Artisan Partners Asset Management (APAM) 28 Oct 202020 Q3 Earnings call transcript

Hello, and thank you for standing by. My name is Andrew. I will be your conference operator today. [Operator Instructions]. At this time, I would like to turn the conference over to Makela Taphorn, Director, Investor Relations for Artisan Partners Asset Management.

you. Thank Artisan Business the Call. and Asset Partners to Update Management Earnings Welcome call Eric C.J. from include Chairman Today's remarks and Colson, will and CEO; Daley, CFO.

Investor Our available website. investor and Relations the latest our section presentation of results on are

these Following for we the will line remarks, questions. open

like which I'd you remind in risks are uncertainties. are call, subject begin, on may deal presented that your These earnings detailed responses to our to we the questions, made release in with today's SEC. to Before comments including with forward-looking and the statements, filings and

We any are the or not required to of call. update revise following these statements

In addition, references remarks today to will some include of our measures. non-GAAP financial made

call reconciliations GAAP those earnings will the over can to the Colson. the I of to measures find Eric in most comparable release. You turn measures now

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of investments. sheet maintain $XXX new balance healthy. Our fund remains continued make operations, to We approximately products and excess million seed cash

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Instructions]. [Operator

of The America. Carrier first question of from Bank comes Mike

of from And strategies, do less spend a standpoint? there limit, more constant a Or like G, added new focus question, and particularly you building hired distribution generation? as and Eric, which out that talent on you a in to like strategy think is having but generation, talent about well. has team very more you you there more about the gone the third teams you When thinking time? start is recently, a X next

most do way from operational in talent. how strategy current supporting taking that and have strategies and XX good and make them practice the into X we To the We've a that new if depth always it geographies sure newer up without or move And we strategy about a teams. to the success properly, of a to and up finding slower day the going always certainly. support done teams. make there's platform. than or to have firms and we're fundamentally of set set right into new going vehicles on with that's it's start the for a a an we resources, our to sure into, X channels thoughtful moved work team onboard X distribution hoping go said limit away Yes, We've strategies thought launching talent organization. new X we as operations to inside mature a me, it from and limitation, and bringing opposed probably can day real that the and the We've support to strategy fairly existing we the

the opportunities. from but we're we're -- a quite we just few seeing of So teams that at, amount of govern number or the opportunities, does looking meetings

marketplace always the can team of to properly amount looking continue good array in we onboarded opportunities. for talent, and the But So see do. we limit does we're a the

scale tipping that payouts more in kind or the coming structures driving I that? like works compensation? of That up, line? Just -- in that more makes if of sense. and shift, about some mean, does C.J., terms to these the But on bring Okay. ]. there's on asset the bottom Like shown to to how or and continue then, are of margin it terms had how see margins? points healthy as just And like curious strategies And in levels you you whether model flows guys anything think of you

Yes. our been results generally start-up earnings. teams a difference generally, the but material you've same onboard different, from costs, do range. only it all specifically, teams, economic every that seen the hasn't current not well, to the one to of are Mike, fund we And as in it's sort will -- instance, on could but and tight any past, as in but team we of amount come be The model. in

But fully pressure first the teams X for you no supported scale, years. that as share revenue XX% firm the on which the balance which the get to to takes we in supplement know, a by there's versus other thing it they're time frame is So sheet. the generally, guarantee means

employed So there material -- with there's from I anything don't should think respect on teams model that that past. to know we've the you bringing the or we're the

William of comes question next Shutler Chris from The Blair.

could new those on and guess, -- thoughts be days, comfortable the those? Small you'd be? it's International how -- comfortable? Cap On should I And in Greater realize about strategies, where early any large we or ultimately post-venture how, how rates would Value China but fee think And very you I

move the higher post-venture Yes. typically has that Both phase most then think, strategies. freedom -- we're strategies to strategies, up are to the we're fund, fee is Capacity-constrained a a that properly China the in and slower like the capacity-constrained than And Greater that region sure properly do, in those fund more things we I degrees a of with that this case up newer set early yield the most rate. support will make new team. set

that would strategies at and have some to I a we've expect move pace more come slower both than seen So market. of to recently grow those with our of strategies

gatekeepers. differently two you're about if Got today Eric, -- And there? Okay. there's color doing that deepen or a that just today? ago versus relationships more working year it. anything with or any Just then, to more you Maybe you're talked emphasizing

bought quite seeing gatekeepers, in I We've We're in have Well, our from so brought with backbone over environment. more the X years, put yielding I the the -- connecting new website. a all for consultants investment is than that's ever tools We're and quite different. more to would to starting those seeing utilize environment's have a clients, and given I We software fortunately, for home prospects part, the We've invested and thought working new CRM. seeing and capabilities obviously prospects, different. great think and a tracking in than now. last think operating clients, anybody thought, most

helped bit sending that's offices that's than flying normally. a people the so world, different to quite us around that's just out different. So and And

called We I for writers more that more environment. content. think in time, to out. at We've, blog up video we're set the Canvas. create same a We've well launched invested put Artisan

we just because few our So doing of a And coupled well things are environment. content environment. with the the brand, are quite this connectivity, differently I doing in given trusted think we and

Okay. Makes And bit the little on point? of occupancy a this caused one what was the C.J., sense. maybe And in Is increase? a level expense lastly, the jumping quarter. just for up off just kind new

No. ran the quarter. a firm in subleasing some New so were current we in it York. into was we a space. took given the had Chris, We that charge difficulty subleasing for write-off and pandemic, the And space that

The Kenneth comes RBC next question Markets. Lee from Capital of

one potential cash for needs. the around Just

in call special as the within be around time mentioned prepared needs. frame, the about aside any out should $XXX Wondering initiatives any or especially the aware if roughly Board just million of goes of you potential that investments considering dividend? could quarter fourth that remarks You we for cash, keeping special uses

Yes. Ken. Thanks,

where the we've Our both then the there a us the through the environment has year to caused earned distributed hold a policy been years our date, same. a on special. And bit. few dividend cash market to all have we And little back remained in have

recommendation the standpoint. consider process. We'll it's the from wait turns any see policy. weigh level -- the when environment. earnings the to the we'll uses. January, that same have year get consider out and the And we how in an now, Board will We'll of We'll same as It a and special. will point of in, be decide So at the to and other we'll market time

may. just if And I one follow-up,

any on very distribution appreciate the you in talk industry terms high a longer the see as level, slide. the on additional term, I about firm Just Slide relationships. do X just of Could maintaining -- potentially you pressure consolidates, at

to about peers larger of maintain some benefits relationships. it I think scale some seeing comes distribution talk when

that Just out? how wondering, could from perspective, work your

things forward, going delivered, Yes. our in moves Certainly, out we partners uptick these strategic was I comments seen of investment out, laid that more partners. in ecosystem and interact with a as good asset in strategies be opportunities of and having world the to greater there's that think for deeper And we're and partners. structure continue how whatever more And need We've some And and as a embedded is and relationships a we done across segment, classes strategic investment part seeing to slight the with. that on as the high feel be with that to you breadth we're we always marketplace. we people. some working than have that ever deliver strategies relationships distribution we've performance we fit the will and all build-out always value-added the offer all don't in to we've

Next of question Katz Citigroup. comes William from

these One So you Eric, some And just opportunity. did that you multiple opportunity. more a intriguing. investing that, a like sort didn't about me. the quite interesting assets found kind assets? on maybe multi-asset maybe sort the size, more the sound of made of latter, I of of sound two of relationships And then opportunities? linkage you it Gen strategic to could was on one to comments you, maybe what Could the Gen sort then I but little see expand and was those bit of of tenor X, more the X have

number and the the on using. we've This been the a financial guess uptick We're RIA and runs wealth see bit of not an larger of regional the products the interesting and corporate a clients. of regional scale We've relationship, seen has uptick past but comes size advisers. of have I seen the of most broker-dealer, It may advisers they're RIAs with and it little many growing size gamut. tenor in quarter, into to some of in seen broker-dealers. more starting large We've our strategic channel financial and Probably though the there. larger that's Yes. some growth the that occurring the broker-dealers. really some really institutional

dollars So geography number the our -- or originally, interest it's around started started or it out by When both securities. broadening and comments in that's size size using multiple for the of degrees types peaking comes Gen we reason strategic broadening the by relationships. of of to freedom, of X out products

Now you're starting and to private to see classes to to to multiple different teams wanting want able in be hedge strategies. want use securities. also securities. use those They asset They

teams in using the opposed to And we've those hedge into bit. could future, seen the a So of X X. on will you wanting that from see of use as public play last public's just degrees and generation change also to the freedom in private and change ability to a come to going one-dimensional and

just me. And a quick Okay. follow-up for

Or mentioned X, your an can point? this structural to flow? are headwinds investors. into to that is Is be about area which there assets, at half that interest You positive be there platform of back more of Gen tipping earlier to get point had continues considering a where

tough look the forward one That's active/passive. fighting been on, a to and we've

or producing strategies hard given that, we're it's forecast with more don't But pressure so use been It's period many a of the very time, that I prevalent see And and offering long bit passive the flow. us in competitive that's on movement been clients see going of for you're passive feel have a that's going segment. that cap-style that. good that to quite our we of we continue. confident regards of And there's performance that in market structure a to to changing. to

The Bailey next from Goldman Sachs. question Ryan of comes

or the scale of maybe And for the XQ question about we C.J., wanted would from investment in reputation preference are professionals another toolkit? usual tool should I Is from rate? of more and additional actually just benefit is come to there expenses change teams. to you to more go thinking teams investment to the existing strategically be sort this part it comp very have about you for Mike payout professionals to that of first comp back existing and any above having rather a that, in PMs

this the have in it There's no we more onboarding bring such team organization, bringing of we bit into we've how and we we of talent, flexibility that Ryan, of about is an change done highlighted think a Eric. quite inside or and a existing recently in vary may how team. new talent

the it's I can tool think organization. highlighting of just that talent model we showing into how another the bring our flexibility we're So and of

to third respect expenses, quarter. with our the to firm both during additions Ryan, And occurred

So there will material bit to be guide in existing little expense, more a you to would that but nothing expectations. model I your

the good haven't those has how institutional been you performance the is interest much considering a why maybe flows in the there Got made some Gen of a that seen you interest if differences point reason from sources or as the just follow-up could on it. And around that was with strategies, curious, more from -- for side? of I I I X, guess, just focused. being less well

Can you question that restate again?

Sure.

your of a from that during you intermediary institutional maybe comments, So and is growth channel. less of seeing net flows little some Gen from the think said channel I the wealth X lot and had a of bit

much from has why been so the performance demand the I haven't as in seen good So when side Gen institutional you just strategies? was wondering X

from institutions and do the We good see consultants. Yes. interest

client I think to you and trend the of when private real down the equity still and break debt down that base corporates, like, private they're estate. into and institutional foundations of continuing endowments,

And so that focus there. really a given marketplace push into the institutional deep we've that, to the alternatives, greater has seen having group opportunities

difference potentially back it those the are into into real with focused date is But or the alternative to the and starting into strategies retail there are starting point wealth the to target you commercialization into think space. of I funds. occur, think you I market that's see bringing saw institutional deeper clients tipping the

Next Fannon of question comes from Jefferies. Dan

and capacity there the Just both markets are close in watching managing AUM if are you're flows that and that beta, -- strategies ask given terms in wanted to your certain move capacity? about of from that

Yes. growth that strong really in we've on, -- few seen strategies keeping an that eye a team. interest we're There's the we've and

last a at. on been as gross managing eye on is said we've right small-cap well this uptick those clients growth other opportunities the I coming that more out. kept Otherwise, what's strategy given I and it's terms, coming we're difficult global an think so flows something mindful where the quarter, finding of both been strategies. in of few right as And are the in what's U.S. given that very And strategies a the bit we've

-- So we're we're the are that team the towards X dollars only gross monitoring. -- looking are team probably really But that given leaning the replacing going outflows. those the probably still at out, growth is

of And that you out more with kind next if just flow more follow-up there beyond? And about of expenses? lower. AUM on the might we of that's about of performance year should things through a Okay. given into technology or thinking next that that side, follow-up then, about a of we there's then think be are this just just obviously, natural might as expenses the -- other thinking is the a be on things year, certain contributor bigger SMAs that, coming in fees, being be discretionary C.J., as But anything office, and environment,

Yes.

normal. contracts go that running With and at the maybe data impact expect, Obviously, belief see respect growth back you rates. would pretty to maybe the seen. flat to slightly. would anybody's as data market start guess mid-single-digit from to the expense that And last those of pandemic in back and Generally, just So and technology I has be we're ability obviously up to higher is trajectory, positive up return life expenses. to XXXX, in renew travel technology, when I'll and a When this remains year, at costs just happens normal point. expenses on had home will we're returns with our that to a work

as performance. fees, our as is $X of than So account isn't would growth year hedge an percent couple seen a I have have more in fund, subject There there uptick the well that's fees, AUM we to billion private anything worth do this separate fees -- inflationary of about vehicles. fund on plus given really you And X performance our performance Other there. that that, performance mentioning. see

fourth being towards It's annual probably into accounts are the there's predicated year, next year, opportunity, upon then performance. you quarter. for our and fees. performance know, opportunities next as performance well. in But likely given are it's tracking and measured good that performance some there are year largest the all strong So on coming there opportunities And a as up basis an few this

Next question KBW. comes from Robert Lee of

infrastructure this mean likely and -- those I the have teams the to new apologize types fund feel the maybe curious. I'm came liquid just with new up already, handle but of Or structures going pretty -- and to structures, and investment? kind kind be private . funds, you discrete the costs necessary that's C.J., akin and the more do I requirements it that kind of up fully raising been Just assets, one you Eric like of fund, is small? it or of is a is perpetual constantly a curious, better fundraise reporting analogy, something incremental of more to fund

strategies in on had bit just talk the about private are C.J, it's the place. the comment funds. I'll we're really, vehicles about that make and Eric. that -- a after putting We've Rob, we're little now vehicles thinking I structure. the fund It's let

have We in invested the distribution.

to So setting is manner. done vehicles, really, the private is place. have vehicles infrastructure sure regards we But we're the in in on we comments handful the operational appropriately. and with It a believe prudent a that's place, -- up it's team of in your making

you is to wouldn't any uptick expectation our with vehicles. forward to of expense requirements regards So see move

anything don't add. really I Yes. have to

a this is We've operations for of years. number for ready. Our been preparing

I Yes. appreciate.

it's more returning like of -- structure? and structure, on an kind realization discrete but fund-type type a opposed capital invested if curious, raised as just Just interval to

new No. a -- launching be not We're we're to vehicle. be going to going using

apologize ahead, the last may about this asked some missed into to earlier. have was I of start to next as to may we thinking having Again, the strategies control limiting, if trends thinking whether I mix? continue particularly the in any it's third-generation, the as with ahead it, or issues look individual part now even that of assuming second-generation be but kind the of or Okay. year we first success investors kind or My should of past have in question. maybe running you start bumpy capacity some look institutional

we that a to will, we capacity have continue other manage Yes. base, that in other we've intend strategies managed a as go-forward long-duration We future, make the teams practice certainly sure on to mix. basis. certainly and And fee a client robust

So play that come. come to into and down certainly years will come the in

today's our question-and-answer conference. and presentation. session today's concludes This Thank for you attending

may disconnect. now You