.

We will, therefore, continue to have a significant opportunity to invest in outstanding firms across the global asset management industry, including investment opportunities resulting from subsidiary divestitures, secondary sales and other special situations.

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our substantial experience and expertise in structuring and negotiating transactions;

and our strong global reputation as an outstanding partner to our Affiliates, as well as for providing innovative solutions for the strategic needs of boutique investment management firms.

and our strong global reputation as an outstanding partner to our Affiliates, as well as for providing innovative solutions for the strategic needs of independent investment firms.

Investment Management Operations

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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.

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”), collective investment trusts and other retail products.

We provide 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”), collective investment trusts, and other retail products.

We also provide investment management and customized investment counseling and fiduciary services to high net worth individuals, families, charitable foundations, and individually managed accounts directly and through intermediaries, including brokerage firms or other sponsors.

As of December 31, 2019 , we managed approximately $726 billion, pro forma for a new Affiliate investment which has since been completed, in equities, alternative and multi-asset strategies across investment styles, asset classes and geographies.

The following chart provides information regarding our equities, alternative and multi-asset strategies as of December 31, 2019 .

As of December 31, 2020, we managed approximately $716 billion in equity, alternative, and multi-asset strategies across investment styles, asset classes, and geographies.

The following chart provides information regarding our equity, alternative, and multi-asset strategies as of December 31, 2020.

Assets Under Management

Through our Affiliates, we offer investors access to a broad and diverse array of independent boutique managers with distinct brands and specialized investment processes.

Through our Affiliates, we offer investors access to a broad and diverse array of independent investment managers with distinct brands and specialized investment processes.

Our Affiliates distribute their investment services and products to institutional investors through direct sales efforts and established relationships with consultants and intermediaries around the world through their own business development resources.

In addition, our global distribution platform operates in major markets to extend the reach of our Affiliates’ own business development efforts, including strategy, marketing, distribution, and product development.

Our Affiliates benefit from the expertise of our senior sales and marketing professionals located in Asia, Australia, Europe, the Middle East, the UK and the U.S.

Our Affiliates’ investment management services are also distributed globally to retail investors through our Affiliates’ own efforts and through our retail distribution platforms in the form of advisory and sub-advisory services to mutual funds and other retail oriented products.

Our Affiliates benefit from the expertise of our senior sales and marketing professionals located in the U.S., the UK, the Middle East, Asia, and Australia.

Our Affiliates’ investment management services are also distributed globally to retail investors through our Affiliates’ own efforts and through our retail distribution platform in the form of advisory and sub-advisory services to mutual funds and other retail oriented products.

Our Affiliates’ investment management services are delivered to retail investors through various intermediaries, including independent investment advisers, retirement plan sponsors, broker-dealers, major fund marketplaces, sponsors of separately managed accounts (including unified managed accounts), and bank trust departments.

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For a majority of our Affiliates, we use structured partnership interests in which we contractually share in the Affiliate’s revenue without regard to expenses.

In this type of structured partnership interest, the Affiliate allocates a specified percentage of its revenue to us and Affiliate management, while using the remainder of its revenue for operating expenses and for distributions to Affiliate management.

We and Affiliate management, therefore, participate in any increase or decrease in revenue, and only Affiliate management participates in any increase or decrease in expenses.

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Under the equity method of accounting, we do not consolidate the Affiliate’s results into our Consolidated Financial Statements.

Instead, our share of earnings or losses, net of amortization and impairments, is included in Equity method income (loss) (net) in our Consolidated Statements of Income, and our interest in these Affiliates is reported in Equity method investments in Affiliates (net) in our Consolidated Balance Sheets.

Instead, our share of earnings or losses, net of amortization and impairments, is included in Equity method loss (net) in our Consolidated Statements of Income, and our interest in these Affiliates is reported in Equity method investments in Affiliates (net) in our Consolidated Balance Sheets.

Whether we consolidate an Affiliate’s financial results or use the equity method of accounting, we maintain the same innovative partnership approach and provide support and assistance in substantially the same manner for all of our Affiliates.

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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.

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.

These firms may have significantly greater financial, technological, and marketing resources;

captive distribution;

and assets under management.

Many of these firms offer an even broader array of products and services in particular investment strategies such as passively-managed products, including exchange traded funds, that typically carry lower fee rates, as well as environmental, social, and governance (“ESG”) strategies and other developing strategies or trends.

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.

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The ability to compete with other investment management firms also depends, in part, on the relative attractiveness of our Affiliates’ active, return-oriented strategies, market trends, fees, or a combination of these factors.

We compete with a number of acquirers of and investors in boutique investment management firms, including other investment management companies, private equity firms, sovereign wealth funds and larger financial organizations.

We compete with a number of acquirers of and investors in boutique investment 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:

breadth and depth of our relationships with boutique investment management firms;

• breadth and depth of our relationships with boutique investment firms;

• target firms’ view of our innovative partnership approach, including our succession planning solutions and the preservation of their unique entrepreneurial cultures, investment independence, and operational autonomy in managing their businesses;

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and in other jurisdictions, and are subject to regulatory requirements in the jurisdictions where those funds are sponsored or offered, including, with respect to mutual funds in the U.S., the Investment Company Act of 1940, as amended (the “Investment Company Act”).

The Investment Company Act governs the operations of mutual funds and imposes obligations on their advisers, including investment restrictions and other governance, compliance, reporting and fiduciary

obligations relating to the management of mutual funds.

Many of our Affiliates are also subject to directives and regulations in the European Union and other jurisdictions relating to funds, such as the UCITS Directive and the Alternative Investment Fund Managers Directive (“AIFMD”), with respect to depositary functions, remuneration policies and sanctions, among other matters.

Our Affiliates’ sales and marketing activities are subject to regulation by authorities in the jurisdictions in which they offer investment management products and services.

Our Affiliates’ ability to transact business in these jurisdictions, and to conduct related cross-border activities, is subject to the continuing availability of regulatory authorization.

Our Affiliates’ ability to transact business in these jurisdictions, and to conduct related cross-border activities, is subject to the continuing availability of regulatory authorizations and exemptions.

Through our global distribution platform, we also engage in sales and marketing activities that extend the reach of our Affiliates’ own business development efforts, and which are subject to regulation in numerous jurisdictions.

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In the UK, our global distribution subsidiary is regulated by the FCA.

We also have global distribution subsidiaries or branches of subsidiaries regulated by the Dubai Financial Services Authority, the Securities and Futures Commission in Hong Kong, and the Australian Securities and Investments Commission, and our activities in the European Union are regulated by various regulators in European jurisdictions.

Certain of our Affiliates and our U.S.

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Risk Factors”.

Employees and Corporate Organization

As of December 31, 2019 , we and our consolidated and equity method Affiliates had approximately 4,000 employees, excluding the employees of certain Affiliates in which we are repositioning our interests and that are not significant to our results of operations.

The substantial majority of employees 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.

Human Capital Resources

As of December 31, 2020, we and our Affiliates had approximately 3,900 employees, the substantial majority of which were employed by our Affiliates and not by AMG.

Through our innovative partnership approach with our Affiliates, each Affiliate’s management team retains operational autonomy in managing and operating their business on a day-to-day basis, including with respect to their human capital.

AMG and Affiliates frequently share and discuss best practices in managing, aligning and engaging their respective workforce.

Given this approach, the following is a discussion of AMG’s workforce, or approximately 5% of the total employees, and the policies and cultural initiatives in respect of our human capital.

Our employees and our reputation are our most important assets, and attracting, retaining, and motivating top talent to execute on our strategic business objectives is a fundamental imperative.

We support that imperative through our strong values-based culture, commitment to career development and training, employee engagement, attractive compensation and benefits programs, attention to succession planning, and fostering of diversity and inclusion at all levels of our organization.

Our leadership training and sponsored skills development programs cover a wide range of subject area expertise as well as career development generally, and are anchored on a comprehensive performance review process, which includes a company-wide 360-degree review program.

Further, we support employees’ educational pursuits relating to degree programs and certifications through company-supported time off for professional development and flexible work arrangements tailored to individual employees’ educational goals.

We regularly conduct company-wide surveys to solicit feedback from our employees on a variety of topics, including philanthropic interests, remote working, work-from-home technology needs, flexible time off, and general job satisfaction, which help us enhance employee engagement and retention.

Our 2020 anonymous employee

engagement survey reported an employee satisfaction rating of 92%, relative to 88% in 2019, which we attribute to our focus and commitment to our employees.

We prioritize employee engagement through a range of cross-functional, multi-level communication mediums, which historically have included small working group lunches, company-wide town halls, management off-sites, and charitable volunteer activities, and more recently have continued in virtual forums.

Through employee participation in our corporate philanthropic initiatives across our global offices, we are committed to giving back to the communities in which we operate, and we believe that these initiatives also support our efforts to attract and retain employees.

We provide company-supported time off to encourage employees in their charitable endeavors.

We also have a formal program to match employee donations to eligible non-profit institutions through AMG and The AMG Charitable Foundation.

Through our matching program as well as through direct grants, AMG and The AMG Charitable Foundation have made donations to over 300 organizations around the world.

We believe diversity and inclusion result in a highly creative and innovative workforce, and are committed to fostering and promoting an inclusive and diverse work environment.

We seek to recruit the best people for the job without regard to gender, ethnicity or other protected traits, and it is our policy to comply fully with all domestic, foreign and local laws relating to discrimination in the workplace.

We have achieved gender diversity of approximately 40% across management positions in our workforce, and overall approximately 50% of our employees are women (in each case, excluding our U.S.

retail distribution subsidiary).

Further, 50% of the independent members of our Board of Directors are women, and 33% of the independent directors are ethnically diverse, in each case, above the average of S&P 500 companies.

We continually seek to enhance the diversity of our employee base, as our employees around the world contribute their distinct perspectives to improve our business and the communities in which our businesses operate.

Our executive management team has responsibility for diversity initiatives, in coordination with our Sustainability Committee, and reviews these initiatives with our Board of Directors at least annually.

Our website is www.amg.com .

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The Investor Relations section of our website 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.

We make these reports available through our website as soon as reasonably practicable after our electronic filing of such materials with, or the

furnishing of them to, the SEC.

We make these reports available through our website 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 website is not a part of this Annual Report on Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business