Q2 2024 Artisan Partners Asset Management Inc Earnings Call

Good afternoon, and welcome to the Artisan Partners second quarter 2024 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero on your telephone keypad.

Operator: All participants will be in listen-only mode. Should you need assistance, please signate conference specialists by pressing star, then zero on your telephone keypad.

Operator: 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. To withdraw your question, please press star, then two.

Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Artisan Partners Asset Management.

Operator: Please note this event is being recorded.

Operator: I would now like to turn the conference over to Artisan Partners Asset Management. Please go ahead.

Operator: Welcome to the Artisan Partners Asset Management business update and second quarter 2024 earnings call.

Unknown Executive: Welcome to the Artisan Partners Asset Management business update and second quarter 2024 earnings call. Today's call will include remarks from Eric Colson, CEO; Jason Gottlieb, President; and CJ Daley, CFO. Following these remarks, we will open the line for questions.

Speaker Change: Please go ahead.

Speaker Change: Welcome to the Artisan Partners Asset Management Business Update and Second Quarter 2024 Earnings Call.

Operator: Today's call will include remarks from Eric Colson, CEO; Jason Gottlieb, President; and CJ Daley, CFO. Following these remarks, will open the line for questions.

Speaker Change: Today's call will include remarks from Eric Colson, CEO , Jason Gottlieb, President, and C.J. Daley, CFO .

Unknown Executive: Our latest results and investor presentation are available on the Investor Relations section of our website. Before we begin today, I would like to remind you that comments majoring today's call, including responses to questions, may include forward-looking statements. These 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 FCC filings. These risks and uncertainties may cause actual results to differ materially from those discussed in the statements, and we assume no obligation to update or revise any of these statements following the presentation.

Unknown Executive: Our latest results and investor presentation are available in the Investor Relations section of our website. Before we begin today, I would like to remind you that comments made during today's call, including responses to questions, may include forward-looking statements. These 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 filings. These risks and uncertainties may cause actual results to differ materially from those discussed in the statements, and we assume no obligation to update or revise any of these statements following the presentation.

Speaker Change: Following these remarks, we will open the line for questions.

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

Unknown Executive: In addition, some of our remarks today will include references to non-GAAP financial measures. You can find reconciliation of those measures to the most comparable GAAP measures in the earnings release and the supplemental materials, which can 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 products or a recommendation for any investment service. I will now turn it over to Eric Colson.

Speaker Change: Before we begin today, I would like to remind you that comments made during today's call, including responses to questions, may include forward-looking statements.

Speaker Change: These 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 filings.

Speaker Change: These risks and uncertainties may cause actual results to differ materially from those discussed in the statements, and we assume no obligation to update or revise any of these statements following the presentation.

Unknown Executive: In addition, some of our remarks today will include references to non-GAAP financial measures. You can find reconciliation of those measures to the most comparable GAT measures in the earnings release and the supplemental materials, which can be found on our investor relations website.

Speaker Change: In addition, some of our remarks today will include references to non-GAAP financial measures

Speaker Change: You can find reconciliation of those measures to the most comparable GAAP measures in the earnings release and the supplemental materials, which can be found on our investor relations website.

Unknown Executive: 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: 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. I will now turn it over to Eric Colson.

Eileen: I will now turn it over to Eric Wilson.

Eric Colson: Thank you, Eileen. And thank you, everyone, for joining the call or reading the transcript.

Eric Richard Colson: Thank you, Eileen, and thank you, everyone, for joining the call or reading the TRAM script. Artisan Partners is a high-value-added investment firm designed for talent to thrive in a thoughtful growth environment. Since our founding in 1994, we have focused on areas with a combination of investment talent, attractive absolute returns, long-term demand from sophisticated clients, and market inefficiencies that allow talented investors to generate alpha over extended periods of time. This kind of high-value-added investing transcends any single asset class, investment style, geography, sector, or market cycle. A business built on high-value-added investing is durable, and excess returns are rare.

Eric Richard Colson: Thank you, Eileen. And thank you, everyone, for joining the call or reading the transcript.

Eric Colson: Artisan Partners is a high-value added investment firm designed for talent to thrive in a thoughtful growth environment. Since our founding in 1994, we have focused on areas with a combination of investment talent, attractive absolute returns, long-term demand from sophisticated clients, and market inefficiencies that allow talented investors to generate alpha over extended periods of time. This kind of high-value added investing transcends any single asset class, investment style, geography, sector, or market cycle. A business built on high-value added investing is durable. Access returns are rare. Allicators will pay a premium for them, and demand will endure. Artisan Partners aligns talented investors with long-term allocators.

Eric Richard Colson: Artisan Partners is a high-value-added investment firm designed for talent to thrive in a thoughtful growth environment.

Eric Richard Colson: Since our founding in 1994, we have focused on areas with a combination of investment talent,

Eric Richard Colson: Attractive Absolute Returns, Long-Term Demand from Sophisticated Clients, and Market Inefficiencies that Allow Talented Investors to Generate Alpha over Extended Periods of Time.

Eric Richard Colson: This kind of high-value-added investing transcends any single asset class, investment style, geography, sector, or market cycle.

Eric Richard Colson: Allocators will pay a premium for them, and demand will endure. Artisan Partners aligns talented investors with long-term allocators. We are not a distribution shop.

Eric Richard Colson: A business built on high-value-added investing is durable. Excess returns are rare. Allocators will pay a premium for them, and demand will endure.

Eric Colson: We are not a distribution shop. We do not engineer product to meet short-term demand. Over our history, we have remained committed to high-value added investing while methodically expanding our capabilities by adding breadth to existing investment franchises and onboarding exceptional talent in new areas.

Eric Richard Colson: We do not engineer products to meet short-term demand. Over our history, we have remained committed to high-value-added investing while methodically expanding our capabilities by adding breadth to existing investment franchises and Onboarding Exceptional Talent in New Areas. Our approach is guided by a core set of characteristics. We always seek exceptional investment talent. We will not compromise on investment talent. We focus on asset classes where talent can compound capital at attractive absolute rates of return and where market inefficiencies and degrees of freedom allow for differentiation and alpha over-venture.

Artisan Partners: Artisan Partners aligns talented investors with long-term allocators.

Artisan Partners: We are not a distribution shop. We do not engineer product to meet short-term demand.

Artisan Partners: Over our history, we have remained committed to high-value-added investing while methodically expanding our capabilities by adding breadth to existing investment franchises and onboarding exceptional talent in new areas.

Eric Colson: Our approach is guided by a core set of characteristics. We seek exceptional investment talent always. We will not compromise on investment talent. We focus on asset classes where talent can compound capital at attractive absolute rates of return, and where market inefficiencies and degrees of freedom allow for differentiation and alpha over benchmarks. We invest behind long-term demand from institutional allocators. We prefer fragmented markets, where competition is based on net of fee returns, not fee rates or distribution scale. Lastly, we arbitrage time. We operate in areas where we believe our patients and our long-term approach are competitive advantages.

Artisan Partners: Our approach is guided by a core set of characteristics.

Artisan Partners: We seek exceptional investment talent, always.

Artisan Partners: We will not compromise on investment talent.

Artisan Partners: We focus on asset classes where talent can compound capital at attractive absolute rates of return and where market inefficiencies and degrees of freedom allow for differentiation and alpha over benchmarks.

Eric Richard Colson: We invest behind long-term demand from institutional allocators. We prefer fragmented markets, where competition is based on net of fee returns, not fee rates or distribution scale. Lastly, we arbitrage time. We operate in areas where we believe our patience and our long-term approach are a competitive advantage. Applying these characteristics, we have historically entered new areas with specialty strategies. We started nearly 30 years ago in small, mid-cap, and international equity. We then grew into a less capacity constrained, larger cap, and global strategy. In 2014, we entered fixed income in the high-yield market.

Artisan Partners: We invest behind long-term demand from institutional allocators.

Artisan Partners: We prefer fragmented markets, where competition is based on net-of-fee returns, not fee rates or distribution scale.

Artisan Partners: Lastly, we arbitrage time. We operate in areas where we believe our patience and our long-term approach are competitive advantages.

Eric Colson: Applying these characteristics, we have historically entered new areas with specialty strategies. We started nearly 30 years ago in small, mid-cap, and international equities. We then grew into less capacity constrained, larger cap and global strategies. In 2014, we entered fixed income in the high yield market, and more recently, we launched emerging market debt. As high-value added investing has evolved towards alternatives and private assets. We have added degrees of freedom to our existing strategies and launched an array of new strategies with existing and new talent and less liquid and more alternative spaces. Throughout, we have established ourselves in smaller but robust, specialist markets where talent matters, differentiation is possible, and investors are willing to pay a premium for a premium outcome.

Artisan Partners: Applying these characteristics, we have historically entered new areas with specialty strategies.

Artisan Partners: We started nearly 30 years ago in small, mid-cap, and international equities.

Artisan Partners: We then grew into less capacity constrained, larger cap, and global strategies.

Artisan Partners: In 2014, we entered fixed income in the high-yield market, and more recently, we launched emerging market debt.

Eric Richard Colson: And more recently, we launched emerging market debt. As high-value added investing has evolved towards alternatives and private assets, we have added degrees of freedom to our existing strategies and launched an array of new strategies with existing and new talent and less liquid and more alternative space. Throughout, we have established ourselves in smaller but robust specialist markets where talent matters, differentiation is possible, and investors are willing to pay a premium for a premium outcome.

Artisan Partners: As high value-added investing has evolved towards alternatives and private assets, we have added degrees of freedom to our existing strategies and launched an array of new strategies with existing and new talent in less liquid and more alternative spaces.

Artisan Partners: Throughout, we have established ourselves in smaller but robust specialist markets where talent matters, differentiation is possible, and investors are willing to pay a premium for a premium outcome.

Eric Colson: As we show in slide two, successfully establishing ourselves in specialty areas has provided the foundation for evolving into larger opportunity sets and growing larger and more diversified businesses. From the foundation created by these five strategies, we now manage 19 strategies and over 149 billion in AUM.

Eric Richard Colson: As we show on slide two, successfully establishing ourselves in specialty areas has provided the foundation for evolving into larger opportunity sets and growing larger and more diversified businesses from the foundation created by these five strategies. We now manage 19 strategies and over $149 billion in AUM. Slide 3 is our most recent example, CM Sites Capital Group.

Artisan Partners: As we show on slide two, successfully establishing ourselves in specialty areas has provided the foundation for evolving into larger opportunity sets and growing larger and more diversified businesses.

Artisan Partners: from the foundation created by these five strategies.

Artisan Partners: We now manage 19 strategies and over $149 billion in AUM.

Eric Colson: Slide three is our most recent example, the MSITE's Capital Group. We identified, recruited, and onboarded exceptional and proven investment talent in Mike Sirami, Sarah Orbin, and Michael Bryan. Emerging market debt has historically generated attractive absolute returns, and it has been a fertile hunting ground for exceptional investment talent, given the poor quality of indices, the larger number of issuers and currencies, and the multitude of ways to take and manage risk. The potential returns and diversification benefits have made Emerging Market debt, a logical target for institutional allocators seeking both yield and uncorrelated returns. Lastly, the competitive landscape is highly fragmented, with the top 10 funds accounting for just 25% of category AUM as of March 31, 2024.

Artisan Partners: Slide 3 is our most recent example, the M-Sites Capital Group. We identified, recruited, and onboarded exceptional and proven investment talent in Mike Sarami, Sarah Orvin, and Mike O'Brien.

Eric Richard Colson: We identified, recruited, and onboarded exceptional and proven investment talent in Mike Cerami, Sarah Orvin, and Mike O'Brien. Emerging market debt has historically generated attractive absolute returns, and it has been a fertile hunting ground for exceptional investment talent, given the poor quality of indices, the larger number of issuers and currencies, and a multitude of ways to take and manage risk. Potential returns and diversification benefits have made emerging markets debt a logical target for institutional allocators seeking both yield and uncorrelated returns. Lastly, the competitive landscape is highly fragmented, with the top 10 funds accounting for just 25% of Category AUM as of March 31st, 2024.

Artisan Partners: Emerging market debt has historically generated attractive absolute returns and it has been a fertile hunting ground for exceptional investment talent given the poor quality of indices, the larger number of issuers and currencies, and a multitude of ways to take and manage risk.

Artisan Partners: The potential returns and diversification benefits have made emerging markets debt a logical target for institutional allocators seeking both yield and uncorrelated returns.

Artisan Partners: Lastly, the competitive landscape is highly fragmented with the top 10 funds accounting for just 25% of category AUM as of March 31st, 2024.

Eric Colson: Over the last two years with the MSITE's capital group, we have seen these characteristics play out since inception in May 2022, and after fees, the Emerging Market Debt opportunity strategy has generated an average annual return of 11.71%, beating its index by an average of 724 basis points annually. The emerging markets' local opportunity strategy has generated an average annual return of 8.01 percent since inception in August 2022 and after fees, beating its index by 202 basis points.

Eric Richard Colson: Over the last two years, with M Sites Capital Group, we have seen these characteristics play out since inception in May 2022. And after fees, the emerging market debt opportunity strategy has generated an average annual return of 11.71%, beating its index by an average of 724 basis points annually. The Emerging Markets Local Opportunities Strategy has generated an average annual return of 8.01% since inception in August 2022, and after fees beating its index by 202 basis. When we established the M Sites Capital Group, we were not trying to time the market or satisfy near-term demand for a hot-dot product.

Speaker Change: Over the last two years with the M-Sites Capital Group, we have seen these characteristics play out.

Speaker Change: Since inception in May 2022 and after fees, the Emerging Market Debt Opportunity Strategy has generated an average annual return of 11.71%, beating its index by an average of 724 basis points annually.

Speaker Change: The Emerging Markets Local Opportunities Strategy has generated an average annual return of 8.01% since inception in August 2022 and after fees beating its index by 202 basis points.

Eric Colson: When we established the MCI's Kaplow Group, we were not trying to time the market or satisfy near-term demand in a hot dot product. In fact, we launched into unprecedented outflows for the asset class. We were executing our playbook, getting talent and performance right in the area where long-term demand exists and exceptional investment talent can differentiate. Notwithstanding the difficult business environment, as of July 15, we have raised a cumulative 2.2 billion across the MCI's Kaplow Group's three strategies. This includes high-quality institutional anchors in each strategy.

Speaker Change: When we established the M-Sites Capital Group, we were not trying to time the market or satisfy near-term demand in a hot-dot product. In fact, we launched into unprecedented outflows for the asset class.

Eric Richard Colson: In fact, we launched into unprecedented outflows for the asset class. We were executing our playbook. Getting talent and performance right in an area where long-term demand exists and exceptional investment talent can differentiate, notwithstanding the difficult business environment, as of July 15, we have raised a cumulative $2.2 billion across the M-Sites Capital Group's three strategies. This includes high-quality institutional anchors in each strategy. I will now turn it over to Jason to discuss how we are executing this process and approach in Alternative.

Speaker Change: We were executing our playbook.

Speaker Change: Getting talent and performance right in the area where long-term demand exists and exceptional investment talent can differentiate.

Speaker Change: Notwithstanding the difficult business environment, as of July 15th we have raised a cumulative $2.2 billion across the M-Sites Capital Group's three strategies.

Jason Gottlieb: I will now turn it over to Jason to discuss how we are executing this process and approach in alternatives.

Speaker Change: I will now turn it over to Jason to discuss how we are executing this process and approach in Alternatives.

Jason Gottlieb: Thank you, Eric. We have shown the data on slide 4 many times. AUM and revenue and traditional active strategies is plateauing, with net outflows offsetting investment returns. Net new asset growth is occurring on either end of the bar belt: passive and alternatives. And the line share of the allocator management fee budgets are being spent on alternative strategies. Traditional active management remains a very large market with money constantly in motion and tremendous long-term opportunity. We will continue to compete and have success in that market long into the future.

Jason A. Gottlieb: We have shown the data on slide four many times. AUM revenue and traditional active strategies are plateauing. With Net Outflows Offsetting Investment Returns, Net new asset growth is occurring on either end of the barbell, passive and alternative, and the lion's share of the allocator management fee budgets is being spent on alternative strategies. Traditional active management remains a very large market with money constantly in motion and tremendous long-term opportunity. We will continue to compete and have success in that market long into the future, but our incremental investments are focused on alternative investments.

Jason A. Gottlieb: Thank you, Eric. We have shown the data on slide four many times.

Jason A. Gottlieb: AUM and revenue in traditional active strategies is plateauing with net outflows offsetting investment returns.

Jason A. Gottlieb: Net new asset growth is occurring on either end of the barbell, passive and alternatives.

Jason A. Gottlieb: And the lion's share of the allocator management fee budgets are being spent on alternative strategies.

Jason A. Gottlieb: Traditional active management remains a very large market with money constantly in motion and tremendous long-term opportunity. We will continue to compete and have success in that market long into the future.

Jason Gottlieb: What are incremental investments focused on alternative investments. Alternatives are a very natural fit for us. They are talent-driven; they have generated attractive absolute returns, and many alternative strategies operate in highly inefficient areas where talented investors can generate consistent and meaningful access returns. There is demand for alternatives from sophisticated allocators, both institutions and within the wealth channel. And a landscape is highly fragmented, with competition centering around investment quality, differentiation, and net-a-feet returns, not scale or fees. This is a very natural evolution and growth area for us, reminiscent of how we have expanded our business in the past.

Jason A. Gottlieb: Alternatives are a very natural fit for us. They are talent-driven, and many alternative strategies operate in highly inefficient areas where talented investors can generate consistent and meaningful excess returns. There is demand for alternatives from sophisticated allocators, both institutions and within the wealth channel. And the landscape is highly fragmented, with competition centering around investment quality, differentiation, and net-a-fee returns, not scale or fees.

Jason A. Gottlieb: But our incremental investments are focused on alternative investments.

Jason A. Gottlieb: Alternatives are a very natural fit for us. They are talent-driven, they have generated attractive absolute returns, and many alternative strategies operate in highly inefficient areas where talented investors can generate consistent and meaningful excess returns.

Jason A. Gottlieb: There is demand for alternatives from sophisticated allocators, both institutions and within the wealth channel.

Jason A. Gottlieb: And the landscape is highly fragmented, with competition centering around investment quality, differentiation, and net-a-fee returns, not scale or fees.

Jason A. Gottlieb: This is a very natural evolution and growth area for us, reminiscent of how we have expanded our business in the past. Today, we classify six of our investment strategies as alternative or liquid alternative: Antero Peak, Antero Peak Hedge, Credit Opportunities, China Post Venture, and Global Unconstrained.

Jason A. Gottlieb: This is a very natural evolution and growth area for us, reminiscent of how we have expanded our business in the past.

Jason Gottlieb: Today we classify six of our investment strategies as alternatives for liquid alternatives. Anturopeak, Anturopeak Edge, Credit Opportunities, China Post Venture, and Global Unconstraint.

Jason A. Gottlieb: Today we classify six of our investment strategies as alternative or liquid alternatives.

Jason A. Gottlieb: Antero Peak, Antero Peak Hedge, Credit Opportunities, China Post Venture

Jason Gottlieb: In addition to these open-ended strategies, we have the closed-end Credit Dislocation Fund, which has successfully closed on $160 million of commitments. We have methodically developed these strategies over the last seven years. They are led by proven leaders who are passionate about their asset classes, their philosophies, and their processes, and generating exceptional absolute and relative returns for clients. To implement these strategies, we have expanded our operational platform to support more instruments, markets, counterparties, vehicles, data, and other resources, and we have remained patient, knowing that it takes time to develop the track records necessary for long-term business success.

Jason A. Gottlieb: In addition to these open-ended strategies, we have the Closed-End Credit Dislocation Fund, which has successfully closed on $160 million of commitments. We have methodically developed these strategies over the last seven years. They are led by proven leaders who are passionate about their asset classes, their philosophies, and their processes and delivering exceptional, absolute, and relative returns for clients. To implement these strategies, we have expanded our operational platform to support more instruments, markets, counterparties, vehicles, data, and other resources. And we have remained patient, knowing that it takes time to develop the track records necessary for long-term business success.

Jason A. Gottlieb: and Global Unconstrained.

Jason A. Gottlieb: In addition to these open-ended strategies, we have the Closed-End Credit Dislocation Fund, which has successfully closed on $160 million of commitments.

Jason A. Gottlieb: We have methodically developed these strategies over the last seven years.

Jason A. Gottlieb: They are led by proven leaders who are passionate about their asset classes, their philosophies, and their processes.

Jason A. Gottlieb: and Generating Exceptional, Absolute and Relative Returns for Clients.

Jason A. Gottlieb: To implement these strategies, we have expanded our operational platform to support more instruments, markets, counterparties, vehicles, data, and other resources.

Jason A. Gottlieb: And we have remained patient, knowing that it takes time to develop the track records necessary for long-term business success.

Jason Gottlieb: All five open-ended alternative strategies have performed well. Four of the five have generated compelling absolute returns. Four of the five have generated more than 300 basis points of annual outperformance, net of these and conception. And the credit opportunities and global unconstrained strategies have provided the diversification and low correlation benefits sought by clients. As we have broadened out our alternative line-up and established investment trackers, we have begun to invest more in dedicated alternative distribution, increasing expertise, improving marketing, and growing our network. In addition, these early outcomes have created more opportunities to add additional alternative capabilities with existing and external talent.

Jason A. Gottlieb: All five open-ended alternative strategies have performed well; four of the five have generated compelling absolute returns. Four of the five have generated more than 300 basis points of annual outperformance net fees since inception, and the Credit Opportunities and Global Unconstrained Strategies have provided the diversification and low correlation benefits sought by clients. As we have broadened out our alternatives lineup and established investment track records, we have begun to invest more in dedicated alternative distribution.

Jason A. Gottlieb: All five open-ended alternative strategies have performed well.

Jason A. Gottlieb: Four of the five have generated compelling absolute returns.

Jason A. Gottlieb: Four of the five have generated more than 300 basis points of annual outperformance net-of-fees since inception.

Jason A. Gottlieb: And the Credit Opportunities and Global Unconstrained Strategies have provided the diversification and low correlation benefits sought by clients.

Jason A. Gottlieb: As we have broadened out our alternatives lineup and established investment track records, we have begun to invest more in dedicated alternative distribution, increasing expertise, improving marketing, and growing our network.

Jason A. Gottlieb: Increasing Expertise, Improving Marketing, and Growing Our Network. In addition, these early outcomes have created more opportunities to add additional alternative capabilities with existing and external talent. We have demonstrated our ability to successfully operate in the alternative space. Continuing to expand our alternative capabilities and sharpen our alternative distribution remains a high priority for our entire management. We are highly confident that our business model and philosophy are ideal for alternatives, talent, and strategy. Our early success confirms our thinking, and we fully expect to do more.

Jason A. Gottlieb: In addition, these early outcomes have created more opportunities to add additional alternative capabilities with existing and external talent.

Jason Gottlieb: We have demonstrated our ability to successfully execute in alternative spaces. Continuing to expand our alternative capabilities and sharpen our alternative distribution remains high priorities for our entire management team. We are highly confident that our business model and philosophy are ideal for alternatives, talent, and strategies. Our early success confirms our thinking, and we fully expect to do more.

Jason A. Gottlieb: We have demonstrated our ability to successfully execute in alternative spaces.

Jason A. Gottlieb: Continuing to expand our alternatives capabilities and sharpen our alternatives distribution remains high priorities for our entire management team.

Jason A. Gottlieb: We are highly confident that our business model and philosophy are ideal for alternatives, talent, and strategies.

Jason A. Gottlieb: Our early success confirms our thinking, and we fully expect to do more.

Jason Gottlieb: Thank you, Jason.

Eric Richard Colson: Thank you, Jason. Before turning it over to CJ, I want to provide an update on emerging markets. In the third quarter update last year, we included the data on slide six. As we said then, an extended period of underperformance relative to developed markets has resulted in emerging markets allocations being under target, and Allocators Rethinking Emerging Markets Allocation Altogether. We continue to believe that for many sophisticated allocators, emerging markets, equity, and debt will remain meaningful long-term allocations.

Eric Colson: Before turning it over to CJ, I want to provide an update on emerging markets. In the third quarter update last year, we included the data on slide six. As we said then, an extended period of underperformance relative to developed markets has resulted in emerging markets' allocations being under target, and in allocators' rethinking emerging markets' allocation altogether. We continue to believe that, for many sophisticated allocators, emerging markets' equity and debt will remain meaningful long-term allocations. We have an impressive and diverse line-up of emerging market equity and six income strategies built over time and focused on the same characteristics we have been discussing.

Jason A. Gottlieb: Thank you, Jason. Before turning it over to CJ, I want to provide an update on emerging markets.

CJ: In the third quarter update last year, we included the data on slide 6.

Speaker Change: As we said then, an extended period of underperformance relative to developed markets has resulted in emerging markets allocations being under target, Thank you for your time.

Speaker Change: and in Allocators Rethinking Emerging Markets Allocation Altogether.

Speaker Change: We continue to believe that for many sophisticated allocators, emerging markets equity and debt will remain meaningful long-term allocations.

Eric Richard Colson: We have an impressive and diverse lineup of emerging markets equity and fixed income strategies built over time and focused on the same characteristics we have been discussing. In June, we onboarded an $800 million institutional mandate in our Sustainable Emerging Markets Strategy. Maria Negrete Grusin and her team are now managing just shy of two billion dollars with a healthy pipeline of institutional investors. The recent win is a testament to Maria and her team's dedication and Artisan's long-term approach.

Speaker Change: We have an impressive and diverse lineup of emerging markets equity and fixed income strategies built over time and focused on the same characteristics we have been discussing.

Eric Colson: In June, we onboarded an 800 million institutional mandate in our sustainable emerging market strategy. Maria and the Greta Gruson and her team are now managing just shy of $2 billion with a healthy pipeline of institutional interest. The recent win is a testament to Maria and her team's dedication and artisan's long-term approach. We continue to believe that there is significant opportunity for the Sustainable Emerging Markets team to grow.

Speaker Change: In June , we onboarded an $800 million institutional mandate in our Sustainable Emerging Markets Strategy.

Speaker Change: Maria Negrete Grusin and her team are now managing just shy of two billion with a healthy pipeline of institutional interest.

Speaker Change: The recent win is a testament to Maria and her team's dedication and Artisan's long-term approach.

Eric Richard Colson: We continue to believe that there is a significant opportunity for this sustainable emerging markets team to grow, and in the first half of July, M-Sites Capital Group onboarded an $860 million institutional account in the Emerging Markets Debt Opportunity Strategy. Another recognition of the quality and potential of our emerging markets lineup. Across the strategies highlighted on this page, we manage approximately $8 billion in AUM. We have considerable additional capacity and are poised to benefit as allocators come back to emerging markets or reallocate to emerging market managers who can add value over what have been lackluster index returns.

Speaker Change: We continue to believe that there is significant opportunity for the Sustainable Emerging Markets team to grow.

Eric Colson: In the first half of July, the M-Sites capital group onboarded an 860 million institutional account in the emerging markets debt opportunity strategy. Another recognition of the quality and potential of our emerging markets line-up. Across the strategies highlighted on this page, we manage approximately 8 billion in AUM. We have considerable additional capacity and are poised to benefit as allocators come back to emerging markets or reallocate to emerging market managers who can add value over what have been lackluster index returns. As with all of our strategies, the characteristics are consistent: talent, absolute and relative returns, long-term allocations, fragmented markets, and time.

Speaker Change: And in the first half of July , the M-Sites Capital Group onboarded an $860 million institutional account in the Emerging Markets Debt Opportunity Strategy.

Speaker Change: Another recognition of the quality and potential of our emerging markets lineup.

Speaker Change: Across the strategies highlighted on this page, we manage approximately $8 billion in AUM.

Speaker Change: We have considerable additional capacity and are poised to benefit as allocators come back to emerging markets or reallocate to emerging market managers who can add value over what have been lackluster index returns.

Eric Richard Colson: As with all of our strategies, the characteristics are consistent. Talent, Absolute and Relative Returns, Long-Term Allocations, Fragmented Markets, and Time. We will continue to execute and remain patient. Over time, we expect outcomes consistent with the value we have historically added for clients and generated for shareholders. I will now turn it over to CJ to discuss our recent financial outlook.

Speaker Change: As with all of our strategies, the characteristics are consistent. Talent, absolute and relative returns, long-term allocations,

Eric Colson: We will continue to execute and remain patient. Over time, we expect outcomes consistent with the value we have historically added for clients and generated for shareholders.

Speaker Change: Fragmented Markets and Time

Speaker Change: We will continue to execute and remain patient. Over time, we expect outcomes consistent with the value we have historically added for clients and generated for shareholders.

CJ Daley: I will now turn it over to CJ to discuss our recent financial outcomes.

Speaker Change: I will now turn it over to CJ to discuss our recent financial outcomes.

CJ Daley: Thank you, Eric. An overview of financial results begins on slide 8. Asset's under management ended the June quarter at 159 billion, down slightly from last quarter and up 11 percent from the June 2023 quarter. Net client cash outflows during the quarter were 1.6 billion. Net outflows and our growth and value strategies were partially offset by net inflows and our sustainable emerging markets and fixed income strategies. Second quarter outflows were lumpy and included two redemptions from non-US clients totaling 1.1 billion. As Eric mentioned, the second quarter included a roughly $800 million in flow in our sustainable emerging market strategy, nearly doubling the assets in that strategy.

Charles James Daley: An overview of financial results begins on slide eight. Assets under management ended the June quarter at $159 billion, down slightly from the previous quarter and up 11% from the June 2023 quarter. Net client cash outflows during the quarter were $1.6 billion. Net outflows in our growth and value strategies were partially offset by net inflows in our sustainable emerging markets and fixed income strategies. Second quarter outflows were lumpy and included two redemptions from non-U.S. clients totaling $1.1 billion.

CJ: Thank you, Eric. An overview of financial results begins on slide 8.

CJ: Assets under management ended the June quarter at $159 billion, down slightly from last quarter and up 11% from the June 2023 quarter.

CJ: Net client cash outflows during the quarter were $1.6 billion.

CJ: Net outflows in our growth and value strategies were partially offset by net inflows in our sustainable emerging markets and fixed income strategies.

CJ: Second quarter outflows were lumpy and included two redemptions from non-U.S. clients totaling $1.1 billion.

Charles James Daley: As Eric mentioned, the second quarter included a roughly $800 million inflow into our Sustainable Emerging Markets Strategy, nearly doubling the assets in that strategy. And in early July, we onboarded $860 million into our Emerging Markets Debt Opportunity Strategy. Average AUM for the quarter was up 3% sequentially and up 14% compared to the June 2023 quarter. Our complete GAAP and adjusted results are presented in our earnings release. Revenues for the quarter increased in line with average AUM, up 2% when compared to the March 2024 quarter.

CJ: As Eric mentioned, the second quarter included a roughly $800 million inflow in our Sustainable Emerging Markets Strategy, nearly doubling the assets in that strategy.

CJ Daley: And in early July, we onboarded 860 million into our emerging markets that opportunity strategy. Average AUM for the quarter was up 3 percent sequentially and up 14 percent compared to the June 2023 quarter.

CJ: And, in early July , we onboarded $860 million into our Emerging Markets Debt Opportunity Strategy.

CJ: Average AUM for the quarter was up 3% sequentially and up 14% compared to the June 2023 quarter.

CJ Daley: Our complete gap and adjusted results are presented in our earnings release. Revenues for the quarter increased in line with average AUM, up 2 percent when compared to the March 2024 quarter. Compared to the June 2023 quarter, revenues were up 11 percent on higher average AUM. Our average recurring fee rate for the quarter was 69 basis points, consistent with last quarter. The fee rate is down one basis point from the June 2023 quarter, largely due to strategy mix with the addition of lower fee fixing income inflows. Adjusted operating expenses for the quarter were up suddenly over the first quarter of 2024, primarily from travel associated with our annual investment forum held in the second quarter.

CJ: Our complete GAAP and adjusted results are presented in our earnings release.

CJ: Revenues for the quarter increased in line with average AUM, up 2% when compared to the March 2024 quarter.

Charles James Daley: Compared to the June 2023 quarter, revenues were up 11% on higher average AUM. Our average recurring fee rate for the quarter was 69 basis points, consistent with last quarter. The fee rate is down one basis point from the June 2023 quarter, largely due to strategy mix with the addition of lower fee fixed income inflows.

CJ: Compared to the June 2023 quarter, revenues were up 11% on higher average AUM.

CJ: Our average recurring fee rate for the quarter was 69 basis points, consistent with last quarter.

CJ: The fee rate is down one basis point from the June 2023 quarter, largely due to strategy mix with the addition of lower fee fixed income inflows.

Charles James Daley: Adjusted operating expenses for the quarter were up slightly over the first quarter of 2024, primarily from travel associated with their annual investment forum held in the second quarter. However, the increase in short-term incentive compensation from higher revenue was offset by seasonal declines in certain compensation-related expenses that we typically see in the second quarter of each year. In comparison to the same quarter last year, adjusted operating expenses were up $18 million, or 11%, primarily from higher revenue-based incentive compensation.

CJ: Adjusted operating expenses for the quarter were up slightly over the first quarter of 2024, primarily from travel associated with our annual investment forum held in the second quarter.

CJ Daley: The increase in short term incentive compensation from higher revenue was offset by seasonal decline in certain compensation-related expenses that we typically see in the second quarter of each year. In comparison to the same quarter last year, adjusted operating expenses are up 18 million dollars or 11 percent, primarily from higher revenue-based incentive compensation. Adjusted operating income increased 7 percent sequentially and 13 percent compared to last year's June quarter. Adjusted net income per adjusted share improved 8 percent compared to last quarter and 15 percent compared to the June 2023 quarter. Year-to-date revenues are up 12 percent compared to the same period in 2023 on higher average AUM.

CJ: The increase in short-term incentive compensation from higher revenue was offset by seasonal decline in certain compensation-related expenses that we typically see in the second quarter of each year.

CJ: In comparison to the same quarter last year, adjusted operating expenses are up $18 million, or 11%, primarily from higher revenue-based incentive compensation.

Charles James Daley: Adjusted operating income increased 7% sequentially and 13% compared to last year's June quarter. Adjusted net income per adjusted share improved 8% compared to last quarter and 15% compared to the June 2023 quarter. Year-to-date revenues are up 12% compared to the same period in 2023 on a higher average AUM. Adjusted operating expenses increased 11% from the 2023 six month year-to-date period, primarily due to higher incentive compensation on elevated revenues.

CJ: Adjusted operating income increased 7% sequentially and 13% compared to last year's June quarter.

CJ: Adjusted net income per adjusted share improved 8% compared to last quarter and 15% compared to the June 2023 quarter.

CJ: Year-to-date revenues are up 12% compared to the same period in 2023 on a higher average AUM.

CJ Daley: Adjusted operating expenses increased 11 percent from the 2023 six-month year-to-date period, primarily from higher incentive compensation on elevated revenues. Also contributing to the increase in compensation of benefits are higher fixed comp expenses from a 4 percent increase in the number of full-time associates and annual merit increases.

CJ: Adjusted operating expenses increased 11% from the 2023 six-month year-to-date period, primarily from higher incentive compensation on elevated revenues.

Charles James Daley: Also contributing to the increase in compensation and benefits are higher fixed comp expenses from a 4% increase in the number of full-time associates and an annual merit increase. Amortization of long-term incentive compensation increased primarily from the $4 million impact of the acceleration clause included in the 2024 annual grant discussed last quarter. We expect the long-term amortization to be $16 million in each of the third and fourth quarters of this year, excluding the mark-to-market impact.

CJ: Also contributing to the increase in compensation and benefits are higher fixed comp expenses from a 4% increase in the number of full-time associates and annual merit increases.

CJ Daley: Emeritization of long-term incentive compensation increased primarily from the 4 million dollar impact of the acceleration clause included in the 2024 annual grant. Discuss last. We expect the long-term amortization to be 16 million in each of the third and fourth quarters of this year, excluding the market market impact. Higher revenues year to date led to a 15% improvement in adjusted operating income and a 16% improvement in adjusted debt income for adjusted share over the comparable prior year period. In calculating our non-GAAP measures, non-operating income includes only interest expense and interest income. Although the income generated on our seat investments adds to shareholder economics, we fully exclude these investment gains from our adjusted results to provide transparency into our core business operations.

CJ: Amortization of long-term incentive compensation increased primarily from the four million dollar impact of the acceleration clause included in the 2024 annual grant discussed last quarter.

CJ: We expect the long-term amortization to be $16 million in each of the third and fourth quarters of this year, excluding the mark-to-market impact.

Charles James Daley: Higher revenues year to date led to a 15% improvement in adjusted operating income and a 16% improvement in adjusted net income for adjusted share over the comparable prior year period. In calculating our non-GAAP measures, non-operating income includes only interest expense and interest income.

CJ: Higher revenues year-to-date led to a 15% improvement in adjusted operating income and a 16% improvement in adjusted net income for adjusted share over the comparable prior year period.

CJ: In calculating our non-GAAP measures, non-operating income includes only interest expense and interest income.

Charles James Daley: Although the income generated on our SEED investments adds to shareholder economics, we fully exclude these investment gains from our adjusted results to provide transparency into our core business operations. Moreover, our balance sheet remains strong. We currently have $150 million of seed capital in our investment products with significant amounts of realizable capacity. As those products begin to scale, we will regain the seed capital to deploy into new products, or otherwise reinvest in the business or return it to shareholders.

CJ: Although the income generated on our seed investments adds to shareholder economics, we fully exclude these investment gains from our adjusted results to provide transparency into our core business operations.

CJ Daley: Our balance sheet remains strong. We currently have $150 million of seed capital in our investment products, but significant amounts of realizable capacity. As those products begin to scale, we will redeem the seed capital to deploy into new products; otherwise, reinvest in the business or return it to shareholders. In addition, our $100 million revolving credit facility remains unused. We continue to return capital to shareholders on a consistent and predictable basis through quarterly cash dividend payments and a year-end special dividend.

CJ: Our balance sheet remains strong. We currently have $150 million of seed capital in our investment products with significant amounts of realizable capacity.

CJ: As those products begin to scale, we will redeem the seed capital to deploy into new products, otherwise reinvest in the business or return it to shareholders.

Charles James Daley: In addition, our $100 million Revolving Credit Facility remains unused. We continue to return capital to shareholders on a consistent and predictable basis through quarterly cash dividend payments and a year-end special dividend. Consistent with our dividend policy, our Board of Directors declared a quarterly dividend of $0.71 per share with respect to the June 2024 quarter, which represents approximately 80% of the cash generated in the quarter. That concludes my prepared remarks, and I will now turn the call back to the operator.

CJ: In addition, our $100 million Revolving Credit Facility remains unused.

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

CJ Daley: Consistent with our dividend policy, our board of directors declared a quarterly dividend of 71 cents per share with respect to the June 2024 quarter, which represents approximately 80% of the cash generated in the quarter.

CJ: Consistent with our dividend policy, our Board of Directors declared a quarterly dividend of 71 cents per share with respect to the June 2024 quarter, which represents approximately 80% of the cash generated in the quarter.

Operator: That concludes my prepared remarks, and I will now turn the call back to the operator.

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

Unknown Executive: 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're using a speaker phone,

Operator: We will now begin the question and answer session. Do ask a question; you may press star, then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star, then two. Please limit your questions to two in order to allow time for other questions. Again, if you have a question, please press star, then one.

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

Speaker Change: To ask a question, you may press star, then 1 on your telephone keypad.

Unknown Executive: Please pick up your handset before pressing the keys. If at any time your question has been answered 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 other questions. Again, if you have a question, please press star. [inaudible] The first question comes from Alex Blostein with Goldman Sachs. Please go ahead.

Speaker Change: If you are using a speakerphone,

Speaker Change: 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,

Speaker Change: Please press star then 2.

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

Speaker Change: Again, if you have a question.

Speaker Change: Please press star, then 1.

Alex Flosene: The first question comes from Alex Flosene with Goldman Sachs. Please go ahead.

Speaker Change: The first question comes from Alex Blostein with Goldman Sachs.

Alex Flosene: Hey, good afternoon. Thanks for taking the question.

Alexander Blostein: Hey, good afternoon. Thanks for taking the time to ask the question. I was hoping we could start with the ALTS discussion that you started at the beginning of the presentation. So maybe spend a couple of minutes just walking through strategies that you expect to be most active in their fundraising goals over the next kind of 12 to 18 months within the ALTS kind of distribution and the footprint that you established there. And as you build out this part of the business, can you talk a little bit about the fee rate within the ALTS bucket and how that's likely to evolve based on where you expect the growth to go?

Speaker Change: Please go ahead.

Alex Flosene: I was hoping we could start with the old discussion that you started at the beginning of the presentation. So maybe spend a couple of minutes on just walking through strategies that you expect to be most active in their fundraising goals over the next kind of 12 to 18 months. Within the old kind of distribution in the footprint that you established there. And as you build out this part of the business, can you talk a little bit about the fear rate within the old bucket and how that's likely to evolve based on where you expect the growth to come from.

Alexander Blostein: Hey, good afternoon. Thanks for taking the question. I was hoping we could start with the old discussion that you started at the beginning of the presentation. So.

Speaker Change: Maybe spend a couple minutes on just walking through strategies that you expect to be most active in their fundraising goals over the next kind of 12 to 18 months.

Speaker Change: within the alts kind of distribution in the footprint that you established there. And as you build out this part of the business, can you talk a little bit about the fee rate within the alts bucket and how that's likely to evolve based on where you expect the growth to come from?

Jason A. Gottlieb: Sure. Hey, it's Jason.

Jason Gottlieb: Sure, hey, it's Jason.

Jason Gottlieb: You know, I think we've got pretty high expectations that all of the strategies in the old bucket will be active over the next, you know, several months, if not 12 to 18 months. You know, I'd highlight a few, you know, if you look at full of long constraint.

Speaker Change: Sure. Hey, it's Jason. You know, I think we've got

Jason A. Gottlieb: Pretty high expectations that all of the strategies in the ALTS bucket will be active over the next, you know, several months if not 12 to 18 months.

Jason A. Gottlieb: I think we've got pretty high expectations that all of the strategies in the ALTS bucket will be active over the next several months, if not 12 to 18 months. I'd highlight a few. If you look at global unconstrained, as you well know, the milestone of a three-year track record is a pretty meaningful milestone, and we're about six or seven months away from that. That strategy has continued to compound wealth at a meaningful absolute rate of return, provided diversification benefits, low correlation, low volatility, and produced really nice alpha for clients. We've put a strong campaign around that to get the word out in light of the fact that the M-Sites team has been managing this strategy going back well past a decade prior to joining Artisan.

Jason Gottlieb: As you well know, the milestone of the three year track record is a pretty meaningful milestone, and we're about six or seven months away from that. That strategy is continued to compound wealth at a meaningful absolute rate of return, provided diversification benefits, low correlation, low volatility. Produced really nice alpha for clients. You know, we've put a strong campaign around that to get it out. And light of the fact that, you know, the website team has been managing this strategy going back, you know, well past a decade prior to joining Artisan and so we feel like we've really got good momentum.

Speaker Change: I'd highlight a few, you know, if you look at Global Unconstrained.

Speaker Change: As you well know, the milestone of a three-year track record is a pretty meaningful milestone and we're about six or seven months away from that.

Speaker Change: That strategy is continue to compound wealth at a meaningful absolute rate of return.

Speaker Change: Provided diversification benefits, low correlation, low volatility.

Speaker Change: produced really nice alpha for clients. You know, we've put a strong campaign around that to get out in light of the fact that, you know, the M-Sites team has been managing the strategy going back

Speaker Change: Well past a decade prior to joining Artisan. And so we feel like we've really got good momentum for that strategy. And when the time comes, when the three are record.

Jason Gottlieb: For that strategy and when the time comes when the three or record hits, you know, well, if we think we'll be in a really good spot. When you think about credit opportunity, something that we've been talking about for a while, we're now, you know, well into our seventh year. Of performance, the five year number is generating a mid-teens net return to clients. It's delivering on pretty much every expectation that we can think of. The clients are looking for allocations within alt and fixed income are picking up. And we're seeing that activity in that in that volume pick up well. The pipeline feels, you know, really strong there.

Jason A. Gottlieb: We feel like we've really got good momentum for that strategy. When the time comes, when the three-year record hits, we think we'll be in a really good spot. When you think about credit opportunities, something that we've been talking about for a while, we're now well into our seventh year of performance. The five-year number is generating a mid-teens net return to clients.

Speaker Change: It's, you know, we think we'll be in a really good spot. When you think about credit opportunities, something that we've been talking about for a while, we're now well into our seventh year.

Speaker Change: of Performance. The five-year number is generating a mid-teens

Jason A. Gottlieb: It's delivering on pretty much every expectation that we can think of that clients are looking for. Allocations within alternative assets and fixed income are picking up, and we're seeing that activity and that volume pick up well. The pipeline feels really strong there. This isn't going to surprise you.

Speaker Change: Net return to clients. It's delivering on pretty much every expectation

Speaker Change: that we can think of that clients are looking for. Allocations within Alt and Fixed Income are picking up, and we're seeing that activity and that and that volume pick up well. The pipeline feels, you know, really strong there.

Jason Gottlieb: You know, this is going to surprise you, kind of post venture and just the, you know, the overhang from the macro makes it a little bit more of a challenge. So, you know, while there is that macro overhang, we are still actually still having clients engaging; they don't want to. The bump when if and when China does re rate and, you know, the fact that Tiffany and her team have just continued to deliver this year alone. I might get the the number exactly precisely wrong, but close here, but we're, you know, they're producing over a thousand basis points of excess return.

Jason A. Gottlieb: China post-venture and just the overhang from the macro makes it a little bit more of a challenge. While there is that macro overhang, we are actually still having clients engage. They don't want to miss the bump if and when China does re-rate. The fact that Tiffany and her team have just continued to deliver this year alone. I might get the number precisely wrong, but I'm close. They're producing over 1,000 basis points of excess return year-to-date, and that compounds on top of the long-term alpha that they've already been able to produce.

Speaker Change: This isn't going to surprise you, China post-venture and just the overhang from the macro makes it a little bit more of a challenge. So while there is that macro overhang, we are still actually still having clients engaging. They don't want to.

Speaker Change: to miss the bump if and when China does re-rate.

Tiffany: And, you know, the fact that Tiffany and her team have just continued to deliver this year alone. I might get the number exactly, precisely wrong, but I'm close here, but, you know, they're producing over a thousand basis points of excess return.

Jason Gottlieb: You're today, and that compounds on top of, you know, a long term alpha that they've already been able to produce.

Tiffany: Year-to-date and that compounds on top of you know long-term alpha that they've already been able to produce

Jason Gottlieb: And so that's us is more of a, you know, a timing, a timing issue. And then, you know, when you think about entero, you know, you've seen a really nice uptick in their performance more recently. That might take a little bit more time and light of the fact that they did have a, you know, a difficult alpha history over the last one to one to two years. But we were, we're thrilled that Chris has been able to sort of write the ship and put up some really good numbers.

Jason A. Gottlieb: That, to us, is more of a timing issue. Then when you think about Antero, you've seen a really nice uptick in their performance more recently. That might take a little bit more time in light of the fact that they did have a difficult alpha history over the last one to two years, but we're thrilled that Chris has been able to right the ship and put up some really good numbers. When you think about the fee rates, all of our strategies have fee rates commensurate with the alpha that we expect them to deliver.

Tiffany: And so that to us is more of a, you know, a timing, a timing issue.

Speaker Change: And then, you know, when you think about Antero, you know, you've seen a really nice uptick in their performance more recently.

Speaker Change: That might take a little bit more time in light of the fact that they did have a difficult alpha history over the last one to two years. But we're thrilled that Chris has been able to right the ship and put up some really good numbers.

Jason Gottlieb: You know, when you, when you think about the fee rates. You know, all of our strategies have, you know, fee rates measure it with the alpha that we expect them to deliver on. You know, global on constrained the, the, the expense ratio and management fees are somewhere around a hundred basis points, and, you know, we would expect that to be maintained. Some of the new things that we're looking at on the rise and would continue to deliver in that, you know, sort of a hundred basis point category in that under basis point range. So we don't see any reason to believe that, you know, that trend won't continue.

Speaker Change: When you think about the fee rates, all of our strategies have fee rates commensurate with the alpha that we expect them to deliver on. Global unconstrained, the expense ratio and management fees are somewhere around 100 basis points and we would expect that to be maintained.

Jason A. Gottlieb: Globally, the expense ratio and management fees are somewhere around 100 basis points, and we would expect that to be maintained. Some of the new things that we're looking at on the horizon would continue to deliver in that 100 basis point category and that 100 basis point range. We don't see any reason to believe that this trend won't continue.

Speaker Change: Some of the new things that we're looking at on the rise and would continue to deliver in that, you know, sort of hundred basis point category and that hundred basis point range. So we don't see any reason to believe that, you know, that trend won't continue.

Alex Flosene: Gotcha.

Jason A. Gottlieb: Gotcha. Yeah, no. I was thinking that the fury might actually start to kind of creep up a little bit in that bucket, more meaningfully when some of these come online.

Alex Flosene: Yeah, now I was thinking that the furate might actually start to kind of creep up a little bit, right? And that bucket more meaningful if some of these. Yeah, these ones come online. Great. Yeah. Right. Cool. All right.

Speaker Change: Gotcha. Yeah, no, I was thinking that the Fiori might actually start to kind of creep up a little bit, right, in that bucket more meaningfully if some of these wins come online. Great. Yeah, I think you're right.

Jason A. Gottlieb: Great. Yeah, you're right. Um, cool. All right. Well, speaking of fee rates, can you maybe give a little bit of color on the $800 million you highlighted in the emerging market debt? Sounds like it's funded in July and whether or not that's going to have any impact on the fee rate for fixed income as we look forward?

Alex Flosene: Well, speaking of furate, can you maybe give a little bit of color on the $800 million when you highlighted an emerging market debt? Sounds like it funded in July and whether or not that's going to have any, you know, any impact on the furate for fixed income as we look forward. Yeah.

Speaker Change: Cool. All right. Well, speaking of FEAR 8, can you maybe give a little bit of color on the $800 million win you highlighted in emerging market debt? Sounds like it's funded in July and whether or not that's going to have any impact on the FEAR 8 for fixed income as we look forward.

Eric Richard Colson: Yeah, Alex, it's Eric. The, you know, fee rate was, you know, highly competitive for a large mandate. I think the positive we're starting to see in the marketplace as people rebalance and restructure is we don't see the trend towards just taking the lowest fee rate bid, which, you know, we were always hesitant to bid over the last few years when large mandates were just completely, completely a scale and fee game.

Eric Colson: Alex, it's Eric. The, you know, the furate was, you know, highly competitive for a large mandate. I think the positive we're starting to see in the marketplace as people rebalance and restructure is we don't see the trend towards just taking the lowest fee rate bid, which, you know, we were always hesitant to bid over the last few years when large mandates were just completely. Completely a scale and fee game and more recent competition. We see a shift towards finding focus, high quality, active managers and competing at a fee rate that is competitive for large allocations, but I think that the positive trend and takeaway for us is we're starting to really compete there across the board.

Speaker Change: Yeah, Alex, it's Eric. The, you know, the fee rate was, you know, highly competitive for a large mandate. I think the positive we're starting to see in the marketplace as people rebalance and restructure is we don't see the

Speaker Change: The trend towards just taking the lowest fee rate bid, which, you know, we were always hesitant to bid over the last few years when large mandates were just completely a scale and fee game.

Eric Richard Colson: In more recent competition, we see a shift towards finding focused, high-quality, active managers and competing at a fee rate that is competitive for large allocations, but That's the positive trend and takeaway for us is that we're starting to really compete there across the board. When we look at our pipeline across the firm, we're seeing a lot of larger mandates where that's the case, and it's across many of our investment franchises as we look out the next couple of quarters.

Speaker Change: In more recent competition, we see a shift towards finding focused, high-quality, active managers and competing at a fee rate that is competitive for large allocations, but

Speaker Change: I think that's the positive trend and takeaway for us is we're starting to really compete there across the board. When we look at our pipeline across the firm, we're seeing a lot of larger mandates.

Eric Colson: When we look at our pipeline across the firm, we're seeing a lot of larger mandates where that's the case, and it's across many of our investment franchises as we look out the next couple of quarters.

Speaker Change: where that's the case and it's across many of our investment franchises as we look out the next couple of quarters.

Alex Flosene: Okay. Great. Thanks.

Alexander Blostein: Okay, great. Thanks. I'll hop back in.

Alex Flosene: I'll hop back into you.

Bill Katz: The next question comes from Bill Katz with TV Cohen. Please go ahead.

Unknown Executive: The next question comes from Bill Katz with TV Cowan. Please go ahead. Okay, thanks.

Speaker Change: Okay, great. Thanks. I'll hop back into queue.

William Raymond Katz: Okay, thank you very much for all the color. So just taking the question, just in terms of the opportunity set, you mentioned trying to get bigger alternatives, both in the manufacturing and distribution side. Could you talk a little bit about how you're thinking about incremental teams now and how that sort of played out on sort of a de novo versus maybe an inorganic opportunity? And then how you're facing off in the distribution; there are a lot of alternative managers who have built pretty sizable sales forces and speak to the importance of that sort of gain traction with the traditional financial advisor community to increase those allocations.

Speaker Change: The next question comes from Bill Katz with TV Cowan. Please go ahead. Okay, thank you very much for all the color. So just, I'm taking the question, just in terms of the opportunity set you mentioned trying to get bigger alternatives both on the manufacturing and the distribution side.

Bill Katz: Okay. Thank you very much for all the color.

Bill Katz: So just and taking a question. Just in terms of the opportunity set, you mentioned trying to get bigger and alternative, both in the manufacturing and the distribution side. Could you talk a little bit about how are you thinking about incremental teams now and how that was so I'll play through on to a bit of the novel versus maybe an acquisition or an organic opportunity and then how you're facing off in the distribution. There's a lot of the alternative managers who have built pretty sizable sales forces and speak to the import of that sort of gain traction with the traditional financial advisor community to increase those allocations.

William Raymond Katz: Could you talk a little bit about how you're thinking about incremental teams now and how that sort of play through on sort of a de novo versus maybe an acquisition organic opportunity

William Raymond Katz: And then how you're facing off in the distribution, there's a lot of the alternative managers who have built pretty sizable sales forces and speak to the import of that to sort of gain traction with the traditional financial advisor community to increase those allocations. So just trying to get a sense on.

Bill Katz: So just trying to get a sense on where else to look for incremental investment by the team to grow all and then how to leverage that to the retail distribution channel. Notwithstanding your notion that you don't want to become like a distribution-led platform.

William Raymond Katz: So just trying to get a sense of where else to look for incremental investment by the team to grow alternative revenue streams and then how to leverage that through the retail distribution channel, notwithstanding your notion that you don't want to become like a distribution-led platform. Thank you.

Speaker Change: Where else to look for incremental investment by the team to grow alts and then how to leverage that through the retail distribution Channel notwithstanding your notion that you don't want to become like a distribution led platform. Thank you

Jason Gottlieb: Thank you.

Jason Gottlieb: Hey Bill, it's Jason.

Jason A. Gottlieb: Jason, I'll take the first part of your question. We're certainly spending incremental time with both our existing franchises, where we think that there are, you know, some broad opportunities to expand degrees of freedom and move incrementally across the board into alternatives. So that's taking up a fair bit of our time. And we're excited to partner with our existing teams; that's going to be the highest investment, and the highest and best use of our time.

Jason Gottlieb: I'll take the first part of your question. We're certainly spending incremental time with both our existing franchises where we think that there's some broad opportunities to expand degrees of freedom and move incrementally across the board into alternatives. So that's taking up a fair bit of our time, and we're excited to partner with our existing teams. That's going to be the highest and best use of our time. But when we look across the landscape, we are extremely busy evaluating external opportunities as well. And, you know, as you can imagine, it ranges across a number of different asset classes.

Speaker Change: Hey Bill, it's Jason. I'll take the first part of your question.

William Raymond Katz: We're certainly spending incremental time with both our existing franchises, where we think that there's, you know, some broad opportunities to expand degrees of freedom and move incrementally across the board into alternatives.

William Raymond Katz: So that's taking up a fair bit of our time, and we're excited to partner with our existing teams. That's going to be the highest and best use of our time.

Jason A. Gottlieb: But when we look across the landscape, we are extremely busy evaluating external opportunities as well. And, you know, as you can imagine, it ranges across a number of different asset classes; we're seeing everything from private equity, private credit, private real estate, GP stakes, investment opportunities, you name it. And, you know, I would just highlight something that I think we talked about last quarter of the previous quarter before, but our investment strategy group, which is a very deep and experienced team that partners with our existing franchises and certainly is out there in the market, talking with new opportunities, you know, is well equipped to handle the volume.

William Raymond Katz: But when we look across the landscape, we are extremely busy evaluating external opportunities as well. And, you know, as you can imagine, it ranges across a number of different asset classes. We're seeing everything from

Jason Gottlieb: We're seeing everything from private equity, private credit, private real estate, GP stakes, investment opportunities. You name it.

William Raymond Katz: Private Equity, Private Credit, Private Real Estate, GP Stakes, Investment Opportunities

Jason Gottlieb: And, you know, I would just highlight something that I think we talked about the last quarter of the quarter before, but our investment strategy group, which is a very deep in experience team that partners with our existing franchises and certainly is out there in the market talking with new opportunities, you know, is well equipped to handle the volume. But we have seen a pretty meaningful uptick in the volume of opportunities that coming that's coming across our desk. And they are coming in many different forms. There's, you know, clearly the lift-out approach, which we've incorporated into our business for the last 30 years and certainly acquisition opportunities across all those asset classes.

William Raymond Katz: You name it. And, you know, the I would just highlight something that I think we talked about last quarter of the quarter before, but our investment strategy group, which is a.

William Raymond Katz: Very deep and experienced team that partners with our existing franchises and certainly is out there in the market Talking with with new opportunities You know is well equipped to handle the volume But we have seen a pretty meaningful uptick in the in the volume of opportunities that coming that's coming across our desk

Jason A. Gottlieb: But we have seen a pretty meaningful uptick in the volume of opportunities that are coming across our desks, and they are coming in many different forms. There's, you know, clearly the lift-out approach, which we've incorporated into our business for the last 30 years, and certainly acquisition opportunities across all those asset classes, and we're not saying no to anything. We want to look and be objective and evaluate each one on the merits, but, as you've heard us say numerous times, it's always going to come down to the talent. If we find the right talent in the right asset class that diversifies the platform, then that's what excites us, and if we can make it work, we will certainly do it.

William Raymond Katz: And they are coming in many different forms. There's, you know, clearly the lift out approach, which we've

William Raymond Katz: which we've incorporated into our business for the last 30 years and certainly

Jason Gottlieb: And we're not saying no to anything. We want to look and be objective and evaluate each one on the merits, but it's, you know, as you've heard us say numerous times, it's always going to come down to the talent. If we find the right talent in the right asset class that diversifies the platform, then that's what excites us. And if we can make it work, we will certainly do it.

William Raymond Katz: Acquisition opportunities across all those asset classes and we're we're not saying no to anything we want to look and be objective and

William Raymond Katz: and evaluate each one on the merits. But it's, you know, as you've heard us say numerous times, it's always gonna come down to the talent. If we find the right talent and the right asset class that diversifies the platform, then that's what excites us. And if we can make it work, we will certainly do it.

Eric Colson: I'm Bill Athera, Eric. With regards to the question on the distribution. We've certainly seen quite a few alternative shops filled out distribution to mainly capture the wealth channel, is what we're seeing and hearing. We have added a couple of individuals to focus on alternative strategy sales. The feedback we received from those individuals as we are hiring them is that we were an extremely attractive organization to join because of our current footprint in the intermediary channel. We have 80 plus ratings across the broker-dealer space. We have an enormous breadth in the large financial advisor or RIA market, and we have an established network in the bank trust world.

Eric Richard Colson: And Bill, if you're as Eric with regards to the question about distribution, we certainly have seen quite a few alternative shops filled out distribution, to mainly capture the wealth channel is what we're seeing and hearing. We have added a couple of individuals to focus on alternative strategy sales. The feedback we received from those individuals as we were hiring them is that we were an extremely attractive organization to join because of our current footprint in the intermediary channel.

William Raymond Katz: Bill is here as Eric with regards to the question on the distribution. We've certainly seen quite a few alternative shops build out distribution.

Speaker Change: To mainly capture the wealth channel is what we're we're seeing and hearing and We have added a couple of individuals to focus on alternative strategy sales

William Raymond Katz: [inaudible]

William Raymond Katz: feedback we received from those individuals as we are hiring them is that we were an extremely attractive organization.

William Raymond Katz: to join because of our current footprint in the intermediary channel. We have 80 plus ratings across the broker-dealer space. We have an enormous breadth in the large financial

Eric Richard Colson: We have 80 plus ratings across the broker-dealer space. We have an enormous breadth in the large financial, advisor, RIA Market, and we have an established network in the bank trust world. It really is just connecting the relationship to the alternative side of the house, which gives us a leg up versus starting from zero.

William Raymond Katz: Advisor, RIA Market, and we have an established network in the bank trust world. It really is just connecting the relationship to the alternative side of the house which gives us a leg up versus starting from zero.

Eric Colson: It really is just connecting the relationship to the alternative side of the house, which gives us a leg up versus starting from zero. That's helpful.

Bill Katz: Then just coming back to your commentary around the opportunity here for emerging markets to pick up both in terms of the season of your platform as well as potential allocations.

Unknown Executive: That's helpful. And then just coming back to your commentary around the opportunity here for emerging markets to pick up, both in terms of the seizing of your platform as well as potential allocations. Maybe two parts, where might those allocations be coming from and what are the implications for the rest of your business, the growth and the value side of the equation? And then you mentioned the big win in July, and what if you could give us a broader update of what you're seeing and sort of some of the other parts of the business to net up against that?

Speaker Change: And then just coming back to your commentary around the opportunity here.

Speaker Change: For emerging markets to pick up both in terms of the seizing of your platform as well as potential allocations

Bill Katz: Maybe two part. Where might those allocations be coming from, and what are the implications for the rest of your business, the growth and the value side of the equation? And then you mentioned the big win in July, and what if you can give us a broader update of what you're seeing and some of the other parts of the business to net up against that.

Speaker Change: Maybe two part, where might those allocations be coming from and what are the implications for the rest of your business, the growth and the value side of the equation?

Speaker Change: And then you mentioned the big win in July . I wonder if you can give us a broader update of what you're seeing in some of the other parts of the business to net up against that. Thank you.

Eric Colson: Thank you. Primarily in the emerging markets, we see a lot of discussion around the institutional channel. You've seen an array of discussions go on over the last year. Some people have excluded emerging markets altogether. Some people are talking about separating out China, and many are looking at their targets and wondering should they be rebalancing up or restructuring managers to address with the lower returns. Netnet, we think any discussion around emerging market allocations and any rebalancing back to target or restructuring benefits us enormously. Given the mix of strategies we have, especially on the emerging market equities and, more recently, on the emerging market debt, as our emerging market debt seasons and gets to that three-year record, and as we increase the AUM in those strategies, we're going to be able to compete at the institutional level where typically a three-year and asset minimum is required.

Unknown Executive: primarily in emerging markets. We see a lot of discussion around the institutional channel. You've seen an array of discussions go on over the last year.

Speaker Change: Primarily in the emerging markets we see a lot of discussion around the institutional channel. You've seen an array of discussions go on over the last year. Some people have excluded.

Unknown Executive: Some people have excluded Emerging Markets altogether. Some people are talking about separating out China, and many are looking at their targets and wondering whether they should be rebalancing up or restructuring managers to address the lower returns. Net-net, we think any discussion around emerging market allocations and any rebalancing back to targets or restructuring benefits us enormously. [inaudible] at the institutional level, where typically a three-year and asset minimum is required.

Speaker Change: Emerging markets all together. Some people are talking about separating out China.

Speaker Change: and many are looking at their targets and wondering should they be rebalancing up or restructuring managers to address with the the lower returns.

Speaker Change: NetNet, we thank any discussion around emerging market allocations and any rebalancing back to target or restructuring benefits us enormously.

Speaker Change: given the mix of strategies we have.

Speaker Change: especially on the emerging market equities, and more recently on the emerging market debt as our emerging market debt seasons and gets to that three-year record. And as we increase the AUM in those strategies, we're going to be able to compete

Speaker Change: at the institutional level, where typically a three-year and asset minimum is required.

Eric Colson: So we have a positive outlook on our emerging market's opportunity set and see it primarily occurring in the institutional, both US and non-US; maybe a little bit more emerging market debt outside the US and equities in the US, but that would be a slight difference. And with regards to the other large mandates, it's across the platform that we see this tilt as people may have brought down their active weighting versus passive. They've also rebalanced and structured towards higher quality active managers that has benefited off, and they step back away from just going after the lowest fee possible as they rebalance the managers.

Unknown Executive: So we have a positive outlook on our emerging markets opportunity set and see it primarily occurring in the institutional, both U.S. and non-U.S., maybe a little bit more emerging market debt outside the U.S. and equities in the U.S., but that would be a slight difference. And with regard to the other large mandates, it's across the platform that we see this tilt as people may have brought down their They've also rebalanced and structured their funds towards higher quality active managers, and that has benefited us. And they've stepped back away from just going after the lowest fee possible as they've rebalanced the managers. We've seen multiple, at least five-plus franchises, compete on large mandates on a go-forward basis.

Speaker Change: So we have a positive outlook on our emerging markets opportunity set.

Speaker Change: and see it primarily occurring in the institutional, both US, non-US, maybe a little bit more emerging market debt outside the US and equities in the US, but that'd be a slight difference.

Speaker Change: And with regards to the other large mandates, it's across the platform that we see this tilt as people may have brought down their active weighting versus passive.

Speaker Change: They've also rebalanced and structured towards higher quality active managers that has benefited us and they've stepped back away from just going after the lowest fee possible as they've rebalanced the managers. So we've seen

Eric Colson: So we've seen multiple, at least five-plus franchises compete on large mandates on a go-forward basis.

Speaker Change: Multiple, at least five plus, franchises compete on large mandates on a go-forward basis.

Operator: This concludes our question and answer session and the Artisan Partners Asset Management business update and 2024 earnings call. Thank you. You may now disconnect.

Unknown Executive: This concludes our question and answer session and the Artisan Partners Asset Management Business Update and 2024 earnings call. Thank you. You may now disconnect.

Speaker Change: Thank you.

Speaker Change: This concludes our question and answer session and the Artisan Partners Asset Management Business Update and 2024 Earnings Call. Thank you. You may now disconnect.