Earnings Call Transcript - AMG Q2 2021

Operator, Operator

Greetings and welcome to the AMG Second Quarter 2021 Earnings Call. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Anjali Aggarwal, head of investor relations for AMG. Thank you. You may begin.

Anjali Aggarwal, Head of Investor Relations

Good morning and thank you for joining us today to discuss AMG's results for the second quarter of 2021. 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 the reconciliation of any non-GAAP financial measure, 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 are Jay Horgen, President and Chief Executive Officer; and Tom Wojcik, Chief Financial Officer. With that, I'll turn the call over to Jay.

Jay Horgen, President and Chief Executive Officer

Thanks Anjali and good morning everyone. Growth continues to be a theme for AMG, as evidenced by our outstanding second quarter results, which were driven by the consistent execution of our strategy and enhanced by our focus on new investments. Economic earnings per share of $4.03 grew 47% year-over-year, and represented the strongest second quarter in our history, primarily driven by EBITDA growth of 40% and ongoing share repurchase activity. Year-to-date, our affiliates' excellent absolute and relative investment performance has resulted in higher asset levels, enhanced organic growth, and meaningful performance fees. We began the quarter by announcing our new investment in OCP Asia, increasing our exposure to the region and its fast-growing private credit markets. And we ended the quarter with the announcement of our newest partnership in Parnassus, the largest independent ESG dedicated fund manager in the industry. Together with our recent investment in Boston Common, a long-term leader in impact investing, we expect that these new affiliates will contribute over $90 million in EBITDA in 2022 and contribute meaningfully to our organic growth over time. And we're only halfway through 2021. With the addition of Parnassus, our run rate EBITDA is now over $1 billion, increasing our opportunity to invest in new affiliates in areas of secular growth and in resources to enhance the growth of our existing affiliates, including strategic growth capital and distribution. As evidenced by our seven new partnerships that we've established over the last two years, our model is resonating with the highest quality independent investment firms in the industry. Looking ahead, we see an even greater opportunity to execute on our new investment opportunity set, given the favorable transaction environment, AMG's strong competitive position, and the increasing demand for our partnership solutions. As I highlighted in prior quarters throughout the pandemic, a number of client demand trends have remained intact, including the ongoing demand for illiquid alternatives, while other trends have accelerated, such as the appetite for responsible and impact investing, all against the backdrop of an improving environment for active management. Our strategy is focused on investing in areas of secular growth. And our new investments in 2021 reflect this focus, as we've increased our exposure to fast-growing segments such as Asia, private markets, and ESG. With the addition of Parnassus, Boston Common, and Inclusive Capital Partners, AMG's affiliates will now manage more than $80 billion in dedicated ESG strategies, and more than $600 billion in strategies that integrate ESG into their investment process, and they are positioned to capitalize on future growth as investors around the world continue to turn to active managers for responsible and impact investing. We are pleased to welcome Parnassus as AMG's newest affiliate, a pioneer in sustainable investing. Parnassus has a 37-year track record of investing based on principles and performance, achieving attractive risk-adjusted returns by building portfolios that also have a positive societal impact. We have known Ben Allen, Todd Alston, and their partners for nearly a decade. And when it came time for Parnassus to choose a permanent partner and complete the first generational transition to the firm's long-term succession plan, they chose AMG. We believe that AMG's partnership approach is the best solution in the market today for independent firms, as it preserves the alignment between clients and partners across multiple generations, while maintaining unique entrepreneurial cultures of partner-owned firms. And this will be especially important to Parnassus, given its leading market position in responsible and impact investing. Succession planning has been and continues to be a core component of AMG's partnership approach, as generational, succession and demographically driven transition is inevitable for partner-owned firms. Selecting an experienced supportive partner is critical to the long-term success of these independent firms. AMG's expertise in collaborating with affiliates to develop and execute management transition plans, and align incentives across generations of affiliate partners remains a significant differentiating factor as firms select AMG as their institutional partner. Today, having worked with affiliates on these matters for nearly three decades, AMG is able to provide customized solutions for new partnerships based on our foundational principles of independence, alignment, and support. Over the past two years, we have significantly enhanced our strategic focus and our resources dedicated to originating, structuring, and executing on new investments. For the first time since 2016, the majority of our cash flow will be deployed in new affiliate investments already announced with additional high-quality prospects in our transaction pipeline. As I said before, growth was certainly a theme for the second quarter. In addition to new investments, the strategic actions we have taken to invest in our affiliates, and in distribution resources on behalf of our affiliates, are also key contributors to that growth. During the quarter, we completed the evolution of our US wealth platform AMG Funds to an affiliate-only model, consistent with our institutional distribution strategy. We have received shareholder approval for all funds transitioning from external sub-advisors, resulting in an incremental $4 billion in assets now being managed by our affiliates. As part of these changes, we are offering a more differentiated product lineup at lower fees and providing clients access to excellent affiliate strategies including attractive areas such as ESG equities and fixed income, Asian equities, and international equities. This is an important evolution of our strategy as all of AMG's operations and resources across our institutional wealth platforms globally are now fully aligned with our affiliates, which positions us to deliver meaningful additional organic growth over time. And this is just one example of shareholder value creation through investments in our affiliates' growth. Several years ago, we launched the AMG Pantheon fund with $10 million given the opportunity we saw to provide US wealth investors access to private equity portfolios. Last week, the fund reached a significant milestone crossing the $0.5 billion mark in AUM. The fund's performance is outstanding and its organic growth is accelerating as US wealth investors are seeing the benefits of allocating to private equity in their portfolios. This is a great example of how AMG's central capabilities can drive new growth areas for our affiliates. In addition, we have been actively investing in affiliates through lift-outs, including global sustainable equities and fixed income teams at Artemis, and more recently at Pantheon, where we assisted lifting out a real estate team for its global infrastructure and real assets platform. Finally, the strength and momentum that we described in our business at the start of the year has only just begun to manifest in our results. As we look forward to the second half of 2021 and the full year 2022, we see tremendous opportunity to further build on this momentum through the continued execution of our strategy to drive top-line EBITDA growth, which together with share repurchases will further compound our earnings per share and create meaningful shareholder value over time. With that, I'll turn it over to Tom to review the details of the quarter.

Tom Wojcik, Chief Financial Officer

Thank you, Jay, and good morning, everyone. Our second quarter results demonstrate the differentiated growth drivers inherent in AMG's business model and our ability to create shareholder value now and into the future. Our affiliates delivered strong investment performance. We generated net inflows excluding quant strategies. We put significant capital to work both in new partnerships and investments in affiliates, and we repurchased stock in the quarter, evidencing our ability to compound growth through each of our core earnings drivers. For the quarter, adjusted EBITDA of $227 million grew 40% year-over-year, driven by strong affiliate investment performance and the impact of our growth investments. Economic earnings per share of $4.03 grew 47% year-over-year, further benefiting from share repurchase activity. Net client cash inflows, excluding certain quantitative strategies, were $3 billion in the quarter driven by private markets, specialty fixed income, US equities, ESG strategies, and the strategic evolution of our US wealth platform AMG Funds. Outflows from certain quant strategies totaled $11 billion and had a de minimis impact on our earnings. Our organic growth profile continues to improve as clients seek active management solutions in the face of a more volatile market environment. And we continue to add new affiliates in areas of secular growth, including ESG, Asia and private markets. Turning to performance by asset class and excluding certain quantitative strategies, in alternatives, our illiquid strategies posted another strong quarter with $3.7 billion in net inflows led by strong fundraising at Pantheon, EIG, and Bearing. Performance in this category remained strong, with more than 90% of assets outperforming benchmarks in the most recent and prior vintages. Private markets businesses like OCP Asia continued to be a focus area for us from a new investment perspective and represent a significant source of management fee earning stability and performance fee potential over the long term. Within liquid alternatives, net inflows were $1.4 billion, supported by continued client appetite for alternative sources of risk and return in the low yield environment, including at affiliates such as Garda, and Copula. We continue to see significant performance fee generation in this category, reflecting our excellent performance across our concentrated long-only equity, and specialty fixed income strategies. Moving to global equities, we reported net outflows of $6.3 billion driven by idiosyncratic, lower fee, institutional reallocation activity. These mandates accounted for approximately two-thirds of the outflows in this category. Long-term global equity performance continues to be strong, particularly in strategies that are meaningful contributors to our EBITDA. Momentum in our US equity strategies continues with inflows of $2.9 billion driven by strong client demand, particularly for our value-focused strategies, managed by leading firms such as River Road and Yactman and our small-cap strategies. Our performance continues to be strong in this category. And with our recent investments in Jackson Square, Boston Common and Parnassus, going forward, we have a balanced mix of high-performing growth and value strategies. Our multi-asset and fixed income category generated inflows of nearly $1 billion, primarily driven by ongoing demand for Muni bond strategies and wealth management solutions, particularly at GW&K and Baker Street this quarter. Turning to financials: for the second quarter, adjusted EBITDA of $227 million grew 40% year-over-year, driven by strong affiliate performance and additional earnings power from our recent new affiliate investments. Our adjusted EBITDA included $16 million of performance fees, and as I mentioned previously, reflects excellent affiliate investment performance, particularly in our liquid alternatives category. Economic earnings per share of $4.03 grew 47% year-over-year, further benefiting from ongoing share repurchase activity. Our recently announced partnership with Parnassus is expected to close early in the fourth quarter, and will therefore have a partial year impact on our financial results in 2021. Net of one-time transaction costs, we expect Parnassus to contribute approximately $15 million to our fourth quarter EBITDA results. On a full-year 2022 basis, we expect Parnassus to contribute approximately $70 million of EBITDA and $1.30 of economic earnings per share. Now, moving to specific modeling items for the third quarter, we expect adjusted EBITDA to be in the range of $215 million to $220 million based on current AUM levels, which reflect a flat market blend through yesterday, and seasonally lower performance fees of up to $5 million. Our share of interest expense was $27 million for the second quarter. And we expect interest expense to be $28 million in the third quarter, reflecting our recent hybrid bond offering. Controlling interest depreciation was $2 million in the second quarter, and we expect the third quarter to be at a similar level. Our share of reported amortization and impairments was $36 million for the second quarter, and we expect it to be similar in the third quarter. Our effective GAAP and cash tax rates were 36% and 18% respectively for the second quarter. And we expect GAAP and cash tax rates to be 25% and 18% respectively for the third quarter. Intangible related deferred taxes were $31 million this quarter. And we expect this to decline to a more normalized level of $12 million in the third quarter. Both our GAAP tax rate and intangible related deferred taxes were elevated this quarter as a result of recently enacted UK tax rate changes and did not impact economic net income or economic earnings per share. Other economic items were negative $4 million. In the third quarter for modeling purposes, we expect other economic items, excluding any mark-to-market impact on GPNC to be $1 million. Our adjusted weighted average share count for the second quarter was $42.5 million. And we expect our share count to be approximately $42.1 million for the third quarter. Finally, turning to the balance sheet and capital allocation. Our balance sheet remains a source of strength as we invest for growth and consistently return capital to shareholders. Earlier this month, we further enhanced the balance sheet by issuing a 40-year $200 million hybrid bond at an asset management industry low coupon of 4.2%. We continue to prioritize extending duration, enhancing flexibility and maintaining significant capacity to allocate capital to fuel our growth strategy. We also remain committed to returning excess cash to our shareholders. In the second quarter, we repurchased $80 million of shares, bringing us to $290 million year-to-date. And we remain on track for $500 million of repurchases for the full year, subject to market conditions and the timing of new affiliate investments. Over the last 24 months, we've returned nearly $1 billion of excess capital to shareholders, having repurchased nearly 20% of our shares outstanding while simultaneously partnering with seven new affiliates and investing in our existing affiliates and centralized capabilities. As Jay highlighted in his remarks, our strong results this quarter demonstrate AMG's differentiated growth drivers and highlight the strength of our business model and the efficacy of our strategy. The momentum in our business continues to accelerate. And we are putting our capital and resources to work to compound growth over time. Our recent new investments in affiliates add significant and growing earnings power to our business. And together with our strong capital position and demonstrated ability to return capital to shareholders, we are well-positioned to deliver shareholder value over time. Now we're happy to take your questions.

Operator, Operator

Our first question comes from Brian Bedell with Deutsche Bank.

Brian Bedell, Analyst

Great, thanks. Good morning, folks. May I ask on Parnassus and ESG strategy broadly? Obviously, this is a big pivot in the ESG contribution for AMG. So, two-part question. First, just to clarify the $70 million of EBITDA, is that based on the current $47 billion AUM? Is there upside to that, if it continues to grow? We're seeing about $500 million monthly of organic or net inflows into the funds, for example. And then secondly, just broader about the ESG strategy, clearly it looks like Parnassus will be the anchor for your firm. So, curious to see to what extent do you think you can leverage their products across your distribution franchise? Whether you can create customized solutions using Parnassus, and are you still in the hunt for more ESG strategies? Or do you think for new investments you might be done for now with that investment strategy?

Jay Horgen, President and Chief Executive Officer

Thanks for your questions. I appreciate it, Brian, and good morning to you. Let me take the second part on the strategy first, and then I'll let Tom talk about the impact of Parnassus on our financials. And just, maybe even, I'll even back up one second half second, and talk about where ESG fits into our overall growth strategy. So I think you've heard us say in the last several calls that our strategy is focused on investing in areas of secular growth. That includes a number of areas, private markets, especially fixed income, Asia, multi-asset solutions, and especially, and importantly, ESG. So you can put Parnassus in the context of our overall strategy. ESG is one of the fastest-growing areas in the industry. I think we're all aware of that. It's also one of the fastest-growing areas at AMG. There's lots of data out there, but just the one that recently I came across was this Global Sustainable Investment Alliance, which published some data showing that it's growing at double-digit rates over the last five years; I think we're seeing that as well. And Brian, you and Deutsche Bank have done some research in this area, and I think you're coming up with similar facts. We see this as a durable trend given strong client appetite. We believe that active management will take a leading role in the growth of sustainable investing. The one consistent theme we're hearing across all of our client conversations today is the desire for and increasing focus on sustainability. As clients have a greater desire to drive outcomes that requires an active approach. We think this focus on sustainability is revolutionizing our industry. We believe that active managers, especially independent owned firms, will lead the industry through this evolution both in public securities as well as in private investing. So maybe now turning to AMG, and how we're enhancing our exposure to ESG. Obviously, Parnassus is just one component of it. It is an area of continued focus of our prospecting activity in new investments. It's clearly reflected in the new investments we've made. In addition to Parnassus, we've invested in Boston Common, as well as we've partnered with EnCap. So we have greatly expanded our own ESG exposure in the last 18 months. We've also actively collaborated with and also invested in some of our existing affiliates to evolve and grow their ESG exposure. A couple of ways we do that; most importantly, we've provided a sort of centralized best practice and consultative approach so that we've been talking to all of our affiliates about expanding their involvement in the ESG space. We began marketing Boston Common through the strategic repositioning that we just did in an AMG Fund. So we're now selling AMG Funds ESG strategies in Boston Common and GW&K. So we have about $2 billion of assets there. This is an affiliate whole investment that we've been making in both marketing and through repositioning in order to get behind those products in our wealth channel. Finally, we've seeded products at other firms like Artemis and GW&K that are involved in ESG. So we're pretty much across the board investing in ESG, whether that's a new investment in our own distribution or in capital for new products. Today, we have three affiliates wholly dedicated to sustainable investing. That means our dedicated assets are now at about $80 billion inclusive of those three, along with a number of other products at affiliates that I just mentioned that we've seeded or supported. We have about $600 billion now, in strategies that are integrating ESG factors since a number of our affiliates were already integrating ESG factors into their investment process. We do think ESG investing is best done by active management, as impact and positive change are really best achieved through stewardship and active engagement.

Tom Wojcik, Chief Financial Officer

Let me add a bit more on Parnassus. This was a larger transaction for us. Obviously, the investment thesis there was that it was a business operating in the ESG space. The growth there is obvious, its investment returns are excellent, and you can see that as well. It has been inflowing significantly; we're proud to partner with an extremely high-quality group of next-generation partners with the ability to grow further from here, both domestically and abroad, with very scalable products. This transaction, and I'm going to let Tom get into this just now, will be immediately accretive to us, and it is our third-largest transaction in our history. So it is a very impactful transaction.

Operator, Operator

Our next question comes from the line of Alex Paris with Barrington Research.

Alex Paris, Analyst

Good morning, all. Thank you for taking my question. I think my question dovetails a bit into the prior question, but I've been covering AMG for many years, practically since its IPO across many business cycles. Lately, you've been talking about rising M&A activity and a significant amount of engagement with prospective new affiliates, both the volume and the quality of your conversations. You've announced three investments already year-to-date, seven, as you mentioned, since the beginning of 2019, including the majority investment in Parnassus. And you've said that you expect new investments to continue to be a significant source of forward earnings growth. My question is, what is different in the current environment? Why the recent above trend success after a bit of a pause in 2017 and 2018? And you've talked about expanding your solution set. Maybe it would be helpful for us, for me specifically; if you dive a little deeper into what's different now, what does the pipeline look like? What is the competitive situation like, pricing, et cetera?

Jay Horgen, President and Chief Executive Officer

Thanks, Alex, and good morning. Yes, thanks for that question and your own perspective, that was implied in that question. You certainly have been covering us for a long time. So yes, we are seeing elevated new investment activity. Let me dive into that a bit more. I said in the prepared remarks, there are really three reasons for that. First, we see a favorable transaction environment, and I'll elaborate on that. Second, our strong competitive position is probably better than it's ever been. And we'll talk about why that is. Lastly, there's good demand for our solutions, and we've expanded our solution set. Quickly on the environment, this is clear: there are thousands of independent partner-owned firms around the world. We have been actively monitoring them and developing proprietary relationships for over 30 years. Some of this is the key benefit of having been in the market for a long time. We are seeing more interest and discussions, partly because growth capital is important now in our industry. Also, we see a good supply of succession-driven, demographically-driven transactions that we haven't seen in some time. That's elevating our pipeline and adding to industry activity overall. I think it's clear that we are in a relatively stable market environment. As I've said before, you need a backdrop of relatively low volatility to establish new partnerships; otherwise, during the period of discussions, things have to remain relatively stable. I think I've said this before in prior calls. Our options for independent partner-owned firms have evolved over time, but in this recent period, the skew has been towards consolidation and away from independence. For us, particularly firms that are seeking a 100% acquirer, they're not a good fit for AMG, and I don't think they're a good fit for clients either. Consolidation transactions are not a recipe for success. Our opportunity set is in the independent firms that want to stay independent and are looking for a partner that provides access to resources, intellectual capital, and scale benefits. We recognize that we are seeing fewer competitors offering a true hands-off independence model, and even fewer with a track record of success like AMG. Most of our historical competitors, especially traditional ones, have been either bought or consolidated out, or they are selling their businesses. While we do see some competition in the illiquid space, most of those are state buyers, and we've seen inherent conflicts of interest; they've become more evident to the underlying independent firms. For all those reasons, our competitive position is very strong. Lastly, we've expanded our offering over time and have focused on the size spectrum, allowing us to offer growth capital to fast-growing firms. We also offer succession planning to firms like Parnassus that are going through a generational evolution. Our offering has expanded, and the demand for this expanded solution set has increased. We're truly the only ones who can offer both a strategic and permanent solution while ensuring independence. All those factors have put us in our sweet spot today, leading to elevated new investment activity continuing in the near to intermediate term, making this one of the best environments I've seen in a decade.

Operator, Operator

Our next question comes from the line of William Katz with Citigroup.

William Katz, Analyst

Okay, thank you very much for taking the questions. And good morning, everybody. Just following up, Jay, on what we just left off there, is there a way to sort of ring-fence maybe the absolute size of assets that are sort of in the near to intermediate-term pipeline? Just trying to get a sense of incremental opportunity to the bottom line. And then related to that, just keep talking about pricing. The last couple of deals have been more prospective price very well. Just want to sort of get a sense on sensitivity around that. I apologize for the nested questions. But Tom, could you sort of explain why you would expect flat EBITDA sequentially exit performance fees, just given just AUM levels, flows, and momentum in the business? Thank you.

Jay Horgen, President and Chief Executive Officer

Let me take the pipeline first, and then I'll let Tom take the forward guidance question. Thanks, Bill. Good morning. On the pipeline, as I stated earlier, we are very focused. Our strategy is zeroed in on investing in areas of secular growth. This includes illiquid, especially fixed income, multi-asset, Asia, and ESG. You can assume we have all those in our pipeline. There is obviously timing associated with pipelines, and the environment around getting transactions done takes time. However, in my prepared remarks, I mentioned that we have seen a majority of our cash flow go to investments that have already been announced. We see prospectively the opportunity to invest a majority of our cash flow in this pipeline moving forward, meaning we see an elevated set of opportunities across a diverse group of independent firms in areas of secular growth. I would also highlight that we are seeing more demographically-driven succession-oriented transactions coming to us. After years of few succession-driven transactions, we have more today, which is especially good for AMG since that's our most outstanding quality—structuring succession plans and transition plans for independent firms. I'm excited about that, especially as new investments were made. Maybe on the structure and pricing, over the last couple of years we really refocused our attention on new investments, adding resources to our origination, structuring, and execution. We're looking for appropriate balance for the alignment between our shareholders, the partners, and ultimately, the clients to ensure we are getting returns that, over long periods of time, will generate shareholder value alongside repurchases. But also balancing that with market pricing and what the right structures are for a partnership that will be permanent. The fact that firms are only selling us a portion of their equity and the main value resides in the future makes pricing a little less important in those transactions, although it’s important, it is a bit less vital. Our structures are balanced. We've oriented ourselves towards areas of secular growth, and transactions have been attractive to us, which is primarily due to how fast the businesses are growing.

Tom Wojcik, Chief Financial Officer

Sure, maybe I'll give you a few numbers to provide some clarity on Q3, and then I’ll put it in context for the full year and going forward. In the second quarter, we reported adjusted EBITDA of $227 million, and we noted we had $16 million in performance fees, so that gives us a base level of $211 million. If you look at Q3 thus far, I said our market blend is flat right now. For Q3 guidance, we see core EBITDA going from that $211 million level to a $215 million level, with up to $5 million in performance fees, which brings us to the $215 million to $220 million range. It's important to understand that Q3 is our lowest performance fee quarter of the year, and has some seasonality. Last quarter was very strong. If I provide some context for the full year, we anticipate seeing the investment in Parnassus. Obviously, that won't be in the Q3 guidance, but its impact will be felt in Q4 and throughout 2022. Our first-half results were very strong with excellent performance in the liquid alternative side, and we believe we are well-positioned for the full year based on where things stand. We’ve done $290 million in share repurchases this year, reiterating our target of $500 million for the full year. Overall, putting all of this together gives a strong sense of how 2021 is shaping up with significant momentum heading into the latter part of the year and into 2022.

Jay Horgen, President and Chief Executive Officer

Yes, one last comment I think we should mention. Our guidance originally considered the need for capital for new investments, but we didn't put that in the earnings power of the business since it’s hard to predict the timing. Some of that is coming through now, but we still have more to grow. It’s always a bit challenging to build that into forecasts, but we have plenty of capital. In fact, we enhanced our balance sheet last quarter, freeing up even more capital. There aren't real barriers for us to drive growth through new investments.

Operator, Operator

Our next question comes from the line of Alex Blostein with Goldman Sachs.

Alex Blostein, Analyst

Great, good morning. Thanks for taking the question. Shifting gears a little bit, I was hoping to talk about AMG's private market footprint and really was hoping you guys can help us frame the forward organic EBITDA growth here for AMG. Specifically, trying to break it out between the fundraising outlook across a number of your liquid alternative affiliates against the realization environment, which feels like it continues to be pretty attractive. We saw $9 billion come out this quarter for you guys. So as you think about the growth, whether it's funds or separate accounts, net of realization outlook, help us think about how that nets out for EBITDA growth from this part of the market. Thanks.

Jay Horgen, President and Chief Executive Officer

Why don't you take that one, Tom?

Tom Wojcik, Chief Financial Officer

Great, Alex, thanks for your question. A number of points to cover here. First, I noted in my prepared remarks that the majority of the performance we saw this quarter was driven primarily by the liquid alternative side of the business. There was a little impact from illiquid associated with those realizations, but really not that much. In terms of realizations, as you consider overall, we aren't seeing an impact on our earnings power. We continue to see earnings power overall increasing. The reason for that is that those realizations—about two-thirds were in funds well past their investment periods where management fees had historically already stepped down significantly. The remaining third of the realizations we saw this quarter were in co-investment vehicles with low management fees. So, when it comes to earnings power associated with those realizations, the impact is very modest, if any impact at all. Looking at our private markets, with the recent addition of Combvest and OCP Asia, we now have five dedicated private market businesses, including Pantheon, Barington, and EIG. Each of these businesses delivered excellent performance and outcomes for our clients. They are continuing to grow into adjacent product areas and expand their growth based on historical success. We've experienced double-digit organic growth in this category over the past couple of years, and we expect to see our private market businesses have an increasing impact on overall organic growth at the AMG level going forward. There are two key drivers in growing our business in this area: first, from existing affiliates raising larger funds, helping diversify their businesses, and grow; second, as Jay discussed, as we target private market opportunities within our new investment process. We're very bullish about private markets being a significant part of the overall AMG organic growth story.

Jay Horgen, President and Chief Executive Officer

Let me add a couple of other thoughts. We are actively driving our mix shift at AMG through capital deployment in both new affiliates and existing affiliates. I recognize it's harder to see that immediately, but our EBITDA growth of 40% and earnings per share growth of 47% showcase all the growth that ultimately is not in our quarter. OCP is only a portion of what's in numbers. We closed OCP at the end of April; part of it was considered. We've closed our strategic repositioning at AMG Funds, a $4 billion move to our affiliates that happened at the end of June. Parnassus isn't even in the numbers this quarter, which was announced at the beginning of Q3 and won't expect to close until Q4. If you pro forma for all those events, you would have seen our EBITDA closer to 50% growth and our earnings per share maybe closer to 60%.

Operator, Operator

Our next question comes from the line of Dan Fannon with Jefferies.

Dan Fannon, Analyst

Thanks. Good morning. My question is around flows and just wanted to clarify a few things. So the ex-quants inflows that—I just want to clarify that includes the strategic realignment. If so, can we talk about improvement ex-realignment in terms of where that's happening? Secondly, Tom, you talked about the global equity outflows and some specific mandates that were lower fee. Could you talk about the momentum or traction within that business, and how we should think about that on a go-forward basis?

Tom Wojcik, Chief Financial Officer

Yes, Dan, thanks for your question. A lot of moving parts in there. Let me go through flows overall. Ex-quant, we've seen strengthening over the past few quarters driven by existing affiliates, along with impacts from new investments. We see continued momentum moving forward. Regarding global equities, we observed an increase in gross sales specifically where strong long-term performance and increased client focus are intersecting at affiliates. On the redemption side, this quarter we did have some idiosyncratic low-fee redemptions due to institutional rebalancing, particularly noting three mandates accounted for about two-thirds of the total ex-quant global equity outflows. It's more unusual to see such chunky activity in any single quarter. The upcoming trends are stronger than what we experienced this past quarter, and we continue to like our positioning over the long term given the excellent investment performance we have. We're also seeing strong performance in US equity strategies, where both growth and net flows continue to increase—especially in small cap and value strategies on the retail side. In the broader picture, across our affiliate base, particularly in illiquid and fixed income sectors, we see the profile of our business shifting toward areas of secular growth, ultimately presenting exciting opportunities for AMG as we continue to adapt our strategic growth with this outlook.

Operator, Operator

Our next question comes from the line of Patrick Davitt with Autonomous Research.

Patrick Davitt, Analyst

Hey, good morning, guys. Thanks for squeezing me in. You just did your largest deal in a long time. How should we think about the trade-off between repurchase guidance in new deals? Would we have to start factoring out repurchases if you announce another large deal? Or is that not a trade-off that we worry about anymore, given how much higher your cash flow generation is?

Tom Wojcik, Chief Financial Officer

Yes, Patrick, thanks for the question. Let's take a step back and discuss capital allocation overall, including your specific query. First, we have tremendous momentum in our business that translates into a growing free cash flow stream. Given the strength of our balance sheet, we can execute on the growing opportunity set while simultaneously returning significant cash excess capital to shareholders—evidenced by our actions. We have made six new affiliate investments and repurchased nearly 20% of our shares outstanding. We plan to remain disciplined, applying a common framework to all capital decisions to ensure we're earning a suitable risk-adjusted return aligned with long-term value generation for our shareholders. We firmly believe new investments are the best use of capital, optimizing our growth value, while allowing us to step into immediate organic growth and tax benefits. Even with these three new investments including a sizable one in Parnassus, we are still on track for $500 million in repurchases.

Jay Horgen, President and Chief Executive Officer

Yes, I do believe we will do both, and it's been beneficial to have executed both strategies. We are reallocating more capital towards new investments with better returns, and you will observe more capital being deployed into that area over the near term. That ties into Bill's earlier question regarding a strong pipeline. We envision allocating a significant amount of capital to that pipeline, and valuable caution surrounds the forecasts. All those transactions come unlevered, and as we grow our underlying EBITDA, we have substantial capacity for growth today. Our EBITDA run rates exceed $1 billion, and there are opportunities available for large and multiple transactions while also returning capital.

Operator, Operator

Our next question comes from the line of Robert Lee with KBW.

Robert Lee, Analyst

Oh, great. And thanks for squeezing me in, guys. Good morning. Most of my questions have been asked; just a quick one. If I look at the balance sheet today, the $780 million in cash, could you just update how much of that is currently available to you versus maybe affiliate cash, just consolidated on there? That's my first question.

Tom Wojcik, Chief Financial Officer

Yes, Rob, it’s probably about half. That's a good benchmark for you right now. Certainly, we’re generating something like $175 million after-tax cash a quarter. Yes. And obviously, the hybrid bond transaction we did was after the quarter closed, so you can think about that $200 million as well.

Jay Horgen, President and Chief Executive Officer

Thank you all for joining us this morning. AMG has delivered outstanding results in the first half of 2021, and we see strong momentum as we continue to execute on our strategy. I hope everyone remains safe and healthy, and we look forward to speaking with you next quarter. Thank you.

Operator, Operator

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.