Artisan Partners(US:APAM)2024-07-24 20:14Financial Data and Key Metrics Changes - Assets under management (AUM) ended the June quarter at $159 billion, down slightly from the previous quarter but up 11% from June 2023 [20] - 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 [20] - Average AUM for the quarter was up 3% sequentially and up 14% compared to June 2023 [21] - Revenues for the quarter increased by 2% compared to the previous quarter and were up 11% year-over-year [21] - Adjusted net income per adjusted share improved by 8% compared to the previous quarter and 15% compared to June 2023 [22] Business Line Data and Key Metrics Changes - The Emerging Markets Debt Opportunities strategy generated an average annual return of 11.71%, beating its index by an average of 724 basis points annually since inception [10] - The Emerging Markets local opportunities strategy generated an average annual return of 8.01%, beating its index by 202 basis points since inception [10] - All five open-ended Alternative strategies have performed well, with four generating more than 300 basis points of annual outperformance since inception [15] Market Data and Key Metrics Changes - The competitive landscape in Emerging Markets is highly fragmented, with the top 10 funds accounting for just 25% of category AUM as of March 31, 2024 [10] - Institutional interest in Emerging Markets is expected to grow, with significant allocations anticipated as allocators reconsider their strategies [18][44] Company Strategy and Development Direction - The company focuses on high-value-added investing, expanding capabilities by adding breadth to existing investment franchises and onboarding exceptional talent in new areas [6][8] - The strategy includes a strong emphasis on Alternatives and Private Assets, with a commitment to developing new strategies in less liquid and more Alternative spaces [8][15] - The company aims to leverage its established network in the intermediary channel to enhance distribution for Alternative strategies [41] Management's Comments on Operating Environment and Future Outlook - Management believes that Emerging Markets equity and debt will remain meaningful long-term allocations for sophisticated allocators despite recent underperformance [17] - The company is optimistic about the growth potential in Emerging Markets, particularly in the institutional channel, as allocators look to rebalance their portfolios [44] - Management expressed confidence in the business model and philosophy being well-suited for Alternatives talent and strategies, expecting to see continued growth in this area [16] Other Important Information - The company declared a quarterly dividend of $0.71 per share, representing approximately 80% of the cash generated in the quarter [26] - The balance sheet remains strong, with $150 million of seed capital in investment products and a $100 million revolving credit facility that remains unused [25] Q&A Session Summary Question: Discussion on Alternative strategies and fundraising goals - Management expects all strategies in the Alternatives bucket to be active over the next 12 to 18 months, highlighting Global Unconstrained and Credit Opportunities as key areas [28][29] Question: Impact of the $800 million win in Emerging Market Debt on fee rates - The fee rate for the large mandate was competitive, indicating a shift in the marketplace towards high-quality active managers rather than just low fee rates [34] Question: Incremental investment in Alternatives and distribution strategies - The company is evaluating both internal and external opportunities for growth in Alternatives, focusing on talent and diversification [38][40]