AFFILIATED MANAGERS GROUP, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements Certain matters discussed in this Quarterly Report on Form 10-Q, in our other filings with the Securities and Exchange Commission, 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,” “positioned,” “prospects,” “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” in our Annual Report on Form 10-K for the year ended December 31, 2020. These factors (among others) could affect our financial condition, business activities, results of operations, cash flows, or overall financial performance and cause actual results and business activities to differ materially from historical periods 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 that 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. Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Consolidated Financial Statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. Executive Overview 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 March 31, 2021, our aggregate assets under management were approximately $738 billion, across a broad range of active, return-oriented strategies. In the first quarter of 2021, we completed a minority investment in Boston Common Asset Management LLC, a women-owned leader in global sustainable and impact investing. On April 30, 2021, we completed a minority investment in OCP Asia Limited, a leading alternative manager in private markets, providing customized secured lending solutions across the Asia-Pacific region. Operating Performance Measures Under accounting principles generally accepted in the U.S. (“GAAP”), we are required to consolidate certain of our Affiliates and use the equity method of accounting for others. Whether we consolidate an Affiliate or use the equity method of accounting, we maintain the same innovative partnership approach and provide support and assistance in substantially the same manner for all of our Affiliates. Furthermore, all of our Affiliates are boutique investment managers and are impacted by similar marketplace factors and industry trends. Therefore, our key aggregate operating performance measures are important in providing management with a more comprehensive view of the operating performance and material trends across our entire business. The following table presents our key aggregate operating performance measures: As of and for the Three Months Ended March 31, (in billions, except as noted) 2020 2021 % Change Assets under management $ 599.9 $ 738.0 23 % Average assets under management 663.0 733.6 11 % Aggregate fees (in millions) 1,253.1 1,414.4 13 % 21 Table of Contents Assets under management and therefore average assets under management, include the assets under management of our consolidated and equity method Affiliates. Assets under management is presented on a current basis without regard to the timing of the inclusion of an Affiliate’s financial results in our operating performance measures and Consolidated Financial Statements. Average assets under management reflects the timing of the inclusion of an Affiliate’s financial results in our operating performance measures and Consolidated Financial Statements. Average assets under management for mutual funds and similar retail investment products represents an average of the daily net assets under management, while for institutional and high net worth clients, average assets under management generally represents an average of the assets at the beginning or end of each month during the applicable period. Aggregate fees consist of the total asset and performance based fees earned by all of our consolidated and equity method Affiliates. For certain of our Affiliates accounted for under the equity method, we report aggregate fees and the Affiliate’s financial results in our Consolidated Financial Statements one quarter in arrears. Aggregate fees are provided in addition to, but not as a substitute for, Consolidated revenue or other GAAP performance measures. Assets Under Management 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 continue to see demand for active, return-oriented strategies, particularly in illiquid alternative and multi-asset and fixed income strategies, reflecting continued investor demand for returns that are less correlated to traditional equity markets, while we are experiencing outflows in quantitative strategies across liquid alternative strategies and equities strategies. In addition, investor demand for passively-managed products, including exchange traded funds has continued, and we have experienced outflows in certain equity strategies, consistent with this industry-wide trend. However, we believe the best performing active equity managers (whether global-, regional-, or country-specific) will continue to have significant opportunities to grow as a result of net client cash inflows. We believe we are well-positioned to benefit from these trends. We also anticipate that independent investment firms will continue to seek access to an evolving range of partnership solutions, and that we have a significant opportunity to invest in outstanding firms across the global asset management industry. The following charts present information regarding the composition of our assets under management by active, return-oriented strategy and client type as of March 31, 2021: Assets Under Management ___________________________ (1) Alternatives include illiquid alternative strategies, which accounted for 14% of our assets under management as of March 31, 2021. (2) Global equities include emerging markets strategies, which accounted for 9% of our assets under management as of March 31, 2021. The following tables present changes in our assets under management by active, return-oriented strategy and client type for the three months ended March 31, 2021: By Strategy - Quarter to Date 22 Table of Contents (in billions) Alternatives Global Equities U.S. Equities Multi-Asset & Fixed Income Total December 31, 2020 $ 216.5 $ 278.5 $ 103.5 $ 117.7 $ 716.2 Client cash inflows and commitments 8.3 9.1 6.7 6.7 30.8 Client cash outflows (6.1) (17.1) (7.8) (7.3) (38.3) Net client cash flows 2.2 (8.0) (1.1) (0.6) (7.5) New investments — 2.9 1.1 — 4.0 Market changes 4.4 10.5 7.0 2.5 24.4 Foreign exchange (1) 0.3 0.8 0.1 0.2 1.4 Realizations and distributions (net) (0.4) — — — (0.4) Other (2) (0.2) — 0.1 — (0.1) March 31, 2021 $ 222.8 $ 284.7 $ 110.7 $ 119.8 $ 738.0 By Client Type - Quarter to Date (in billions) Institutional Retail High Net Worth Total December 31, 2020 $ 401.0 $ 189.3 $ 125.9 $ 716.2 Client cash inflows and commitments 9.2 14.5 7.1 30.8 Client cash outflows (15.5) (17.3) (5.5) (38.3) Net client cash flows (6.3) (2.8) 1.6 (7.5) New investments 2.2 0.9 0.9 4.0 Market changes 12.1 8.4 3.9 24.4 Foreign exchange (1) 0.8 0.5 0.1 1.4 Realizations and distributions (net) (0.4) — — (0.4) Other (2) (0.5) 0.5 (0.1) (0.1) March 31, 2021 $ 408.9 $ 196.8 $ 132.3 $ 738.0 ___________________________ (1) Foreign exchange reflects the impact of translating into U.S. dollars the assets under management of our Affiliates whose functional currency is not the U.S. dollar. (2) Other includes assets under management attributable to product transitions and reclassifications. Aggregate Fees Aggregate fees consist of asset and performance based fees of our consolidated and equity method Affiliates. Asset based fees include advisory and other fees earned by our Affiliates for services provided to their clients and are typically determined as a percentage of the value of a client’s assets under management. Performance based fees are based on investment performance, typically on an absolute basis or relative to a benchmark, and are generally recognized when it is improbable that there will be a significant reversal in the amount of revenue recognized. Performance based fees are generally billed less frequently than asset based fees, and although performance based fees inherently depend on investment performance and will vary from period to period, we anticipate performance based fees will be a recurring component of our aggregate fees. Aggregate fees are generally determined by the level of our average assets under management and the composition of these assets across our strategies that realize different asset based fee ratios and performance based fees. Our asset based fee ratio is calculated as asset based fees divided by average assets under management. Aggregate fees were $1,414.4 million for the three months ended March 31, 2021, an increase of $161.3 million or 13% as compared to the three months ended March 31, 2020. The increase in our aggregate fees was due to a $143.3 million or 11% increase from performance based fees and an $18.0 million or 2% increase from asset based fees. The increase in asset based fees was due to an increase in our average assets under management, principally in our global equity strategies, offset by a change in the composition of our assets under management. 23 Financial and Supplemental Financial Performance Measures The following table presents our key financial and supplemental financial performance measures: For the Three Months Ended March 31, (in millions) 2020 2021 % Change Net income (loss) (controlling interest) $ (15.6) $ 149.9 N.M. (1) Adjusted EBITDA (controlling interest) (2) 200.4 246.8 23 % Economic net income (controlling interest) (2) 151.3 184.8 22 % ___________________________ (1) Percentage change is not meaningful. (2) 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. For the three months ended March 31, 2021, our Adjusted EBITDA (controlling interest) increased $46.4 million or 23%, primarily due to a $161.3 million or 13% increase in aggregate fees, of which we hold a greater economic interest. While Adjusted EBITDA (controlling interest) increased $46.4 million or 23% for the three months ended March 31, 2021, our Net income (controlling interest) increased $165.5 million. The increase in Net income (controlling interest) was greater than the increase in Adjusted EBITDA (controlling interest) primarily due to a $144.1 million decrease in equity method intangible amortization and impairments and a $17.3 million increase in Investment and other income attributable to the controlling interest, partially offset by a $48.2 million increase in Income tax expense attributable to the controlling interest. We believe Economic net income (controlling interest) is an important supplemental financial performance measure because it represents our performance before non-cash expenses relating to the acquisition of interests in Affiliates and improves comparability of performance between periods. For the three months ended March 31, 2021, our Economic net income (controlling interest) increased $33.5 million or 22%, primarily due to a $46.4 million increase in Adjusted EBITDA (controlling interest), partially offset by an $8.0 million increase in Interest expense attributable to the controlling interest. Results of Operations The following discussion includes the key operating performance measures and financial results of our consolidated and equity method Affiliates. Our consolidated Affiliates’ financial results are included in our Consolidated revenue, Consolidated expenses, and Investment and other income, and our share of our equity method Affiliates’ financial results is reported, net of intangible amortization and impairments, in Equity method income (loss) (net). Consolidated Revenue The following table presents our consolidated Affiliate average assets under management and Consolidated revenue: For the Three Months Ended March 31, (in millions, except as noted) 2020 2021 % Change Consolidated Affiliate average assets under management (in billions) $ 351.9 $ 422.1 20 % Consolidated revenue $ 507.3 $ 559.1 10 % Our Consolidated revenue increased $51.8 million or 10% for the three months ended March 31, 2021, due to a $49.5 million or 10% increase from asset based fees and a $2.3 million or less than 1% increase from performance based fees. The increase in asset based fees was due to an increase in consolidated Affiliate average assets under management, principally in our global equity strategies, offset by a change in the composition of our assets under management. Consolidated Expenses Our Consolidated 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 expenses attributable to the non-controlling interests, including compensation, is generally determined by the percentage of revenue allocated to expenses as part of the 24 Table of Contents structured partnership interests in place at the respective Affiliate. Accordingly, increases in revenue generally will increase a consolidated Affiliate’s expenses attributable to the non-controlling interests and decreases in revenue will generally decrease a consolidated Affiliate’s expenses attributable to the non-controlling interests. The following table presents our Consolidated expenses: For the Three Months Ended March 31, % Change (in millions) 2020 2021 Compensation and related expenses $ 207.8 $ 246.9 19 % Selling, general and administrative 90.3 78.8 (13) % Intangible amortization and impairments 20.6 7.5 (64) % Interest expense 19.5 27.5 41 % Depreciation and other amortization 5.1 4.3 (16) % Other expenses (net) 11.0 13.5 23 % Total consolidated expenses $ 354.3 $ 378.5 7 % Compensation and related expenses increased $39.1 million or 19% for the three months ended March 31, 2021, primarily due to a $28.9 million increase in bonus and salary expenses principally as a result of the increase in Consolidated revenue, an $8.6 million increase in Affiliate equity compensation expense, and a $1.5 million increase in share-based compensation expense. Selling, general and administrative expenses decreased $11.5 million or 13% for the three months ended March 31, 2021, primarily due to a $5.4 million decrease in travel-related expenses as a result of reduced travel during the COVID-19 pandemic, a $3.5 million decrease in reserves on notes receivable, and a $1.1 million decrease in professional fees. Intangible amortization and impairments decreased $13.1 million or 64% for the three months ended March 31, 2021, primarily due to a $13.6 million decrease in amortization expense related to certain definite-lived assets being fully amortized. Interest expense increased $8.0 million or 41% for the three months ended March 31, 2021, primarily due to a $6.3 million increase from our debt securities issued in 2020 and a $2.8 million increase from the termination of our pound sterling-denominated forward foreign currency contracts, which occurred in the first quarter of 2020. These increases were partially offset by a $1.6 million decrease from lower interest rates and lower borrowings on our senior unsecured term loan facility (the “term loan”). There were no significant changes in Depreciation and other amortization for the three months ended March 31, 2021. Other expenses (net) increased $2.5 million or 23% for the three months ended March 31, 2021, primarily due to a $2.0 million decrease in gains related to changes in the value of Affiliate equity purchase obligations. Equity Method Income (Loss) (Net) For our Affiliates accounted for under the equity method, we use structured partnership interests in which we contractually share in the Affiliate’s revenue or revenue less agreed-upon expenses. Our share of earnings or losses from Affiliates accounted for under the equity method, net of amortization and impairments, is included in Equity method income (loss) (net). The following table presents 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 Equity method income (loss) (net): 25 Table of Contents For the Three Months Ended March 31, (in millions, except as noted) 2020 2021 % Change Operating Performance Measures Equity method Affiliate average assets under management (in billions) $ 311.1 $ 311.5 0 % Equity method revenue $ 745.8 $ 855.3 15 % Financial Performance Measures Equity method earnings $ 66.1 $ 86.9 31 % Equity method intangible amortization and impairments (179.3) (35.2) (80) % Equity method income (loss) (net) $ (113.2) $ 51.7 N.M. (1) ___________________________ (1) Percentage change is not meaningful Our equity method revenue increased $109.5 million or 15% for the three months ended March 31, 2021, primarily due to a $141.0 million or 19% increase from performance based fees, partially offset by a $31.5 million or 4% decrease from asset based fees. The decrease in asset based fees was primarily due to a change in the composition of our assets under management. For the three months ended March 31, 2021, equity method earnings increased $20.8 million or 31%, primarily due to a $109.5 million or 15% increase in equity method revenue. Equity method earnings increased more than equity method revenue on a percentage basis primarily due to the recognition of performance based fees at Affiliates in which we hold more of an economic interest. Equity method intangible amortization and impairments decreased $144.1 million or 80% for the three months ended March 31, 2021, primarily due to a $140.0 million decrease in expenses to reduce the carrying value of an Affiliate to fair value (see Note 11 of our Consolidated Financial Statements) and a $5.9 million decrease in amortization expenses related to a decrease in actual and expected client attrition. These decreases were partially offset by a $2.3 million increase in amortization expense due to investments in new Affiliates. Investment and Other Income The following table presents our Investment and other income: For the Three Months Ended March 31, (in millions) 2020 2021 % Change Investment and other income $ 2.4 $ 32.3 N.M. (1) __________________________ (1) Percentage change is not meaningful. Investment and other income increased $29.9 million for the three months ended March 31, 2021, primarily due to a $32.3 million net increase from the valuation of Investments in marketable securities and Other investments. Income Tax Expense The following table presents our Income tax expense: For the Three Months Ended March 31, (in millions) 2020 2021 % Change Income tax expense $ 2.2 $ 50.5 N.M. (1) __________________________ (1) Percentage change is not meaningful. 26 Table of Contents Income tax expense increased $48.3 million for the three months ended March 31, 2021, primarily due to a $213.7 million increase in income (loss) before income taxes attributable to the controlling interest, partially offset by a $3.1 million decrease in tax shortfalls related to share-based compensation. Net Income (Loss) The following table presents Net income, Net income (non-controlling interests), and Net income (loss) (controlling interest): For the Three Months Ended March 31, (in millions) 2020 2021 % Change Net income $ 40.0 $ 214.1 N.M. (1) Net income (non-controlling interests) 55.6 64.2 15 % Net income (loss) (controlling interest) (15.6) 149.9 N.M. (1) __________________________ (1) Percentage change is not meaningful. Net income (controlling interest) increased $165.5 million for the three months ended March 31, 2021, primarily due to an increase in Equity method income (net), an increase in Consolidated revenue, and an increase in Investment and other income attributable to the controlling interest. These increases were partially offset by an increase in Income tax expense attributable to the controlling interest. Supplemental Financial Performance Measures Adjusted EBITDA (controlling interest) As supplemental information, we provide a non-GAAP measure that we refer to 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, certain Affiliate equity expenses, gains and losses on general partner and seed capital investments, and adjustments to our contingent payment arrangements. We believe that many investors use this measure when assessing the financial performance of companies in the investment management industry. This non-GAAP performance measure is provided in addition to, but not as a substitute for, Net income (loss) (controlling interest) or other GAAP performance measures. The following table presents a reconciliation of Net income (loss) (controlling interest) to Adjusted EBITDA (controlling interest): For the Three Months Ended March 31, (in millions) 2020 2021 Net income (loss) (controlling interest) $ (15.6) $ 149.9 Interest expense 19.5 27.5 Income taxes 0.2 48.4 Intangible amortization and impairments (1) 195.7 40.6 Other items (2) 0.6 (19.6) Adjusted EBITDA (controlling interest) $ 200.4 $ 246.8 ___________________________ (1) Intangible amortization and impairments in our Consolidated Statement of Income include amortization attributable to the non-controlling interests of our consolidated Affiliates. For our Affiliates accounted for under the equity method, we do not separately report intangible amortization and impairments in our Consolidated Statements of Income. Our share of these Affiliates’ amortization is reported in Equity method income (loss) (net). The following table presents the Intangible amortization and impairments shown above: 27 Table of Contents For the Three Months Ended March 31, (in millions) 2020 2021 Consolidated intangible amortization and impairments $ 20.6 $ 7.5 Consolidated intangible amortization and impairments (non-controlling interests) (4.2) (2.1) Equity method intangible amortization and impairments 179.3 35.2 Total $ 195.7 $ 40.6 (2) Other items includes depreciation, adjustments to contingent payment arrangements, certain Affiliate equity expenses, and gains and losses on general partner and seed capital investments. Economic Net Income (controlling interest) and Economic Earnings Per Share As supplemental information, we also provide non-GAAP performance measures that we refer to as Economic net income (controlling interest) and Economic earnings per share. We believe Economic net income (controlling interest) and Economic earnings per share are important measures because they represent our performance before non-cash expenses relating to the acquisition of interests in Affiliates and improve comparability of performance between periods. Economic net income (controlling interest) and Economic earnings per share are used by our management and Board of Directors as our principal performance benchmarks, including as one of the measures for aligning executive compensation with stockholder value. These non-GAAP performance measures are provided in addition to, but not as substitutes for, Net income (loss) (controlling interest) and Earnings (loss) per share (diluted) or other GAAP performance measures. We adjust Net income (loss) (controlling interest) to calculate Economic net income (controlling interest) by adding back our share of pre-tax intangible amortization and impairments attributable to intangible assets (including the portion attributable to equity method investments in Affiliates) because these expenses do not correspond to the changes in the value of these assets, which do not diminish predictably over time. We also add back the deferred taxes attributable to intangible assets because we believe it is unlikely these accruals will be used to settle material tax obligations. Further, we add back other economic items to improve comparability of performance between periods. Economic earnings per share represents Economic net income (controlling interest) divided by the Average shares outstanding (adjusted diluted). In this calculation, the potential share issuance in connection with our junior convertible securities is measured using a “treasury stock” method. Under this method, only the net number of shares of common stock equal to the value of these junior convertible securities in excess of par, if any, is deemed to be outstanding. We believe the inclusion of net shares under a treasury stock method best reflects the benefit of the increase in available capital resources (which could be used to repurchase shares of common stock) that occurs when these securities are converted and we are relieved of our debt obligation. This method does not take into account any increase or decrease in our cost of capital in an assumed conversion. The following table presents a reconciliation of Net income (loss) (controlling interest) to Economic net income (controlling interest) and Economic earnings per share: For the Three Months Ended March 31, (in millions, except per share data) 2020 2021 Net income (loss) (controlling interest) $ (15.6) $ 149.9 Intangible amortization and impairments (1) 195.7 40.6 Intangible-related deferred taxes (31.0) 8.9 Other economic items (2) 2.2 (14.6) Economic net income (controlling interest) $ 151.3 $ 184.8 Average shares outstanding (diluted) 47.8 45.4 Stock options and restricted stock units 0.0 — Assumed issuance of junior convertible securities shares — (2.2) Average shares outstanding (adjusted diluted) 47.8 43.2 Economic earnings per share $ 3.16 $ 4.28 ___________________________ 28 Table of Contents (1) See note (1) to the table in “Adjusted EBITDA (controlling interest).” (2) Other economic items includes non-cash imputed interest (principally related to the accounting for convertible securities and contingent payment arrangements), tax windfalls and shortfalls from share-based compensation, certain Affiliate equity expenses, and gains and losses on general partner and seed capital investments. For the three months ended March 31, 2020 and 2021, other economic items were net of income tax expense of $1.1 million and $6.9 million, respectively. Liquidity and Capital Resources We generate long-term value by investing in new Affiliate partnerships, investing in existing Affiliates, and investing in centralized capabilities through which we can leverage our scale and resources to benefit our Affiliates and enhance their long-term growth prospects. Given our annual cash generation from operations, in addition to investing for growth in our business, we are also able to return excess capital to shareholders primarily through share repurchases. We continue to manage our capital structure consistent with an investment grade company and are currently rated A3 by Moody’s Investors Service and BBB+ by S&P Global Ratings. Cash and cash equivalents were $766.2 million as of March 31, 2021 and were attributable to both our controlling and the non-controlling interests. In the three months ended March 31, 2021, we met our cash requirements primarily through cash generated by operating activities. Our principal uses of cash in the three months ended March 31, 2021 were for share repurchases, investments in existing Affiliates through purchases of Affiliate equity interests, and investments in new Affiliates. We expect investments in new Affiliates, investments in existing Affiliates, primarily through purchases of Affiliate equity interests and general partner and seed capital investments, the return of capital through share repurchases and the payment of cash dividends on our common stock, repayment of debt, distributions to Affiliate equity holders, and general working capital to be the primary uses of cash on a consolidated basis for the foreseeable future. We anticipate that our current cash balance, cash flows from operations, and borrowings under our revolver will be sufficient to support our uses of cash for the foreseeable future. In addition, we may draw funding from the debt and equity capital markets, and our credit ratings, among other factors, allow us to access these sources of funding on favorable terms. The following table presents operating, investing, and financing cash flow activities: For the Three Months Ended March 31, (in millions) 2020 2021 Operating cash flow $ 85.6 $ 188.9 Investing cash flow 15.9 (24.1) Financing cash flow (37.7) (440.9) Operating Cash Flow Operating cash flows are calculated by adjusting Net income for other significant sources and uses of cash, significant non-cash items, and timing differences in the cash settlement of assets and liabilities. For the three months ended March 31, 2021, Cash flows from operating activities were $188.9 million, primarily from Net income of $214.1 million adjusted for non-cash items of $10.5 million, and $157.9 million of distributions of earnings received from equity method investments. These items were partially offset by timing differences in the cash settlement of receivables and payables, accrued liabilities, and other liabilities of $159.2 million, primarily due to the payment of incentive compensation, and net purchases of securities by consolidated Affiliate sponsored investment products of $24.6 million. For the three months ended March 31, 2021, operating cash flows were primarily attributable to the controlling interest. Investing Cash Flow For the three months ended March 31, 2021, Cash flows used in investing activities were $24.1 million, primarily due to investments in new Affiliates of $11.8 million and net purchases of investment securities of $11.6 million. Financing Cash Flow For the three months ended March 31, 2021, Cash flows used in financing activities were $440.9 million, primarily due to the return of $313.3 million of capital to shareholders, principally through share repurchases, $102.6 million of distributions to non-controlling interests, $15.0 million of Affiliate equity purchases, net of issuances, $15.0 million of repurchases of our junior convertible securities, and $10.0 million of taxes paid from shares withheld related to issuances of common stock. Cash 29 Table of Contents flows used in financing activities were partially offset by the receipt of $23.1 million of subscriptions to consolidated funds, net of redemptions. Affiliate Equity We periodically purchase Affiliate equity from and issue Affiliate equity to our consolidated Affiliate partners and our officers, under agreements that provide us with a conditional right to call and Affiliate equity holders with a conditional right to put their Affiliate equity interests to us at certain intervals. For Affiliates accounted for under the equity method, we do not typically have such put and call arrangements. The purchase price of these conditional purchases is generally calculated based upon a multiple of the Affiliate’s cash flow distributions, which is intended to represent fair value. Affiliate equity holders are also permitted to sell their equity interests to other individuals or entities in certain cases, subject to our approval or other restrictions. As of March 31, 2021, our current redemption value of $730.6 million for Affiliate equity interests (including $59.1 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors) has been presented as Redeemable non-controlling interests. Although the timing and amounts of these purchases are difficult to predict, we paid $15.0 million for Affiliate equity purchases, net of issuances, during the three months ended March 31, 2021, and we expect net purchases of approximately $100 million of Affiliate equity during the remainder of 2021. In the event of a purchase, we become the owner of the cash flow associated with the purchased equity. See Notes 14 and 15 of our Consolidated Financial Statements. Share Repurchases Our Board of Directors authorized share repurchase programs in January 2021 and October 2019 to repurchase up to 5.0 million and 6.0 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 trading plans, as well as pursuant to accelerated share repurchase programs or other share repurchase strategies that may include derivative financial instruments. During the three months ended March 31, 2021, we repurchased 1.6 million shares of our common stock, at an average price per share of $128.84. As of March 31, 2021, there were a total of 5.3 million shares available for repurchase under our January 2021 and October 2019 share repurchase programs. Debt The following table presents the carrying value of our outstanding indebtedness. See Note 7 of our Consolidated Financial Statements: (in millions) December 31, 2020 March 31, 2021 Senior bank debt $ 350.0 $ 350.0 Senior notes 1,097.3 1,097.5 Junior convertible securities 318.4 308.8 Junior subordinated notes 565.7 565.8 The carrying value of our debt differs from the amount reported in the notes to our Consolidated Financial Statements, as the carrying value of our debt in the table above is not reduced for debt issuance costs. Senior Bank Debt We have a $1.25 billion senior unsecured multicurrency revolving credit facility (the “revolver”) and a $350.0 million term loan (together with the revolver, the “credit facilities”). On January 8, 2021, we amended and refinanced the term loan to adjust the marginal rate by 0.075% to 0.950% and to extend the maturity by three years. The commercial terms of the term loan otherwise remained the same. The revolver matures on January 18, 2024, and the term loan, as amended, matures on January 18, 2026. Subject to certain conditions, we may increase the commitments under the revolver by up to an additional $500.0 million and may borrow up to an additional $75.0 million under the term loan. As of March 31, 2021, we had no outstanding borrowings under the revolver, and could borrow all capacity and remain in compliance with our credit facilities. Junior Convertible Securities 30 Table of Contents As of March 31, 2021, we had 5.15% junior convertible trust preferred securities outstanding (the “junior convertible securities”) with a carrying value of $308.8 million. The junior convertible securities were issued by AMG Capital Trust II, a Delaware statutory trust, in October 2007. Each of the junior convertible securities represents an undivided beneficial interest in the assets of the trust. The trust’s only assets are junior subordinated convertible debentures issued to it by us, and have substantially the same payment terms as the junior convertible securities. We own all of the trust’s common securities, and have fully and unconditionally guaranteed, on a subordinated basis, the payment obligations on the junior convertible securities. We do not consolidate the trust’s financial results into our Consolidated Financial Statements. The carrying value of the junior convertible securities is accreted to the principal amount at maturity ($416.7 million) over a remaining life of approximately 17 years. Holders of the junior convertible securities have no rights to put these securities to us. Upon conversion, holders will receive cash or shares of our common stock, or a combination thereof, at our election. We may redeem the junior convertible securities, subject to our stock trading at or above certain specified levels over specified times periods, and may also repurchase junior convertible securities in the open market or in privately negotiated transactions from time to time at management’s discretion. In the first quarter of 2021, we paid $15.0 million to repurchase a portion of our junior convertible securities, resulting in reductions of $10.3 million and $2.9 million to Debt and Additional paid-in capital, respectively. As a result of these repurchases, we also reduced our Deferred income tax liability (net) by $3.3 million. Equity Distribution Program We have equity distribution and forward equity agreements with several major securities firms under which we may, from time to time, issue and sell shares of our common stock (immediately or on a forward basis) having an aggregate sales price of up to $500.0 million (the “equity distribution program”). As of March 31, 2021, no sales had occurred under the equity distribution program. Derivatives See Note 8 of our Consolidated Financial Statements. Commitments See Note 9 of our Consolidated Financial Statements. Leases As of March 31, 2021, our lease obligations were $29.4 million for the remainder of 2021, $66.1 million from 2022 through 2023, $48.6 million from 2024 through 2025, and $63.9 million thereafter. The portion of these lease obligations attributable to the controlling interest were $7.4 million for the remainder of 2021, $15.9 million from 2022 through 2023, $14.0 million from 2024 through 2025, and $4.0 million thereafter. Recent Accounting Developments See Note 2 of our Consolidated Financial Statements. Critical Accounting Estimates and Judgments Our 2020 Annual Report on Form 10‑K includes additional information about our Critical Accounting Estimates and Judgments, and should be read in conjunction with this Quarterly Report on Form 10‑Q. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to our Quantitative and Qualitative Disclosures About Market Risk for the three months ended March 31, 2021. Please refer to Item 7A of our 2020 Annual Report on Form 10-K.