Artisan Partners(US:APAM)2019-10-30 20:38Financial Data and Key Metrics Changes - The company ended the quarter with Assets Under Management (AUM) of $112.5 billion, down 1% from the previous quarter and down 4% year-over-year, but up 17% year-to-date [18] - Adjusted net income was $54.8 million, or $0.70 per adjusted share, which is up $0.03 compared to the previous quarter and down $0.09 compared to the same quarter last year [24] - Operating margin increased to 37.2% from 35.3% in the previous quarter, but declined from 38.5% in the same quarter last year [22][23] Business Line Data and Key Metrics Changes - The company experienced aggregate net inflows of $1.1 billion during the quarter, with 10 strategies showing growth, while earlier generation strategies faced $1.8 billion in net outflows [20] - Third-generation strategies managed over $10 billion and had strong organic growth, raising $3.3 billion in net inflows year-to-date [14] Market Data and Key Metrics Changes - The company noted a decline in AUM due to approximately $700 million in client cash outflows and market depreciation of about $600 million [18] - The average AUM for the year-to-date period was $109.4 billion, down 6% compared to the same period last year [21] Company Strategy and Development Direction - The company focuses on "thoughtful growth," emphasizing the importance of recruiting and developing exceptional talent while maintaining a disciplined approach to growth [5][6] - The firm has diversified its investment franchises from five to nine and increased strategies from 10 to 17, enhancing its sources of alpha and future growth [6][7] - The company aims to continue generating excess returns, which it believes will lead to long-term growth prospects across all three generations of strategies [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that investment performance will create sufficient flows and long-duration client relationships to generate growth outcomes [18] - The firm anticipates ongoing disruption in client preferences will create opportunities to align its investment focus with clients' long-term needs [17] Other Important Information - The company declared a variable quarterly dividend of $0.65 per share, representing approximately 80% of cash generated in the quarter [25] - The adjusted effective tax rate is expected to increase to between 24.5% to 25% in 2020 [23] Q&A Session Summary Question: What could recouple excess return and flows? - Management noted that improved performance in mature strategies, particularly in the Mid-Cap space, could mitigate outflows and stabilize flows in the first-generation group [28] Question: What investments or new opportunities are being seen in the changing retail landscape? - Management highlighted that the third-generation strategies are more skewed towards the intermediary or wealth management segment, which is experiencing disruption that could favor their performance [34] Question: What is the current status of talent acquisition? - Management indicated that it is a favorable time for talent acquisition, with many individuals seeking opportunities outside structured environments [44] Question: What is the outlook for fee rates? - Management acknowledged a mix shift leading to lower fee rates but emphasized that they will maintain a focus on alpha delivery [55] Question: What efforts are being made to reinvest in first- and second-generation strategies? - Management confirmed ongoing efforts to bring in talent and evolve teams to enhance performance in these strategies [64]