amg managers centersquare real estate fund...w straight line rent, lease termination fees, tenant...
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For Investment Professional Use Only – Not For Use With the General Public An AMG AffiliateFor Investment Professional Use Only – Not For Use With the General Public
AMG Managers CenterSquare Real Estate Fund Class N (MRESX) | Class I (MRASX) | Class Z (MREZX)
March 2019
For Investment Professional Use Only – Not For Use With the General Public
w The largest network of institutional quality boutique investment solutions through a single point of access
w Unrivaled access to insights of over 30 independent and autonomous investment managers
w More than 100 actively managed products covering the risk spectrum for investors searching beyond the index
AMG Funds Overview
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As of March 31, 2019.
SMA
$12.2 billion
Mutual Funds
$35.9 billion
Sub-advisory
$10.5 billion
Assets Under Management Funds: $29.7 billion SMA: $107.2 million
Assets Under Service Funds: $6.2 billion SMA: $12.1 billion Sub-advisory: $10.5 billion
$58.6 billion
Assets Under Management & Service
For Investment Professional Use Only – Not For Use With the General Public
U.S. REITs 62%
Global REITs 21%
Global Covered Call REITs
10%
Ex-U.S. REITs 1%
U.S. Preferred REITs <1%
Private Real Estate
6% Infrastructure
<1%
CenterSquare is a boutique manager of public and private real estate.
w Founded in 1987, subadvisor since 2004, focused exclusively on real assets
w Headquartered in Philadelphia with affiliate offices in Los Angeles, Denver, London and Singapore
w Multiple strategies and customized solutions
w 41 investment professionals
CenterSquare Overview
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Source: CenterSquare, AUM based on fair value as of March 31, 2019, of client investments determined in accordance with generally accepted accounting principles. Fair value of public real estate and infrastructure securities are based on last sale prices listed on world wide established exchanges. Private equity AUM represents net asset values. Private equity values are generally derived based on discounted cash flows of underlying property investments. Total may not sum to 100% due to rounding.
$10 billion Assets Under Management
For Investment Professional Use Only – Not For Use With the General Public 4
CenterSquare’s Competitive Advantage
Experienced Global Team
A Focus on Clients
Disciplined Proprietary Investment Process
w Large dedicated global platform specializing in real assets
w 30+ years of experience in private equity real estate
w One of the longest serving U.S. and global REIT managers
w Management team holds an average of 28 years of experience
w A predominantly institutional client roster of large pension and sub-advisory clients
w A thought leader and partner in your goal to enhance the performance and resiliency of your investment portfolio
w Robust research and underwriting methods focused on identifying mispriced investment opportunities
w Proprietary risk management techniques to seek consistent outperformance
For Investment Professional Use Only – Not For Use With the General Public
Investment Philosophy
“Our experience has shown that attractive relative valuations provide both downside protection and potential for upside growth. We are relentless in our pursuit of value and
through proprietary risk management, we are consistent in our execution.”
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For Investment Professional Use Only – Not For Use With the General Public
What This Fund Will Provide to Investors
w Access to a well-known public and private real estate manager
w Exposure to an under-allocated asset class
w Additional equity diversification
w A modicum of direct property exposure
w Potential inflation hedge
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Diversification does not guarantee a profit or protect against a loss in declining markets.
For Investment Professional Use Only – Not For Use With the General Public
Investment Process
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For Investment Professional Use Only – Not For Use With the General Public
CenterSquare employs a value-oriented investment process with two distinct and complementary components: top-down economic analysis and bottom-up real estate research.
Top Down Regional, property type and thematic
allocations
Investment Process
Bottom Up
Best in class valuation techniques informed by full quantitative and qualitative analysis on each company in the universe
Risk Management Proprietary analytics seek
to ensure active risk is deployed to achieve goal of consistent alpha
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For Investment Professional Use Only – Not For Use With the General Public
Establish Initial Top-down Positioning
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Investment Process: Top Down
Fundamentals
w Supply and Demand w Occupancy w Rental Rates w Cash Flow w Growth
Capital Markets
w Interest Rates w Equity Availability w Debt Availability
Government Policy
w Fiscal w Monetary w Regulatory
Property Type Thematic Regional
Examples: w Overweight West Coast w Underweight Northeast
Examples: w Overweight Industrial w Underweight Regional Malls
Examples: w Overweight Strong Balance Sheets w Underweight Development Strategies
For Investment Professional Use Only – Not For Use With the General Public
Investment Process: Bottom Up
The Valuation Problem
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The Problem
w GAAP accounting does not work well for REITs
w Noise from non-core items obscures true value
w Difficult to systematically compare stocks on an apples to apples basis
Popular but
Limited Solutions
Discounted Cash Flow
w Overdependence on analyst assumptions
w Fictional value for perpetual development and acquisitions
w Did not work during the global financial crisis
NAV
w Highly levered (small changes make a big difference)
w Many premiums and discounts are nearly static with wide deviations existing for long periods
w Did not work in 2015
For Investment Professional Use Only – Not For Use With the General Public
Investment Process: Bottom Up
The Valuation Solution
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GAAP Accounting Does Not Fit
w Straight line rent, lease termination fees, tenant improvement and leasing commission smoothing, differing accounting treatment for expense vs. capitalized items, nonrecurring items
Noise from Noncore Items
w Separate valuation approach for non-income producing real estate assets
– Development in progress
– Land on balance sheet
– Joint ventures
– Management contracts and fee revenue
– Asset sales
– Mark to market debt
– Cash
Difficult to Systematically
Compare Stocks
w Innovative approach for making adjustments to P/E ratio, NAV and implied cap rate
w CenterSquare’s proprietary relative value model compares companies inter- and intra-sector
Valuation philosophy grounded in 20+ years of market-tested experience w Seek to provide consistent approach over time and across sectors and markets
w Focus on comparing companies based on recurring cash flow from core real estate
w Build and maintain models based on exhaustive review of public filings, never based on data streamed from database
w Build in flexibility to run sensitivity analysis to macro-based assumptions
For Investment Professional Use Only – Not For Use With the General Public
Investment Process: Bottom Up
Qualitative Ranking Framework
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Management & Strategy
w Capital Allocation w Operational Excellence w Balance Sheet Management w Strategy
Governance
w Board Independence & Alignment
w Disclosure Quality
Assets
w Quality w Location w Environmental Factors w Supply
Qualitative Ranking Score
Companies are scored (0 to 10) on ten qualitative factors. Enhancement provides for a more thorough analysis of investment universe and adds to risk management framework.
For Investment Professional Use Only – Not For Use With the General Public
Investment Process: Risk Management
Comprehensive Risk Optimization Process
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Active Exposures Fundamentals Liquidity Risk Metrics
w Sector w Intra-Sector Exposure w Geography w Stock w Market Cap
w Growth Rates w Earnings Multiples w Dividend Yield w Dividend Payout Ratio w Net Asset Value w Implied Capitalization Rate w Financial Leverage w EBITDA Coverage
w Standard Deviation w Beta w Volatility w Value at Risk (VaR) w Ex-Ante Tracking Error w Performance Attribution w Correlation
w Days-to-Trade w Daily Volume w Minimum Size
Establishes consistent management style, identifies unintended bets, and provides independent perspective.
For Investment Professional Use Only – Not For Use With the General Public
Investment Process: Portfolio Construction
Company Specific Decision Context
w Maintained simultaneously for every company in the universe
w Paints a holistic bottom-up picture of a company’s attractiveness
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Implied Cap Rate
NAV Discount
Dividend Yield
Growth Rate Quality Score
Earnings Yield
Negative Momentum
Value at Buy Portfolio
Current Buy Range
Bottom Up Quantitative and qualitative analysis
Top Down Regional, property type and thematic
allocations
Risk Management Proprietary analytics
of active risk
For Investment Professional Use Only – Not For Use With the General Public
CenterSquare’s Concluding Thoughts
Experienced Global Team with a Consistent Process
w Large dedicated global platform specializing in real asset investments
w Significant senior investment professional tenure
w Proprietary fundamental real estate research and integrated risk management process
w Performance track record over different market environments
Focus on Client Partnership
w A predominantly institutional client roster of large pension and sovereign wealth funds
w Commitment to ensure capacity provides liquidity and execution advantage
Disciplined Investment Process
w CenterSquare combines proprietary research and analytics to seek attractive risk-adjusted performance across multiple market cycles
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For Investment Professional Use Only – Not For Use With the General Public
Case for Real Estate Investment
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For Investment Professional Use Only – Not For Use With the General Public
U.S. Equities (S&P 500® Index)
U.S. 10-Year Treasury (Federal Reserve 10-Year Treasury Note)
TIPs (Bloomberg Barclays U.S. TIPS Index)
Broad Fixed Income Market (Bloomberg Barclays U.S.
Aggregate Index)
Intermediate Duration Corporate Bonds (Bloomberg Barclays U.S.
Intermediate Corporate Index)
U.S. REITs (Dow Jones U.S. Select REIT Index)
0 0.5 1 1.5 2 2.5 3 3.5 4 Yield (%)
Asset Class Yield
Diversify Sources of Income by Investing in REITs
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Past performance is not a guarantee of future results. Source: FactSet. As of March 31, 2019.
U.S. REITs can generate a steady stream of income from:
w Long-term commercial lease agreements
w Diversified commercial property exposure
For Investment Professional Use Only – Not For Use With the General Public
Non-U.S. Government Bonds (Citigroup World Government Bond
Index)
U.S. IG Corporate Bonds (Bloomberg Barclays U.S. Corporate Investment
Grade Index)
High Yield Bonds (Bloomberg Barclays U.S. Corporate High Yield
Index)
International Equities (MSCI EAFE)
U.S. Equities (S&P 500 Index)
U.S. REITs (Dow Jones U.S. Select REIT Index)
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% Average Annual Total Return (%)
Asset Class Performance: 10-Year Return
Long-term Performance of REITs
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Past performance is not a guarantee of future results. Source: FactSet. As of March 31, 2019.
Returns from REIT investments are based on two primary factors:
w Real estate valuations: Based on occupancy, rental rates, supply and demand factors and market sentiment
w Rental income: REITs typically invest in commercial real estate with tenants that sign long-term leases. If properly diversified, the investment may result in a steady stream of income
For Investment Professional Use Only – Not For Use With the General Public
Investment Team
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For Investment Professional Use Only – Not For Use With the General Public
Portfolio Manager Biographies
Dean Frankel, CFA, Global Head of Real Estate Securities Mr. Frankel is the Global Head of Real Estate Securities at CenterSquare Investment Management. He is responsible for management of the firm’s proprietary research process. In addition, Mr. Frankel analyzes and interprets implications of major events and economic trends while managing the daily operations of the real estate securities portfolios. Mr. Frankel also dedicates a significant portion of his time to on-site visits with companies and property tours in order to make real time assessments of a market’s health. Prior to joining CenterSquare in 1997, Mr. Frankel ran a retail distribution business. Mr. Frankel received a B.S. in Economics from the University of Pennsylvania’s Wharton School of Business.
Eric Rothman, CFA, Portfolio Manager Mr. Rothman serves as Portfolio Manager for CenterSquare’s real estate securities group covering the Americas. As portfolio manager, Mr. Rothman is responsible for market research, sector allocations, research and financial modeling across the real estate public securities universe. Mr. Rothman is a member of the Public Securities Investment Committee. Mr. Rothman brings 15 years of REIT and real estate investment experience to his position. Prior to joining CenterSquare in 2006, he spent more than six years as a sellside REIT analyst at Wachovia Securities and three years as an analyst at AEW Capital Management, LP. Mr. Rothman graduated cum laude from Boston University with a B.A. in economics, international relations and French.
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For Investment Professional Use Only – Not For Use With the General Public
Fund Performance and Characteristics
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For Investment Professional Use Only – Not For Use With the General Public
AMG Managers CenterSquare Real Estate Fund Overview
w Fund AUM: $248 million1
w Fund seeks to achieve a combination of income and long-term capital appreciation
w Provides investors exposure to real estate securities, primarily REITs, which provide investors with exposure to a variety of commercial property sectors and potential diversification benefits and income
w Invests in 50-80 stocks with a minimum of 80% exposure to the real estate industry, including REITs
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1 As of March 31, 2019. 2 Individual retirement accounts may only invest in Class Z share by purchasing directly from the Fund.
Ticker CUSIP Inception Minimum Investment Maximum Sales Load
12b-1 Fee
MRESX 00170J748 12/31/97
Expense Ratio Gross/Net 1.12%/1.12% $2,000 ($1,000 IRA) — —
MRASX 00170J698 02/24/17 0.99%/0.99% $100,000 ($25,000 IRA) — —
MREZX 00170J680 02/24/17 0.87%/0.87% $5,000,000 ($50,000 IRA)2 — —
For Investment Professional Use Only – Not For Use With the General Public 23
CenterSquare Investment Objective & Strategy
AMG Managers CenterSquare Real Estate Fund
Benchmark Dow Jones U.S. Select REITs Index
Target Tracking Error 100-300 bps
Approach Fundamental with Value Bias
Core Holdings 50-80
Maximum Position Size 7.5%
Expected Annual Turnover 50-70% depending on market conditions
Expected Alpha Generation
25% sector selection, 75% stock selection
1 Represented by the U.S. Total Return Strategy and Global Total Return Strategy, respectively. Refer to Section III for more information about these strategies.
For Investment Professional Use Only – Not For Use With the General Public
Disclosures
Investors should carefully consider the Fund’s investment objectives, risks, charges and expenses before investing. For this and other information, please call 800.835.3879 or visit amgfunds.com for a free prospectus. Read it carefully before investing or sending money. The Fund is subject to special risk considerations similar to those associated with the direct ownership of real estate. Real estate valuations may be subject to factors such as changing general and local economic, financial, competitive and environmental conditions.
Companies that are in similar businesses may be similarly affected by particular economic or market events; to the extent the Fund has substantial holdings within a particular sector, the risks associated with that sector increase.
A greater percentage of the Fund’s holdings may be focused in a smaller number of securities which may place the Fund at greater risk than a more diversified fund.
Investing in initial public offerings (IPOs) is risky and the prices of stocks purchased in IPOs tend to fluctuate more widely than stocks of companies that have been publicly traded for a longer period of time. Stocks purchased in IPOs generally do not have a trading history, and information about the companies may be available for very limited periods.
The Russell 1000® Index measures the performance of approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market.
The MSCI EAFE® Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.
The Bloomberg Barclays U.S. Government/Credit Bond Index is an index of investment grade government and corporate bonds with a maturity rate of more than one year. Effective August 24, 2016, the Barclays indices were renamed Bloomberg Barclays Indices.
The Dow Jones U.S. Select REIT Index measures U.S. publicly traded real estate investment trusts.
The S&P 500 Index is capitalization-weighted index of 500 stocks. The S&P 500 Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Unlike the Fund, the Indices are unmanaged, are not available for investment and do not incur expenses.
AMG Funds are distributed by AMG Distributors, Inc., a member of FINRA/SIPC.
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FOR INVESTMENT PROFESSIONAL USE ONLY – NOT FOR DISTRIBUTION TO OR USE WITH THE GENERAL PUBLIC
Appendix
21
AMGManagersCenterSquareRealEstateFund
Page1of12
QUARTERLYPERFORMANCE(%)ANDEXPENSERATIOSasof03/31/2019InceptionDate 1Mo. PreviousQuarter YTD 1Year 3Years 5years 10Years LifeofFund Gross/NetExpenseRatio(%)
NShareClass(MRESX) 12/31/1997 2.79 15.48 15.48 17.77 5.22 9.08 18.55 8.91 1.09/1.09
IShareClass(MRASX) 02/24/2017 2.82 15.52 15.52 17.94 - - - 5.62 0.95/0.95
ZShareClass(MREZX) 02/24/2017 2.76 15.44 15.44 18.08 - - - 5.67 0.84/0.84
DowJonesU.S.SelectREITIndex - 2.88 15.72 15.72 19.73 5.29 8.93 18.50 9.01
S&P500Index - 1.94 13.65 13.65 9.50 13.51 10.91 15.92 7.17
Theperformancedatashownrepresentspastperformance.Pastperformanceisnotaguaranteeoffutureresults.Currentperformancemaybelowerorhigherthantheperformancedataquoted.Theinvestmentreturnandtheprincipalvalueofaninvestmentwillfluctuatesothataninvestor'sshares,whenredeemed,maybeworthmoreorlessthantheiroriginalcost.Forperformanceinformationthroughthemostrecentmonthendpleasecall800.835.3879orvisitourwebsiteatamgfunds.com.Fromtimetotime,theadvisorhaswaivedfeesorreimbursedexpenses,whichmayhaveresultedinhigherreturns.ThelistedreturnsoftheFundarenetofexpenses,andthereturnsoftheindicesexcludeexpenses.
SincetheinceptionoftheClassNshareson12/31/1997.
1
1
1
AMGManagersCenterSquareRealEstateFund
Page2of12
SeeDISCLOSUREandGLOSSARYsectionsatthebackforimportantinformation.
CALENDARYEARRETURNSPrevious10yearsending12/31/2018
ShareClassN(MRESX) ShareClassI(MRASX) ShareClassZ(MREZX)Benchmark1:DowJonesU.S.SelectREITIndex Benchmark2:S&P500Index
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
36.22% 28.83% 9.35% 16.05% 2.09% 31.52% 5.3% 6.82% 5.4% -5.55%
- - - - - - - - - -5.4%
- - - - - - - - - -5.3%
28.46% 28.07% 9.37% 17.12% 1.22% 32% 4.48% 6.68% 3.76% -4.22%
26.46% 15.06% 2.11% 16% 32.39% 13.69% 1.38% 11.96% 21.83% -4.38%
-10%
0%
10%
20%
30%
40%
■ MRESX
■ MRASX
■ MREZX
■ Benchmark1
■ Benchmark2
AMGManagersCenterSquareRealEstateFund
Page3of12
MPTSTATISTICS–MRESX
Benchmark:DowJonesU.S.SelectREITIndex
Fund Benchmark Fund Benchmark Fund Benchmark
-0.01 — 0.23 — 0.63 —
13.49 13.58 14.48 14.61 18.68 19.34
0.30 0.30 0.58 0.56 0.97 0.94
-0.06 — 0.15 — 0.03 —
4.09 — 8.45 — 18.84 —
97.73 — 98.05 — 96.12 —
98.57 — 98.26 — 98.97 —
0.99 — 0.99 — 0.96 —
99.37 — 99.51 — 99.55 —
1.08 — 1.02 — 1.44 —
-13.71 -14.71 -13.71 -14.71 -17.31 -17.40
Asof:03/31/2019
3Years 5Years 10Years
Alpha
StandardDeviation
SharpeRatio
InformationRatio
TreynorRatio(%)
UpsideCaptureRatio(%)
DownsideCaptureRatio(%)
Beta
R-Squared
TrackingError(%)
MaxDrawdown
SeeDISCLOSUREandGLOSSARYsectionsatthebackforimportantinformation.
AMGManagersCenterSquareRealEstateFund
Page4of12
REALESTATESUB-INDUSTRIES
Industry 03/31/2019
ResidentialREITs 23.97%
RetailREITs 17.19%
OfficeREITs 14.95%
SpecializedREITs 12.70%
HealthCareREITs 10.42%
IndustrialREITs 10.10%
Hotel&ResortREITs 6.13%
DiversifiedREITs 3.14%
OtherEquities 0.86%
Cash&Other 0.54%
Asof:03/31/2019
AMGManagersCenterSquareRealEstateFund
Page5of12
PORTFOLIOCHARACTERISTICS(EQUITY)
Holdings Fund
FundAssets(Mil.$) $248
NumberofHoldings 49
WeightedAvg.MarketCap(Mil.$) $20,150
MedianMarketCap(Mil.$) $7,164
EPSGrowth(Trailing3-yr%) 6.35%
EPSGrowth(Trailing5-yr%) 18.31%
ForwardEPSGrowth(1-yr%) -22.16%
ForwardEPSGrowth(LongTerm%) 5.70%
WeightedAvg.DividendYield 3.55%
SEC30-DayYield(%) 2.47%
SEC30-DayYield(%)w/ofee 2.47%
Trailing12-MonthsPortfolioTurnover 54.46%
Asof:03/31/2019
SeeDISCLOSUREandGLOSSARYsectionsatthebackforimportantinformation.
AMGManagersCenterSquareRealEstateFund
Page6of12
Portfolioholdingsandcharacteristicsaresubjecttochangeatanytime.
TheTop10ContributorsandTop10Detractorsaredeterminedbasedonthestock'scontributiontotheFund'sreturnduringthespecifiedquarter.
TOPHOLDINGS(REALESTATE)
Asof:03/31/2019
SimonPropertyGroupInc 6.96%
PrologisInc 6.83%
AvalonBayCommunitiesInc 5.69%
VentasInc 5.35%
EquityResidential 4.65%
PublicStorage 4.45%
HCPInc 3.58%
BostonPropertiesInc 3.50%
SunCommunitiesInc 3.20%
KilroyRealtyCorp 2.98%
%inTop10Holdings 47.19%
TOP10CONTRIBUTORS
Asof:03/31/2019
FundHoldings Avg.Weight TotalReturn
Prologis,Inc. 7.21% 23.44%
AvalonBayCommunities,Inc.
5.61% 16.20%
BostonProperties,Inc. 3.69% 19.80%
SimonPropertyGroup,Inc.
7.18% 9.67%
AlexandriaRealEstateEquities,Inc.
2.80% 24.54%
KilroyRealtyCorporation
3.05% 21.52%
HCP,Inc. 3.96% 13.41%
EquityResidential 3.96% 14.97%
CamdenPropertyTrust 3.20% 16.18%
SunCommunities,Inc. 2.74% 17.26%
TOP10DETRACTORS
Asof:03/31/2019
FundHoldings Avg.Weight TotalReturn
VornadoRealtyTrust 0.87% -3.53%
CyrusOne,Inc. 2.17% 0.04%
SeniorHousingPropertiesTrust
0.07% -0.38%
KiteRealtyGroupTrust 0.14% 1.95%
ColumbiaPropertyTrust,Inc.
0.17% 3.92%
DigitalRealtyTrust,Inc. 0.01% 4.10%
RetailOpportunityInvestmentsCorp.
0.15% 1.69%
QTSRealtyTrust,Inc.ClassA
0.08% 8.91%
PebblebrookHotelTrust 0.43% 11.05%
MacerichCompany 1.63% 1.89%
AMGManagersCenterSquareRealEstateFund
Page7of12
MARKETCAP
MarketCap Fund
MarketCap($mm)1,000-1,500 0.38%
MarketCap($mm)1,500-2,500 3.56%
MarketCap($mm)2,500-5,000 9.46%
MarketCap($mm)5,000-10,000 18.78%
MarketCap($mm)10,000-25,000 38.23%
MarketCap($mm)25,000-50,000 22.59%
MarketCap($mm)50,000-100,000 7.00%
Asof:03/31/2019
AMGManagersCenterSquareRealEstateFund
Page8of12
DISCLOSURE
InvestorsshouldcarefullyconsidertheFund’sinvestmentobjectives,risks,chargesandexpensesbeforeinvesting.Forthisandotherinformation,pleasecall800.835.3879orvisitwww.amgfunds.comforafreeprospectus.Readitcarefullybeforeinvestingorsendingmoney.
Theperformancedatashownrepresentspastperformance.Pastperformanceisnotaguaranteeoffutureresults.Currentperformancemaybelowerorhigherthantheperformancedataquoted.Theinvestmentreturnandtheprincipalvalueofaninvestmentwillfluctuatesothataninvestor’sshares,whenredeemed,maybeworthmoreorlessthantheiroriginalcost.Forperformanceinformationthroughthemostrecentmonthendpleasecall800.835.3879orvisitourwebsiteatwww.amgfunds.com.Fromtimetotime,theadvisorhaswaivedfeesorreimbursedexpenses,whichmayhaveresultedinhigherreturns.ThelistedreturnsandyieldsoftheFundarenetofexpenses,andthereturnsandyieldsoftheindicesexcludeexpenses.
TheFundissubjecttospecialriskconsiderationssimilartothoseassociatedwiththedirectownershipofrealestate.Realestatevaluationsmaybesubjecttofactorssuchaschanginggeneralandlocaleconomic,financial,competitive,andenvironmentalconditions.
AgreaterpercentageoftheFund’sholdingsmaybefocusedinasmallernumberofsecuritieswhichmayplacetheFundatgreaterriskthanamorediversifiedfund.
Investingininitialpublicofferings(IPOs)isriskyandthepricesofstockspurchasedinIPOstendtofluctuatemorewidelythanstocksofcompaniesthathavebeenpubliclytradedforalongerperiodoftime.StockspurchasedinIPOsgenerallydonothaveatradinghistory,andinformationaboutthecompaniesmaybeavailableforverylimitedperiods.
Companiesthatareinsimilarbusinessesmaybesimilarlyaffectedbyparticulareconomicormarketevents;totheextenttheFundhassubstantialholdingswithinaparticularsector,therisksassociatedwiththatsectorincrease.
TopTenHoldings:Mentionofaspecificsecurityshouldnotbeconsideredarecommendationtobuyorsolicitationtosellthatsecurity.
FutureHoldingsRisk:Anysectors,industriesorsecuritiesdiscussedshouldnotbeperceivedasinvestmentrecommendations.TheviewsexpressedrepresenttheopinionsofAMGFundsLLCandarenotintendedasaforecastorguaranteeoffutureresults.Anysecuritiesdiscussedmaynolongerbeheldinanaccount’sportfolio.Bothcurrentandfutureportfolioholdingsaresubjecttorisk.Itshouldnotbeassumedthatanyofthesecuritiestransactionsdiscussedwereorwillprovetobeprofitable,orthattheinvestmentrecommendationswemakeinthefuturewillbeprofitable.
DataSources:BoNY,FactSet,BloombergandICEDataAnalytics.
TheDowJonesU.S.SelectREITIndexmeasuresU.S.publiclytradedrealestateinvestmenttrusts.UnliketheFund,theDowJonesU.S.SelectREITIndexisunmanaged,isnotavailableforinvestmentanddoesnotincurexpenses.
TheS&P500Indexiscapitalization-weightedindexof500stocks.TheS&P500Indexisdesignedtomeasureperformanceofthebroaddomesticeconomythroughchangesintheaggregatemarketvalueof500stocksrepresentingallmajorindustries.UnliketheFund,theIndexisunmanaged,isnotavailableforinvestmentanddoesnotincurexpenses.
AMGManagersCenterSquareRealEstateFund
Page9of12
AMGFundsaredistributedbyAMGDistributors,Inc.,amemberofFINRA/SIPC.
GLOSSARY
AdjustableCouponAbondwithfloatingcouponpaymentsthatareadjustedatspecificintervals.Thebondispayabletothebondholderupondemandfollowinganinterestratechange.Generally,thecurrentmoneymarketrateiswhatisusedtosettheinterestrate,plusorminusasetpercentage.
AlphaAlphaisameasureofperformanceonarisk-adjustedbasis.Alphatakesthevolatility(pricerisk)ofasecurityormutualfundandcomparesitsrisk-adjustedperformancetoabenchmarkindex.Theexcessreturnofthesecurityorfundrelativetothereturnofthebenchmarkindexisafund'salpha.
AverageCreditQualityAveragecreditqualityisdeterminedbytakingthehigheroftheS&PandMoody'screditratingofeachratedFundsecurity,andthencalculatingaweightedaveragecreditquality(highest-AAA,lowest-D).UnratedFundsecuritiesarenotincluded.AveragecreditqualityappliestotheFund'sunderlyingsecuritiesandnottheFunditself.
AverageEffectiveDurationAverageEffectiveDurationmeasurestheexpectedvolatilityofabondfundinresponsetointerestratefluctuations.
AveragematurityAveragematurityisusedfortaxablefixed-incomeinstrumentsandisaweightedaverageofallthematuritiesofthebondsinaportfolio.Itiscomputedbyweightingeachmaturitydate(thedatethesecuritycomesdue)bythemarketvalueofthesecurity.Averageeffectivematuritytakesintoconsiderationallmortgageprepayments,puts,andadjustableratecoupons,butdoesnotaccountforcallprovisions.Longer-maturitygenerallymeansthattheportfolioismoreinterest-ratesensitivethanitsshortercounterparts.
BetaBeta,whichisacomponentofModernPortfolioTheory,measuresaportfolio'ssensitivitytomarketmovements.Specifically,itmeasurestherelationshipbetweentheportfolio'sexcessreturnoverT-bills(representingarisk-freerate)relativetotheexcessreturnoftheportfolio'sbenchmark.Bydefinition,thebetaofthebenchmarkis1.00.Accordingly,aportfoliowitha1.10betahasperformed10%betterthanitsbenchmarkindex-afterdeductingtheT-billrate-thantheindexinupmarketsand10%worseindownmarkets,assumingallotherfactorsremainconstant.Conversely,abetaof0.85indicatesthattheportfoliohasperformed15%worsethantheindexinupmarketsand15%betterindownmarkets.Alowbetadoesnotimplythattheportfoliohasalowlevelofvolatility;rather,alowbetameansthattheportfolio'smarket-relatedriskislow.Betaisoftenreferredtoassystematicrisk.
ConvexityConvexitymeasuresthedeviationofabond'sprice/yieldcurvefromastraightline;thatis,convexitymeasuresthedegreeofcurvatureoftheprice/yieldrelationship.Thisfigure,usedinconjunctionwithduration,providesamoreaccurateapproximationofthepercentagepricechangeresultingfromaspecifiedchangeinabond'syield.
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CurrentYieldWhereavailable,thisfigureiscalculatedastheasset-weightedsumofeachunderlyingsecurity’scoupondividedbythecurrentprice.ForBarclaysBondIndices,thecurrentyieldiscalculatedastheaveragecoupondividedbytheaveragecurrentprice.
DebttoEquityDebttoEquityisusedtoevaluateacompany'sfinancialleveragecalculatedbydividingtotaldebtbytotalequity.Forafunditistheweightedaveragedebttoequityratioofportfolioholdings.
DownsideCaptureThedownsidecaptureratiomeasuresamanager'sperformanceindownmarketsrelativetoaparticularbenchmark.Adownmarketisoneinwhichthemarket'squarterly(ormonthly)returnislessthanzero.Forexample,aratioof50%meansthattheportfolio'svaluefellhalfasmuchasitsbenchmarkindexduringdownmarkets.
EarningsPerShare(EPS)EarningsPerShare(EPS)isacompany’sprofitspershareofcommonstock.
ForwardEPSGrowthExpectationsForwardEPSGrowthExpectationsisthegrowthrateoffutureearningspershare(EPS)measuredbycombiningtheestimatesoftheanalystscoveringapubliccompany
InformationRatioInformationratioisaratioofportfolioreturnsabovethereturnsofabenchmark(usuallyanindex)tothevolatilityofthosereturns.Theinformationratio(IR)measuresaportfoliomanager'sabilitytogenerateexcessreturnsrelativetoabenchmark,butalsoattemptstoidentifytheconsistencyoftheinvestor.Thisratiowillidentifyifamanagerhasbeatenthebenchmarkbyalotinafewmonthsoralittleeverymonth.ThehighertheIR,themoreconsistentamanageris,andconsistencyisanidealtrait.
MarketCapitalizationThisfigurerepresentsthecurrentstock-marketvalueofacompany'sequity.Itiscalculatedasthecurrentsharepricetimesthenumberofsharesoutstandingasofthemostrecentquarter.
MaxDrawdownMaxDrawdownisthelargestdeclineinvaluefromthepeaktotroughfortheperiodshown.
ModifiedDurationModifiedDurationisthenamegiventothepricesensitivityandisthepercentagechangeinpriceforaunitchangeinyield.
PEGRatioThePEGRatioisequaltothePrice/EarningsratiodividedbytheprojectedEPSgrowth.
PortfolioTurnoverPortfolioturnoverisameasureofhowmuchbuyingandsellingofsecuritiesaportfoliodoesduringaparticularperiod.Aturnoverof100percentmeanstheportfoliohassoldtheequivalentofeverysecurityinitsportfolioandreplaceditwithsomethingelseoverasetperiod,usuallyoneyear.
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Price/BookPrice/book(orP/B)ratioiscalculatedbydividingthemarketpriceofacompany'soutstandingstockbyitsbookvalue(totalassetsofacompanylessliabilities)andthenadjustingforthenumberofsharesoutstanding.Stockswithnegativebookvaluesareusuallyexcludedfromthiscalculation.Tocomputeaportfolio'saverageP/B,eachholdingisweightedbythepercentageofequityassetsitrepresents,sothatlargerpositionshaveproportionatelygreaterinfluenceonthefinalP/B.
Price/EarningsRatio(P/E)Price/earnings(orP/E)ratioisacomparisonofacompany'sclosingstockpriceanditstrailing12-monthearningspershareorforwardestimatedearningspershare,asapplicable.
R-SquaredR-squaredrangesfrom0to100andreflectsthepercentageofaportfolio'smovementsthatareexplainedbymovementsinitsbenchmarkindex.AportfoliowithanR-squaredof100meansthatallmovementiscompletelyexplainedbybenchmarkindexmovement.Thus,aportfoliothatinvestsonlyinS&P500stockswillhaveanR-squaredverycloseto100.Conversely,alowR-squaredindicatesthatverylittleoftheportfolio'smovementisexplainedbybenchmarkmovement.AnR-squaredmeasureof35,forexample,meansthatmovementsinitsbenchmarkindexcanexplainonly35%oftheportfolio'smovements.R-squaredisusedtoascertainthesignificanceofaparticularbetaoralphaandgenerallyahigherR-squaredwillindicatemoreusefulalphaandbetafigures.
ReturnonEquity(ROE)(definitionforstocks)ROEisthepercentageacompanyearnsonitstotalequityinagivenyear.Acommonwaytocalculatethisratioistodividedebt-freenetincomebyaveragetotalequity.ROEshowshowmuchprofitacompanygeneratesonthemoneyshareholdershaveinvestedinthefirm.
SEC30-DayYieldTheSECyieldisastandardizedcalculationmethodprescribedbytheSECforfairercomparisonsofquotedyields.Thecalculationrepresentsnetincomeforthemostrecent30-dayperiod,whichisannualizedandshownasapercentage.
SharpeRatioTheSharperatioiscalculatedusingstandarddeviationandexcessreturntodeterminerewardperunitofrisk.ThehighertheSharperatio,thebettertheportfolio'shistoricalrisk-adjustedperformance.
StandardDeviationAnnualizedstandarddeviationisameasureofthedispersionofasetofdatafromitsmean.Themorespreadapartthedata,thehigherthedeviation.Standarddeviationiscalculatedasthesquarerootofvariance.
StepCouponBondAstepcouponbondisabondwithacouponthatincreases("stepsup")periodically.
TrackingErrorTrackingerrormeasuresthestandarddeviationoftheexcessreturnsaportfoliogeneratescomparedtoitsbenchmark.Ifamanagertracksabenchmarkclosely,thentrackingerrorwillbelow.Ifamanagertracksabenchmarkperfectly,thentrackingerrorwillbezero.
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Trailing5-YearRevenueGrowthTheaveragegrowthrateofacompany’stotalsalesoverthepreviousfiveyears.
TreynorRatioTreynorRatio,whichwasdevelopedbyJackTreynor,measuresrewardperunitofbetarisk.Itmeasuresreturnsearnedinexcessofthatwhichcouldhavebeenearnedonalessriskinvestmentpereachunitofmarketrisk.TheTreynorRatiorelatesthedifferencebetweentheportfolioreturnandtherisk-freeratetotheportfoliobetaforagiventimeperiod.
UpsideCaptureTheupsidecaptureratioisameasureofamanager'sperformanceinupmarketsrelativetoaparticularbenchmark.Anupmarketisoneinwhichthemarket'squarterly(ormonthly)returnisgreaterthanorequaltozero.Forexample,aratioof50%meansthattheportfolio'svalueincreasedhalfasmuchasitsbenchmarkindexduringupmarkets.
WeightedAverageDividendYieldForeachholdingintheportfolio,dividendyieldisthetotaldividendspaidoverthetrailing12monthsrelativetothecurrentshareprice.Theweightedaverageiscalculatedbymeasuringeachcompany’sdividendyieldinproportiontothesizeoftheholdingintheportfolio.
WeightedAverageLife(WAL)Weightedaveragelife(WAL)istheaveragelengthoftimethateachdollarofunpaidprincipalonaloan,amortgageoranamortizingbondremainsoutstanding.WALindicateshowmanyyearsitwilltaketoreceivehalftheamountoftheoutstandingprincipal.Thetimeweightingsarebasedontheprincipalpaydowns,i.e.,theyearswithmoreprincipalpaymentswillhaveahigherweight.
YieldtoMaturity(YTM)YTMisthepercentagerateofreturnearnedonabond,noteorotherfixedincomesecurityifyoubuyandholdittoitsmaturitydate.ThecalculationforYTMisbasedonthecouponrate,lengthoftimetomaturityandmarketprice.Itassumesthatcouponinterestpaidoverthelifeofthebondwillbereinvestedatthesamerate.
Zero-CouponBondAzero-couponbondhasnostatedinterestrateandpaysonlytheprincipalportionatastateddateinthefuture.Thebondsareissuedatadiscounttoparandthedifferencebetweenthediscount,andparisthereturntothebondholder.