Artisan Partners Asset Management (APAM) 31 Jan 242023 Q4 Earnings call transcript

Good afternoon, and welcome to the Artisan Partners Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Eric Colson, Chief Executive Officer. Please go ahead.

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

remarks, line these open questions. Following we'll for the

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

forth would to including, the Before responses and you that call, may unknown to but known include to, forward-looking in risks to comments we like set remind uncertainties, during not made limited factors begin, today's subject release results from earnings and cause in and filings. statements I questions, to in Risks including statements and SEC the these our of obligation statements, following and our to update presentation. detailed uncertainties the any or we no may those actual have materially revise differ are discussed

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

on of a this Eric also or measures GAAP supplemental You purchase in product measures investment constitutes can solicitation investment to in materials, turn any Colson. found and website. find please be Artisan it an which to Relations offer on or service.I’ll release over the reconciliations most sell or for interest to Investor Also, the the nothing any comparable can recommendation those earnings that an note our call

joining call Thank you for transcript. the the and reading

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you, Eric. Thank

been equity As mentioned, decades. have nearly franchises for we X building Eric

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throughout We have our business. this of multiple examples equity

talent-driven and add talent fixed for value The is fixed opportunity tremendous growing. Turning years income foundation. complex business value-added asset populations yield. We would there is is team. XX aging to and creating resourced that addition of fully on asset It into years with large took fixed a believe talent, necessary the the ago The and to to need XX and focused Slide expanded the translate demand income, Krug success income with approach right credit we high and long-term Bryan effort opportunity of time with the clients, model compelling. X. set is We and the partnered areas, class the provided allocation the for ago to for skilled solid income with our build

funds return its is time ranked #X the it The long-term has see strategy generated in average of fees the are XXX that for its annual category. out Artisan Artisan X.X% nearing index. of X.XX% is We Income to to Lipper mark. inception, after compared XX-year Income Over High Fund period, outcomes. Since the an beginning High

income in the emerging generated our we team, billion result, XXXX. Capital EMsights strategy XXXX, has a second on Group, high income-oriented In in which As markets. launched $X.X net fixed flows the focuses

are in franchises can as that income, are capacity. significant believe work we every philosophy time, as fixed platform, our and income income approach equity investment steady these by fixed proving take bit and be We franchises franchises. successful X It fixed establishing will will believe world-class we growth in AUM. sustainable our We but with evidenced

build Turning alternatives income the way built that our to businesses, continue innings. Slide the equity in fixed capabilities. In early X. we to we methodically remain have We same our and

that We provides and talent have are avenue strategies income an this of focused expanding where edge continue natural setting time. direction. launching We believe foundation, degrees grow an fixed adding on we to designing right a freedom, opportunity in with over and the to investment

since X-year inception, and since strategy Our credit unconstrained launched of generated The recently commitments for more net track return an of annual $XXX global of annual of has a markets. fund our strategy fees. And inception, fees. an average now opportunity X.XX% average during we of to X.XX% has first million generated closed return net capture closed-end designed dislocated the quarter, record credit fourth in has opportunities

early we in model the income. our will confident work innings, are and remain has we worked like alternatives that it fixed in in and equities While philosophy

alternatives. equities, long-term excited Thank We we the you, income remain investments extremely fixed Jason. and are making across about

for and outcomes the of and investment our clients, from successful asset talent stems classes investment across excitement periods, for a time. talent, Our limited time long-term and of approach combination key proven supply autonomy, resources homes providing and shareholders

versus to over success. continue in to we will Thank think now I for or day will continue of directly and will in out focus long-term those you time, it pursuit influence can that things We day we on your decades and turn in to quarters, and years C.J.

Thanks, Eric.

investment our financial results volatility. structure Market XXXX a of importance minimize volatility the market highlights expense XXXX to of and in highly short-term strong experienced model, the a reflect and rising performance. impact distractions XXXX Our of the variable maintain market

An deliver overview stable is and the our of financial in on shown X. results model cycles. predicable we've results Slide As past, to market our begins through financial able

of of products $XX.X Assets AUM client outflows were were increase of September for million to from to trends of cash into funds be and year returns December at attributed contributed were of funds benchmark the Net XXXX and $X.X year-over-year. the The well Average under fourth billion was XX% X% were billion, fixed remain down quarter $X.X was the returns management that the performance in investment December AUM XX% down for and XXXX returns Artisan increase to billion passive outflows historical index year-end. Average reinvested. the quarter. AUM compared $XXX levels. up move contributed sequentially low-fee muted was $XXX year. industry the from in excess Net up XXXX the in quarter. by full and recently, below billion there in income. the outflows more Net investment X% for inflows in ended to client during those million, prior returns. AUM. million Gross quarter the the impacted to up favor cash quarter distributions not continue our $XXX $XX quarter XX% and Investment the

offset Our were complete Total $X.X last fees GAAP increased more quarter of million performance in earnings than X% and AUM. as impact adjusted fees results quarter than performance release. the less quarter. our in Revenues lower in are the compared presented to average the

the of on quarter for incentive million fourth compensation the as on a of XX% of consolidated the net our by the average XXXX, on as below up reduction in same line investment credit required products. revenues. P&L increased opportunity $X fees an operating result quarter were Compared primarily are a to the X% to X% of Adjusted operating year, performance recorded higher increase However, to attributable compared consolidation expenses strategy, to income sequentially AUM. last and driven quarter expense higher revenues our

on X% For average XXXX the from full year, AUM. revenues were down lower

income benefit due average employees more negligible in realizable Balance Our X% higher up X% variable and costs X% revenues full-time research higher decrease operating was cash in the significant strong. compensation in million capacity. of number about and basis million XXXX. excess distribution remained investment was to capital costs. fixed professionals. on Adjusted on driven up expenses The sponsored and lower. amounts investment operating invested sheet travel by income Adjusted the in Adjusted remains Travel 'XX have XX inflationary includes to by We XXXX offset fee in over expenses than compared amount increases. a the earned expenses decreased to to were recurring of million XXXX were also of EPS XXXX during interest currently an $X $XX was XX% EPS compared 'XX. increased seed year. expense adjusted increase Fixed in of rate by $XXX $X points. million and compared up X% salary The with products were in at in lower

the begin reinvest products, those will scale, the As to new in seed return to or either into to redeem we products otherwise shareholders. deploy business capital

facility revolving addition, million unused. $XXX credit In our remains

approximately payments December XX% return to We shareholders special of the with and basis quarter. of represents cash which on through and consistent dividend policy, in a dividend our per a with the dividend. Directors our generated XXXX quarter, to continue capital Board declared dividend respect to of predictable year-end the a $X.XX quarterly quarterly share Consistent cash

franchise per out also XX% consisting Each year, to to share. and $XX of of awards. approved awards capital In dividend of approved cash-based quarter a portion million on capital rata vest of Our special Total almost with years XXXX, years, yield Starting of first this with X% annual $XX stock per Board our XX investment our over in award fund include cash restricted XXXX awards. the XXXX historical retained IPO or strategies That future new and Similar a grant, in retirement. be of million, remaining vests line an in $X.XX to make Directors incentive incentive in and $XX a share will to qualified annual retirement of approximately a prior of respect generated growth we Board seed the primarily average of the Directors in an traditional declared initiatives, vehicles. XXXX a of Board acceleration resulted grant XXXX. of generation. dividend long-term the feature. our of the $X.XX with award XX% Generally, is awards will majority yield our of X% the since of X paid annual after and cash trailing months investments million pro of

of X-year talent. a eliminates years acceleration service new an the qualified requirement result employees threshold recipients added will traditional plus provision. structure to notice in have same. retirement of statement million remain awards vesting career $X the feature to retirement The approximately to best-in-class the periods years the conditions, requirement. other million is feature of perspective, estimating for granted that We're will for the million XX%. of after effect. including All service who expense top of maintain From compensation a met vesting amortization having provision clawbacks results age amount Full in front-loaded expense of for our incentive New the and be expense award is plus a financial of of $XX to age overall remain $X already meet long-term XXXX, recorded expense retirement when

expense due to the several expect elevated expect next for expense LTI the will and this then off. and have change to We reduce years level

of will expense low our and to growth capitalize XXXX fixed compensation, XXXX. hired additions XXXX. expected expected full be XXXX. to a flat are operating reflects incentive full-time in the year distribution are and primarily slightly The be also in to employees fixed in may expenses on technology long-term execute mid-single investment initiatives. we increase related increase Excluding expenses XXXX XXXX increase in of to increase of Majority roles the on compared growth digits strategy. relatively to our Occupancy, merit for increases, as expected Travel other single-digit in employees absorption an in

in As remarks. XXXX. back of to XXXX of my million compared benefits higher fourth That a the and turn due the to generally $X expenses first the are in will reminder, our the be the year concludes compensation each higher quarter quarter seasonal prepared I expenses We will estimate to call these operator. of expenses. approximately first quarter

[Operator Instructions].

first Goldman Blostein The question Alex with from comes Sachs.

will maybe high continue hoping and prospects market you was for pretty couple for there's income Nice demand I could traction years. guys fixed with over income fixed you start Eric, have expectation a quarters improve. business. the the of last that Clearly, the to

that? your growth What strategies in how are perhaps 'XX? your products So positioned for participate these for are to in expectations

that asset to history and get returns, I'll opportunities EMsights emphasizing a in come for we're comes the at we bit franchise continue of the quite and we next I the competitive as Krug EMsights then growth global global constraint the and and about now Mike X-year start team is global given franchise the bit We've that we the with debt market expect, record, base. landscape, franchise. also characteristics quite record. over with of think value, year, Between I credit, highlighted outflow really looked with 'XX, very base value same well track X-year United percentage, the to getting outflow category. look performance-wise. last that the to the the up client requirement allocations deck, XX of A institutional bulk the in as We emerging correlation alts. are asset track the global outside have and we high building that we movement the an with a to allocation the the outflow expect after alternatives, in to with once way largest Alex, opportunities, well think we in liquid traits alternative assets in higher favorable in billion, participate have record track been specifically our channel. Bryan mark, building to see the as a you probably EMsights And at that witnessed year, from base X-year the risk, credit then We're very the XX% States. of meaningful our it not in slope the to There global starting saw in we the expect strategy but majority Cirami. of the we a or inquiries. Similar a a $X debt all close around market and close one buildup category. was we global from emerging And strategies, if stack the steep the but X-year saw the

capacity and billion and strong was runway that saving to seeing floating fund. our in $XX quite take early-stage degrees very way more we're its same So build they're credit that opportunities, of to credit rate phase the we've other And we sites the established We Krug, go We're strong base build. mature create in building that built of Jason that we're and mentioned into saw about highlighted, alternative we're really and with the at a up a franchise, strategies. for our and second franchises With that mark. quite freedom the making franchises. get franchise X-year and the which franchise that seen a to progress with fund pleased drawdown where has see with just we've bit with out as Brian with

building the So those again, and time. it's waiting terms right right over for patiently clients,

just Can a you acceleration for what path? talk on like clause years. couple what bit you highlighted down awards for look long-term And you one an retirement of this earlier. incentive to elevated And little about C.J., prompted comp change as you on out that the in change? incentive caused weigh guys it you beyond will sounds XXXX, the a go

think $X million we million beyond XXXX should So about expense the that is $XX well? incremental as new to incremental

In we a provisions. as duration as clause introduced vested before providing career for a this it time always our and XXXX, to for path And these partnership introduced years next with as of retirement sustainable that. the we've And We've talent qualified the extend them been suspend have extending are well aligned our investment their here. evolved careers been phase value and investment over well we've and as designed shares, and talent their thoughtful here. to of public long-term the in provide a path to spend creation we've duration business both career growth. for XX as retirement We've which thrive, to comprised

shareholders' respect going qualified in elevated X-year be to that meaningfully be then level $X-ish years, the whether XXXX to in forfeiting succession align worry the our to in wind about the will With only up with further And grants X and interest, it interest down a our over next the it have expect and period, to thing. proper it interest, they're expense, will anything They million to then It So right will do step forward. retirement and they're for they provision clients' the our off. planning. pretty retirement. they and don't I have would clear, applies to started just

And everyone. so a long-term will benefit be we that benefit think for

Evercore ISI. from The Dunn comes next John with question

non-U.S. institutional Australia like stuff you maybe Europe, channel Could got for on quarter? the better maybe an update us you equities, of give drivers this the because

wane of The And change. our there we've some strategies. in we in non-U.S. phases Value then fourth bit early in it drivers, continued And some Australia the probably wins then had the ops a big relationships outflows. around in was stage strong with had Global to global has And that of one I on our and say our the we first was would quarter, as inflow had the quarter. a had U.K., distribution key EMsights we that early well

and down So global if ops, you quarter, Middle it's well insights team, value out a of global as the the for flow really our as broke good East. it probably and was in that

or Investor talked Day, private you not joining part bunch And teams stuff better firms. first then that or bigger been be changes be market a backdrop areas. about whether at you for Have any newer someone lately, distribution into firms bigger? like about better having it's potential guys' of the to there's observed But to getting in of sellers and thinking you

Jason. is that. take This I'll

I lift-out the in seen as And and something the see credit which world the our acquisition. not of both private well to it stop. going primarily with of that surprising. part world, opportunities, model that's the is private to we in lot we've be We a space, see parcel think market activity don't as in as

going come a be around think there's in form to might is funds of I our disappointing. changes the that that the up fact, may, belief wind that And more series in of lift-outs.

that has opportunities to been Artisan. inbound we've more inquiry that And some some experiencing here be the might than shallow for were bit they carry And been at investment so teams past, opportunities the in the correlated shake little and of free. a that could the

very world. in look to So take hard area with the and really deliberate opportunity opportunities the of it's be given us a class. is asset that That the an

call segment interest, to go area find where is in we're team. our just can in strategically certainly, the the that to here right acquisitions the come us, tend And we not your do at you Investor necessarily the directly the obviously let's we're As all in can we the the mergers and We're find of right and clients. back business talked big, know, not not but and for one adjust results with has here or think And to in we to world-class our of of for Day first be an right we've distribute, produce differentiated world of model. we them, identify returns to market about to to terms to, differentiated deliver discussed a point, that's going and distribution. foremost, form of It September, right outcome. as on that clients alternatives, these model on what the that you me had deliver

consistent right remain history shot it time. and arises And as with to recognizing and our we're going past take so and it the when might our very that take

The Bill Cowen. with question from TD comes Katz next

side. off flow the Just maybe on start

new instinct was, And you've into appreciate dollars that? my do always Where release the you're pretty billion, but And a out coming relatedly, watched are performance? pretty incremental a at here. where there's the different of within you are $XX time some there more comments smaller fund. your attractive it you vehicles seeing of equities. around you highlighted some capacity seizing into seasoned opportunities like incremental Value you some maybe the older, International Or vehicles carefully. tend that press made seems it to okay, that's opportunities big in lot the So Fund, cap demand? lines, I attractive Is

again. Jason It's

have inculturation caps, David teams forms, capacity opportunities through to Eric talent. place shareholders. work Krug are with continuously expanding Samra franchises clients as in Also, growth large see with mindset, high in time including and They've they horizons. with their of of thoughtful for differentiated we degrees modest mentioned, our Our pursuit This to have liquidity why that who structures. the philosophies identify come remain their in opportunities is embody for via build broader sought and markets, top-tier and many this value, sophisticated they recruitment credit, for while their part securities success, of returns understand believe importantly, market their freedom. the in methodical existing we with the like-minded importantly ability Brian

recognize And his reasonably side out a him that on can he but team return types fund, has so broadened has use. large-size we David's to the of the securities propelled success

value the today. will think think themselves, I think of see when whether numbers isn't we or the But of money I we those of getting a find David the performance money just our that $X think seen You've commentary, we global you've assets I bit, and end give say, and I and and a numbers returns our for to market much Beini cap I that team, we joined having opportunity broadly, on ultimately it's XXXX. down and teams the more for do lot in then Value And expanded does International would of us, the the any a more Xs pent-up credit really be with from high Anand increase what set some see in huge team until market the strategies there's get specific on a mentioned home, any know are this this high and a don't one it the institutional about trillion space grown or reversal in world a that, but seen might I sidelines. the the or market, But at vehicles. of one the but and speak our that demand in off and to little somewhere or reversal, franchise. EMEA.

very there capture going that back markets, money well is of So to stay we're think to out patient. move we're thoughtful. that. we We're But stay going back safety and positioned to to when

maybe And C.J. one for

ahead end of little the payout? a thinking what how maybe payout year, the did right. folks if to the back I balancing in bit reinvestment thinking in math this business higher the As you were you versus about the are XX.X%, think came ratio Your look like I about year,

before You've of couple XX-ish-percent a been to that. running years close

the reinvestment of recognizing ahead cetera, needs, how ratio you So payout looking the when the of do year? think some just some year, seasoning, seed after look you capital, et this through the

at cash I see in back held products. we're new this We staying some Bill, time, this think year the to course.

pretty I good our about where we feel are think size seed we in book. the of

to next the of could we action. other including along right there to each at sit potentially special quarter, some be variable cash dividend the up we dividend. additional So end now, But special paid the continue see dividend year for to of here with the adding be uses that year, our as XX% freed course

anticipate percentage. what wouldn't to seeing from a major you're any changes I So payout

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

Just investment if could one demand, bit on how current rate in strategies. credit little Wondering more especially the potential the you a about see you talk environment. alternative

This believe a over spent them. the form follow-up record. Brian And side know. shy that we've now X.X% the time if a of has Jason we've when I'll that past just he's me think Jason about credit is been the about years, And you question, -- around Gottlieb almost But performance developing there's then that let we building asset now been phenomenal been really of distribution done talk couple think opportunity and we again. strategy because X And just it's in net firmly a highlighted, of always that. the spend on of on the is time his we've XX%, got as will fee. patient we

return starting of X% a a We question, the we're a are that if lens with digits, whereas Brian of range I in get up X% uptake very the think money innings. through strategy the low then building deploys, are let's just build tends clients in And uncorrelated somewhere have clients opportunity to some different clients, whether a in somewhere is to an and pipeline. the very, unconstrained is that or think Unconstrained really evaluating new you existing evaluate market countercyclical take it's starting to that top interesting prior way strategy the people the to that broader that's market X% really, of develop generate in And if potentially alternative mid- market to Global are that for on I continue us interesting to grow the this if able interesting alternatives that likewise, markets. we team, execute, going money in had you can to think to and are single somewhat that strategy that. what's it's on rate, the be the, EMsights to it, digits, the and you the global back conversation Again, outcomes to to call rates note excess early the really the on double high to X% money allocation.

the team Brian, produces and could stages, we're I million we years. that they exciting dislocation mentioned, deploy that I'd opportunities if raising the hit dislocation, our is X-year remiss platform strength drawdown to really the And This into that, And growth to, a to opportunity one and returns X platform I continue an to $XXX be think build of people the for develop not Eric should X grow mention even testament fund, credit a interesting is journey, this a didn't return quite we We vehicles. think, hopefully around early capital, evaluate And the As capital. his years that Once leg be record. their and be really stool. the Brian think drawdown of these and once the really many. to be we broadly. going the brand

higher success team The we've here. identify feel out much bring we still growth of long-term for out opportunities I there's we probability with is to more whether and the and interesting short ultimately like go intermediate platform, is think that. opportunities the highest develop teams, existing next it's or time best use that got the so platform, good And themselves, really whether which the to our the will and duration for really of reveal we've of got we

I may. And just if one follow-up,

I think talk year. a an the expansion in about for plans distribution prepared little headcount, remarks, more talked bit you in distribution about could just if you this wondering increase

emphasize after strategies, of the firm. cross-selling. in those credit attached in a are expanded also that knowledge to year, management strategies, the sales the a product distribution individuals a orientation the group, focused of other we the selling inside continued We and global product teams. that alternative of focus day, firm going array added at compensation, is the strategies. to team for spent the real relationship alternative groups adding we create and and sales smoother product we adjusted the for time on need of we help non-U.S. individuals relationship teams. to direct training our alternatives, our complexity the the as will manage areas complexity, also And centralized unconstrained to and service client resources, built team. of our closest distribution dedicated well cycle, we're looked distribution with quite the across mix, We knowledge sales also think our the credit Those to into the intermediary, And both get opportunities, centralized adjustments, XX autonomous That then of a amplify with with few individuals We end that emphasized we clients Last bit getting including and an we at optimizing up felt as center sales the from launched distribution. will

This concludes Artisan the Earnings you. Thank XXXX Conference Partners Quarter and Fourth Call. session our question-and-answer

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