Artisan Partners(US:APAM)2023-02-01 21:58Financial Data and Key Metrics Changes - Assets under management (AUM) decreased from $175 billion to $128 billion, a 27% decline [4][17] - Net outflows totaled $9.8 billion for the year, with over $5 billion occurring in the fourth quarter [4][17] - Revenues declined by 19% year-over-year, reflecting the decrease in average AUM [17][19] - Adjusted operating income fell by 37% for the year compared to 2021 [21] - Average AUM for 2022 was down 18% year-over-year [19] Business Line Data and Key Metrics Changes - The Artisan High Income strategy generated average annual returns of 5.1% after fees, outperforming its benchmark by 178 basis points [9] - The Credit team has generated cumulative net flows of $7 billion since inception, averaging approximately $750 million per year [10] - The firm diversified from five long-only equity investment teams managing 12 strategies to 10 investment teams managing 25 strategies [17] Market Data and Key Metrics Changes - Non-U.S. equity strategies outperformed in the fourth quarter, contributing to over $12 billion in investment returns [15] - Approximately 55% of equity AUM is invested in companies domiciled outside the U.S. [14] - The index yield to worst for high-yield credit is currently about 8%, significantly higher than the 4% to 6% range of the past decade [12] Company Strategy and Development Direction - The company is focusing on fixed income and global equities, anticipating increased demand due to rising rates and spreads [6][8] - The firm aims to leverage its investment capabilities to capture growth opportunities in fixed income and credit-oriented strategies [8][12] - The company is optimistic about the current level of market volatility, which may benefit active management strategies [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for growth in fixed income and non-U.S. equities despite a challenging 2022 [6][16] - The firm is focused on executing growth opportunities and filling capacity in 2023 [32] - Management acknowledged the uncertainty in the market but highlighted the importance of client research and due diligence in driving future asset flows [28][30] Other Important Information - The company declared a quarterly dividend of $0.55 per share and a special annual dividend of $0.35 per share [22] - Seed capital investments increased to $125 million, up from $72 million a year ago, indicating a focus on future growth [22] - The firm plans to maintain a flat year-over-year expense structure while managing variable costs based on revenue levels [47] Q&A Session Summary Question: Opportunities in non-U.S. equities and emerging markets - Management noted an increase in due diligence activity and a strong list of meetings for non-U.S. strategies, but emphasized the mixed asset flow trends [27][28] Question: Expense margins and operating leverage - Management highlighted the strength of their model in managing expenses during revenue declines and discussed the focus on growth opportunities in 2023 [31][32] Question: Institutional vs. retail growth opportunities - Management indicated a focus on institutional markets for growth, while also recognizing the potential in retail democratization through partnerships [39][41] Question: EMsights opportunity and asset ramp-up - Management acknowledged the longer sales cycle for institutional assets but expressed confidence in the strong position of the EMsights team [43][45] Question: Future seed capital investments - Management stated that there are no major seed capital requirements planned for 2023, focusing instead on filling existing capacity [50][51]