Artisan Partners Asset Management Q4 2024 Earnings Report

Artisan Partners Asset Management EPS Results

• Actual EPS: $1.05
• Consensus EPS: $0.97
• Beat/Miss: Beat by +$0.08
• One Year Ago EPS: N/A

Artisan Partners Asset Management Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $293.50 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Artisan Partners Asset Management Announcement Details

• Quarter: Q4 2024
• Date: 2/4/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, February 5, 2025
• Conference Call Time: 1:00PM ET

Artisan Partners Asset Management (NYSE:APAM) is publicly owned investment manager. It provides its services to pension and profit sharing plans, trusts, endowments, foundations, charitable organizations, government entities, private funds and non-U.S. funds, as well as mutual funds, non-U.S. funds and collective trusts. It manages separate client-focused equity and fixed income portfolios. The firm invests in the public equity and fixed income markets across the globe. It invests in growth and value stocks of companies across all market capitalization. For fixed income component of its portfolio the firm invests in non-investment grade corporate bonds and secured and unsecured loans. It employs fundamental analysis to create its portfolios. Artisan Partners Asset Management Inc. was founded in 1994 and is based in Milwaukee, Wisconsin with additional offices in Atlanta, Georgia; New York City; San Francisco, California; Leawood, Kansas; and London, United Kingdom.

Artisan Partners Asset Management Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day, everyone, and welcome to the Artisan Partners Fourth Quarter twenty twenty four Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Brennan Hughes, Head of Investor Relations.

[Operator]

Please go ahead.

[Brendan Hughes, Investment Advisor at Lafayette Investments]

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

[Brendan Hughes, Investment Advisor at Lafayette Investments]

These risks and uncertainties may cause actual results to differ materially from those disclosed in the statement, and we assume no obligation to update or revise any of these statements following the presentation. In addition, some of our remarks today will include references to non GAAP financial measures. You can find reconciliations of these 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 product or a recommendation for any investment service. I will now turn it over to Eric.

[Eric Colson, CEO at Artisan Partners Asset Management]

Thank you, Brennan, and thank you, everyone, for joining the call or reading the transcript. We passed our thirtieth anniversary as a firm in December. Throughout our history, we have remained true to who we are as a high value added investment firm designed for talent to thrive in a thoughtful growth environment. Based on those first principles, we have built an investment platform that supports, accelerates and amplifies investment talent in order to invest differently, generate compelling returns and build durable investment franchises. We combine autonomy, entrepreneurialism and economic alignment with the depth and breadth of resources available to a global multi asset class investment manager with over $160,000,000,000 of assets under management.

[Eric Colson, CEO at Artisan Partners Asset Management]

Each of our teams benefits from best of breed and customized support across people, technology, data, execution and capital. All operations are designed for and responsive to investment team needs. Distribution includes business leaders dedicated to individual investment teams and is designed to protect investment team time and optimize the overall multi channel global distribution effort. Firm leadership is independent, has no investment responsibilities and is dedicated to making each investment franchise successful and sustainable. We believe our investment platform is a force multiplier and compounding machine.

[Eric Colson, CEO at Artisan Partners Asset Management]

On our platform, differentiated thinkers build durable investment franchises that seek to compound capital for decades. Slide two shows how our platform has expanded over time. In 02/2004, we had four investment teams managing seven relatively constrained public equity strategies. In 2014, after our IPO, we had six investment teams managing 13 public equity strategies and one newly launched fixed income strategy. Today, we have 11 investment teams managing 25 strategies spanning long only equities, longshort equity, U.

[Eric Colson, CEO at Artisan Partners Asset Management]

S. High yield, longshort credit, emerging market debt, global macro and private assets. As Jason will discuss, we are firmly established in fixed income with two best in class investment franchises and we are gaining more traction and alternatives every day. As we have broadened our platform by geography, style, client base and asset class, we have increased our avenues for growth. In 2024, '13 of our 25 investment strategies achieved net inflows for the year.

[Eric Colson, CEO at Artisan Partners Asset Management]

10 of our 25 strategies achieved net inflows in excess of $100,000,000 which included equities, fixed income and alternatives and spanned seven of our 11 investment teams. With each additional investment team, we expand the capabilities of our investment platform, demonstrate the repeatability of our process and increase the probability of success for existing teams and new talent. I will now turn it over to Jason to speak about our two credit oriented franchises, the success of which demonstrates the power and repeatability of the Artisan investment platform.

[Jason Gottlieb, President at Artisan Partners Asset Management]

Thank you, Eric.

[Jason Gottlieb, President at Artisan Partners Asset Management]

A little over ten years ago, we had no history in fixed income investing, no fixed income investment talent and no fixed income investment operations. Today, we have two exceptional credit oriented investment franchises. In 2024, the Denver based credit team led by Brian Krug passed its tenth anniversary, raised $1,700,000,000 of net inflows and now manages nearly $12,000,000,000 The Boston based Emsights Capital Group led by Mike Surami and Mike O'Brien raised $1,900,000,000 of net inflow and now manages nearly $3,000,000,000 Collectively, the two teams raised $3,600,000,000 in 2024 and now managed nearly $15,000,000,000 in six different strategies, including two alternative strategies. The successful business development is driven by exceptional investment performance for clients. Since inception and after fees, the high income, emerging markets debt opportunities and emerging markets local opportunities strategies have generated 174 basis points, seven twenty basis points and two forty one basis points respectively of out performance annually versus their benchmarks.

[Jason Gottlieb, President at Artisan Partners Asset Management]

The absolute return oriented credit opportunities and global unconstrained strategies have generated average annual returns of 10.419.76% respectively since inception after fees. The quality and uniqueness of these strategies is reflected in their weighted average effective fee rate, which was 67 basis points in 2024. That includes nearly $12,000,000 in performance fees earned in the fourth quarter, which CJ will further discuss. We are still early on our credit journey. As we have said in the earnings release, at Artisan, a decade is not that long and three years is just the blink of an eye.

[Jason Gottlieb, President at Artisan Partners Asset Management]

When we partner with new talent, we focus on getting them up and running quickly and with high quality support. We provide time and a distraction free environment so that the investment team can put their time, energy and focus into building a foundation of people and process and a track record of investing success. Only when the foundation is firmly in place do we begin to develop a business with greater commercial breadth. That is what we have been doing with the credit team over the last several years and what we are beginning to do with the M sites Capital Group. We aim for durable success and long term growth, the precise form of which is unpredictable at the time talent joins Artisan.

[Jason Gottlieb, President at Artisan Partners Asset Management]

Slide four shows our execution of this deliberate process with the M sites Capital Group. We had long been on the hunt for talent in emerging markets debt. It's an asset class with a large opportunity set in which investment talent can differentiate and long term asset allocation demand exists. We had spoken with numerous EM debt managers prior to meeting Mike Cerami and Mike O'Brien in early twenty twenty one. Once we met them, we embarked on a rigorous process of getting to know them, understanding their process and track records, educating them about Artisan Partners and determining the appropriate terms and timing for them to join our platform.

[Jason Gottlieb, President at Artisan Partners Asset Management]

They ultimately joined Artisan in September of twenty twenty one and established the M sites Capital Group. Once onboard, it was imperative to minimize the time before they began managing capital and reestablish a track record. Seven months after they joined the firm, we launched Artisan Global Unconstrained, which has the ability to invest directly in over 89 markets and since inception has invested in sovereign debt, corporate debt, loans, equities, options, currency forwards and futures, commodity derivatives, CDS and CDX, interest rates and repurchase agreements. A month later, we launched Artisan Emerging Market Debt Opportunities. And three months after that, we launched Artisan Emerging Markets Local Opportunities.

[Jason Gottlieb, President at Artisan Partners Asset Management]

Within a year from the leadership team joining Artisan, the M sites Capital Group comprised 13 individuals and was managing three strategies. Mike and Mike built the team just the way they wanted it. Working with them, we delivered a customized operating stack to support their process, their execution and their analytics. Simultaneously, we resourced the team with a dedicated business leader with previous experience building a large emerging market step business. In the third quarter of twenty twenty three, we accepted large strategic mandates in each of the emerging markets local opportunities and global unconstrained strategies.

[Jason Gottlieb, President at Artisan Partners Asset Management]

We accepted similar large strategic mandates in the Emdoe and MLO strategies in the third and fourth quarter of twenty twenty four respectively. The team has a very firm foundation and is poised for further success. Each strategy will hit its third anniversary this year, which we believe will accelerate business development, especially in pool vehicles. More generally, I think the process we have undertaken over the past four years to build the M sites Capital Group is a perfect example of the power of our investment platform. We found the right talent.

[Jason Gottlieb, President at Artisan Partners Asset Management]

We supported them for success. We focused on the investment performance. We structured distribution to work for the team and minimize distraction. We worked quickly and with high quality. We delivered results and we established the foundation for something that can be very powerful for a very long time.

[Eric Colson, CEO at Artisan Partners Asset Management]

Thank you, Jason. I want to expand upon your final point and broaden the lens. What we have accomplished with the Emsights Capital Group is what we have been accomplishing with investment talent repeatedly over a long period of time. Slide five shows AUM after one, two and three years for the five investment teams we have established since our IPO in 2013. Within three years of joining our firm, each of these five teams reached a level of foundational capital that allowed them to execute their investment strategy, build upon initial track records and establish the economic foundation for long term franchise development.

[Eric Colson, CEO at Artisan Partners Asset Management]

Capital for talent to manage is a critical component of our investment platform. We have proven our ability to deliver early foundational capital for new talent. In 2025, we will celebrate another important milestone, the tenth anniversary of the Developing World strategy. Working closely with founding portfolio manager, Louis Kaufman, we have designed and communicated the Developing World strategy as a highly differentiated means of accessing emerging markets demand opportunities via an enlarged opportunity set including firms domiciled in developed markets. Since inception and after fees, the Developing World strategy has generated a cumulative return of 157%, which is more than four times greater than the MSCI Emerging Markets Index.

[Eric Colson, CEO at Artisan Partners Asset Management]

Lewis is an incredibly experienced, thoughtful and differentiated investor. He is truly one of a kind, which is reflected in his performance relative to the index. As we celebrate the tenth anniversary, we are excited about the opportunity in front of Lewis and the developing world strategy, especially in the wealth marketplace, where investors are looking for differentiation and absolute return. Approximately $95,000,000,000 of our AUM is managed for intermediated wealth clients. We have broad and deep relationships across the space.

[Eric Colson, CEO at Artisan Partners Asset Management]

It is growing and there is demand for differentiated absolute return oriented strategies. We have reoriented our distribution structure to better address the wealth and alternatives marketplace. And we believe there is tremendous opportunity to bring more of our investment platform to existing and new intermediated wealth clients, in addition to the traditional institutional business. In 2025, we remain committed to building our investment platform, developing our existing franchises, adding new talent to the platform and tapping into demand from investors around the world seeking high value added investments. I will now turn it over to CJ to discuss our most recent financial results.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

Thank you, Eric. An overview of financial results begins on Slide seven. Fourth quarter results reflect the outcome of our quality business model, which drives durable growth and long term returns for clients and shareholders. Compared to the September, revenues rose 6%, adjusted operating income was up 12% and our adjusted operating margin improved by 180 basis points. More specifically, assets under management ended the December at $161,000,000,000 down 4% from last quarter and up 7% from the end of twenty twenty three.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

Net client cash outflows during the December were approximately $800,000,000 and included an outflow from a client rebalance on a $1,100,000,000 sub advised mandate. Full year net client cash outflows improved slightly to 3,700,000,000 Fourth quarter and full year 2024 represent the tenth consecutive quarter and eleventh consecutive year of positive flows for our fixed income business. Average AUM for the quarter was up 2% sequentially and up 18% compared to the December, while full year average AUM improved 15%. In the fourth quarter, the equity Artisan Funds completed their annual income and capital gain distributions. The amount of distributions not reinvested in the Artisan's Funds totaled $795,000,000 for the quarter and $1,200,000,000 for the full year.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

This amount is presented separately from client cash outflows. Our complete GAAP and adjusted results are presented in our earnings release. Revenues for the quarter increased 6% compared to the September and up 19% compared to the prior year fourth quarter. The December reflects approximately $17,000,000 of performance fees from seven different strategies. Included in that amount is a $2,400,000 performance fee earned on a consolidated investment product, which is reflected in non operating income as required by accounting rules.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

As of the end of twenty twenty four, approximately 3% of our AUM is subject to performance fees and the majority of those arrangements are annual fees with measurement dates at the December. Our weighted average recurring fee rate for the quarter, excluding performance fees, was 68 basis points, reflecting the growing portion of our AUM and lower fee fixed income strategies. Inclusive of performance fees, our weighted driver fee rate for the fourth quarter was 72 basis points. Adjusted operating expenses for the quarter were up 3% from the third quarter of twenty twenty four and eleven percent for the same quarter last year, primarily from higher incentive compensation expense due to increased revenues. Adjusted operating income increased 12% sequentially and 37% compared to the same quarter last year as a result of revenue growth outpacing increases in operating expenses.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

Adjusted net income per adjusted share improved 14% compared to last quarter and 35% compared to December. Full year 2024 revenues were up 14% compared to 2023 on higher average AUM. Adjusted operating expenses increased 10% from 2023, primarily from higher incentive compensation on elevated revenues. Also contributing to the increase in compensation and benefits was higher fixed compensation expenses from an increase in the number of full time associates and annual base salary merit increases. Additionally, amortization of long term incentive compensation expense increased primarily from the $6,000,000 impact of the retirement acceleration clause discussed during the first quarter twenty twenty four call and the net increase from the impact of the addition of the January 2024 long term incentive award grants.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

Higher revenues in 2024 led to a 22% improvement in adjusted operating income and a 23% improvement in adjusted net income per adjusted share over 2023. In calculating our non GAAP measures, non operating income includes only interest expense and interest income. Although valuation changes on our seed investments impact shareholder economics, we fully exclude these valuation changes from our adjusted results to provide transparency into our core business operations. Turning to Slide 11, our balance sheet remains strong. We currently have $155,000,000 of seed capital in our investment products with significant capacity.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

As strategies reach scale and our seed investments are redeemed, any gains realized are included in the cash available for corporate purposes, seed investment or as an addition to our year end special dividend. In addition, our $100,000,000 revolving credit facility remains unused. $60,000,000 of our senior notes will mature in August 2025. We currently expect to refinance the maturity amounts of new series of long term senior notes. We continue to return capital to shareholders on a consistent and predictable basis through quarterly cash dividend payments and a year end special dividend.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

Consistent with our dividend policy, our Board of Directors declared a quarterly dividend of $0.84 per share with respect to the December and an additional $0.5 for the year end special dividend. Dividends declared with respect to 2024 cash generated totaled $3.48 per share, an increase of 25% from the dividends declared with respect to 2023 cash generation. The special dividend declared with respect to 2024 was 47% larger than the previous year end special dividend as a result of higher earnings and realized gains on seed capital redemptions. Dividends declared with respect to 2024 represent an 8% dividend yield calculated based on the closing price of APAM common stock on 12/31/2024. Consistent with prior years, a portion of cash available for the special dividend has been retained for future growth initiatives.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

Looking ahead to 2025, our Board approved the 2025 annual long term incentive award of approximately $66,000,000 consisting of $47,000,000 of cash based franchise capital awards and $19,000,000 of restricted stock awards. Approximately 85% of the awards are awarded to our investment talent. Generally, 50% of the award vest pro rata over five years and the remaining 50% vest on or eighteen months after a qualified retirement. We expect long term incentive amortization to be approximately $75,000,000 for 2025, excluding the mark to market impact. Excluding long term incentive compensation, fixed expenses are expected to increase mid to low single digits in 2025.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

The majority of the increase reflects 2025 merit increases and the absorption of a full year of expense for full time employees hired in 2024. As a reminder, our compensation and benefits expenses are generally higher in the first quarter of each year due to seasonal expenses. We estimate those seasonal expenses will be approximately 6,000,000 higher in the first quarter of twenty twenty five compared to the fourth quarter of twenty twenty four. That concludes my prepared remarks and I will now turn the call back to the operator.

[Operator]

And our first question today comes from Bill Katz from TD Cowen. Please go ahead with your question.

[William Katz, Senior Equity Analyst at TD Cowen]

Great. Thank you very much. Appreciate the commentary and the opportunity to ask a question. Just thinking through the interplay between the what seems to be a bit of a pickup in the organic growth rate versus the fee rate and sort of wondering if this might be just some of the initial capital you've taken on this on the fixed income platform more broadly. Can you sort of speak to the extent you can continue to grow out the credit platform and the EMCites team, excuse me, how that might play through on the sub advisory fee rate, which seems to have gone down rather dramatically?

[William Katz, Senior Equity Analyst at TD Cowen]

And then sort of relatedly, just sort of wondering as you look at the rest of the business with particular emphasis on the international value fund, which is doing very well, that's now roughly 25% of the platform. Just wondering where you are in terms of risk management of capacity in terms of continuing to grow that platform? Thank you.

[Eric Colson, CEO at Artisan Partners Asset Management]

Hey, Bill, it's Eric Colson. Thanks for the questions. Kind of taking a reverse order, the international value strategy is hit a similar spot where we've seen in the early years of international equity or our growth platform or our value platform. Over thirty years, we've seen various teams build up and we've had to manage the capacity given our values at the firm heavily weigh performance. And we believe by weighing more on performance and betting on performance, we create a longer term business.

[Eric Colson, CEO at Artisan Partners Asset Management]

What we've seen in many of our competitors that have become an asset gathering business have focused on maximizing the dollars they can bring in, in a given year. We clearly are in capacity management with a few of our strategies. What that means to us is that we're always looking at the velocity of assets, we're looking at the mix of assets and we're looking at the total asset capacity. We will manage international value with a forward lean, but really not let the assets get out of control so that we don't hurt the performance track record. And that's been fairly consistent and it's worked out very well for us over the thirty years.

[Eric Colson, CEO at Artisan Partners Asset Management]

With regards to the organic growth and fee rate, you clearly saw a buildup over the last year specifically and a little bit in the fourth quarter of what we call foundational assets. I think you've used the term sub advisory. These are foundational assets that are have been a little larger than past teams given the emerging market debt and the global unconstrained strategies. Both have taken on or all three strategies have taken on foundational assets and some of these have had performance based fees. And so it's brought down the fee rate a bit more, as opposed to the clear mix of fixed income.

[Eric Colson, CEO at Artisan Partners Asset Management]

As you can see in the fixed income fee rate, it would be slightly if we grew fixed income enormously, it would bring down the rate slightly. The tick you saw was the foundational asset over the last couple of quarters.

[William Katz, Senior Equity Analyst at TD Cowen]

Okay. That was my suspicion. And then maybe one for CJ and thanks for taking the questions. The payout rate this year was much higher on the dividend. I think it sounds like it was realization of some gains on seed capital.

[William Katz, Senior Equity Analyst at TD Cowen]

So maybe a two part question. Where are you in terms of any kind of where are you in terms of seed capital needs versus maybe repatriating that? And then secondary, how we should be thinking about payout rate for 2025? Thank you.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

Sure. Thanks for the question, Bill. So the payout ratio, slight uptick, I think you hit the point. We did realize some gains on seed capital investments that we redeemed during the year. I think there will be we expect to see some more of that in 2025 With respect to our private fund credit opportunities, which we've had seed in there for the last ten years, so or seven years.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

And then the rest of the seed capital is majority of it's in M sites, which is, as Eric said, still in the foundational phase. So at some point that will be harvested, but no clear timeframe on that. With respect to the payout ratio, I mean, we've been in the mid-90s. For the last three years, we've held back some cash to fund seed capital needs. We did that again this year, but I would think you would see something similar in the mid-ninety percent range on the payout ratio with respect to calculating that on adjusted EPS.

[William Katz, Senior Equity Analyst at TD Cowen]

Thank you.

[Operator]

Our next question comes from Alex Blostein from Goldman Sachs. Please go ahead with your question.

[Alexander Blostein, Managing Director at Goldman Sachs]

Hey, Eric. Good morning. Good afternoon, everybody. Thanks for the question as well. A little bit of a bigger picture question for you guys for global and international emerging markets equity strategies broadly.

[Alexander Blostein, Managing Director at Goldman Sachs]

We've clearly seen lots of volatility in those markets relative to U. S. Markets for some time. Political uncertainty continues to be significant. So curious how you're seeing the end customer, the end market respond to that with respect to either institutional interest in the non U.

[Alexander Blostein, Managing Director at Goldman Sachs]

S. Businesses picking up, staying the same or diminishing, as well as anything on the retail side that you're noticing on the ground that could pivot the appetite for these strategies. And if things do turn and there's more appetite, which products are sort of most best positioned from a capacity perspective to take in new assets? Thanks.

[Eric Colson, CEO at Artisan Partners Asset Management]

Hey, Alex, it's Eric. I'll give it a start and probably Jason will jump in a bit too. But just on the big picture, it's that time of the year where people roll into looking at capital market forecast, revisiting asset allocation. I think the direction there has been really an eye on inflation and a lot of the volatility in the global macro markets. I think the output we've been seeing from clients is a bit of a hesitation though, given the macro environment and honestly what's going on with the tariff news and inflation and the Fed, I don't think we are going to see as much tactical movement as we thought.

[Eric Colson, CEO at Artisan Partners Asset Management]

I think it will be more strategic in nature. I think people are a little frozen on which direction things are going to go, given all the news in the marketplace. So we're expecting some moderate strategic moves in asset allocation, but not wholesale changes that some people talk about of big moves this year. I think if there's if we start getting a clearer picture of the direction of some policies and regulation and where the markets are digesting the news, you might see some shifts, but we're expecting just some modest changes in the marketplace when we look at our product mix.

[Jason Gottlieb, President at Artisan Partners Asset Management]

Yes. The only thing I would add, Alex, it's Jason Gottlieb, is we've seen continued progress and stability in the alpha profile of a number of those strategies. And it tends to make sense to us. The uncertainty drives volatility in those markets and volatility is basically the gas in an active managers tank. And our team's ability to capture that volatility has proven out pretty nicely across the platform.

[Jason Gottlieb, President at Artisan Partners Asset Management]

We're seeing it in the global equity team, the international value team, global value, sustainable emerging markets, developing world. So we feel like we're really well positioned in that regard for what is an active management opportunity set. It's just I think it's really just more a question of when that tide turns. We'll certainly be very well positioned for it.

[Alexander Blostein, Managing Director at Goldman Sachs]

Great. Yes, no, that all makes sense. CJ, one for you, I heard the comments around compensation and the guidance for $25,000,000 Sorry, if I missed any color on non comp as well, if we can run through your expectations for expense growth in those buckets in total and as well by line if you have that? Thanks.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

Yes, sure. So if you were to assume flat markets, I mean, I would expect expenses to be up low single digits, a couple percent. If you were to really focus in on fixed controllable given the variable nature of our P and L, obviously revenues are going to dictate variable expenses. But on the fixed side, I mean, you're really looking at probably mid single digits. I'd say two thirds of it is the long term incentive comp, which we highlighted in the prepared remarks.

[Charles Daley, Executive VP, CFO & Treasurer at Artisan Partners Asset Management]

And then we have some increases in salary and benefits, primarily some muted new roles over last year and then merit increases and the full impact of new hires net new hires of about 10 or 11 folks last year in 2025. The rest of the buckets are relatively flat per our projections.

[Alex Blostein, Managing Director at Goldman Sachs]

Okay, great. Thank you.

[Operator]

Our next question comes from John Dunn from Evercore ISI. Please go ahead with your question.

[John Dunn, Analyst at Evercore]

Hey, thank you. You guys talked about two EM sites EM sites strategies hitting three year track records. Can you remind us maybe if any other strategies getting to significant milestones in 2025?

[Jason Gottlieb, President at Artisan Partners Asset Management]

International Explorer is I think it's March of this year. They're going to be hitting their three year milestone. That is the smaller cap strategy that's sitting in the international value franchise. And that is that's clearly going to, I think springboard them into greater opportunities. Their alpha profile is exceptional.

[Jason Gottlieb, President at Artisan Partners Asset Management]

Their absolute return profile is quite compelling. As we had mentioned in our earnings commentary, the Developing World Fund is going to be hitting its ten year anniversary and by all accounts most relevant time periods look extremely compelling. And certainly the short term numbers that Lewis and the developing world team have been able to produce have been catching a lot of attention and a lot of forward lean in the emerging market space as well.

[John Dunn, Analyst at Evercore]

Got it. And then at your Investor Day, you guys had talked about not needing to be first movers to do anything in like private markets. Alts. Now that we're a little further away from that, any kind of perspectives, observations, learnings updated about going down in that direction at some point?

[Jason Gottlieb, President at Artisan Partners Asset Management]

Yes. I'll take that. This is Jason again. Ultimately, we're going to be measured by the opportunities we bring to the platform. That being said, behind the scenes, Eric and I have been methodically building out the investment strategy group.

[Jason Gottlieb, President at Artisan Partners Asset Management]

I think if you were there, you saw the co heads of investment strategy, which are led by Keegan O'Brien and Chris Nicolau, talking about the platform and what we're developing. Together with Eric and I, we're evaluating more opportunities than we ever have. Our bias has been towards Alts, but we have an open door policy. We're looking at anything and everything. We learn a lot by doing that.

[Jason Gottlieb, President at Artisan Partners Asset Management]

And as I had mentioned last quarter, we're looking primarily in the real estate, credit and equity across privates, but also credit more broadly. There's still plenty of opportunity for us. Talent is looking for a new home everywhere and anywhere. Lift out and acquisition format still remains quite strong. Our goal will continue to remain focused on talent and partnering with the right individuals.

[Jason Gottlieb, President at Artisan Partners Asset Management]

We do have later stage opportunities we're working through, but as I said last quarter, until the team or individual has joined, uncertainty remains extremely high. I think it's important to point out that there are several of our current franchises that have embraced Degrees of Freedom and we continue to work across the platform to develop new capabilities that intersect with the team's passion, asset allocation and commercial application, look no further than the international value team and the launch of Global Special Situations, which we expect to be in fund format in late Q1 of this year. We believe that Artisan in general is a highly attractive home and that we provide autonomous and distraction free investment environment. It's aligned economics and it's a platform that is built to build a business. So we're going to be patient.

[Jason Gottlieb, President at Artisan Partners Asset Management]

We're going to swing at pitches that we think are akin to success for our platform, but we do have plenty of opportunities where we can grow and expand.

[John Dunn, Analyst at Evercore]

Thank you.

[Operator]

And ladies and gentlemen, with that, we will be ending today's question and answer session as well as today's presentation and conference call. We do thank you for attending. You may now disconnect your lines.

Participants

Executives

• Eric Colson, CEO
• Jason Gottlieb, President
• Charles Daley, Executive VP, CFO & Treasurer

Analysts

• Brendan Hughes, Investment Advisor at Lafayette Investments
• William Katz, Senior Equity Analyst at TD Cowen
• Alexander Blostein, Managing Director at Goldman Sachs
• Alex Blostein, Managing Director at Goldman Sachs
• John Dunn, Analyst at Evercore