APAM - Earnings call transcript Q2 2024 | Artisan Partners Asset Management Inc.

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Operator

Good afternoon, and welcome to the Artisan Partners Second Quarter 2024 Earnings Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Artisan Partners Asset Management. Please go ahead.

Unknown Executive

Welcome to the Artisan Partners Asset Management Business Update and Second Quarter 2024 Earnings Call.

remarks Colson, include President; Jason will C.J. and call from CEO; Eric Gottlieb, Today's CFO. Daley,

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

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

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

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

a our measures materials, the Relations and most You to earnings in on of supplemental measures can those found the Investor the be find GAAP comparable release website. which can reconciliation

solicitation an that note products nothing please or investment Artisan recommendation any interest or Also, or service. call a investment for on constitutes sell in any an offer to this purchase

I will over now Eric turn Colson. it to

Eric Colson

a style, inefficiencies that time. investors geography, investment high cycle. attractive investment of is talent, you, designed high Since Thank any investing of single thank for talented Partners everyone, the value-added absolute or in returns, XXXX, thoughtful founding and long-term allow and market our on reading thrive of Artisan or with transcript. investment focused value-added you, asset market call firm, in to areas for sophisticated generate combination the extended kind environment. from alpha talent joining a Eileen, a growth demand have to we sector This periods over class, transcends clients

allocators. them, high A long-term demand returns is talented and a value-added will for premium are rare, business investors excess Artisan with endure. allocators aligned will pay Partners built durable, on investing

existing committed demand. have our We shop. product history, to talent are short-term engineer remained exceptional We capabilities to onboarding investing by areas. expanding franchises while new distribution not methodically high breadth meet and Over our not investment to a in value-added we do adding

approach We seek Our of guided exceptional set investment always. core a is talent characteristics. by

not will capital absolute and return rates of inefficiencies differentiation talent and attractive classes talent. where and compromise We We on freedom compound allow focus at where asset benchmarks. of can alpha on market investment degrees over for

fee from invest institutional fragmented allocators. prefer net where behind distribution scale. on markets based demand not long-term competition rates We We of fee is or returns,

long-term operate are new arbitrate specialty areas characteristics, approach we we where these we patients in have Applying time. competitive historically advantage. and strategies. Lastly, We believe entered our our with areas

years In strategies. We into in and high-yield small, international started XXXX, larger grew less nearly then constrained, launched recently, more emerging market And market. equities. we fixed cap XX debt. capacity the we We mid-cap and entered ago in income global

As matters, talent we spaces. robust premium where are to high a strategies and in liquid and willing have of has and degrees premium pay towards freedom smaller and new to existing established talent investing of strategies a we alternatives in specialist is added existing less differentiation an value-added array alternative evolved have new but Throughout, ourselves launched private markets outcome. our and possible, more investors with assets, for

AUM. the larger manage into X now we these businesses. establishing As X, on provided billion larger and in From ourselves evolving foundation we the diversified successfully strategies foundation and Slide for sets show over more by opportunity created specialty has a in growing $XXX areas XX and strategies,

and issuers of fertile has at indices, the investment quality multitude O'Brien. Sarah has currencies, example. our and talent, poor most for returns, Orvin The EMsights recruited market a exceptional given onboarded Capital identified, is ways recent and debt to absolute number generated Mike honey investment Group. ground and Emerging Michael it been attractive the in and talent risk. We manage take X exceptional of historically proven Cirami, and Slide and of larger

The allocators benefits potential markets both returns and uncorrelated diversification institutional seeking target have returns. and yield logical made debt, emerging a for

landscape accounting category for funds fragmented Lastly, highly XX% with of the is as XX, top competitive AUM the XX of XXXX. March just

have Over the EMsights X Group, Capital with last the years, out. these we play characteristics seen

annually. Since by debt return markets opportunity its local feeds The has an index after strategy has an inception basis its average in generated beating market average fees beating in average after and strategy an annual annual August XXX XXXX, by May of emerging index inception since of XX.XX%, XXXX the and of opportunity XXX generated points points. return X.XX% emerging basis

EMsights the or a trying Group, in were satisfy hot near-term established time we we market demand product. dot to not When Capital the

launched fact, executing we outflows area for investment exists were unprecedented and in asset the class. and into getting playbook, talent differentiate. performance In where can demand exceptional our We the long-term talent right

a Notwithstanding July across X X includes Capital strategies. Group's institutional cumulative difficult $X.X environment, of the each billion high-quality anchors raised in the business EMsights we have This strategy. as

this are now in turn will process how to Jason to I alternatives. it approach executing and discuss over we

Jason Gottlieb

Thank you, Eric.

many lion's on allocated the active on in the being alternative revenue fee barbell, is the have is growth share offsetting traditional outflows And end are AUM We shown management of asset and spent strategies returns. data on either new strategies. times. Slide the plateauing passive budgets occurring alternatives. with Net investment X and net of

Traditional large opportunity. and long-term active with constantly management motion tremendous market very remains a in money

for to operate are But absolute many returns to in are alternative future. on where us. talented a investments consistent and in strategies market We are meaningful that will and the generate and they success compete investors can into alternative They attractive natural investments. talent-driven, generated Alternatives areas highly inefficient returns. continue excess long focused our have incremental have very fit

wealth is centering sophisticated we demand business natural reminiscent a quality, is landscape competition channel. allocators, This fees. institutions expanded There the have of evolution the highly and fee and And investment for how both for our past. the area of not with in returns, and very us, scale or is net alternatives within around fragmented, differentiation from growth

and Peak classify Credit Opportunities, of Hedge, our alternatives China X or Peak, we Antero liquid strategies Global Post-Venture Antero Today, Unconstrained. as investment alternatives.

strategies, addition these million In commitments. fund, we has which $XXX Dislocation successfully have of the to Credit closed closed-end on open-ended

methodically other led implement proven developed over exceptional generating instruments, last and strategies remained have asset we are leaders returns are philosophies clients. these these more takes we operational They by patient processes and about data our have platform passionate knowing resources support their who that their and To relative counterparties, We for have expanded years. the strategies, markets, and X their and classes, vehicles, it outperformance to necessary All strategies have records sought fees generated since generated of annual Global X Opportunities the correlation performed by net success. returns. open-ended Unconstrained more than X basis X XXX time X low and inception. strategies have to provided the clients. Credit and of develop business long-term the points alternative benefits well. track of the have And have the of absolute for diversification X compelling absolute

our established we alternatives begun alternative lineup have in and As we track to improving growing dedicated more out records, have our distribution, invest investment marketing expertise, network. broadened and increasing

existing opportunities created outcomes alternative addition, to with capabilities In additional early external and add more talent. have these

ability our execute We in to have successfully spaces. alternative demonstrated

entire team. and capabilities our sharpen expand our for to high alternatives our distribution management Continuing priorities remains alternatives

confident and our for business highly We are strategies. model ideal alternatives, philosophy and are that talent

we do more. thinking, confirms our expect success early to fully and Our

Eric Colson

Thank you, Jason.

markets. the included want to quarter year, last data I C.J., provide the In an to on X. over update it third turning on update Before Slide emerging we

markets rethinking of As target emerging then, allocations markets period to and resulted allocators under we markets said has extended developed an allocation being underperformance relative emerging in altogether.

meaningful We continue for sophisticated that markets allocations. will to remain emerging allocators, and believe long-term debt many equity

We discussing. have and diverse lineup on we an focused income and and over been of emerging fixed built markets time characteristics have strategies same the impressive equity

pipeline $XXX Maria we a sustainable Negrete-Gruson and shy approach. billion and in long-term mandate emerging is her with institutional $X a million to recent onboarded and are win strategy. an now of institutional our of The managing testament her June, interest. team's Maria Artisan's dedication In team healthy just market

that half million Group to the And emerging and believe $XXX debt our EMsights onboarded significant account opportunity markets July, emerging the opportunity there the Capital recognition markets potential sustainable to of the emerging is institutional markets the another of continue first an of strategy, for lineup. team in grow. in quality We

page, the $X we manage on this approximately billion strategies in AUM. highlighted Across

allocators can add who considerable are lackluster and to have capacity emerging managers poised been over index have additional to back markets market as but come benefit We value to emerging reallocate returns. or

As allocations are returns, with characteristics consistent, and all our time. the talent, of relative strategies, fragmented and absolute markets long-term

with Over patient. for we to time, consistent added outcomes historically value expect and continue generated for execute we the clients shareholders. have and will We remain

I outcomes. will it discuss financial over to our now C.J. to turn recent

Charles Daley

Eric. An X. overview financial Slide you, on results Thank begins of

the from strategies outflows partially by quarter slightly quarter in in billion. sustainable at June client Assets Net and emerging last under up Net management growth $XXX $X.X were XXXX income ended quarter during inflows from and XX% value down our net and billion, strategies. markets our cash quarter. fixed the were outflows offset the June

outflows quarter billion. and redemptions from were totaling Second $X.X included non-U.S. clients lumpy X

million quarter the onboarded market emerging assets debt nearly million included our $XXX strategy. our roughly doubling that a $XXX opportunity second strategy, early As in we Eric in into strategy. markets July, emerging in mentioned, inflow the sustainable And

Average up and compared the AUM XX% for XXXX June sequentially quarter. X% up the quarter was to

Compared when AUM. line and in compared release. increased up the average higher Revenues AUM, for complete XXXX our with XXXX on quarter. the presented earnings were revenues to the adjusted quarter, up June in Our results are X% quarter March to GAAP average XX%

up point the of the basis investment strategy of points Adjusted income the our fee rate travel mix basis addition quarter second quarter. X over last fee XXXX held due with first the quarter. average from inflows. in is largely was to the annual associated quarter for expenses from rate quarter, down were the primarily lower June Our XXXX, quarter The fixed forum for operating fee XX slightly with recurring consistent with

were second compensation income quarter. revenue compensation-related year, that compensation. seasonal The increase compared primarily see typically quarter decline to in comparison higher last to revenue-based by XX% from incentive same from incentive short-term increased In sequentially expenses X% the operating quarter expenses was year's each certain in the we in million year. offset up or and of $XX XX% June operating last adjusted Adjusted higher

Adjusted higher net and revenues. compensation in the the share period, incentive XXXX XXXX June compared to to elevated the average primarily operating XXXX AUM. up to revenues from compared expenses on income were period quarter X% increased Year-to-date year-to-date same on from adjusted XX% X-month Adjusted per XX% XX% compared last higher quarter. improved

associates $X and clause from million included from Also compensation annual impact benefits in primarily compensation increased full-time the of fixed in contributing expenses comp to quarter. increase of last in incentive and the merit are acceleration grant discussed the XXXX long-term the X% increase number the higher Amortization of increases. a annual

of each third fourth quarter the in expect the impact. mark-to-market quarter million the long-term to We year, amortization excluding be $XX of this and

revenues XX% year-to-date in to income. prior a comparable measures, the per income and adjusted calculating a income income nonoperating and expense non-GAAP In improvement interest Higher in over year includes led our period. net improvement XX% adjusted only operating interest share adjusted

on the fully we seed economics, our shareholder transparency from our to operations. investment these business Although adjusted investments income adds provide results to generated into gains our core exclude

our currently Our strong. significant We $XXX of in realizable with investment products of balance amounts remains million have sheet seed capacity. capital

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

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

dividend. We through quarterly shareholders payments dividend on a consistent and predictable capital special a basis continue and cash return to year-end to

declared dividend approximately a quarter $X.XX June our Directors cash dividend policy, XXXX XX% of generated represents share with the per which to in of quarter. our the Consistent the quarterly respect Board with of

turn prepared now will concludes I call remarks, That the to my operator. back the and

Operator

Goldman from with first Blostein The comes question [Operator Sachs. Instructions] Alex

Alexander Blostein

strategies I the minutes footprint was the started walking the you discussion beginning to start to in in hoping just presentation. we next that distribution fundraising XX their Maybe expect there. a could kind of goals most the on couple active of be the over the alts through that you of kind established within you spend XX that alts with at of months

you about and can how a the to out alts where as bucket expect part evolve business, that's to growth fee talk build rate the you the you little of likely And from? within based on come this bit the

Jason Gottlieb

Jason. It's Sure.

expectations not few. to a months, next high the pretty got highlight the in I'd bucket if the months. we've think will be over of strategies all alts active XX several that XX I

low is of correlation, a absolute If you well low rate a X-year of for from benefits, milestone, diversification look and or Unconstrained, continued X nice strategy as you wealth know, the alpha milestone that. months really return, provided record meaningful the away That about meaningful X to Global track volatility, clients. at compound pretty has at we're produced

to the joining light it been has out strong that in that the past of back managing the EMsights a going get team Artisan. well fact strategy the decade to put We've around prior campaign

like really good And comes, the when momentum feel strategy when X-year so think we'll time for we we good in a hits we've record really that spot. got be and

much When we've of every alts of pick and seeing can for up. mid-teens pipeline think that that And you up picking the performance. into and generating is feels it's looking The well. We're pretty now are clients, been really we're something to number think for about talking The credit a expectation that within fixed are we income that clients there. a opportunities, net activity allocations strong volume about while. our seventh year well delivering on return X-year

little the overhang the more a of macro a challenge. isn't surprise just it you, from This to makes and Post-Venture bit China going

top we while But engaging. of does excess but the alone, still to and alpha exactly on I'm this team don't if they're close here. year-to-date, miss re-rate. and actually They macro clients X,XXX year long-term And points to Tiffany still precisely get they've able having So might producing we're that want there been the that return the produce. just over that deliver when I that basis -- continued overhang, number and to are her have already wrong, bump compounds fact is China of

of that issue. more to timing is so And us a

a ship might a have about a performance in light And been little they good then some of the more difficult years, put has Antero, X when take uptick alpha the their and bit X that seen nice really history recently in think more to did over that fact the time you've up that numbers. thrilled to we're you last Chris but really ride able

management rates we with and the looking that of rates XXX at of Unconstrained, expense we that alpha the somewhere fee the When the them our some commensurate range. that of in basis category you about the XXX think all basis points, horizon that would deliver ratio fee expect Global point maintained are to around basis point XXX on. we're that strategies expect have deliver to be to things new would continue sort in on fees

we So to any that, trend believe see that don't reason won't continue.

Alexander Blostein

come kind little the meaningfully fee I might in rate start of of a wins that creep right, some online. was No, up that actually more to if Yes. thinking bit, bucket these

Jason Gottlieb

You're right.

Alexander Blostein

debt. million Cool. it color bit fixed to of fee going impact for have we rates, not and Well, you a can speaking or highlighted that's forward. you give July maybe emerging funded fee look rate a little of sounds like on on market win any as the in the in income It whether $XXX

Eric Colson

competitive Alex, for fee Yes, was The it's highly mandate. Eric. large a rate

hesitant were fee were trend bid and to we're scale which positive the rate completely towards the we years in that mandates as restructure people to just think just last always few bid, large at more the and I when competition. we recent see fee don't and game the lowest starting see rebalance marketplace taking is over

larger of case, our the a a high-quality out of we look look focused a as fee board the and allocations, the see to is at franchises trend think our across across but lot I many mandates positive rate managers that and takeaway towards quarters. the We're of we're seeing us for compete We for is firm. there it's and starting competitive and next the that's shift we active at finding pipeline couple competing that across really where large investment

Operator

Cowen. comes question Katz with Bill The TD next from

William Katz

with There's bigger Could in little to community of taking terms set alternative opportunity question, and about manufacturing a novo how phasing you sales import adviser de and the built to the the on a sort sizable on sort allocations. the you're So through the off trying a forces that of those of teams the played distribution alternatives, both traditional the about managers an to distribution. pretty gain talk who get of just speak the that of you're increase thinking incremental mentioned then how and you inorganic to just financial sort and side. in opportunity? versus in traction -- now maybe have lot how bit of And

else get to to look investment a team to just notion become the by distribution-led channel, to So platform. where want grow on distribution trying a the and sense don't incremental to that how then through that you like your for alts leverage retail notwithstanding

Jason Gottlieb

take existing I'll we of move board into alternatives. part to think incrementally first degrees broad opportunities the freedom your of spending our that incremental both Jason. question. it's where expand across with Bill, there's time We're franchises the and some certainly

that's up So use existing that's our to and fair the and be our our of time. taking partner best of time, bit with highest to excited a going we're teams,

something talked is and strategy highlight experienced But we well. evaluating private I new investment quarter look that out as to the -- of and stakes, the it. And busy private landscape, name certainly existing real would team can well very volume. franchises credit, is just it everything the or We're opportunities from GP our different you ranges external the when is talking equity, number with before, think investment quarter that seeing imagine, which asset we we but the you equipped a across classes. deep our across I And group, there private are with partners in extremely opportunities opportunities estate, as handle the a about last market,

we've which to But volume coming many we our in lift-out clearly opportunities forms. meaningful approach, XX each evaluate X And in we're coming saying have not and across of desk. are on opportunities and incorporated they be different all that's those into to objective want classes. merits. And our last across uptick And for acquisition seen certainly, the a the anything. no the pretty We There's asset look business the years.

heard it's to asset then us. going always the platform, make diversifies that numerous And as us the come we it's right class and excites talent will work, down do times, But we what we find it. to right you've say certainly the that's -- talent. If can it the if

Eric Colson

on to Bill, shops seen added the on few is we distribution quite we're We've out to received hearing, And couple alternative to capture mainly have we filled the question because wealth sales. our channel is an we to and of distribution. focus the a individuals regards as what With joined a alternative hiring attractive of them, that Eric. are were those the intermediary feedback individuals The and from we in strategy current extremely it's channel. seeing footprint certainly organization

We space. across XX-plus the have broker-dealer ratings

We large gives is have in to have connecting X. the leg trust an enormous the RIA the we alternative house, from just of starting versus and or It us world. side breadth network adviser bank established which up market, really the a in financial the an relationship

William Katz

opportunity that. big other up, parter, I sort and of if of seeing in the allocations. parts are of the implications mentioned And as a then give helpful. side in emerging up commentary seizing of the where just terms the what back you're against from? the well both coming your wonder then the your your potential July, markets of some the of rest for coming us to for business the Maybe to broader That's to might business, as equation. X net can growth platform value you allocations And win on update in you around pick of what here the be the And those

Eric Colson

of discussion see Primarily in a around lot markets, the we channel. institutional the emerging

go array the an on discussions year. over of seen last You've

Some people altogether. have excluded emerging markets

up their about out are they address managers and should and to be at with restructuring returns. talking are people rebalancing or many China, wondering lower targets the Some separating looking

at on we any and benefits discussion the restructuring debt around especially equities emerging to we mix seasons required. given market an institutional the And be market Net-net, to emerging level as typically us market AUM market any have going enormously, asset minimum compete rebalancing debt X-year the increase and the emerging that our able we're the emerging strategies strategies, allocations more those is back gets X-year we think as where and a to or target recently in record. of on to

a set would it debt slight institutional, emerging a have outlook U.S., on primarily equities but little difference. U.S., our emerging the we see market and So in outside a opportunity occurring both maybe non-U.S. markets that and in bit the be the positive more U.S.

have as passive. us other lowest And away versus benefited with fee and active tilt after to platform across also brought they'd managers, see from they've quality may possible we that mandates, rebalanced back the large their regards it's rebalanced the that and active stepped managers. this the higher as has towards structured the They've going down people just waiting

a we've So go-forward X mandates compete seen on basis. least at multiple -- franchises plus large on

Operator

Asset This concludes XXXX and and Thank you. Artisan session our question-and-answer Earnings Business Call. the Management Update Partners

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Artisan Partners Asset Management (APAM) 24 Jul 242024 Q2 Earnings call transcript