Artisan Partners(US:APAM)2023-11-01 20:00Financial Data and Key Metrics Changes - As of September 30, 2023, assets under management (AUM) decreased to $136.5 billion, a 5% decline from June 30, but a 7% increase from the start of 2023 [22] - Average AUM for the quarter was $142.2 billion, up 2% sequentially and up 7% year-over-year [22] - Revenues increased by 2% compared to the previous quarter and by 6% year-over-year, driven by higher average AUM [23] - Adjusted operating income increased by 4% sequentially and by 5% year-over-year [23] - Year-to-date adjusted operating income and adjusted net income per adjusted share were both down 15% compared to the previous year [25] Business Line Data and Key Metrics Changes - The high income strategy had strong inflows, bringing year-to-date net inflows to over $1 billion [11] - The credit-oriented business is expanding, with the first close of the Artisan dislocation opportunities fund completed [9] - Emerging markets investment strategies have been challenging, with significant outflows in 2022 and continued trends in 2023 [14] Market Data and Key Metrics Changes - Emerging markets account for over 40% of global GDP, presenting a large investment opportunity despite recent outflows [15] - The MSCI EM Equity Index returned 2.07% annually over the last decade, significantly lower than the ACWI Index and S&P 500 [13] Company Strategy and Development Direction - The company is focused on expanding its credit capabilities and diversifying its high-income business [12] - A hybrid distribution model is being evolved to better align resources and improve sales effectiveness [18] - The company aims to compound wealth for clients and scale newer strategies while maintaining a disciplined approach to growth [21] Management's Comments on Operating Environment and Future Outlook - Management noted muted flows in the institutional marketplace due to recent market drawdowns but anticipates a potential reallocation of funds back into emerging markets and fixed income [31] - There is a belief that emerging markets will remain an important source of return and diversification for sophisticated allocators [16] - The company is prepared to capture growth opportunities as market conditions evolve [42] Other Important Information - The company declared a quarterly dividend of $0.65 per share, representing approximately 80% of cash generated in the quarter [27] - The company expects approximately $400 million of net client cash outflows in the fourth quarter due to distributions [28] Q&A Session Summary Question: Current state of the institutional side of the business - Management noted muted flows in the institutional marketplace but highlighted a buildup of cash in money market funds, indicating potential future reallocations [30] Question: Recent new mandates and future activity - Management discussed the successful onboarding of new mandates and expressed optimism for continued activity in those areas [32] Question: Catalysts for reigniting interest in Emerging Markets - Management emphasized the inevitability of money movement in the market, which could present opportunities for the company [37] Question: Expense outlook for 2024 and margin recovery - Management indicated that while expenses are expected to rise due to inflation, they are positioned to handle larger AUM, which could improve margins over time [41][42] Question: Opportunities in private credit - Management acknowledged the growth in private credit and indicated a cautious approach to expanding capabilities in that area [45] Question: Distribution capability investments - Management highlighted a focus on aligning resources with current strategies rather than simply increasing expenses [48]