Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Artisan Partners Asset Management Inc (APAM, Financial) reported an 11% increase in assets under management (AUM) from the June 2023 quarter, reaching $159 billion.
- The company successfully onboarded significant institutional mandates, including an $800 million inflow in their sustainable emerging market strategy and an $860 million account in the Emerging Markets Debt Opportunities strategy.
- Artisan Partners Asset Management Inc (APAM) has expanded its alternatives lineup, with five open-ended alternative strategies performing well, four of which have generated more than 300 basis points of annual outperformance net of fees since inception.
- The company has a strong balance sheet with $150 million of seed capital in investment products and an unused $100 million revolving credit facility.
- Artisan Partners Asset Management Inc (APAM) continues to return capital to shareholders through consistent quarterly cash dividend payments and a year-end special dividend, with a recent quarterly dividend of $0.71 per share.
Negative Points
- Net client cash outflows during the quarter were $1.6 billion, with net outflows in growth and value strategies partially offset by inflows in sustainable emerging markets and fixed income strategies.
- Second quarter outflows included two redemptions from non-US clients totaling $1.1 billion, indicating potential challenges in retaining international clients.
- The fee rate for the quarter was down 1 basis point from the June 2023 quarter, largely due to strategy mix with the addition of lower fee fixed income inflows.
- The company faces challenges in the China Post Venture strategy due to macroeconomic overhangs, impacting client engagement and allocations.
- Adjusted operating expenses increased by 11% compared to the same quarter last year, primarily from higher revenue-based incentive compensation and a 4% increase in the number of full-time associates.
Q & A Highlights
Q: Can you discuss the strategies expected to be most active in fundraising over the next 12 to 18 months within the alternatives distribution? Also, how will the fee rate within the alternatives bucket evolve?
A: Jason Gottlieb, President: We expect all strategies in the alternatives bucket to be active. Key strategies include Global Unconstrained, which is nearing a three-year track record, and Credit Opportunities, which has shown strong performance. Fee rates for these strategies are around 100 basis points, and we expect this trend to continue.
Q: Will the $800 million win in emerging-market debt impact the fee rate for fixed income going forward?
A: Eric Colson, CEO: The fee rate for this large mandate was competitive. We are seeing a shift towards high-quality active managers, which allows us to compete effectively across various investment franchises.
Q: How are you thinking about incremental teams in alternatives, and what is your approach to distribution in this space?
A: Jason Gottlieb, President: We are evaluating both internal and external opportunities across various asset classes, including private equity and credit. Our investment strategy group is well-equipped to handle the increased volume of opportunities.
A: Eric Colson, CEO: We have added individuals to focus on alternative strategy sales, leveraging our existing relationships in the intermediary channel to connect with the alternative side.
Q: What are the implications of potential emerging markets allocations for the rest of your business?
A: Eric Colson, CEO: We see significant opportunities in the institutional channel for emerging markets. Any rebalancing or restructuring of emerging market allocations benefits us, especially given our mix of strategies. We also see a positive outlook for large mandates across multiple franchises.
Q: Can you provide an update on the broader business performance and any notable wins?
A: Charles Daley, CFO: Assets under management ended the quarter at $159 billion, with net client cash outflows of $1.6 billion. Notable wins include an $800 million institutional mandate in our sustainable emerging market strategy and an $860 million account in the Emerging Markets Debt Opportunities strategy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
