Q2 2023 Affiliated Managers Group Inc Earnings Call
Yes.
Greetings and welcome to the AMG second quarter 2023 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
I'd now like to turn the conference over to your host Patricia figure our head of Investor Relations for AMG. Thank you you may begin.
Good morning, and thank you for joining us today to discuss Amg's result for the second quarter of 2023.
Before we begin I'd like to remind you that during this call. We may make a number of forward looking statements, which could differ from our actual results materially and AMG assumes no obligation to update these statements.
A replay of today's call will be available on the Investor Relations section of our website along with a copy of our earnings release and a reconciliation of any non-GAAP financial measures, including any earnings guidance announced on this call.
In addition, we posted an updated investor presentation to our website. This morning, and encourage investors to consult our site regularly for updated information.
With us today to discuss the company's results for the quarter R. J Corrigan, President and Chief Executive Officer, and Tom Wojcik, Chief Financial Officer with that I'll turn the call over to Jay.
Thanks, Patricia and good morning, everyone.
Amg's second quarter results reflect the positive impact of our capital allocation strategy across both growth investments and share repurchases.
During the quarter, we announced a new partnership with 4 billion, marking our seventh investment in alternatives over the last four years further evolving the composition of our business towards in demand strategies.
We continue to see attractive new investment opportunities and advanced several of them during the quarter.
Looking ahead, we expect to deploy additional capital toward private markets and liquid alternatives through investments in new and existing affiliates.
Given our robust financial flexibility, which will be further enhanced by the proceeds from the variable transaction, along with our capital allocation discipline and differentiated partnership model.
M. G is uniquely positioned to deliver significant shareholder value over time as we continue to execute on our long term growth strategy.
Yeah.
In June we announced a minority investment in <unk>, a leading European life Sciences venture capital and growth equity firm with more than 3 billion in assets under management.
For me and is well positioned to benefit from strong investor demand for the development and commercialization of innovative drug therapies.
The firm will be our first affiliate focused on venture capital.
Any further diversification to our business profile.
And this new partnership broadens our participation in private markets as well as life sciences sector with robust client demand trends and meaningful societal impact.
Yeah.
Before I begin team chose to partner with AMG because of our unique approach, which preserves their operational autonomy and investment independence, while providing access to our strategic capabilities.
Before being partners were attracted to AMG, given our firm's deep cultural alignment, including our respective entrepreneurial cultures and long term partnership orientations.
As well as our capital formation capabilities, which we expect will expand for beans client base.
Yeah.
Building, an enduring multi generational firm is of Paramount importance to the four being partners as.
As reflected in the firm's deliberate design of an incentive structure that ensures long term alignment and amg's expertise will further advance for beans ability to achieve this objective.
As evidenced by some of our recent new investments, we are seeing greater demand for firms and private markets that are seeking succession planning oriented partnerships given the inevitable need for next generation leadership transitions at firms that now have operated for decades.
AMG has proven approach in 30 year track record in the area are unmatched, making AMG, a uniquely attractive partner to independent private markets firms seeking succession oriented solutions.
Taking a step back over the last few years AMG has broadened its strategic capabilities enhancing our existing affiliates competitive position and providing in an even more attractive value proposition for prospective affiliates.
Today, we offer the broadest array of partnership solutions available to independent firms.
Including strategic and business development support.
Succession planning.
Product development capital formation capabilities growth capital and insights on the most significant questions that independent firms face.
Our ability to engage and collaborate with our affiliates to magnify their success has yielded tangible results.
Over the past several years, we have meaningfully enhanced the efforts of affiliates, including through product launches in asset gathering support.
On our U S wealth platform, we launched one of the first evergreen funds and the private equity space the AMG Pantheon fund.
And have successfully scaled this strategy.
This fund has grown to more than 2 billion in assets under management and is one of the most highly regarded private markets products in the U S wealth channel.
In the institutional channel, we have successfully supported com vest and growing its private debt platform from approximately 2 billion at the time of our investment to more than 8 billion today through.
Through growth capital and enhanced institutional capabilities, yielding broader opportunities across both the U S and global client base.
We've also been successful in magnifying the growth of multiple affiliates by leveraging amg's scale and strategic relationships globally and.
Enabling affiliates to efficiently access hard to reach marketplaces.
We recently facilitated client wins in the Middle East Korea, Australia and Japan.
Extending our affiliates reached beyond their own historical geographic focus.
Yeah.
Amg's abilities to strategically engaged across a range of growth initiatives can materially improve affiliates long term success.
In addition.
Our proven ability to create value together with our existing affiliates.
Differentiates AMG each prospective new affiliates and is an increasingly important consideration as excellent independent firms seek a strategic partner.
As we continue to cultivate attractive opportunities to partner with the highest quality independent firms in areas of secular growth.
We are well positioned to increase our new investment activity further evolving the composition of our business towards in demand strategies.
More broadly the growth investments we've made over the last few years have already played a critical role in reshaping Amg's business.
Accelerating the evolution of our strategic profile from predominantly traditional long only exposures to a substantial contribution from alternatives.
In the last 12 months approximately half of our earnings were generated by alternative strategies, including private markets and liquid alternatives.
And as we continue to execute on our growth strategy. We expect the composition of our earnings to reflect an even greater contribution from alternatives, both private markets and liquid alternatives.
Further given our focus on high performing independent firms and our ongoing strategic evolution towards areas of secular growth.
We expect Amg's long term organic growth profile to improve.
And well active equity outflows in the current macro environment office skate the underlying momentum in our business specifically in alternatives.
The actions we've taken over the last few years are producing results.
As evidenced by the shift in our earnings composition meaningful flows into alternatives and the significant growth in our earnings per share over the past five years.
Yeah.
Looking forward.
We are well positioned to continue to evolve our business through growth investments in new and existing affiliates, given our track record pipeline and significant financial flexibility.
And our financial flexibility will be further enhanced by the proceeds of the variable transaction announced last week.
For more than a decade, AMG and variable enjoyed a productive and prosperous partnership that's all variable more than double its assets under management as an independent firm.
However, when the opportunity presented itself, both AMG and the variable partners recognize the strategic benefits of a full combination with pasta.
And given our alignment and collaborative approach AMG supported the successful outcome for all stakeholders.
Consistent with our disciplined capital allocation framework, we will deploy the considerable proceeds from the transaction to benefit our shareholders prioritizing growth investments and returning any excess capital thereafter to shareholders.
Since 2019, we have invested more than $1 5 billion in growth areas.
With alternatives accounting for approximately two thirds of that total.
While also returning more than $2 billion in excess capital.
Looking ahead, our opportunities to invest for growth have been steadily building, including as a result of our broadened capabilities.
Given our enhanced opportunity set our excellent capital position and our unique competitive advantages we are confident in our ability to generate incremental value over time.
And with that I'll turn it over to Tom to review the details of the quarter.
Thank you Jay and good morning, everyone.
Our high level of activity in the second quarter reflects the increasingly attractive opportunity for AMG to execute our growth strategy and evolve the composition of our business.
During the quarter, we simultaneously invested for growth.
Returned capital to shareholders and strengthened our balance sheet to enhance future flexibility.
In the past 90 days, we announced a growth investment in <unk>.
Completed our accelerated share repurchase program and repurchased additional shares.
So all of our remaining stake in EQT.
And announced the veritable transaction, which will add significant capital to our strong balance sheet.
Taken together, we have and will continue to reshape the composition of AMG.
We expect that our strategic activity levels will remain elevated going forward.
As we further evolve our business mix towards areas of secular growth and return excess capital to our shareholders to drive long term earnings per share growth and value creation.
Turning to our second quarter results.
Adjusted EBITDA of $214 million included $20 million of net performance fee earnings and reflected the ongoing execution of our strategy to invest in secular growth areas.
As well as strong performance in liquid alternative strategies.
Economic earnings per share of $4 45 grew 10% year over year and benefited from incremental share repurchases as well as discrete foreign tax benefits.
Net client cash outflows, excluding certain quantitative strategies were 7 billion driven primarily by global equities, which offset continued strength in alternatives.
Turning to performance across our business and excluding certain quantitative strategies.
And alternatives, we again reported strong results with nearly $2 billion in net inflows in the second quarter.
These inflows reflect nearly $2 billion in private market flows at pantheon AIG and Comcast.
Our affiliates continue to generate outstanding investment performance and their excellent long term track records across credit real estate secondaries and infrastructure are driving fund raising momentum.
While net flows in liquid alternatives were essentially flat.
Our absolute return oriented strategies continued to see strong demand with 1 billion and inflows that were offset by lockup expirations on beta sensitive strategies that generated performance fees in the quarter.
Overall, our alternatives affiliates have outstanding performance across a wide range of products and are positioned to benefit from forward demand trends as clients look for uncorrelated and differentiated return streams to add diversity to their portfolios.
Industry headwinds in global equities continued and we saw approximately $6 billion in net outflows.
And while overall near term performance in global equities remains mixed.
Our affiliates' strong long term track records across multiple cycles position them to recapture client demand over time.
In U S equities, we saw net outflows of approximately $2 billion.
Our collective long term investment performance remains excellent in this category.
And we are seeing pockets of client demand strength, that's several affiliates.
Finally in multi asset and fixed income flows were flat in the quarter and we saw ongoing demand for fixed income strategies at GW in Kay and Artemis.
Now moving to third quarter guidance.
We expect third quarter, adjusted EBITDA to be between 190 and $200 million.
Based on current AUM levels, reflecting our market blend, which was up 2% quarter to date as of Tuesday.
And including net performance fee earnings of up to $10 million.
This includes a partial quarter of earnings from veritable and does not include any impact from four behan.
And I'll describe each of those transactions more in a moment.
Turning to specific modeling items.
For the second quarter, our share of interest expense was $31 million.
Controlling interest depreciation was $2 million.
Amortization and impairments were $29 million.
And intangible related deferred taxes were $15 million.
We expect all of these metrics to remain at similar levels for the third quarter.
Our effective GAAP and cash tax rates were approximately 20% and 11% respectively.
Reflecting discrete foreign tax benefits and.
And we expect them to be 26% and 17% for the third quarter.
Other economic items for the quarter were negative 1 million.
Which included $1 million of realized economic gains.
As I mentioned last quarter, we expect realized economic gains to be $1 million to $2 million per quarter.
Our adjusted weighted average share count for the second quarter was $37 6 million.
We expect our adjusted weighted average share count to be approximately 37 million shares for the third quarter.
On our year end call in February we guided to a performance fee earnings range of $125 million to $175 million.
Given more muted investment performance and absolute return strategies in the first half of the year. We now expect full year performance fee earnings to be closer to the lower end of that guidance range.
Many of our performance fee generative strategies continued to see strong demand and deliver excellent investment performance and this earnings stream remains a source of strength and diversification for AMG.
Finally, turning to the balance sheet and capital allocation.
Our balance sheet is in an excellent position and remains a source of strength as we look to generate shareholder value.
This month, we completed the sale of our EQT position generating total gross proceeds of $890 million since the closing of the transaction.
That capital has contributed significantly to growth investments share repurchases and reducing our net debt.
As Jay discussed in the quarter.
We announced a new partnership with 4 million in line with our strategy to increase our exposure to secular growth areas, including private markets and the attractive area of life Sciences.
We expect the four being transaction to close in the second half of the year and plan to fund the purchase price with cash.
In addition, the variable transaction announced last week will generate 294 million of pre tax proceeds or approximately $225 million on an after tax basis.
Veritable contributed approximately $17 million of EBITDA in 2022.
And we anticipate the transaction will close later in the third quarter.
Taken together, we expect these two transactions to generate incremental earnings per share of approximately 2% to 3% once the proceeds from variable are fully deployed.
We also completed the execution of the $225 million accelerated share repurchase we announced at year end and repurchased an additional $44 million worth of shares in the quarter brings.
Bringing the total capital deployed towards share repurchases to $269 million in the first half of 2023.
And given the combination of our strong liquidity position and recurring cash flows. We now anticipate full year repurchases of more than 500 million inclusive of the ASR.
As always these expectations remain subject to market conditions and new investment activity.
Given our significant liquidity and capital flexibility. We currently have approximately $500 million in capital that we can deploy towards growth investments over the second half of 2023 <unk>.
Incremental to the funding of $4 billion and the elevated share repurchase guidance I provided for the year.
Our approach to investing in the growth of our business is intentional.
We generate substantial cash flow.
And a diverse set of growth opportunities available to us.
Across investments in new affiliates.
Innovating alongside our existing affiliates and investing in AMG capabilities.
Looking ahead, given our disciplined capital allocation framework and distinct competitive advantages, we remain well positioned to execute on our growth strategy and generate shareholder value over time.
Now we're happy to take your questions.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May press star two if you'd like to remove your question from the queue for participants using speaker equipment, it may be necessary to pick up.
Your handset before pressing the star keys.
In the interest of time, we request that you keep to one question. Each thank you are.
Our first question comes from the line.
Dan Fannon with Jefferies. Please proceed with your question.
Yes. Good morning, everyone. This is actually Rick Roy on for Dan.
And so earlier on on the topic of the affiliate investments you mentioned private Margaret private markets and liquid alts as potential areas of interest.
Just given the recent sale of variable to pass on that occurred in the quarter.
Do you also see.
Wealth management as an immediate term priority and perhaps.
Any interest in trust your custody services and things of that nature.
Yeah.
Well thanks for your question Rick.
Let me, let me address the wealth a question in the context of our strategy and maybe I'll just state our strategy is to invest in areas of secular growth. We do think wealth is one of those areas liquid alternatives private markets Asia and sustainability are the other areas.
And maybe then to just go right at your question wealth continues to be an area of focus.
And we do approach wealth are really into two ways.
To capture the secular growth trend and Thats first by investing directly in wealth management firms that want to remain independent.
And while that universe of potential partners has become smaller given consolidation trends in the industry, specifically within the RIAA channel where roll up strategies have become the dominant business model.
Where we see these strategies are generally PE sponsored and theyre, taking out costs and putting leverage on the business that has also driven up pricing and you can see that in the proceeds we got under variable transaction.
However, there are opportunities for partner owned firms that we see more value in remaining independent and we currently have a number of them in our pipeline.
The second primary way that we experienced growth in the wealth channel is through opportunities by investing AMG capital to expand our affiliates access to the channel, especially.
Especially in alternatives, both liquid and private markets.
We see a growth where we see growing demand for our private markets and liquid alternatives in that channel, where AMG has been successful in bringing affiliates strategies to market and strategically supporting the infrastructure necessary to grow.
Of the numerous opportunities within wealth the introduction of private markets in the U S and non U S markets continues to be the largest growth area for us the democratization of alternatives not just private markets, but other areas of alternatives. It's a major secular trend. We continue to see this play out as individuals' increase allocation.
<unk> to both private markets and liquid alternatives.
We think that's going to be further enabled by technology regulation and product packaging.
So again coming back to your question wealth is going to continue to be a major focus for us. It's multifaceted as I just mentioned and we do have a long term strategy to try to capture opportunities in the space. Thank.
Thank you for the question.
Thank you. Our next question comes from the line of Alex Blaustein with Goldman Sachs. Please proceed with your question.
Thanks, guys good morning.
I was hoping we could spend a little bit more time on sort of the pivot you've been articulating over the last couple of quarters towards faster growth areas, particularly the old.
Do you anticipate that also involving pruning of the sort of traditional businesses and the opportunities you guys see to either reduce stakes herself as a whole or parts of the traditional business. Thanks.
Thanks, Alex.
And I'll I'll start Thomas if I, it's a really good question and it really talks to the shape of our business. So.
So it might it might take a minute and elaborate and then Thomas you have anything to add.
It is true that the shape of our business is changing today, we have approximately just under half of right around half of our EBITDA is coming from alternatives, both private markets and liquid alternatives.
Differentiated active equities is something like 35% to 40% and the remainder is multi asset.
I think theres, an IR slide on that and it's worth just noting and even comparing that.
Three years ago five years ago. So it is definitely changing most of that's coming from our investments in.
New affiliates, we did our seventh.
Our alternative investment just with four being in for Ben.
As you probably saw in the release and in my prepared remarks very exciting.
Business focused on life Sciences is our first.
Investment in and venture in this area and also in life Sciences. So it's very diversifying for us. So we are shaping our business through investments new investments in growth areas also.
Investments in existing affiliates.
A few years ago, we made a second.
Investment in systematic we've made.
Investments in our distribution that have helped affiliates like pantheon grow in the wealth channel. So.
Do you think about capital, sometimes it's easiest to think about it as a new investment, but often times it can be done in an existing affiliates or.
Or directly in capabilities to help affiliates grow so what you're really saying and I think I said in my prepared remarks, our flows are being office gated by the underlying momentum in alternatives.
To your question on.
Yes, I think it was it's sort of.
Driven by the variable transaction and so maybe two.
Talk about you know our strategy generally with respect to our existing affiliates.
Our business model is based on our competitive advantage, which is we help affiliates remain independent and aligned with clients and then we've developed a range of capabilities that enable those firms to maintain their independence over the long term.
So when a partner chooses AMG, they're choosing independents and they they benefit from the capabilities that we have to offer so theres really no intention by us or even buy them at the initial investment to do anything other than remain independent and access our strategic resources. It is a cornerstone feature of.
Our partnership approach. So we expect the vast majority of our affiliates to remain independent remained with us because that's what they chose at the time that the partnership so theres not really any change in strategy here there is no intention.
To do anything different other than continue to help independent firms over the long term, but all businesses and partnerships evolve and sometimes circumstances change such that independents is no longer the optimal structure.
In that case, given our alignment with par.
Our partners and our clients and our business model, we do collaborate with affiliates to consider strategic options that are in the best interest of all stakeholders, including our own shareholders and in some rare cases. This may result in some other strategic transaction likely consolidation transaction like variable.
That was one of those exceptions, but I do think it's an exception.
We we and variable recognize the compelling strategic benefits of a consolidation transaction in this case and because of our alignment and collaborative approach we supported the successful outcome, but.
While the change in ownership is possible, it's unlikely and we committed we remain committed to our strategy to to help independent firms remain independent and then strategically support them.
I think Jay covered it very well and maybe I'll follow up just with a couple of points with respect to continuing to grow that secular growth bucket.
Jay walked through kind of the categories will do that and really three ways one through new investments two through pointing the AMG capabilities largely around product and distribution more toward those growth areas and.
And three there is going to be a natural organic growth difference between some of those businesses and businesses that are facing more organic growth headwinds. So we're really attacking that business mix shift opportunity as part of our strategy and a number of different ways.
Very importantly, and again Jay covered much of this.
No proactive part of our strategy to move away from our existing very high quality.
Active equity oriented affiliates in fact in many ways right quite the opposite these are high quality businesses with very strong long term track records with very unique investment capabilities, and we're focused and working with many of these affiliates from a strategy perspective on how those investment capabilities can be better delivered to clients over time.
Whether that's adjacent strategies, whether that's new wrappers and taking advantage of new trends in the market, but ultimately a lot of these businesses have delivered very strong returns over time. They continue to be an important part of our cash flow and we're working with them to continue to ensure that they're great businesses that are delivering for clients.
<unk> are important part of the overall AMG story.
Thank you. Our next question comes from the line of Craig Siegenthaler with Bank of America. Please proceed with your question.
Hi, Good morning. Thank you for taking the question. This is actually Maggie Kyle filling in for Craig.
It would just be helpful to get an update on how your M&A pipeline has evolved over the last six months and if youre seeing any signs that sellers now are more motivated to execute over the near term. Thank you.
Yes, Thanks for your question Maggie.
So maybe I'll start by saying.
Unlike the general environment for M&A kind of within asset management.
Across all of asset management, I think we're seeing a steady flow of opportunities and transactions. So asset management really hasnt slowed down and we're continuing to see high quality independent partner owned firms in our pipeline.
Yes, I'd like to say I have an obvious answer to why we continue to see steady.
Steady flow, where the rest of the general kind of M&A environment has really slowed down.
It's possibly that.
Asset management has really.
Quite a quite a dynamic group of partner owned firms and even larger firms in our industry. There's a lot going on in it and so I think that's why we've kind of.
Continue to see a backdrop, that's constructive so it's constructive for us too because expectations have come down valuations have moderated and a lot of areas, including in private markets.
And we're seeing structures that better share risk between the buyer and seller so.
We Havent you know AMG hasnt done anything different but the market has kind of moved more of our direction, we see that as a as an incremental tailwind.
But what I would really want to land here is our pipeline has really grown over time for some of the actions that we've taken over the last few years and I think the first one is really focusing on the areas that we want to focus on those areas of secular growth primarily alternatives, both liquid alternatives and private markets.
We mentioned wealth earlier sustainable investing Asia would be another big theme for US we've been methodically targeting these areas over the last several years, which has generated significant pipeline for us we've expanded our product universe across the globe.
Leasing our resources human resources to originate and maintain relationships in this universe.
Other thing Thats happened at AMG, that's I think increase the sort of the pipeline and the probability of the pipeline.
Is that we have.
But I think we've broadened over the last five years the partnership solutions that we.
That we offer to these independent firms to help them strategically.
Strategically and that includes business development support succession planning product development capital formation capabilities growth capital insights to the most important questions that they face and so this combination of targeting and originating the types of <unk>.
Businesses that we would like to partner with and then offering those businesses even more strategically.
We feel really good about our pipeline as I mentioned in my prepared remarks.
And we've advanced several conversations this quarter, we announced four beyond just just recently, we feel pretty good about being able to invest for growth, which we've which we really have done over the last four years I think successfully.
So we're constructive.
You have about our current pipeline.
And we do think our track record our 30 year track record of successful partnerships being a good partner and magnifying the success of our affiliates.
Is are.
Main differentiator in the market relative to all other parties and the fact that we're able to both keep firms independent as well as strategically engage with them makes us unique.
So I think our partnership approach is resonating the pipeline is strong and we continue to see opportunities to invest for growth and we have a lot of financial flexibility to do so so thanks for your question.
Thank you. Our next question comes from the line of Patrick Davitt with Autonomous Research. Please proceed with your question.
Hey, good morning, everyone.
The last question. So you've obviously mentioned a strong pipeline growing pipeline.
You've announced a couple of smaller transactions recently, but is there a pipeline of larger more impactful deals in that pipeline or is it more of these smaller ones that we should expect to be the norm and in that vein is there a limit on the number of affiliates you can support if you keep layering on a lot of these smaller ones. Thank you.
Yes. Thanks, Thanks, Patrick Thanks for your question.
So.
The short answer is we actually have.
Good.
I guess diverse pipeline of both small medium and large.
Transaction types.
In the main they range from.
On the low side $100 million and maybe on the high side it could be up to 500 Thats probably are.
Our target zone four.
Partnerships in terms of capital outlay.
Another thing I would say.
We're only investing in some cases, 20% in other cases, you know 50 up to 50.
It may be just over 50, so just to give you a sense for that's only half of the enterprise value of these firms. So it kind of helps.
Think about the framework.
And when you look at.
Our.
Deployment over the last.
For years we.
We have really.
Been disciplined in our approach and so I think and we've also been intentional in our approach. So we are trying to strategically evolve AMG deliberately investing in those areas of growth.
In doing so.
With this approach to not make really outsized bets.
It doesn't mean, we can't do a large transaction. It just means that the bar is very high for those larger transactions and really sticking to our knitting of businesses that are in a growth phase in those businesses that we think we can strategically engage with them and magnify. Their success. So hopefully that gives you a little more color as to what what were looking looking for and also why we are.
Looking for it.
We do think that the.
That the.
Investable universe for us is such that we can put out.
A majority of our capital in any period into growth investments and that could be in two or three a year, but depending on the size that could be $5 $6 $700 million.
And that's that's really a target for us in the sense of over long periods of time, we think that is a really doable thing for us to do.
As you probably remember and are aware of some of our smaller investments have.
<unk> generated some.
Some of the most significant returns I mean veritable is an example of one that actually is right in front of US and you can see the returns based on the numbers that Tom gave you.
<unk> and Baring Asia, those were all $100 million to $200 million transactions that turned out to be significant.
We like that size because when firms are in that growth phase they can really see breakout growth.
And so we think over our own history, when we analyze our own data that tends to be a sweet spot for us, but going back to the sort of capital deployment.
Since 19, 2019, we've invested more than $1 5 billion and these areas are secular growth.
And we've remained disciplined.
I guess looking back.
If we could have invested more we would have because during that same period. We've returned about $2 billion of excess capital. So we do have disciplined I think we are focused on growth. We like the size range that I mentioned, and I think thats likely where youre going to see US continue to do deals doesn't mean, we won't look at a larger transaction if we.
The bar is just high.
It will likely be some version of a very diverse business in that case.
So I think that hopefully addresses.
Your question.
Here, but that maybe the last point I would make is.
Really over a long periods of time the goal for US is to build a diverse universe of independent partner owned firms. So our shareholders get to participate in that and that profile. Because we think there's something special about those businesses and in the main they tend to be specialized businesses. So that's why the seismic.
Sense and Thats why the growth focus for us makes sense.
Thank you. Our next question comes from the line of Michael Brown with Keyw. Please proceed with your question.
Great. Thank you and good morning.
I wanted to dig in a little bit on the veritable proceeds and how those will be used can you just kind of walk us through the various levers that youre considering there in your accretion guidance does it.
I assume it's going to include a level of share buybacks, but.
It also includes some some delevering and then I guess what are your thoughts on the timing behind that 2% to 3% accretion that you laid out what are some of the variables. We should consider when we think about how that could play through for 2024.
Yes. So thanks, Mike Good morning to you I'm going to have Tom take that one.
Yeah, Mike Good morning, and thanks for your question.
The reality is whether you think about the bearing proceeds or the veritable proceeds we really think about plugging all of that capital into our overall capital allocation strategy.
It's less about specifically where each of those dollars are going to be spent and I think it's more about the quantum of capital that we have and ultimately how we use the entirety of that quantum of capital to drive shareholder value overtime.
As you know we have a very strong liquidity position today and thats going to be further enhanced when we received the proceeds from the variable transaction.
We recently announced the <unk> partnership so we use some capital there we've increased our buyback guidance for 2023 to at least $500 million. So again, another increase in capital allocation, there and as Jay talked about in both his prepared remarks as well as in the answer to several questions. We see a tremendous amount of opportunity in front of us to invest for <unk>.
Growth.
Thats, both at existing affiliates as well as on the new investment front, and we're seeing a lot of opportunity across both of those areas. We also want to make sure that we maintain significant flexibility in our capital and in our liquidity given that we're in a more volatile time in market and we always want to be in a position, where we're able to play offense and able to capitalize on.
The great opportunities in front of us.
In terms of how we use our capital from here. The goal is never going to be to push all of that capital out the door in a single quarter or calendar year, it's really going to make sure that we're prepared.
In terms of uses we have committed to paying down some of our debt probably $2 million to $300 million or so.
In the wake of both the bearing and variable transactions and as I think you know we are holding some matched duration treasuries against our February 24 maturities to do that and that's actually a positive carry trade for US right now given where rates are.
I also mentioned in my prepared remarks that today, we have more than $500 million of cash above and beyond contemplated share repurchases and contemplated debt repayment that we can deploy towards growth over the course of the next several quarters and that should translate into at least a dollar of incremental earnings power.
And also as we've said and I think we've really proven out over the course of the last four years, we're going to be very disciplined with our capital.
And if we don't end up finding great growth investments over the medium term. We can continue to return additional capital through repurchases and Thats another opportunity for us to drive earnings per share growth over time.
So again just to go back to the specifics of your question, we talked about the combination of veritable and for being together.
Adding about 2% to 3% to incremental earnings over time that will be a combination of the actual EBITDA acquired with respect to the <unk> partnership as well as the ultimate allocation of capital.
From <unk> <unk> from the variable transaction across really a combination of growth investments share repurchases and debt paydown.
I just wanted to that was a really good summary by Tom I just wanted to.
Maybe take it way back out here and just say all.
Our business is really well positioned today as you can see in the profile of the business. We have really good diversity across affiliates. We don't have any significant contributor to our earnings we have a broad base set of affiliates. Our profile is really leaning in towards alternatives, both liquid and private markets and leaning into growth areas.
Our new investment pipeline continues we have been.
Very methodical and consistent in terms of making investments again, the seventh investment we've made in alternatives and this most recent transaction for <unk> and we continue to see good opportunities in that pipeline and then to cap it all off our financial flexibility and really our balance sheet strength.
Not been better at least not in recent history. So we're very excited about the positioning of AMG today.
Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Mr. Hogan for any final comments.
Well. Thank you all for joining us this morning, and we look forward to speaking with you next quarter.
Yes.
Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.