Artisan Partners(US:APAM)2022-08-03 19:58Financial Data and Key Metrics Changes - Assets Under Management (AUM) declined 26% from $175 billion to $131 billion, with a year-over-year revenue decline of 11% and adjusted operating margin decreasing by 750 basis points from 43.6% to 36.1% [4][14] - Quarterly revenues decreased by 11% sequentially and 18% compared to the second quarter of 2021, with performance fee revenues being negligible in 2022 compared to $4.1 million in Q2 2021 [15][16] - Adjusted operating income declined 18% sequentially and 26% year-to-date compared to 2021, with adjusted net income per share down 19% from the previous quarter and 27% year-to-date [17] Business Line Data and Key Metrics Changes - Net client outflows were $4.2 billion in the quarter, primarily from growth strategies, particularly within global equity and growth teams [14] - Average AUM for the quarter was $143.9 billion, down 11% sequentially and 16% year-over-year [15] Market Data and Key Metrics Changes - Global equity market indices declined approximately 15% for the quarter and about 20% for the year, contributing to the decline in AUM [14] - Emerging markets debt saw $50 billion in redemptions, the worst outflows in over a decade, with the dollar-denominated EM debt index declining nearly 20% [9] Company Strategy and Development Direction - The company aims to leverage market disruptions to capture long-term growth opportunities, focusing on disciplined investment and maintaining a flexible financial model [5][8] - Investments in new teams and strategies, such as the EMsights Capital Group, are seen as critical for future growth, with a commitment to long-term performance rather than short-term outcomes [9][10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging environment due to inflation, geopolitical tensions, and market volatility, emphasizing the importance of a long-term perspective [4][5] - The company remains confident in its ability to navigate through market shocks and believes that investments made during these periods will yield long-term benefits [17][18] Other Important Information - The company declared a quarterly dividend of $0.60 per share, representing approximately 80% of cash generated, while planning to retain some cash for future seed investments [18] - The firm has invested approximately $60 million in seed investments for new products over the past year [18] Q&A Session Summary Question: Investment capacity in the current market volatility - Management indicated that they have increased capacity in some strategies due to market drawdowns and will manage flows carefully to maintain strategy integrity [20] Question: Details on retention of special dividends for seed investments - The amount retained for seed investments is expected to be in the range of $10 million to $15 million, with a commitment to maintain an 80% cash generation payout policy [22] Question: Conversations with asset allocators regarding performance - Management noted that asset allocators are increasingly moving towards tactical asset allocation, influenced by market conditions, while the firm focuses on long-term strategies [24][26] Question: Non-compensation expenses for the second half of the year - Management confirmed that they are on track with guidance for compensation and operational expenses, with a notable increase in travel expenses returning to pre-COVID levels [27][28] Question: Opportunities for new teams and talent in a volatile environment - The firm is actively engaging in discussions with potential new teams, maintaining a high bar for selection due to existing capacity and strategy alignment [30][31] Question: Demand dynamics on fund and separate account sides - Management explained that outflows were primarily due to clients reassessing their risk exposure, with significant reallocations from a couple of clients [35][38] Question: Future strategy launches for EMsights - Management indicated that the current three strategies launched by EMsights are sufficient for now, with a focus on building scale before considering additional launches [40]