Q4 2023 Artisan Partners Asset Management Inc Earnings Call

Unknown Executive: Good afternoon, and welcome to the Artisan Partners fourth quarter 2023 earnings conference call. All participants will be in listen only mode.

Good afternoon, and welcome to the Artisan partners fourth quarter 2023 earnings Conference call.

<unk> will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.

Unknown Executive: Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad.

After todays presentation, there will be an opportunity to ask questions to us.

Ask a question you May press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.

Unknown Executive: To withdraw your question, please press star then two. Please limit your questions to two in order to allow time for other questions. Please note this event is being recorded. I would now like to turn the conference over to Eric Colson, Chief Executive Officer. Please go ahead.

Please limit your questions to two in order to allow time for other questions. Please note. This event is being recorded I would now like to turn the conference over to Eric Colson, Chief Executive Officer. Please go ahead.

Unknown Executive: Welcome to the Artisan Partners Asset Management Business Update and Earnings Call. Today's call will include remarks from Eric Colson, CEO; Jason Gottlieb, President; and C.J. Daley, CFO. Following these remarks, we'll open the line for questions.

Welcome to the artisan partners asset management business update and earnings call. Today's call will include remarks from Eric Colson, CEO, Jason Gottlieb President and C. J Daley CFO. Following these remarks, well open the line for questions.

Unknown Executive: Our latest results and investor presentation are available in the Investor Relations section of our website. Before we begin, I would like to remind you that comments made during today's call, including responses to questions, may include forward-looking statements, and are subject to known and unknown risks and uncertainties, including but not limited to the factors set forth in our earnings release and detailed in our SEC filing. Risks and uncertainties may cause actual results to differ materially from those discussed in the statements, and we have no obligation to update or revise any of these statements following the presentation.

Speaker Change: Our latest results and Investor presentation are available on the Investor Relations section of our website.

Speaker Change: Before we begin I would like to remind you that comments made during todays call well, creating our responses to questions may include forward looking statements are.

Speaker Change: Are subject to known and unknown risks and uncertainties.

Speaker Change: In but not limited to the factors set forth in our earnings release and detailed in our SEC filings.

And uncertainties may cause actual results to differ materially from those discussed in the statements and weird or obligation to update or revise any of these statements. Following the presentation.

Eric Richard Colson: In addition, some of our remarks today will include references to non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in the earnings release and the supplemental materials, which can also be found on our Investor Relations website. Also, please note that nothing on this call constitutes an offer or solicitation to purchase or sell an interest in any artisan investment product or a recommendation for any investment service. I'll turn it over to Eric Colson. Thank you for joining the call or reading the transcript. For us, these calls are an opportunity to repeatedly communicate who we are, what we seek to accomplish, and the time horizons that matter to us. We intentionally de-emphasize quarterly and annual outcomes.

Speaker Change: In addition, some of our remarks today will include references to non-GAAP financial measures you can find reconciliations of those measures to the most comparable GAAP measures in the earnings release and supplemental materials, which can also be found on our investor Relations website.

Speaker Change: Also please note that nothing on this call constitutes an offer or solicitation to purchase or sell an interest in any artisan investment products or a recommendation for any investment service.

Speaker Change: I'll turn it over to Erik Olsson.

Erik Olsson: Thank you for joining the call or reading the transcript.

For us these calls or an opportunity to repeatedly communicate who we are what we seek to accomplish and the time horizons that matter to us.

Erik Olsson: We intentionally deemphasize quarterly and annual outcomes.

Eric Richard Colson: Instead, we focus on what we are doing to create and maintain an environment and culture that maximizes the probability of long-term performance for clients, talent, and shareholders. Artisan Partners is a high-value-added investment firm designed for talent to thrive in a thoughtful growth environment. Our purpose is to compound wealth for clients over a long period. We do this through our talent-driven business model. We attract, recruit, and partner with exceptional and differentiated investment leaders. We give them autonomy, resources, and time to generate investment returns over a long period. As Jason will discuss, we have been doing this for nearly 30 years in public equity, for a decade in fixed income, and are in the early innings of alternatives. Time is a crucial ingredient in what we do.

Erik Olsson: Instead, we focus on what we are doing to create and maintain an environment and culture that maximizes the probability of long term performance for clients talent and shareholders.

Erik Olsson: Artisan partners is a high value added investment firm designed for talent to thrive in a thoughtful growth environment.

Our purpose is to compound wealth for clients over a long time periods.

Erik Olsson: We do this through our talent driven business model, we attract recruit and partner with exceptional and differentiated investment leaders.

Erik Olsson: We give them autonomy resources and time to generate investment returns over a long time periods.

Jason Gottlieb: As Jason will discuss.

Jason Gottlieb: We have been doing this for nearly 30 years in public equities for a decade in fixed income.

Jason Gottlieb: And are in the early innings and alternatives.

Jason Gottlieb: Prime is a crucial ingredient in what we do well.

Eric Richard Colson: We protect the time of our investment teams so they can maximize time spent on research, investing, and adding value for clients. We work to earn time to extend duration. We do this by being true to who we are, by maintaining a culture focused on the long term, by avoiding the temptation to engineer short-term results, by remaining disciplined through difficult periods, by constantly communicating our time horizon to clients and shareholders, setting the right expectations, and doing business with individuals, allocators, and institutions that are aligned with our long-term approach. The chart on slide two reinforces why we focus on the long term. Short time periods are noisy; skill and luck are indistinguishable.

Jason Gottlieb: We returned at the time of our investment teams. So they can maximize time spent on research investing and adding value for clients.

Jason Gottlieb: We work to earn time to extend duration.

Jason Gottlieb: We do this by being true to who we are.

Jason Gottlieb: By maintaining a culture focused on long term.

Jason Gottlieb: By avoiding the temptation to engineer short term results.

Jason Gottlieb: By remaining disciplined through difficult periods.

Jason Gottlieb: By constantly communicating our time horizon to clients and shareholders setting.

Jason Gottlieb: Setting the right expectations and doing business with individuals' allocators and institutions that are aligned with our long term approach.

Jason Gottlieb: The chart on slide two reinforces why we focus on the long term.

Jason Gottlieb: Short time periods are noisy skill and luck are indistinguishable.

Eric Richard Colson: Over longer periods, the value of process and discipline becomes apparent. As we extend time, the value of what we do becomes evident. For example, of our five strategies with a 20-year track record, all five have added value over the period after. With enough time, Alpha can compound into meaningfully more wealth for clients and investors. A simple example of this is on the right side of the slide.

Jason Gottlieb: Over a longer period, the value of process and discipline become apparent.

Jason Gottlieb: As we extend time the value of what we do becomes evident.

Of our five strategies with 20 year track Records, all five have added value over that period after fees.

Jason Gottlieb: With enough time alpha can compound into meaningfully more wealth for clients and investors.

Jason Gottlieb: Example of which is on the right side of the slide.

Eric Richard Colson: We take a similar long-term approach to developing our business. We look for opportunities that are consistent with who we are and where we have an edge. We are methodical, we don't chase fads, and we remain focused on high-value-added investment. If we do these things with patience, we are confident that quality long-term outcomes will follow. We have asked Jason to elaborate on this approach as it applies to our investment platform. Thank you

Jason Gottlieb: We take a similar long term approach to developing our business.

Jason Gottlieb: Look for opportunities that are consistent with who we are and where we have an edge.

Jason Gottlieb: We are methodical we don't chase that we remained focused on high value added investing.

Jason Gottlieb: If we do these things with patients we are confident that quality long term outcomes will follow <unk>.

I have asked Jason to elaborate on this approach as it applies to our investment platform.

Jason Gottlieb: Thank you Eric.

Jason A. Gottlieb: As Eric mentioned, we have been building equity franchises for nearly three decades. We are a decade in with fixed income, and we are in the early innings with alternatives. I want to start with our equity business.

Jason Gottlieb: As Eric mentioned, we have been building equity franchises for nearly three decades.

Jason Gottlieb: We are a decade in with fixed income and are in the early innings with alternatives.

Jason Gottlieb: I want to start with our equity businesses.

Jason A. Gottlieb: Today we have eight equity investment teams and 16 strategies accounting for $137 billion in AUM and approximately $900 million in annual revenue. Several of our equity teams are well-established franchises with recognized leadership, depth of resources, disciplined investment processes, unique cultures, and long-term track records. These characteristics result in powerful and durable investment and business engineering.

Jason Gottlieb: Today, we have eight equity investment teams and 16 strategies accounting for 137 billion in AUM and approximately 900 million of annual revenue.

Jason Gottlieb: Several of our equity teams are well established franchises with recognized leadership depth of resources disciplined investment processes.

Jason Gottlieb: Neat cultures and long term track records.

Jason Gottlieb: These characteristics result in powerful and durable investment and business engines, but it takes time.

Jason A. Gottlieb: The path is not linear, and there are periods of decline as well as periods of growth. Slide three features our international value franchise. Lead Portfolio Manager David Samra joined Artisan 22 years ago and launched the International Value Strategy.

Jason Gottlieb: The path is not linear and there are periods of decline as well as growth.

Jason Gottlieb: Slide three features our international value franchise.

Lead portfolio manager, David Samra joined artisan 22 years ago, and launched the international value strategy.

Jason A. Gottlieb: David has a well-articulated value investing philosophy and process that the international value team has applied with discipline through market cycles. The result is outstanding investment performance over a long time period. The International Value Strategy has generated 466 basis points of average annual alpha net of fees since inception. The Artisan International Value Fund is ranked number one in its Lipper category.

Jason Gottlieb: David has a well articulated value investing philosophy and process that the international value team has applied with discipline through market cycles.

Jason Gottlieb: Result is outstanding investment performance over a long time periods.

Jason Gottlieb: The international value strategy has generated 466 basis points of average annual alpha net of fees since inception.

Jason Gottlieb: The artisan international value Fund is ranked number one in its lipper category.

Jason A. Gottlieb: You can see the business outcome on this page. The team laid the foundation in the early years, establishing themselves and their track record. They have steadily grown their business by compounding client capital and net new flows. Today, the team manages $41 billion across a diversified book of institutional and wealth-channel clients. In 2020, Benny Zhao and Anand Bhattacharyya joined the International Value Franchise and partnered with David to launch the International Explorer Strategy. The International Explorer now has a three-year record.

You can see the business outcome on the page the team laid the foundation in the early years, establishing themselves and their track record.

Jason Gottlieb: They have steadily grown their business by compounding client capital and net new flows.

Jason Gottlieb: Today, the team manages $41 billion across a diversified book of institutional and wealth channel clients.

Jason Gottlieb: From 2020 pennies out in a non for profit Gary joined the international value franchise and partnered with David to launch the International Explorer strategy.

Jason Gottlieb: International Explorer now has a three year record. It has generated 549 basis points of average annual alpha net of fees since inception is managing nearly $250 million in AUM and is poised for future growth.

Jason A. Gottlieb: It has generated 549 basis points of average annual alpha net of fees since inception, is managing nearly $250 million in AUM, and is poised for future growth. The International Value Franchise demonstrates the demand for high value-added investing in public equity, and the result is a highly valuable business asset that can compound long into the future. We have multiple examples of this throughout our equity business. Turning to slide four, we expanded into fixed income 10 years ago with the addition of Brian Krug and the credit team. The Fixed Income Opportunity Set is compelling. The asset class is large and growing. It is complex, with tremendous opportunity for skilled talent to add value for clients. And there is asset allocation demand, with aging populations creating the need for income and yield. We believed 10 years ago that the success of our talent-driven business model and long-term approach would translate to fixed income, provided we partnered with the right talent, focused on high-value-added areas, fully resourced the effort, and took the time necessary to build a solid foundation. We are beginning to see the long-term outcome.

Jason Gottlieb: The international value franchise demonstrates the demand for high value added investing in public equities.

Jason Gottlieb: Result is a highly valuable business asset that can compound long into the future.

Jason Gottlieb: We have multiple examples of this throughout our equity business.

Jason Gottlieb: Turning to slide four we expanded into fixed income 10 years ago with the addition of Brian Kruger and our credit team.

Jason Gottlieb: The fixed income opportunity set is compelling.

Jason Gottlieb: Asset classes large and growing.

Jason Gottlieb: It is complex with tremendous opportunity for skilled talent to add value for clients and there is asset allocation demand with aging populations, creating the need for income and yield.

Jason Gottlieb: We believe 10 years ago that the success of our talent driven business model and long term approach would translate to fixed income.

Jason Gottlieb: Provided we partnered with the right talent focused on high value added areas fully resource the effort and took the time necessary to build a solid foundation.

Jason Gottlieb: We are beginning to see the long term outcomes.

Jason A. Gottlieb: The Artisan High Income Strategy is nearing its 10-year mark. Since inception, it has generated an average annual return of 6.18% after fees, compared to 4.31% for the index. During that time period, the Artisan High Income Fund has been ranked number one out of 324 funds in its LIPR category.

Jason Gottlieb: And high income strategy is nearing its 10 year Mark.

Jason Gottlieb: Since inception, it has generated an average annual return of $6, one 8% after fees compared to $4 three 1% for the index over that time period. The artisan high income fund is ranked number one out of 324 funds and its lipper category.

Jason A. Gottlieb: As a result, the high income strategies generated 1.5 billion in net flows in 2023. In 2022, we launched our second ThinkSTATECOM-oriented team, the M-Sites Capital Group, which focuses on emerging markets. We are proving that our platform, philosophy, and approach can work in fixed income, as evidenced by steady growth in fixed income AUM. We believe we are establishing two world-class fixed-income franchises with significant investment capacity. It will take time, but we believe these franchises will be every bit as successful and sustainable as our equity franchises. Turning to slide 5. In the same way that we have methodically built our equity and fixed income businesses, we continue to build our alternative capability. We remain in the early innings.

Jason Gottlieb: As a result, the high income strategy has generated $1 5 billion in net flows in 2023.

Jason Gottlieb: In 2022, we launched our second fixed income oriented team the M sites capital group, which focuses on emerging markets.

Jason Gottlieb: We are proving that our platform philosophy and approach can work in fixed income evidenced by steady growth in fixed income AUM.

Jason Gottlieb: We believe we are establishing two world class fixed income franchises with significant investment capacity.

Jason Gottlieb: It will take time, but we believe these franchises will be every bit as successful and sustainable as our equity franchises.

Jason Gottlieb: Turning to slide five.

Jason Gottlieb: And the same way that we have methodically built our equity and fixed income businesses, we continue to build our alternatives capabilities.

We remain in the early innings we.

Jason A. Gottlieb: We are focused on setting the right foundation, adding Investment Degrees of Freedom, Designing, and launching strategies where we have an edge with talent and an opportunity to grow over time. We believe that fixed income provides a natural avenue to continue expanding in this direction. Our credit opportunity strategy now has a six-year track record and has generated an average annual return of 9.84% since inception, net of fees. The more recently launched Global Unconstrained Strategy has generated an average annual return of 8.92% since inception net-a-fee. And during the fourth quarter, we closed $130 million of commitments for our first closed-end fund designed to capture opportunities in dislocated credit markets. While we remain in the early innings, we are confident that our model and philosophy will work in alternatives as it has worked in equities and fixed income. Thank you, Jason.

Jason Gottlieb: We are focused on setting the right Foundation.

Jason Gottlieb: Adding investment degrees of freedom.

Jason Gottlieb: Designing and launching strategies, where we have an edge with talent and an opportunity to grow over time.

Jason Gottlieb: We believe that fixed income provides a natural avenue to continue expanding in this direction.

Jason Gottlieb: Our credit opportunity strategy now has six year track record and has generated an average annual return of 984% since inception net of fees.

The more recently launched global Unconstrained strategy has generated an average annual return of 892% since inception net of fees.

Jason Gottlieb: During the fourth quarter, we closed $130 million of commitments for our first closed end fund designed to capture opportunities in dislocated credit markets.

Jason Gottlieb: While we remain in the early innings, we are confident that our model and philosophy will work in alternatives like it has worked in equities and fixed income.

Speaker Change: Thank you Jason.

Eric Richard Colson: We remain extremely excited about the long-term investments we are making across equities, fixed income, and alternatives. Our excitement stems from a proven approach across asset classes and time periods, successful long-term outcomes for clients, shareholders, and key investment talent. And the limited supply of homes for investment talent, providing our combination of autonomy, resources, and time. We will continue to think in decades versus years or quarters. And we will continue to focus on those things that we can directly influence day in and day out in pursuit of long-term success. Thank you for your time, and I will now turn it over to CJ.

Speaker Change: We remain extremely excited about the long term investments, we are making across equities fixed income and alternatives.

Speaker Change: Our excitement stems from a proven approach across asset classes and time periods.

Successful long term outcomes for clients shareholders and key investment talent.

Speaker Change: And a limited supply of homes for investment talent, providing our combination of autonomy resources and time.

Speaker Change: We will continue to think and decades versus years or quarters, and we will continue to focus on those things that we can directly influence day in and day out in pursuit of long term success. Thank.

Speaker Change: Thank you for your time and I will now turn it over to C. J.

Charles James Daley: Thanks, Eric. Our 2023 results reflect the impact of a rising market and strong investment performance. Market volatility experienced in 2022 and 2023 highlights the importance of our financial model, which maintains a highly variable expense structure to minimize the distractions of short-term market volatility. As we've shown in the past, our financial model is able to deliver stable and predictable results through market cycles. An overview of our financial results begins on slide 8. Asset Thunder Management ended the fourth quarter at $150 billion, up 10% from the September 2023 quarter and up 17% from the prior December year-end. Investment returns contributed $14.6 billion to the increase in AUM in the quarter. Net client cash outflows during the quarter were $400 million, and there were $500 million of artisan fund distributions that were not reinvested.

C. J: Thanks, Eric or 2023 results reflect the impact of a rising market and strong investment performance.

C. J: Market volatility experienced in 2022, and 2023 highlights the importance of our financial model.

C. J: Maintain our highly variable expense structure to minimize the distractions of short term market volatility.

C. J.: As we've shown in the past our financial model is able to deliver stable and predictable results through market cycles.

C. J.: Overview of our financial results begins on slide eight.

C. J.: Assets under management ended the fourth quarter at 150 billion up 10% from the September 2023 quarter and up 17% from the prior December year end.

Investment returns contributed $14 6 billion to the increase in AUM in the quarter.

Net client cash outflows during the quarter were $400 million and there was $500 million of artisan funds distributions that were not reinvested.

Charles James Daley: Average AUM for the quarter was down 1% sequentially and up 10% compared to the December 2022 quarter. For the full year, investment returns contributed $27 billion to the increase in AUM. 3.9 billion of those returns were attributed to investment performance in excess of the benchmark return. Net client cash outflows were $4.1 billion for the year. Net outflows continue to be impacted by industry trends in favor of low-fee passive index products and, more recently, the move of funds into fixed income. Gross inflows, however, remain muted and well below our historical levels.

C. J.: Average AUM for the quarter was down 1% sequentially and up 10% compared to the December 2022 quarter.

C. J.: The full year investment returns contributed $27 billion to the increase in <unk>.

C. J.: Yeah.

C. J.: $3 9 billion of those returns were attributed to investment performance in excess of benchmark returns.

C. J.: Net client cash outflows were $4 1 billion for the year.

C. J.: Net outflows continue to be impacted by industry trends in favor of low fee passive index products and more recently the move funds into fixed income.

C. J.: Gross inflows remain muted and well below our historical levels.

Charles James Daley: Average AUM for 2023 was down 2% year over year. Our complete GAAP and adjusted results are presented in our earnings release. Revenues in the quarter increased less than 1% compared to last quarter, as performance fees more than offset the impact of lower average AUM. Total performance fees were $6.1 million in the quarter.

C. J.: Average AUM for 2023 was down 2% year over year.

C. J.: For a complete GAAP and adjusted results are presented in our earnings release.

C. J.: Revenues in the quarter increased less than 1% compared to last quarter as performance fees more than offset the impact of lower average AUM.

C. J.: Total performance fees were $6 1 million in the quarter. However, as a result of the required consolidation of our credit opportunity strategy.

Charles James Daley: However, as a result of the required consolidation of our Credit Opportunity Strategy, two million of the performances are recorded on our P&O below the operating lines as a reduction to net income attributable to consolidated investment products. Compared to the fourth quarter of 2022, revenues were up 10% on higher average AUM. Adjusted operating expenses for the quarter increased 1% sequentially and 9% compared to the same quarter last year, primarily driven by an increase in incentive compensation expense on higher revenues. However, revenues were down 2% from 2022 on lower average AUM. A recurring average fee rate remained at $0.70.

C. J.: $2 million of the performance fees are recorded on our P&L below the operating line.

C. J.: As a reduction to net income attributable to consolidated investment products.

C. J.: Third to fourth quarter of 2022 revenues were up 10% on higher average AUM.

C. J.: Adjusted operating expenses for the quarter increased 1% sequentially and 9% compared to the same quarter last year, primarily driven by an increase in incentive compensation expense on higher revenues.

C. J.: For the full year revenues were down 2% from 2022 on lower average AUM.

Our recurring average fee rate remained at 70 basis points.

Charles James Daley: Adjusted operating expenses were up 2% in 2023 compared to 22. The decrease in variable expenses due to lower revenues was more than offset by higher fixed costs, which were up $10 million in 2023, on a 4% increase in the number of full-time employees and inflationary Travel expenses were also up $3 million during the year. The higher expense was driven by increased travel by investment research and distribution professionals. However, just an operating income decreased 9% in 2023 compared to 22 and adjusted EPS was 7% lower.

Adjusted operating expenses were up 2% in 2023 compared to <unk> 22.

The decrease in variable expenses due to lower revenues was more than offset by higher fixed costs.

C. J.: Fixed compensation costs were up $10 million and 23 on a 4% increase in the number of full time employees and inflationary salary and benefit increases.

C. J.: Travel expenses were also up $3 million during the year. The higher expense was driven by an increased travel by Investor research and distribution professionals.

C. J.: Adjusted operating income decreased 9% in 2023 compared to <unk> 22, and adjusted EPS was 7% lower.

Charles James Daley: Adjusted EPS includes over $6 million of interest income earned on excess cash in 2023 compared to a negligible amount in 2022. The balance sheet remains strong. We currently have about $150 million of seed capital invested in sponsored investment products with significant amounts of realizable capacity. As those products begin to scale, we will redeem the seed capital to either deploy into new products, otherwise reinvest in the business, or return to shareholders. In addition, our $100 million revolving credit facility remains unused.

C. J.: Adjusted EPS includes over 6 million of interest income earned on excess cash in 2023 compared to the negligible amount in 2022.

C. J.: Balance sheet remains strong we currently have about $150 million of seed capital invested and sponsored investment products with significant amounts of realizable capacity.

C. J.: As those products begin to scale, we will redeem the seed capital to either deploy into new products, otherwise reinvest in the business or returned to shareholders.

C. J.: <unk> around $100 million revolving credit facility remains unused.

Charles James Daley: We continue to return capital to shareholders on a consistent and predictable basis through quarterly cash dividend payments and a year-end special dividend. In line with our dividend policy, our board of directors declared a quarterly dividend of 68 cents per share with respect to the December 2023 quarter, which represents approximately 80% of the cash generated in the quarter. Our board of directors also declared a special annual dividend of $0.34 per share.

C. J.: We continue to return capital to shareholders on a consistent and predictable basis through quarterly cash dividend payments and a year end special dividend.

C. J.: Consistent with our dividend policy, our board of directors declared a quarterly dividend of <unk> 68 per share with respect to the December 2023 quarter, which represents approximately 80% of the cash generated in the quarter.

C. J.: Our board of Directors also declared a special annual dividend of <unk> 34 per share.

Charles James Daley: Similar to prior years, we retained a portion of the cash generated in 2023 to fund future growth initiatives, primarily to make seed capital investments in new investment strategies and vehicles. A total of $2.78 per share will be paid out with respect to the 2023 cash generation. That results in an annual trailing dividend yield of almost 7% and is in line with our historical average annual yield of 8% since our IPO in 2013. Additionally, each year, our Board of Directors approves a grant of long-term incentive awards. In the first quarter of 2024, the Board approved an award of approximately $60 million, consisting of $39 million of cash-based franchise capital awards and $21,000,000 of restricted stock awards. Generally, 50% of the award vests pro-rata over five years, and the remaining 50% vests on or 18 months after the qualified retirement. Starting with this 2024 grant, the majority of our incentive awards will include a traditional retirement acceleration feature. The new provision eliminates the five-year vesting requirement when career award recipients have a qualified retirement after having met an age plus years of service threshold of 70.

C. J.: The merger prior years, we retained a portion of the cash generated in 2023 to fund future growth initiatives, primarily to make seed capital investments and new investment strategies and vehicles.

C. J.: Total of $2 78 per share will be paid out with respect to 2023 cash generation.

C. J.: That resulted in annual trailing dividend yield of almost 7% and is in line with our historical average annual yield of 8% since our IPO in 2013.

C. J.: Each year, our board of directors approves a grant of long term incentive awards in the first quarter of 2024. The board approved an award of approximately $60 million consisting of $39 million of cash based franchise capital Awards and 21 million of restricted stock Awards.

C. J.: Not really 50% of the award vest pro rata over five years and the remaining 50% vest on our 18 months after a qualified retirement.

C. J.: Starting with this 2024 grant the majority of our incentive awards will include a traditional retirement acceleration feature.

C. J.: New provision eliminates the five year vesting requirement when career award recipients have a qualified retirement after having met and age plus years of service threshold of 70.

Charles James Daley: All other vesting conditions, including notice periods and clawbacks, will remain in effect. The goal of the Traditional Retirement Acceleration feature is to maintain our best-in-class compensation structure for top talent. From a financial statement perspective, the added feature results in front-loaded expense for awards granted to employees who already meet the age plus years of service requirements. However, the overall amount of expense to be accorded will remain the same.

C. J.: All other vesting conditions, including notice periods and Clawbacks will remain in effect.

C. J.: So all of the traditional retirement acceleration feature is to maintain our best in class compensation structure for top talent.

For financial statement perspective, the added feature results and Frontloaded expense for awards granted to employees, who already meet the age plus years of service requirement.

C. J.: The overall amount of expense to be recorded will remain the same.

Charles James Daley: We're estimating $69 million of long-term incentive amortization expense for 2024, and approximately $8 to $9 million of that expense is a result of the new retirement provision. We expect to have elevated LTI expense for the next several years due to this change, and then we expect the expense will reduce and level off. Including long-term incentive compensation, fixed expenses are expected to increase mid-single digits in 2024. The majority of the increase reflects 2024 merit increases, the absorption of a full year of expense for full-time employees hired in 2023, and an expected low single-digit increase in employees in 2024. The additions will primarily be related to investment and distribution roles to capitalize on our growth strategy. Travel may also increase slightly in 2024 as we execute on our growth initiative. However, occupancy, technology, and other fixed operating expenses are expected to be relatively flat compared to 2023.

C. J.: We're estimating $69 million of long term incentive amortization expense for 2024, approximately $8 million to $9 million of that expense is a result of the new retirement provision.

We expect to have elevated LTI expense for the next several years due to this change and then expect the expense will reduce and level off.

C. J.: Excluding long term incentive compensation fixed expenses are expected to increase mid single digits in 2024.

C. J.: Majority of the increase reflects 2020 for merit increases the absorption of a full year of expense for full time employees hired in 2023, and an expected low single digit increase in employees in 2024.

C. J.: The additions will primarily be related to investment in distribution roles to capitalize on our growth strategy.

C. J.: Travel May also increase slightly in 2024, as we execute on our growth initiatives.

C. J.: Occupancy technology and other fixed operating expenses are expected to be relatively flat compared to 2023.

As a reminder, our compensation and benefits expenses are generally higher in the first quarter of each year due to seasonal expenses. We estimate these expenses will be approximately $6 million higher than the first quarter of 2024 compared to the fourth quarter of 2023.

Charles James Daley: As a reminder, our compensation and benefits expenses are generally higher in the first quarter of each year due to seasonality. We estimate these expenses will be approximately $6 million higher in the first quarter of 2024 compared to the fourth quarter of 2020. That concludes my prepared remarks. I will turn the call back to the operator. That concludes my prepared remarks. I will turn the call back to the operator. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: That concludes my prepared remarks, I will turn the call back to the operator.

Speaker Change: We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: Please limit your questions to two in order to allow time for further questions.

Speaker Change: This time, we will pause momentarily to assemble our roster.

Yes.

Speaker Change: The first question comes from Alex Blaustein with Goldman Sachs. Please go ahead.

Alexander Blostein: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Please limit your questions to two in order to allow time for further questions. At this time, we will pause momentarily to assemble our roster. The first question comes from Alex Blostein with Goldman Sachs. Please go ahead.

Alex Blostein: Hey, everybody. Good afternoon, thanks for taking the question.

Eric I was hoping maybe you could start with the prospects you guys have for the fixed income business nice traction over the last couple of quarters and years.

Alex Blostein: Clearly there is a pretty high sort of expectation that market demand for fixed income will continue to improve so how are your products positioned to perhaps participate in that.

Unknown Executive: Hey, everybody. Good afternoon. Thanks for taking the question. Eric, I was hoping that we could start with the prospects you guys have for the fixed income business. Nice traction over the last couple of quarters and years.

Alex Blostein: What are your expectations for kind of growth in this in these strategies for 'twenty four.

Eric Richard Colson: Hi, Alex.

Alex: Yes, we have been emphasizing that.

Alex: The credit franchise with Brian crude as well as the M sites franchise with Mike Cirami.

Eric Richard Colson: Clearly, there's a pretty high sort of expectation that market demand for fixed income will continue to improve. So how are your products positioned to perhaps participate in that? What are your expectations for the kind of growth in these strategies for 24?

Speaker Change: I'll start with the M sites franchise.

Speaker Change: Yes.

Speaker Change:

Speaker Change: So quite a bit of outflow in emerging market debt in 'twenty.

Speaker Change: Two I think it was the largest emerging market debt outflow in the history of that category and then 23 last year, we saw it probably close to a 10% outflow in the category.

Eric Richard Colson: We have been emphasizing the Credit franchise with Brian Krug as well as the M-Sites franchise with Mike Cerami. I'll start with the M-Sites franchise, which saw quite a bit of an outflow in emerging market debt in 2020. I think it was the largest emerging market debt outflow in the history of that category. And then 23 last year, we saw probably close to a 10% outflow in the category.

Speaker Change: No.

Speaker Change: We look at our M sites team in the same way, we looked at our global strategies global value global opportunities the bulk of the allocations come from the institutional channel.

Speaker Change: A high percentage if not majority comes from outside the United States.

Eric Richard Colson: We look at our M-SITES team in the same way we look at our global strategies, global value, or global opportunities. The bulk of the allocations come from the institutional channel. A high percentage, if not the majority, comes from outside the United States.

Speaker Change: There is a competitive landscape, but I think we stack up very well performance wise and we expect.

Speaker Change: As we.

Speaker Change: Witnessed with global opportunities and global value the requirement for a three year track record and then starting to see that that steep slope and buildup of assets. Once you get that three year track record.

Eric Richard Colson: There is a competitive landscape, but I think we stack up very well performance-wise, you know, witnessing with global opportunities and global value, the requirement for a three-year track record and then starting to see that steep slope and buildup of assets once you get that three-year track record. Between now and when we get that three-year track record, we're getting quite a lot of inquiries. We're building the asset base close to about a billion, and we expect to continue building the asset base over the next year, but really expect meaningful growth after the three-year mark, given the traits and characteristics around that client base. Similar to the credit, we also... have an alternative strategy with global unconstrained that we highlighted in the deck. The returns, the risk, and the correlation are all very favorable to participate in the movement toward a higher allocation to alternatives, So we're quite pleased with where we are with them sites and the progress they're making to get to that three-year mark.

Speaker Change: Between now and the three year track record, we were getting quite a bit of inquiries we're building.

Speaker Change: Building the asset base close to about $1 billion and we expect to continue.

Speaker Change: Building the asset base over the next year, but really expect meaningful growth after the three year Mark given.

Speaker Change: The traits and characteristics around that client base.

Speaker Change: Similar to the credit we also.

Speaker Change: Have a alternative strategy with global unconstrained that we highlighted in the deck the returns the risk the correlation or all very favorable to participate in the movement and a higher allocation to alternatives specifically liquid alts.

Speaker Change: So we're quite pleased with where we're at with them sites and.

Speaker Change: The progress theyre, making to get to that three year Mark.

Speaker Change: With credit with credit franchise with Brian crude we've established a very strong base.

Eric Richard Colson: With Credit Franchise, with Brian Krug, we've established a very strong base that has built in the same way that we saw our early stage franchises build. We're about $10 billion in the franchise, and we're saving quite a bit of capacity to go into degrees of freedom and create alternative strategies. And with Credit Opportunities, which was highlighted, the Drawdown Fund that Jason mentioned, and the Floating Rate Fund, we just see a strong runway for building out that franchise and really seeing that take its second phase and build up, as we've seen with our other more mature franchises. So, again, it's patiently waiting for the right clients, the right terms, and building those over time. Great. Thanks for that.

Speaker Change: That has built in the same way that we saw our early stage franchises built.

Speaker Change: We're about 10 billion in the franchise and we're saving quite a bit of capacity go into degrees of freedom and create alternative strategies and with credit opportunities, which was highlighted the drawdowns on that Jason mentioned and the floating rate fund.

Speaker Change: We just.

A strong runway for building out that franchise and really seeing that take its second phase and buildup as we've seen with our.

Speaker Change: Or are there more mature franchises.

Speaker Change: So again, it's patiently waiting for the right clients rate terms and building those over time.

Speaker Change: Great. Thanks for that thanks for that overview C. J one for you just on the change in long term incentive awards that you highlighted earlier.

Charles James Daley: Thanks for that overview. CJ, one for you, just on the change in long-term incentive awards that you highlighted earlier. I guess, can you talk a little bit about what prompted you guys to go down this path and what sort of caused this change? And as you look out beyond 2024, it sounds like an elevated retirement acceleration clause will sort of weigh on incentive comp for a couple of years. So, should we think about that incremental $9 to $10 million as sort of the new incremental expense beyond 2024 as well? Yeah, so thanks for the question, Alex.

C. J: Can you talk a little bit about what prompted you guys to.

C. J: Go down this path and what sort of caused the change and as you look out beyond 2024.

C. J: It sounds like an elevated retirement acceleration clausell sort of weigh on incentive comp for a couple of years. So should we think about that incremental $9 million to $10 million is sort of the new incremental expense beyond 2024 as well.

Speaker Change: Yes. So thanks for the question, Alex we've always aligned our business with the long term value creation sustainable growth in.

Charles James Daley: You know, we've always aligned our business with long-term value creation and sustainable growth. And, you know, we've designed it for investment talent to thrive, to extend their careers and provide a path for them to spend their careers here. We've evolved and have been thoughtful over, you know, the 10 years we've been public, as well as, you know, as a partnership before that. You know, in 2014, we introduced these career shares, which are comprised of both time vested as well as qualified retirement provisions. And we've introduced, you know, this retirement clause as sort of in the next phase of, you know, extending duration and providing a path for investment talent to spread to spend their careers here.

Speaker Change: So we've designed it for investment talent to thrive to extend their duration and provide a path for them to spend their careers here.

We have evolved and have been thoughtful over that.

Speaker Change: 10 years, we've been public as well as book.

Speaker Change: As a partnership before that.

Speaker Change: In 2014, we introduce these career shares.

Speaker Change: Which are comprised of both tie invested as well as.

Speaker Change: Qualified retirement provisions.

Speaker Change: And we've introduced this retirement clause is sort of in the next phase of.

Speaker Change: Extending duration and providing a path for investment talent to spread to spend their career here. So they don't have to worry about.

Charles James Daley: So they don't have to worry about, you know, whether they're going to wind up forfeiting anything; they do the right thing, they have qualified retirement; it'll further align their interests, our shareholders' interests, our clients' interests with, you know, proper retirement and, you know, succession planning. With respect to the expense, I would expect it to be elevated in the $8-ish million for the next three years, and then it will step down pretty meaningfully, and then, you know, over a five-year period, it will level off. And, you know, just to be clear, the provision only applies to grants that start in 2024 and forward. And so, you know, we think that benefit will be a long-term benefit for everyone. I got it. All right. That's perfect.

Speaker Change: Whether they're going to wind up for fitting anything they do the right thing they have the qualified retirement.

It will further align there there are interests, our shareholders' interest our clients interest with.

Speaker Change: Proper retirement and an <unk>.

Speaker Change: Succession planning.

Speaker Change: With respect to the expense I would expect it to be elevated in the eight ish million.

For the next three years, and then it'll step down pretty meaningfully and then.

Speaker Change: Over a five year period will level off in.

Speaker Change: Just to be clear the provision only applies to grants that started in 2024 and forward.

Speaker Change: And.

Speaker Change: And so we think that benefit will be a long term benefit for everyone.

Speaker Change: Got it alright thats perfect. Thank you.

Unknown Executive: Thank you. The next question comes from John Dunn with Evercore ISI; please go ahead. Hi, thank you. Could you maybe give us an update on the drivers of the non-US institutional channel for equities, you know, maybe stuff like Europe, Australia, because it got, you know, got better this quarter? The non-US drivers.

Speaker Change: The next question comes from John Dunn with Evercore ISI. Please go ahead.

John Dunn: Alright, thank you.

John Dunn: Could you maybe give us an update on the drivers of that.

John Dunn: The non U S institutional channel for equities.

Definitely Europe, Australia, because it got better this quarter.

John Dunn:

John Dunn: The non U S drivers.

John Dunn: And a bit of it was around M sites.

Eric Richard Colson: A bit of it was around M-Site, that we had some early stage wins, that was probably the big change. I would say Australia's continued to weigh in on our distribution, that we had early fades in the first quarter and then in the fourth quarter we had some outflows. And then with one of our key relationships.

John Dunn: That we had some.

John Dunn: Early stage wins, there was probably the.

John Dunn: The big change.

John Dunn: <unk>.

John Dunn: And.

John Dunn: I would say Australia has continued.

John Dunn: To wane on our distribution.

John Dunn: <unk>.

John Dunn: We've had early phase in the first quarter and then in the fourth quarter, we had some outflows.

John Dunn: <unk>.

John Dunn: And then.

John Dunn:

John Dunn: With our.

With one of our key relationships.

Eric Richard Colson: In the UK, we had a strong inflow as well in our global Operations and Global Value strategy. So if you really broke it down for the quarter, probably a good flow in global operations, global value, and as well as our insights team, and that was out of the Middle East. Gotcha.

John Dunn: In the UK.

John Dunn: We had a strong inflow as well and our global.

John Dunn: Ops and global value strategies. So if you are if you really broke it down for the quarter it probably.

John Dunn: Good flow in global ops global value and as well as.

John Dunn: RM sites team.

John Dunn: That was out of the middle East.

Speaker Change: Got you and then.

Jason A. Gottlieb: And then, Ed, you guys invested, you talked about not having to be first into newer areas. But lately, there's been a bunch of private market firms and teams, you know, joining bigger firms. Have you observed any changes in the backdrop for that or potential sellers thinking about stuff like getting better distribution or, you know, whether it's better to be a part of someone bigger? Hi, this is Jason.

Speaker Change: Investor Day, you talked about not having or not having to be first and into new areas, but lately. There has been a bunch of private market firms and teams joining bigger.

Speaker Change: Firms have you observed any changes in the backdrop for that or potential sellers.

Speaker Change: All of that stuff like getting better distribution or.

Speaker Change: Whether it's better to be.

Speaker Change: Part of something bigger.

Jason Gottlieb: Hi, This is Jason.

Jason A. Gottlieb: I'll, I'll take that. You know, we've seen a lot of activity in the private market space, probably primarily in the Private Credit World. Not to be surprising, we see it both in the world of lift-out opportunities, which is part and parcel with our model, as well as acquisition. And we don't see that as something that's going to stop.

I'll take that.

Jason Gottlieb: I think we've.

Jason Gottlieb: We've seen a lot of activity in the private market space.

Jason Gottlieb: Primarily in our <unk>.

Jason Gottlieb: Private credit World.

Jason Gottlieb: Not to be surprising how we see it both in our in the world of lift out opportunities, which is part and parcel with our model as well as the acquisition.

Jason Gottlieb: And we don't see that as something that's going to stop I think that the changes might come more in the form of lift outs.

Jason A. Gottlieb: I think that the changes might come more in the form of a pull-out, and our belief around that is that there's going to be a series of funds that may, in fact, wind up disappointing, and so the carry opportunities for some of the investors are a little bit shallower than they were in the past, and that might shake some opportunities free. And, you know, that has been correlated to the inbound inquiry that we've been experiencing here at Artisan. So it's given us the opportunity to really take a very hard look and be deliberate with, you know, the opportunities in that area of the world.

Jason Gottlieb: And our belief around that is that there is going to be a series of funds that.

Jason Gottlieb: May in fact quite a disappointing and so the you know the carry opportunities for some of the investment teams could be a little bit more shallow than they were in the past and that might shake some opportunities free and that has been correlated to the inbound inquiry that we've been experiencing here at artisan. So it has given us the opportunity to really take a very.

Jason Gottlieb: Hard luck and be deliberate with our with the opportunities in that area of the world.

Jason A. Gottlieb: That is, you know, an asset class, as we discussed at Investor Day back in September. We've talked about in the world of where we go strategically with alternatives. That is an area of interest, but we're not going to, obviously, adjust our business model just to find a team. It has to be right for us, one that we think we can deliver differentiated returns in a segment of the market and identify the right clients. And to your point, all of these big acquisitions or, you know, mergers tend to come in the form of, "What can you do for me on distribution?". You know, as We're not. We're not here.

Jason Gottlieb: That is an asset class as we had discussed at the <unk>.

Jason Gottlieb: Investor Day back in September and we've talked about in the World, where we go strategically with alternatives certainly.

Jason Gottlieb: That is an area of interest, but we're not going to obviously adjust our business model just to.

Find a team it has to be right for us one that we think we can deliver differentiated returns in a segment of the market and identify the right clients and tier to your point.

Jason Gottlieb: All of these big.

Jason Gottlieb: Let's call them acquisitions or mergers tend to come in the form of.

Speaker Change: What can you do for me on distribution and as you know that that's not necessarily directly our model, we're not we're not here to.

Speaker Change: First and foremost distribute we're here to produce world class differentiated results.

Jason A. Gottlieb: You know, first and foremost, distribute we're here to, and find the right clients on the right terms to deliver that out. And so we're going to remain very consistent with our past and our history and take the right shot as and when it arises, recognizing that, you know, it's just it might take. Thank you very much. The next question comes from Bill Katz with T.D. Cowan.

Speaker Change: And find the right clients on the right terms to deliver that outcome.

Speaker Change: And so we're going to remain very consistent with our past and our history and take the take the ratio as and when it arises.

Speaker Change: Recognizing that it might take time.

Thank you very much.

Speaker Change: The next question comes from Bill Katz with TD Cowen. Please go ahead.

William Raymond Katz: Please go ahead. Okay, thank you very much for taking the questions and I appreciate the prepared commentary. Just maybe start off on the flow side.

William Raymond Katz: Thank you very much for taking the questions and appreciate the prepared commentary.

William Raymond Katz: Just maybe start off on the flow side. So it seems like there's a lot of different opportunities here.

Jason A. Gottlieb: So it seems like there's a lot of different opportunities here, and I guess you made some comments in your press release around the opportunities within equities. Are they some of the smaller incremental vehicles that you are sort of seizing on attractive timelines, attractive performance, or are there some maybe older, more seasoned vehicles where you're seeing the demand? And I guess lately, you've always watched capacity pretty carefully. I appreciate you highlighting the International Value Fund, but at $40 billion, my instinct was, okay, that's a pretty big fund. Where do you tend to sort of cap out incremental new dollars coming into that? Thank you. Thanks, Bill. It's Jason again.

William Raymond Katz: And I guess you made some comments in your press release around the opportunities within equities is it some of the smaller incremental vehicles that you've.

Speaker Change: You are sort of seasoning into attractive timelines attractive performance or there's some maybe older more seasoned vehicles, where you're seeing the demand and I guess with lately, you've always watch capacity pretty carefully I. Appreciate you highlighted the international value fund, but at $40 billion. My instinct was okay. That's a pretty big fund where do you.

Speaker Change: And then the sort of cap out incremental new dollars coming into that thank you.

Speaker Change: Thanks, Bill it's Jason again.

Jason A. Gottlieb: Yeah, our franchises have continuously sought to identify opportunities for expanding degrees of freedom, broader securities via differentiated markets, market caps, and liquidity structures. Also, we see our teams build capacity through recruitment and acculturation of that talent. David Samra with iValue, and, as Eric mentioned, Brian Krug with Credit. Embody this mindset.

Jason Gottlieb: Yeah, our franchises have continuously sought to identify opportunities for expanding degrees of freedom and they've come in many forms including broader securities via differentiated markets market caps liquidity structures.

Jason Gottlieb: Also we see our teams build capacity through recruitment and acculturation of that talent.

Jason Gottlieb: David Samra with high value and as Eric mentioned, Brian crew with credit.

Jason Gottlieb: And body. This mindset importantly, their success with their success they have the ability to work with likeminded sophisticated clients who understand their philosophies.

Jason A. Gottlieb: Importantly, with their success, they have the ability to work with like-minded, sophisticated clients who understand their philosophies and, importantly, their time horizons. This is in large part why we believe the opportunities for modest, thoughtful growth are in place while they remain methodical in the pursuit of their top-tier returns for existing shareholders. And so, we recognize that David's success on the return side has propelled him to a reasonably large-sized fund, but his team has broadened out the types of securities. You've seen us, and I mentioned this in the commentary, having Bainey and Annan join the team getting down market cap really does give a much more expanded opportunity set for David in the international value franchise. And then, more broadly, I guess I would say, and this isn And I might have the numbers off a little bit, but I think it's grown from somewhere in the high threes to about six trillion at the end of 2023. But I don't know what the numbers are.

Jason Gottlieb: And importantly, their time horizons.

Jason Gottlieb: This is in large part why we believe the opportunities for modest thoughtful growth are in place while they remain methodical in the pursuit of their top tier returns for existing shareholders.

Jason Gottlieb: And so I.

Jason Gottlieb: We recognize that David success on the return side has propelled him to a reasonably large sized fun, but as his his team has broadened out the types of securities you can use you've seen us.

Jason Gottlieb: Mentioned this on the on the commentary having Damian on non joined the team getting down market cap really does give a much more expanded opportunity set for for David in the international value franchise.

Jason Gottlieb: And then more broadly I guess I would say.

Jason Gottlieb: This isn't specific to any one team or any one market, but you've just seen a huge increase in the in the world in money market vehicles I might get the numbers are off a little bit, but I think it's grown from somewhere in the high threes to about six trillion at the end of 2023 I don't know what the numbers are.

Jason A. Gottlieb: Today, but until we see a reversal of that, I think, you know, there's a lot of pent-up demand and money on the sidelines. But when we do see that reversal, we think that our returns and our performance and our teams speak for themselves, and we think that those assets will ultimately find a home, whether it be with iValue or credit or some of the global strategies. So we're just gonna, we're gonna stay thoughtful, we're gonna stay patient, but we think when there is that move back out of safety and money markets, we're very well positioned. Okay, thank you. And maybe one for CJ, as you look ahead to the year.

Jason Gottlieb: But until we see a reversal of that I think you know theres a lot of pent up demand and money on the sidelines, but when we do see that reversal.

Jason Gottlieb: We think that our returns in our performance and our teams speak for themselves and we think that those assets will ultimately find a home whether it be with I value, our credit or some of the global strategies in the institutional space or in in EMEA. So we're just going to we're going to stay thoughtful we're going to stay patient, but we think when there is that that move.

Jason Gottlieb: Back out of.

Back out of safety and money markets, where we're very well positioned to capture that.

Speaker Change: Okay. Thank you and maybe one for C J.

C J: You look ahead to the year.

William Raymond Katz: How are you thinking about balancing reinvestment back into the business versus the payout? I guess your payout ratio came in maybe a little bit at the higher end of what I think folks were thinking about this year, like 96.5% if I did the math right. You've been running closer to 90-ish percent a couple years before that.

C J: How are you thinking about balancing reinvestment back into the business versus the payout.

C J: Your payout ratio came in maybe a little bit of the higher end of what I think folks were thinking about this year like 96, 4%. If I did the math right you've been running closer to 90 ish percent a couple of years before that so you're looking at this year recognizing some of the seasoning. So many reinvestment needs seed capital et cetera, How do you think through the payout ratio is looking at for the year. Thank you.

Charles James Daley: So when you look ahead to this year, recognizing some of the seasonings, some of the reinvestment needs, seed capital, etc., how do you think through the payout ratio as you look ahead for the year? Thank you. Sure, you know, Bill, at this time of year, I think we're staying the course, you know; we held back some cash this year to seed new products. I think we feel pretty good about where we are in the size of our seed book.

Speaker Change: Yes sure.

Speaker Change: Bill at this time I think.

Speaker Change: We're staying the course.

Speaker Change: We held back some cash this year to seed new products I think we feel pretty good about where we are in the size of our seed book.

Charles James Daley: So there could potentially be some additional cash freed up for other uses next year, including adding to the special dividend. But you know, as we sit here right now, we continue to see the 80% variable dividend paid each quarter, along with that special dividend at the end of the year, as our course of action. So I wouldn't, I wouldn't anticipate, you know, any major changes to what you're seeing from a payout. Thank you. The next question comes from Kenneth Lee with RBC Capital Markets. Please go ahead. Hey, good afternoon.

Speaker Change: So there could be potentially some additional cash freed up for other uses next year, including <unk>.

Speaker Change: Adding to the special dividend.

Speaker Change: Yes.

Speaker Change: But.

Speaker Change: As we sit here right now we continue to see the 80% variable dividend paid each quarter, along with that special dividend at the end of the year to be our course of action.

Speaker Change: So I wouldn't I wouldn't anticipate.

Any major changes to what you're seeing from a from.

Speaker Change: From a.

Speaker Change: Payout.

Percentage.

Speaker Change: Thank you.

The next question comes from Kenneth Lee with RBC capital markets. Please go ahead.

Kenneth S. Lee: Hey, good afternoon. Thanks for taking my question just one on the credit alternative investment strategies.

Kenneth S. Lee: Thanks for taking my question. Just one on the credit alternative investment strategies. Wanted to talk a little bit more about how you see potential demand, especially in the current rate environment. Yeah, hi, this is Jason again.

Could you talk a little bit more about how you see potential demand, especially in the current rate environment. Thanks.

Kenneth S. Lee: Yeah, Hi. This is this is Jason again.

Jason A. Gottlieb: I'll talk about a couple of them. If there's a follow-up question, just let me know. When you think about the credit opportunity strategy that Brian has been building and developing over the past six years, we now think we've got a phenomenal asset. Net-A-Fee, and we've always been really patient on the distribution side, firmly believing that time well spent is time spent owning the record.

Jason Gottlieb: I'll talk about a couple of them and then if there's a follow up question just let me know, but when you think about the credit opportunity strategy that that Brian has been that as he has been building and developing over the past six years. We now think we've got a phenomenal asset in the form of his his performance as we.

Jason Gottlieb: Highlighted surround almost just shy of 10% nine 8%.

Jason Gottlieb: Net of fee and we.

We've always been really patient on the distribution side, because we firmly believe that.

Time time will spend his time spent.

Jason Gottlieb: Honing the record and we've now done that.

Jason A. Gottlieb: And we've now done that. I think the uptake with clients, whether it's existing clients that are evaluating Brian in a different way through an alternative lens or some of the new clients that are starting to evaluate him. Building up in the pipeline, we think that that's a Global Unconstrained Strategy on the M-Site. Likewise, you know, what's interesting is this is somewhat countercyclical to the money market conversation that we just had on a prior question. Whereas, you know, if you have money market rates somewhere in the four to 5% range, and the strategy that the Global Unconstrained Strategy deploys, http://TheBusinessProfessor.com somewhere in the, you know, let's call it mid to high single digits, potentially in the low double digits if we're able to actually be uncorrelated.

Jason Gottlieb: I think the.

Jason Gottlieb: The uptake with clients, whether it's existing clients that are evaluating Brian in a different way through and alternatives lens or some of the new clients that are starting to evaluate him. There building up in the pipeline, we think that that's a <unk>.

Really interesting opportunity for us to continue to develop and build and grow the alternatives allocation and then.

Jason Gottlieb: Going back to the.

Jason Gottlieb: Global unconstrained strategy on on the M sites team.

Likewise.

Jason Gottlieb: It's interesting as this is somewhat counter cyclical to the to the money market conversation that we just had on on a prior question, whereas if.

Jason Gottlieb: If you have money market rates somewhere in the 4% to 5% range and the strategy that.

Jason Gottlieb: The global Unconstrained strategy deploys, if you could generate a 3% to 6% excess return on top of that money market rate you get really really interesting outcomes somewhere in the let's call. It mid mid to high single digits potentially in the low double digits, if we're able to execute tends to be uncorrelated to.

To the broader markets and I think people are starting to take note of that you know again, it's very very early innings as Eric mentioned, we're sort of two years into the journey not even quite two years and we think that once people evaluate the team early stages they hit their three year record.

Jason A. Gottlieb: We're sort of two years into the journey, not even quite two years, and we think that once people evaluate the team in the early stages, they hit their three-year record, we think that that could be a really interesting leg to the growth stool. And I'd be remiss if I didn't mention the dislocation fund, raising $130 million for Brian and dislocation opportunities, which is really a testament to, I think, the strength of his And, you know, this is hopefully going to be one of many.

Jason Gottlieb: We think that that could be a really interesting leg to the growth stool.

Jason Gottlieb: I'd be remiss, if I Didnt mentioned the.

Jason Gottlieb: Acacia the drawdown fund.

Jason Gottlieb: Raising $130 million for Brian and dislocation opportunities.

Jason Gottlieb: It is really a testament to I think the strength of his brand and our credit platform broadly.

Jason Gottlieb: And this is hopefully going to be one of many once we deploy that capital Brian produces returns. We returned the capital there should be an opportunity to continue to develop and grow and build a really exciting platform around these these drawdown vehicles and so I think we've got really interesting short intermediate long term duration opportunities for the.

Jason A. Gottlieb: Once we deploy that capital, Brian produces the returns, we return the capital, and this should be an opportunity to develop, grow, and build. It's a really exciting platform around these drawdown vehicles. So I think we've got really interesting short, intermediate, long-term duration opportunities for the platform, and there are more that will ultimately reveal themselves. Whether it's with the existing teams, which is the highest and best use of our time to develop that, the probability of success is much higher, or whether we go out and we identify the next team to bring out of the platform, we still feel like we've got really good opportunities for growth. Very helpful people there.

Platform and there's more of that will ultimately reveal themselves whether it's with the existing teams, which is the highest and best use of our time to develop that the probability of success is much higher or whether we go out and we identified the next <unk>.

Jason Gottlieb: <unk> to bring onto the platform, we still feel like we've got really good opportunities for growth here.

Speaker Change: Great very helpful. There and just one follow up if I may I think the prepared remarks, you talked about increasing distribution head count wondering if you could just talk a little bit more about expansion plans for distribution. This year. Thanks.

Kenneth S. Lee: And just one follow-up, if I may, in your prepared remarks, you talked about an increase in distribution headcount. I'm wondering if you could talk a little bit more about the expansion plans for distribution this year. Thanks. Yes, certainly.

Speaker Change: Yes, certainly.

Unknown Executive: Last year, we spent quite a bit of time optimizing our distribution team, looking at the array of strategies, you know, getting up to 25 strategies, the complexity of the product mix, including credit and alternatives. We felt the need to emphasize the sales orientation of our distribution, our centralized distribution, you know, groups going after the intermediary non-us that centralized group. We adjusted compensation, we added resources, we built in training with a real focus on sales and Client service and product knowledge inside the dedicated distribution, those individuals attached to our autonomous team. And with those adjustments, we're also adding a few individuals to both areas, as well as launching an alternative distribution team that is focused at the center of the firm to help.

Speaker Change: Last year we.

Speaker Change: We spent quite a bit of time optimizing our distribution team.

Speaker Change: We.

Speaker Change: Looked at the array of strategies.

Speaker Change: Getting up to 25 strategies the the complexity.

Speaker Change: The product mix, including credit and alternatives.

Speaker Change: We felt the need to.

Speaker Change: Emphasize the.

The sales orientation of our distribution.

Speaker Change: Of our centralized distribution.

Speaker Change: Groups going after the intermediary non U S.

Speaker Change: That centralized group, we adjusted compensation, we added resources.

Speaker Change: Built in training with a real focus on sales and expanded relationship management for continued cross selling.

We then also.

Speaker Change: Emphasized client service and product knowledge inside the dedicated distribution.

Speaker Change: Those individuals' attached to our autonomous teams.

Speaker Change: And with.

Speaker Change: With those adjustments were also adding a few individuals.

Speaker Change: To both areas as well as we launch day alternatives.

Speaker Change: Distribution team.

Speaker Change: That is focused in the center of the firm.

Speaker Change: To help our <unk>.

Unknown Executive: Amplify Sales for Credit Opportunities, Global Unconstrained, and Other Alternative Strategies. We think at the end of the day that will create a smoother sales cycle selling across the firm, and also with the complexity, our clients will get direct feedback, and relationship management product knowledge from individuals that are closest to the [inaudible] This concludes our question and answer session and the Artisan Partners fourth quarter 2023 earnings conference call. Thank you. You may now disconnect.

Speaker Change: <unk> sales for <unk>.

Speaker Change: Credit opportunities global unconstrained and other alternative strategies.

Speaker Change: We think at the end of the day that will that will create a.

Speaker Change: Smoother.

Speaker Change: Sales cycle selling across the firm.

Speaker Change: And also with the complexity.

Our.

Speaker Change: Clients will get direct.

Speaker Change: Relationship management product knowledge from individuals that are closest to the teams.

Speaker Change: Got you very helpful. There. Thanks again.

This concludes our question and answer session and the artisan Partners' fourth quarter 2023 earnings Conference call. Thank you you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.