APAM - Earnings call transcript Q1 2021 | Artisan Partners Asset Management Inc.

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Operator

Hello and thank you for standing by. My name is Jason and I'll be your conference operator for today. At this time, all participants are in a listen-only mode. After the prepared remarks, management will conduct a question-and-answer session, and conference participants will be given instructions at that time.

As a reminder, this conference call is being recorded. will Relations call Management. for I Taphorn, to time, Investor Director, Artisan this turn over the Makela At Partners Asset

Makela Taphorn

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

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

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

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

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

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

Eric Colson

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exemplifies China. Tiffany China experience, and They and the newest in network work putting Post-Venture slide and Greater clear to wealth Ji vision Turning a have strategy Hsiao ambition. we a also for remarkable capital our together. bring to Yuanyuan three, ingredients of talent, have

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autonomy Tiffany to giving and We different. something Yuanyuan and do are tools the

will give time We also them to execute.

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markets to Credit on firm, opportunities investment an to We help capitalize our alpha high-yield compound we further we're in dislocation the and and on see constantly those wealth. skill dislocations. teams for As investment the looking team ways generate capitalizing serial and see

on clients. take we do advantage We extremely of clients terms, the dislocation, on long-term $XXX.X contributed This in patient. to degrees add XXXX, would net for our right we flexibility strategy the high-value-added that are benchmarks investment have returns returns and remain currently stress, Since have the what six find and exploring contributed $XX shows $XXX a into focused relentlessly billion. grown further Bryan Credit allocate is to billion, billion outcome. and of a Market of firm, excess regularly and $XX.X as freedom, have flows stay $X.X our have AUM capital billion. billion, from Slide approximately compound returns investments, give right team contributed

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excellence. to through expect We investment grow

than For the nine excess our flows. period returns were times alone our shown on more cumulative net this slide,

our are We as an fulfilling investment firm. purpose

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C.J. Daley

you, Thank Eric.

today and focus Our on adjusted earnings release both primarily results. includes adjusted financial will results. My GAAP comments

management revenues. inflows, the global equity which impact strong quarter under the in of cash and average in strength assets markets client net led Our results to higher continued first reflect

intermediary cash the the to AUM contributed December growth quarter for client billion meaningfully of up XXXX. the compared at Our were to during $X.X AUM X% first net of a billion, growth channel. through cash representing inflows Investment of net and organic US inflows were X% had $X.X XX our quarter. was The or our client rate. returns flows majority annualized strategies cash client $XXX.X quarter the net end billion

last generations our inflows. strong the in of grew net sequentially our total AUM by over across of quarter and our changes quarter. $XX second Average benchmarks $X.X drove first net AUM. Over AUM for AUM flows of above XX% XX the investment March generation, increased XX% strategies When including increased $XX.X billion client returns the Investment AUM cash our XX% cash our months, and or over XX% strategies excess third-generation drove due in AUM growth performance, and year-over-year. to client returns three looking billion, billion generation in at and $X billion all to

for higher benefits expenses incentive variable higher compensation XX% quarter principally well XXXX. expenses variable performance results revenue, $XX.X increased year-over-year, costs. salary taper first off financial of of this distribution million the Revenues incentive in expense $XX.X and increased higher quarter. XX% XX% QX, to to Variable compensation and quarter our long-term the due and compensation our year-over-year or million AUM expense, in represented increased of million fees expenses expenses higher sequentially expenses total the with incentive to to Operating and due on seasonal average due Turning as of XX% higher as or of Operating which grew in XX% higher third-party million year. revenues beginning which first primarily sequentially will expense. and higher $X $X.X

our As increased adjusted XX% million quarter or sequentially, year-over-year. income $XX.X a result, million $X.X or operating first X%

was margin XX.X% from first fourth of XXXX, quarter expenses. in XXXX of for to due primarily the quarter XX.X% operating down the Our seasonal

basis points margin year a to sequentially ago. operating adjusted net per income $X.XX. from year-over-year share X% Our improved XXX XX% and Adjusted grew

our cash by well reserving with remains us the sustainability provides sheet closing, I That incentive and healthy my declared $X.XX XXXX financial call approximately and and and predictability long-term remarks weather sustainability strong quarter, continues and the which a of Q&A. now as for operator serve March cash quarterly of dividend concludes predictability global represents to share borrowings turn to are modest balance the to to back plan. supported our generation our after Our ever-changing respect weather market per conditions. In we model will for XX% generated

Operator

America. question-and-answer from We’ll from Michael session. is you. Thank Please begin Carrier question Our go the Instructions] ahead. Bank [Operator first of now

Michael Carrier

Great. much long-term Thanks are how so, strategies. and guys China you you currently terms or you for the in for over you're versus team, next much at see market opportunity When strategies you developing and positioned at the where taking of look that - opportunity, years still in just it's Maybe feel even whether private that mean you on positioned kind I like R&D the do is that that how the - look those those still see? potential how XX of for, of question. you

Eric Colson

Eric. it's Michael, Hey,

strategies it's really and strategies, this that's some put firm put the quite then distribution has a place we leaning economy there exposure in strategies on have in back we and the we're early Europe. a of Asia the and the there. our and opportunity up in emerging I reason start specifically. can out base innings start largest there see entering I'd time been global primarily number with the the for say as we mindset performance, global built I world. become institutions non-US and built - out China, presence second to strategies, and for similar consumer-oriented generation in - in would at and time equity spent we trend those franchises the larger around for financial firms over look years and then look we're strategies, of the how more client time. been there it's the think China Artisan And we over at have too we into say really, [ph] more the see presence both and time with a the a we early teams management importantly, been But asset out I in for the phases, Europe play at operate talent in and a of how we look the operated a and of in have then vehicles, with would go as where that we the And to finally place, space. see operated we an you markets say and lot in number in we a

Michael Carrier

two just items maybe then some AUM. just small as Great, like on and Okay. a follow-up

item, then don't seems Just a quarter if was on anything higher? I in like the was redemptions third just that or looks was were maybe it that the little again elevated, And the know the in returns negative and there high-line separate in side other was like bit outflows account generation, anything and quarter. like the it like unusual the there

Eric Colson

money their institutional at anything into didn't look we've rebalance been exposure-oriented happening of Yeah. We've value. I up which growth, it talk seen of seen anything wouldn't extraordinary I there and quarter. exposure lot in some But indexes. some don't value unusual. has been non-US in a There's move think there US of equity jump some would accounts, at and strategies that's rotation, include - clients us out separate as the active talk is

Michael Carrier

a Thanks right. lot. all Okay,

Operator

The ahead. next Goldman Sachs. from question is Alex Blostein Please from go

Alex Blostein

Thanks Thanks. guys. question. Hi, for the

to announced a how months credit the soft-closing about talked on around bigger XX or clients the need see versus And you on the you last you the find well. horizon in XX growth impact help picture the as anything ago, question we're over as new the existing you much to of try from capacity. the that business Can clients to from that week call ultimate two us of think contextualize going then due just in a has that on Just come self-closing product? Obviously, might the about that else just to capacity. flows to soft-close organic

Eric Colson

definitive it's a Alex, a would hard-close is certainly. it point activities. shut time all Yes, do not and process, down a in you Eric. where The soft-close

we're liquidity the mutual decision is as new to diverse we anybody flows made back I mix, And encourage really was point. greater we the clients at look always investors. made produced we most mutual in call a and account to primary to we're the daily and existing look of the think So the as and a we dislocation. it's look on vehicle, clients. going are with at we we has returns regards opportunities to the make that of open the point to total regards missing question that velocity separate looking more at and vehicles Credit the of continue And produce at it XX.X%, mix, new look return. degrees of of at are on the And mix saying or performance. capacity, the the XX% is statement strategies the and soft price, funds' dollars don't to ways soft-closing impact your a at at strategy, is and dollars. and flows. we other stellar overall than look around at the to Opportunities we with our The we're a freedom, say And is saw daily we with Credit looking we mutual compounding the in looking really fund a looking fund close taking a the The mix,

as we've we're results can of we a of can, that drove do to that's and that our thinking of money don't has that as this smoothing base, capacity client complex the as to which positioning alpha out to lot velocity it time long-term we years the versus because the So We think strategies, and is to franchise that value over and the period a value broadening a as are. back trying short it's over who franchise take. of And franchise. and periods fairly of a strong of long the delivering view much our just of damage again long-term goes not number franchise short-term term out opposed saving view. willing the present And a and flow to think we capture broadening high the to done

be closing think how on But thinking it was it operate. we and High-Income. surprise shouldn't around primary any of the the how that we - soft So

Alex Blostein

very consistent you to to when looking You've kind it similar? that Anything been at start do else capacity the to might against franchise have or comes you're that bump-up that. something you might across feel of

Eric Colson

it and is hard we given Right monitoring now, the are few a things predict performance. there's to

historically to attract results, strategies nice. some when value some the have of performance lot of starting that people's So franchises. good It's attention. if catch strategies see recently you in all see some with hopefully, easy you strategies it's a attention these and producing franchise, you're to rally, very the each benefits other those to more and And

a of is that and eye keeping money. monitoring really we're how it performance going is absolute there the to be and couple So an on compounding we're

Alex Blostein

Thanks right. all Great, lot. a

Operator

next Lee The Capital ahead. Kenneth comes from Please from go question Markets. RBC

Kenneth Lee

When China expect you us for if And recently Thanks like potential for and the regards share similar introduced have Post-Venture you how wonder for Thanks. in these question. growth of the these organic taking strategies, could in fund. would strategies just my strategies over the including AUM as introduced recently about newly think is you you this seen a look contribution introduced past? of term kinds with at would you to sort near to ramp strategies

Eric Colson

is their the growth bringing strategies what dollars exactly can you that that of pending running have different you're track in a phase have track and Some have strategies early that of to record cycle, records, and growth where linkage track the the don't pattern teams team of own the of on matches billions early point records, pending X-year doing at patterns has a and individuals the in history that individuals the today.

where what track regards is China a strategy, So Small not history, a but International in look can the the you a to with exactly track record Value to it's doing. point Likewise at, is we're specifically. there to not but Post-Venture, record Cap there

Value and little I strategies. the Mid of that other would we've newer bit different the some strategies specifically what than in team. traits These, I more So experienced the a International the probably versus with had into strategy same I'm Select Global guess growth Equity the brought we speaking were to - expect Small traits under on, slower

have a some we those mindset have the strategies of for -- slower right So we growth for now. early

Kenneth Lee

just that may. investment term other thoughts you. investment now opportunities any near Got latest And in horizon? in out one any just there around follow-up your Wondering the whitespace particular add the helpful. if the That’s see very new if if could you to or I get I potential teams is Thanks.

Eric Colson

to the interaction dialog the dialog health with really see continue announce. the last a nothing it in new slowed teams. Around pandemic, and over have of and we hasn't our marketplace, pretty teams, year We to active

people on we that period and new over strategies. new brought launched In fact,

So are the asset healthy as a Post-Venture, when align well that around as teams More we the the whitespace of be jurisdictions look quite of to the did you think developing. and with specifically, at funds China there that number of other the some hybrid dialog's world. is that based crossover bit classes what the we or could in

we for dialogue a active. and remains of our bit is model think whitespace quite there So quite the

Kenneth Lee

Got Thank you you. very much. helpful. Very

Operator

is question next go from The Citigroup. Please ahead. Bill from Katz

Bill Katz

much very you Thank Good Okay. taking questions. the afternoon. for

to Just China the coming back opportunity.

you million. comments, mentioned in $XXX I your think, prepared you're at now Eric,

I of think years tail what sort from volume sort would in do the that with think maybe build was monthly. record of of this And day. growth or very you you the the at the that's a Where coming growth? need March long a how sort to measurable term disclosed track bit is higher very, for commentary of stage and of than and expect that couple little I that more to start triangulate of near a leverage you your end of sort you new to bit early

Eric Colson

on a what within it's current institutional and relationships higher past. than typical build interesting clientele March we some our an Bill, have the XXst clientele little Yeah, leave saying described little of advisors that been and outside of number bit we and a the disclosed marketed of the the

grow that. of It's current opportunities offices, slower of at which wealth from a whether pools the of crossover recent in we space interest interest we've relatively that I The strategy growth dialog of up is in the curve, public, call, the up hear a seen the allocation the earlier. pace is with than rate. China-specific opportunity of the seen some private of optimism the of the is mix the is up we've the at were some the world the mindset strategy lot and opened dialog unknown that or which to puts with looking the and into it's we've that described footprint other outside the their this brought and should money and side the more to a regions lot channel the strategy in makeup still lot traits around demand strategies, new surprised of in we So hope of Artisan of our and we've so bit of opened a family of a new the positioning

Bill Katz

in. could just then a if I maybe two-part it sneak And

was out capacity plus might competitors a the little Thank how some You protect scale. more you. or would there mentioned of would fund that that you at And that of current carry but seasoned the mentioned differentiate something wondering if also you like a economics the type is any then bit that Credit distress. helpful? I talk versus on you kind to team could about work, granularity the fee bigger side on of management be a how

Eric Colson

also for marketplace. flexible and it other Yeah, be us call taking versus specifically Opportunities a as it the to results portfolio the in high the the peers. Credit with in being of He Opportunities and is the that Credit we security to and able as Brya has take enhance and performance-based more take franchise, to that rate. look fee in team happens Credit that deliver well fee specific both more much and set type be strategies the allocation new at reason see and got but of that to I ability rate, value selection to narrow asset go be looking across freedom it in lower skill produce our security space aggregate. to just to the we stress present expect We at narrow pure room to so alpha, as private carry skill expect up the high-yield a given ends funds the in a the for the into and and has We the believe credit into income breadth very and very we sets scale that the manage the playing - capacity the a we rate. also manage dollars, the or that those it and opportunity see strategies alternative the and fee and lowest more use would think of have bulge number than to versus of the able continue to would able high-income be is And strategy can flexibility competition instruments being process And to prefer we very want future. space, degrees space. in of into has for and of advantage a flexibility save strategy of to interest more in the team space and enhancing strategies Credit vehicle And the we expand fee our private tend to pressure a greater of

Bill Katz

All much. right. Thank very you

Operator

next ahead. The is from from Fannon question Dan Please Jefferies. go

Dan Fannon

Thanks.

Just for at the I of about and you're on and kind a a and line discretionary of think outlook today, what year remainder for travel this in as think how normalization level? budgeting other and we the activity question C.J., about item items of you the should maybe spend year

C.J. Daley

Yeah, Dan.

areas, there travel I largely will We return some do back some for be efficiencies. year. will in we're think nothing mentioned the that ease think largely be minimal into think I less There to I before. spend will be And to believe the this certain over but will going we've but that part normal. back. most meaningful

some And you know, so year. and dynamic with this the very But of whole is situation I pandemic savings would expect ever-changing. through as we'd have this rest

quarter remains in months X, X then and them we other or have. would to back hesitate we do into be nail really whether ease And now, down Savings that try to X and so specifics P&L than into continuing which next are I seen. takes expect and any them to the continue to

Dan Fannon

on Okay. capacity. just And more then one

Just a as us returns given you quarter, when Credit couple were bucket, and you about they quite the obviously, gave you've have it, last not funds been context mentioned asked solid in that said. the

there sure the that don't versus want just resource-wise, things or team-wise, was shift what I in discussed that make in know last to Just the months to announced a resulted for April highlighted few - other close ago? nothing else, is soft

Eric Colson

regards the team's is ready we is to nothing on mindful but the to flows, announce, think array that we're eye keep mix, mix. a of the within Yeah, I velocity opportunity each with strategies performance, an there do the Dan. There set product of

So are number year is that looking we are at. there last good stellar came out a strategies results of there and that some of

have So the capacity and how discuss about active the it's through, discuss performance teams dynamic discussion. investment we outlook as and we a and we dialog -- various opportunities investment play discuss with

we understand at And into the where are is mindful for the need a capacity, also fully so we lot equation. that but there we're on

So yeah, of two - a up fund that a or dialog with will firm. how to should of manage could certainly that's history some but and be soft close strategy separate either there regards the come we active an managing accounts, through the or the

So I that deliver would to expect alpha. ability towards expect and continue the leans protecting to capacity management

Dan Fannon

Understood. Thank you.

Operator

conference the you concludes question-and-answer There the are concluded. the now queue. no today's and more questions in session, has This Thank for attending presentation.

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Artisan Partners Asset Management (APAM) 28 Apr 212021 Q1 Earnings call transcript