NYSE:APAM Artisan Partners Asset Management Q2 2025 Earnings Report $45.20 -1.06 (-2.29%) Closing price 08/7/2025 03:59 PM EasternExtended Trading$45.28 +0.08 (+0.17%) As of 08/7/2025 05:42 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Artisan Partners Asset Management EPS ResultsActual EPS$0.83Consensus EPS $0.82Beat/MissBeat by +$0.01One Year Ago EPS$0.82Artisan Partners Asset Management Revenue ResultsActual Revenue$282.80 millionExpected Revenue$269.00 millionBeat/MissBeat by +$13.80 millionYoY Revenue Growth+4.40%Artisan Partners Asset Management Announcement DetailsQuarterQ2 2025Date7/29/2025TimeAfter Market ClosesConference Call DateWednesday, July 30, 2025Conference Call Time1:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Artisan Partners Asset Management Q2 2025 Earnings Call TranscriptProvided by QuartrJuly 30, 2025 ShareLink copied to clipboard.Key Takeaways Neutral Sentiment: As of Q2, Jason Gottlieb succeeded Eric Colson as CEO while Colson became Executive Chair, marking the firm’s first leadership transition since 2013. Positive Sentiment: AUM reached $176 billion, up 8% from Q1, supporting revenue growth and a slight increase in the weighted average fee rate to 68 bps. Negative Sentiment: The firm reported $1.9 billion of net client cash outflows in Q2, driven by lower equity inflows and outflows as clients rebalanced global equity allocations. Positive Sentiment: Fixed income saw the twelfth consecutive quarter of net inflows and emerging market strategies collectively attracted $700 million in net new assets YTD. Positive Sentiment: The board declared a quarterly dividend of $0.73 per share, a 7% increase over the prior quarter, reflecting confidence in cash flow generation. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallArtisan Partners Asset Management Q2 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipantsPresentationSkip to Participants Operator00:00:00Good afternoon, and welcome to the Artesyn Partners Asset Management Business Update and Second Quarter twenty twenty five Earnings Call. All participants will be in listen only mode. After today's presentation, Please note this event is being recorded. I would now like to turn the conference over to Artisan Partners Asset Management. Please go ahead. Brennan HughesHead - IR at Artisan Partners Asset Management00:00:42Welcome to the Artisan Partners Asset Management business update and earnings call. Today's call will include remarks from Eric Colson, Executive Chair Jason Gottlieb, CEO and C. J. Daley, CFO. Following these remarks, we will open the line for questions. Brennan HughesHead - IR at Artisan Partners Asset Management00:00:57Our 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. 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. Brennan HughesHead - IR at Artisan Partners Asset Management00:01:40You 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 ColsonMD & Chair of the Board at Artisan Partners Asset Management00:02:06Thank you, Brennan, and thank you all for joining the call or reading the transcript. In June, Jason succeeded me as CEO, and I assumed the role of his executive chair. This will be my last quarterly call, my fiftieth since our IPO in 2013. On each of the 50 calls, I have started with the same slide level setting who we are as a firm. Artisan Partners has been, is, and I believe always will be, a high value added investment firm designed for talent to thrive in a thoughtful growth environment. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:02:42Since our founding thirty years ago, we have demonstrated the repeatability of our model across investment leaders, generations, geographies, asset classes, and distribution channels. We have grown the firm thoughtfully, methodically, expanding in the direction of high value added investing. Throughout, we have maintained and enhanced our investment first culture, staying focused on investments and client outcomes. We take tremendous pride in the consistency of our approach and the consistency of our results. After Jason speaks, I'll say a few words about how we have evolved as an investment firm and how we are positioned for the future. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:03:27Thank you, Eric. First of all, on behalf of everyone at Arsen, thank you for your twenty years of service to the firm, the last fifteen as CEO. During Eric's tenure as CEO, the firm has grown to 11 investment teams and 26 strategies across equities, fixed income, and alternatives. We have established Artisan as a multi asset investment platform. We have reoriented our distribution to better access and serve the intermediate wealth channel. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:03:57And we have stayed true to who we are, maintained our investments first culture, enhanced Artisan as a home for talent, compounded capital for clients, and generated healthy returns for shareholders. For me individually, it has been a great privilege to work alongside Eric. I am honored to serve as the third CEO in Artesyn Partners' thirty year history, and I look forward to continuing to work closely with Eric in his role as Executive Chairman. As I think everyone knows, Eric plans to remain very active in the firm's governance, strategy, and future. We have been very methodical in executing on this transition and will continue to be a source of consistency and stability for investment talent and clients. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:04:41In 2013, Artisan identified Brian Krug and recruited him to join the firm and start the Artisan Partners credit team. The firm's decision to enter fixed income with Brian and the development of the credit franchise over the last twelve years was further validated earlier this month when Brian won Morningstar's 2025 Investment Excellence Award for Outstanding Fixed Income Portfolio Manager. The award covers the entire fixed income universe, not just high yield. The list of past winners includes multiple fixed income luminaries. Brian has proven himself as one of the very, very best. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:05:17Over the past eleven years, the credit team's flagship high income strategy has outperformed its benchmark by 170 basis points annually after fees. Since inception, the high income strategy is ranked number two of 154 products in its eVestment universe. In 2017, the credit team launched the Credit Opportunity Strategy, which has generated 10.23% annual returns net of fees since inception. In 2022, the team launched the Floating Rate Strategy, which has generated 6.68% annual returns net of fees since inception. And in 2024, the credit team closed Artisan's first drawdown fund, the Artisan Dislocation Opportunity Strategy, with $130,000,000 of commitments for the team to opportunistically invest in dislocation events. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:06:08Today, the credit team manages more than $13,000,000,000 across the franchise. We are currently onboarding two more institutional mandates for the team. We continue to prioritize business development for credit opportunities and floating rate strategies, and we are actively exploring ways to further expand the credit team's degrees of freedom and business. Congratulations to Brian and the team on the most recent recognition, your investment track record, and the franchise you have built. In addition to Brian and the credit team, Morningstar also recognized David Samra as one of three finalists for the 2025 U. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:06:46S. Morningstar Award for Investing Excellence Outstanding Equity Portfolio Manager. Along with Dan O'Keefe, David previously won Morningstar's International Stock Fund Manager of the Year Award in 2008 and 2013, an award they were nominated for five times between 2011 and 2016. DAVID's flagship international value strategy has compounded capital at nearly 11% annually for twenty three years, generating four eighteen basis points of average annual outperformance since inception and after fees. Over that period, the Artisan International Value Fund ranks number one in its Lipper category among 22 funds. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:07:28Almost five years ago, David expanded his team with the addition of Bene Zhao and Anand Vasegiri. The pair's international explorer strategy has compounded capital at a rate of 14.47% annually since inception, outperforming its index by four sixty five basis points annually on average since inception and after fees. Since inception, the International Explorer Fund ranks twelfth of 135 funds in its Lipper category, with approximately $800,000,000 in the International Explorer Strategy. As we have previously discussed, earlier this year, we launched the Global Special Situations strategy inside the International Value Group. Global Special Situations is the International Value Group's first fixed income strategy, and is off to a strong start. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:08:14Congratulations to David Sammer and the International Value Group on the recent recognition from Morningstar, the performance and the growth of the International Explorer, and the launch of Global Special Situations. Moving to slide five. On July 1, the Developing World Strategy became our twelfth strategy with a ten year track record. Since inception in 2015, Louis Kaufman and his team have compounded capital at an average annual rate of 11.59%, beating the index by six seventy eight basis points after fees. Since inception, the Artisan Developing World third of four thirty four funds in its Lipper category. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:08:56This is truly an exceptional outcome, which we believe will drive additional business expansion for Developing World. That expansion should be aided by the growing interest and demand we are seeing across our emerging market strategies. Across equities, fixed income, and alternatives, each of Artisan's five emerging market strategies has positive year to date net flows. In aggregate, we have raised a net $700,000,000 across the group so far this year. In addition to developing world's performance and ten year milestone, the sustainable emerging market strategy has outperformed the index by more than 100 basis points annually over each of the trailing one, three, five, and ten year periods after fees. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:09:38And each of the M Sites Capital Group's three strategies has or will soon surpass its three year anniversary, all with strong performance, anchor capital, and business momentum. Industry dynamics and leadership transitions at other managers are contributing to money in motion and a promising setup for us with strong teams and track records across all five emerging market strategies. More generally, the information on this slide is a further testament to the Artisan Partners model and its repeatability through time. Not only have we developed and expanded the investment platform, we have extended the duration of our existing strategies and franchises, compounded capital for clients, and generated positive outcomes for multiple generations of talent, as well as for our shareholders. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:10:27Thank you, Jason. Our ability to evolve around a core set of principles has been key to the repeatability of our success. 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. At the same time, we have evolved. We have methodically expanded degrees of freedom inside of existing strategies, and with new strategies. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:10:54We have gone from public equities to fixed income to alternatives to multi asset class. Broadening the opportunity set for our investment teams has enhanced their ability to differentiate and outperform. We have built out the platform that talented investors can plug into at Artisan. When we started, talent wanted to be left alone in an office with a Bloomberg. In today's environment, talent wants and needs a lot more: access to markets, instruments, and information, technology and data, and advice, guidance, support to build a sustainable investment franchise. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:11:33Lastly, we have evolved our distribution to align with clients who value what we offer and what we do. Clients with long term asset allocation for high value added investing, clients with duration that gives managers the time needed to pursue alpha, clients to do the hard work and research upfront to identify and partner with managers who will deliver over long periods. Increasingly, this has taken us into the direction of intermediated wealth clients, which today represents over half of our AUM. We are a very different firm than we were fifteen years ago, let alone thirty years ago. But at our core, we haven't changed. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:12:16We are a high value added investment firm driven by talent. We have simply evolved where and how we apply our principles, so that we remain relevant to investment talent and sophisticated asset allocators. These evolutions have taken us in the direction of an investment platform that fully resources talent, multi asset and alternative investments, and increasing focus on the opportunities in the intermediate wealth. I'm extremely proud of the evolution we have made. I expect it to continue under Jason's leadership, and I am confident we will continue to execute well for investment talent, clients and shareholders. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:12:56I will now turn it over to CJ to discuss our recent financial results. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:13:02Thanks, Eric. An overview of financial results begins on slide seven. Second quarter results reflect strong equity market returns across global markets, which drove our ending AUM to $176,000,000,000 up 8% compared to the March. Our business model continues to deliver durable growth and attractive long term returns for clients and shareholders. While ending AUM was up sharply, average AUM for the quarter was flat sequentially and up 5% compared to the June. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:13:39Year to date average AUM improved 7% over the prior year's six month period. Net client cash outflows during the June were 1,900,000,000 driven by a lower volume of gross equity inflows and outflows as compared to the prior quarter. Equity outflows were partially offset by continued positive fixed income flows. The second quarter represents the twelfth consecutive quarter of positive flows for our fixed income business. Year to date, net client cash outflows increased over the prior year, primarily due to a previously disclosed $1,200,000,000 outflow from a separate account rebalancing in the first quarter. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:14:23Our complete GAAP and adjusted results are presented in our earnings release. Revenues for the quarter were up 2% compared to the March and up 4% compared to the prior year second quarter. Our weighted average recurring fee rate for the quarter was 68 basis points, up slightly from the prior quarter. Adjusted operating expenses for the quarter were up 3% from the 2025 and five percent from the same quarter last year, primarily from higher incentive compensation expense due to increased revenues and market appreciation of long term incentive awards. Additionally, second quarter twenty twenty five reflects a $1,200,000 charge in connection with the closure of the China Post Venture strategy. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:15:12Adjusted operating income increased slightly compared to the prior quarter and 3% compared to the same quarter last year as a result of higher revenue. Adjusted net income per adjusted share was flat compared to last quarter and up slightly compared to the second quarter of twenty twenty four, consistent with operating income. Year to date, 2025 revenues were up 5% compared to the 2024 on higher average AUM. Year to date adjusted operating expenses increased 4% from 2024, primarily from higher incentive compensation on elevated revenues and the impact of the addition of the January 2025 long term incentive award grants. In calculating our non GAAP measures, non operating income includes only interest expense and interest income. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:16:06Although 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. Looking forward to Q3, revenue should benefit from 8% higher AUM. In addition, the September will benefit from the absence of approximately $2,400,000 of costs associated with the China Post Venture Team, including the $1,200,000 one time charge related to the closure of the China Post Venture Strategy. Turning to slide 11, our balance sheet remains strong. We currently have approximately $140,000,000 of seed capital invested in seeded products. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:16:55As strategies reach scale and our seed investments are redeemed, any redemption amounts realized are included in the cash available for corporate purposes, new seed investments, or as an addition to our year end special dividend. In addition, our $100,000,000 revolving credit facility remains unused. In August, dollars 60,000,000 of our senior notes will mature. Last month, we announced the closing of $50,000,000 new private placement debt on 08/15/2025. We will use the proceeds from the new debt along with cash on hand to retire the $60,000,000 of debt maturing in August 2025. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:17:38We 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 $0.73 per share with respect to the June 2025 quarter, a 7% increase over the prior quarter. That concludes my prepared remarks, and I will turn the call back to the operator. Operator00:18:06We will now begin the question and answer session. Please go ahead. Anthony CorbinEquity Research Analyst at Goldman Sachs00:18:53Hey, good afternoon guys. This is Anthony on for Alex. Maybe just to start on capital allocation and more specifically around M and A. You guys have expressed interest in M and A specifically around building out your ALPS capabilities. So what areas or asset classes are you most open to pursue? Anthony CorbinEquity Research Analyst at Goldman Sachs00:19:13And how should we think about the pipeline of deals today? Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:19:18Hi, it's Jason. Thanks for the question. We have spent some time talking about M and A. Guess I'd just take it back to first principles. Number one, it's always going to be a talent driven opportunity that's going to guide where to we're go. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:19:35There's an absolute standard. We're not going to change that standard whether it's lift out or M and A. But as you rightly pointed out, we do think M and A is a potent opportunity for us in the future, specifically in the alternatives to asset classes. There's a range of areas that we focus on, and we're not trying to be pigeonholing ourselves into any one specific area, but as you've heard us talk about, real estate is interesting because it's highly fragmented. There's multiple ways to win. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:20:11There's a lot of talent out there systematically. There's a lot of disruption going on, and certainly idiosyncratic at various firms there's opportunity to dislodge talent. We will focus on the, let's call it the areas where we think value can be driven. So we're not looking to do anything in the core or core plus from a lift out or M and A perspective. We would really focus on value add into the opportunistic categories where return differential is a lot higher and where we think our platform can be a benefit to talent. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:20:45We've looked at private equity more specifically. The secondaries business is interesting for us. It's an area where we think risk can be taken, risk can be rewarded. The duration and time to get your DPI is a lot shorter than what you typically see in your traditional buyout or venture funds. We think it plays well into the intermediate wealth space. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:21:12And again, there's a lot of talent out there in both lift out and M and A. We talked about private credit. We don't love doing something that's just a me too in the bulge bracket, sponsor driven area. We don't think we have the ability to compete there. But there are other areas where there's a vast TAM, big opportunity set, and high differentiation in areas like asset based lending. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:21:41And so that's just a flavor, but again, I don't want to say that that's where we're screening or looking for opportunities. That's where opportunities are finding us, and they seem really, really interesting and compelling. But we'll let the talent drive us and guide us in that regard. The last point I would make is we're continuing to see a high volume of activity. And given the build out of our investment strategy group over the last several years, it's allowed us the opportunity to really kind of focus on the external effort a little bit more than we have been in the past. Anthony CorbinEquity Research Analyst at Goldman Sachs00:22:18Great. Yeah, that's helpful. And then maybe for my follow-up just on capacity constraints. I know this has been a headwind headwind in a couple of strategies for a little while. So how should we think about the timing of these kind of reopening and the acceleration to the gross flow profile? Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:22:38Anthony, it's Eric. We are always managing capacity as you've highlighted. As we've always said, investments is the first thing we think about, and then we think about the distribution side. We'll always protect the investment results. There's a few strategies on the growth side that we're freeing up a little bit of capacity and managing that, given some of the trends we've seen in flows and a lot of the rebalancing we saw this last quarter was in the growth side of the equation. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:23:17With regards to the international value and the high income strategy, Really, we're working with a very strong embedded client base. Much of that client base is the intermediated wealth client. Intermediated client puts us in a model, and that model is refreshed for existing and new clients, and many of these intermediated wealth firms want to have consistency. So we really try to work with those groups on capacity and the large existing clients. And we'll continue to manage that and be judicious about that. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:24:02Or really how are we looking at the constraint strategies right now. Thanks, that's helpful. Operator00:24:11The next question comes from John Dunn Please go ahead. John DunnAnalyst at Evercore00:24:18Hey, thank you. You mentioned two institutional mandates. Maybe just if you could talk a little more about them, maybe the timing of when they might fund and also more generally just the temperature of the conversations you're having with institutional clients both in The U. S. And then overseas. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:24:40John, this is Eric. Yeah, the institutional clients, we did see some movement around rebalancing a little bit on the global equity side. And then on the positive front, we see quite a bit of interest in emerging markets at large. We had a nice uptick in our emerging markets local opportunities with the M Sites team. We also have some good opportunity to get funded with sustainable emerging markets. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:25:09And we're also hitting the ten year anniversary that we highlighted on the call with Developing World. So there's definitely a positive story around the fixed income strategies that we have, as well as the emerging markets. With regards to the institutional specifically, I think many of them are dealing with illiquid allocations and many of the private equity and other illiquid in real estate are creating evergreen funds and are really looking to extend the duration of those assets. Some clients are really focused on that. And then the secondly, with the institutional clients, we've just seen a little bit of backing off on risk, given the market environment. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:26:02And I think that's why I've been leaning more towards credit. But that back off of an analysis around risk, given the market environment, the tariffs, we saw really a muted gross flow this quarter. And if you looked at the gross levels, it was down quite a bit from previous quarters. And that signaled, I think, just a more cautious risk aware environment. And we're looking at credit as an area of growth. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:26:31Equity had some rebalancing and many people starting to revisit emerging markets as a place to allocate dollars. John DunnAnalyst at Evercore00:26:43Got you. And then maybe just to frame it again geographically in terms of distribution, any areas where you expect to see inflow demand or money at risk over the next the '25? Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:27:04I think from a geographical, don't think we've seen any specific spots geographically in The US has been the one area with regards to public equities on the institutional side that we've seen the rebalancing. Nothing's jumping out from a geographical standpoint that's causing us concerns. John DunnAnalyst at Evercore00:27:33Great, thank you very much. Operator00:27:37The next question comes from Bill Katz with TD Cowen. Please go ahead. William (Bill) katzSenior Equity Analyst at TD Cowen00:27:42Okay. Thank you. So just staying on the flow discussion for a moment. I apologize. I joined just as your comments were going on. William (Bill) katzSenior Equity Analyst at TD Cowen00:27:49Did you frame or size the institutional wins? I'm so curious, you mentioned that you're seeing a pickup in EM. It sounds like it might be coming from other equities. A, is that correct? And then B, if that does sustain itself, how do you sort of see the net impact flowing through to APEM, given you're skewed to some of the legacy mandates versus the more fertile opportunity in the EM business, but that being a little bit smaller? Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:28:16Yeah, we talked about two larger mandates. We're starting to see that on the EM side of the equation with M sites and sustain emerging markets. And we also mentioned Bill on the Developing World, but we're seeing a growing interest and growing opportunities with M Sites, with Sustainable Emerging Markets, with Developing World. And when we brought in the Emsights team the first couple of years, it was the largest outflow of emerging market debt in the institutional marketplace and the history of that asset class. And that was followed up with another down year. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:28:59You're starting to see a lot of people revisit that allocation, given Emsights just hit a three year number across all of its strategies, Developing Worlds at its ten year, and our Sustainable Emerging Markets had a very strong performance over the last one, three, five, ten, screening well. We're very optimistic on allocations there, as well as beyond the EM debt, the broader fixed income category is also up ticking for us. And how that offsets the equity side, it really depends on how our large clients on our international value, international equity and the global products rebalance and manage their risk. So it's hard to predict. Those are lumpy, episodic rebalancing that does occur. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:29:57That's been the bulk of the outflow this quarter. And as I said earlier, it's been a very muted gross flow across the board this quarter. So it's hard to actually frame the exchange of kicks on the inflow outflow story. William (Bill) katzSenior Equity Analyst at TD Cowen00:30:15All right. Well, I appreciate the perspective. And then maybe one tying in the opportunity for growth to CJ. As you think through maybe the OpEx outlook into the second half of the year, I appreciate the guidance that you won't have the elevated severance associated with the wind down of the China venture fund. How we think about maybe OpEx and particularly would you look to ramp any kind of spend just given that you're at sort of inflection on some of these flagship funds that could potentially scale pretty nicely? Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:30:46Yeah, Bill. Yeah, there's really no sort of update from an OpEx standpoint. I mean, we're still on target to be like mid single digits on the fixed side and of course, on the variable side, which is almost 55 of our expense base, that'll vary with revenues. So there is no expected expense ramping for any type of growth. I think we're well positioned to take advantage of the growth that exists within the system right now. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:31:18And it's just about executing on it, and we don't really need to put any kind of expense initiatives in place to capture that. William (Bill) katzSenior Equity Analyst at TD Cowen00:31:30Okay. Very good. Thank you. And Eric, congratulations again. I'm feeling very nostalgic today. William (Bill) katzSenior Equity Analyst at TD Cowen00:31:34But thank you for all your help along the years. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:31:36Thanks, Bill. Operator00:31:38The next question comes from Kenneth Lee with RBC Capital Markets. Please go ahead. Kenneth LeeVice President at RBC Capital Markets00:31:45Hey, good afternoon and thanks for taking my question. During the prepared remarks, mentioned potentially expanding some of the degrees of freedom on the credit side. I wonder if you could just further flesh out or outline what's in the pipeline for new products within the credit side over the near term. Thanks. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:32:10Yeah. Hey Ken, it's Jason. We are evaluating various structures and opportunities as it relates to the private markets. There could be the potential for interesting ways to access the private markets with our existing franchise, the credit team. We're certainly looking at those and evaluating those in the context of continuing to expand out those degrees of freedom and continue to grow and build what we think is a platform that has the right amount of resources and certainly the brand recognition to have that opportunity. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:32:52I'd say that that's probably the nearest term opportunity, and within the M Sites business, we're continuing to evaluate whether there are opportunities to launch a private fund around our global unconstrained strategy more from an institutional perspective that they might not be interested in accessing a mutual fund. And so those are probably the two. One's a little bit more of an expansion of degrees of freedom, and one's just an opportunity to capitalize on the existing toolkit. Kenneth LeeVice President at RBC Capital Markets00:33:27Great. Very helpful there. And just one follow-up, if I may. Any updated outlook around seed capital needs for this year? Relatedly, any early indication around payout ratio for this year? Thanks. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:33:43Yes, I'll take that one, Ken. In seed capital, I think right now we're well positioned. Always are thinking about new products. But as sit here today, there's nothing no planned new seeds, although some are in the works. I'd say we're in a well positioned spot from a capital perspective as we've ever been. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:34:09As you know, we've had a lot of seed capital that we expended over the last several years, and our book is now $140,000,000 We expect to see some opportunities over the next twelve to eighteen months to start to pull some of that back, redeploy that either for additional seed or acquisitions if something like that comes to fruition. So I feel like we're really well positioned from a seed perspective. And obviously, we're not a fan of debt, but if you think about M and A in context of buying an established firm, we do have capacity within our line of credit and additional debt capacity, obviously not our preference. But just to highlight, we're in a good capital position to execute on what we need to, whether it be seed or M and A. Kenneth LeeVice President at RBC Capital Markets00:35:10Great. Very helpful there. Thanks again. Operator00:35:14This concludes our question and answer session and the Artisan Partners Asset Management business update and second quarter twenty twenty five earnings call. Thank you. You may now disconnect.Read moreParticipantsExecutivesBrennan HughesHead - IREric ColsonMD & Chair of the BoardJason GottliebPresident, MD, CEO & DirectorCharles DaleyEVP, CFO & TreasurerAnalystsAnthony CorbinEquity Research Analyst at Goldman SachsJohn DunnAnalyst at EvercoreWilliam (Bill) katzSenior Equity Analyst at TD CowenKenneth LeeVice President at RBC Capital MarketsPowered by Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Artisan Partners Asset Management Earnings HeadlinesArtisan Partners Asset Management's (NYSE:APAM) Shareholders Will Receive A Bigger Dividend Than Last YearAugust 2, 2025 | finance.yahoo.comArtisan Partners signals $700M net inflows in emerging markets while targeting expanded credit strategiesJuly 30, 2025 | msn.comTrump set to Boost Social Security Checks by 400%?If you're collecting or planning to collect social security... You should see this presentation about President Trump's Executive Order #14196. Legendary investor Louis Navellier believes it could soon not only save Social Security from collapse... But BOOST benefits for millions of retirees by up to 400%. No wonder the financial times called this new initiative...August 8 at 2:00 AM | InvestorPlace (Ad)Artisan Partners Asset Management Inc. (APAM) Q2 2025 Earnings Call TranscriptJuly 30, 2025 | seekingalpha.comArtisan Partners Asset Management Inc. 2025 Q2 - Results - Earnings Call PresentationJuly 30, 2025 | seekingalpha.comArtisan Partners Asset Management Inc. Reports 2Q25 ResultsJuly 29, 2025 | globenewswire.comSee More Artisan Partners Asset Management Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Artisan Partners Asset Management? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Artisan Partners Asset Management and other key companies, straight to your email. Email Address About Artisan Partners Asset ManagementArtisan 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.View Artisan Partners Asset Management ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Constellation Energy’s Earnings Beat Signals a New EraRealty Income Rallies Post-Earnings Miss—Here’s What Drove ItDon't Mix the Signal for Noise in Super Micro Computer's EarningsWhy Monolithic Power's Earnings and Guidance Ignited a RallyRivian Takes Earnings Hit—R2 Could Be the Stock's 2026 LifelinePalantir Stock Soars After Blowout Earnings ReportVertical Aerospace's New Deal and Earnings De-Risk Production Upcoming Earnings SEA (8/12/2025)Cisco Systems (8/13/2025)Alibaba Group (8/13/2025)NetEase (8/14/2025)Applied Materials (8/14/2025)NU (8/14/2025)Petroleo Brasileiro S.A.- Petrobras (8/14/2025)Deere & Company (8/14/2025)Palo Alto Networks (8/18/2025)Medtronic (8/19/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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PresentationSkip to Participants Operator00:00:00Good afternoon, and welcome to the Artesyn Partners Asset Management Business Update and Second Quarter twenty twenty five Earnings Call. All participants will be in listen only mode. After today's presentation, Please note this event is being recorded. I would now like to turn the conference over to Artisan Partners Asset Management. Please go ahead. Brennan HughesHead - IR at Artisan Partners Asset Management00:00:42Welcome to the Artisan Partners Asset Management business update and earnings call. Today's call will include remarks from Eric Colson, Executive Chair Jason Gottlieb, CEO and C. J. Daley, CFO. Following these remarks, we will open the line for questions. Brennan HughesHead - IR at Artisan Partners Asset Management00:00:57Our 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. 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. Brennan HughesHead - IR at Artisan Partners Asset Management00:01:40You 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 ColsonMD & Chair of the Board at Artisan Partners Asset Management00:02:06Thank you, Brennan, and thank you all for joining the call or reading the transcript. In June, Jason succeeded me as CEO, and I assumed the role of his executive chair. This will be my last quarterly call, my fiftieth since our IPO in 2013. On each of the 50 calls, I have started with the same slide level setting who we are as a firm. Artisan Partners has been, is, and I believe always will be, a high value added investment firm designed for talent to thrive in a thoughtful growth environment. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:02:42Since our founding thirty years ago, we have demonstrated the repeatability of our model across investment leaders, generations, geographies, asset classes, and distribution channels. We have grown the firm thoughtfully, methodically, expanding in the direction of high value added investing. Throughout, we have maintained and enhanced our investment first culture, staying focused on investments and client outcomes. We take tremendous pride in the consistency of our approach and the consistency of our results. After Jason speaks, I'll say a few words about how we have evolved as an investment firm and how we are positioned for the future. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:03:27Thank you, Eric. First of all, on behalf of everyone at Arsen, thank you for your twenty years of service to the firm, the last fifteen as CEO. During Eric's tenure as CEO, the firm has grown to 11 investment teams and 26 strategies across equities, fixed income, and alternatives. We have established Artisan as a multi asset investment platform. We have reoriented our distribution to better access and serve the intermediate wealth channel. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:03:57And we have stayed true to who we are, maintained our investments first culture, enhanced Artisan as a home for talent, compounded capital for clients, and generated healthy returns for shareholders. For me individually, it has been a great privilege to work alongside Eric. I am honored to serve as the third CEO in Artesyn Partners' thirty year history, and I look forward to continuing to work closely with Eric in his role as Executive Chairman. As I think everyone knows, Eric plans to remain very active in the firm's governance, strategy, and future. We have been very methodical in executing on this transition and will continue to be a source of consistency and stability for investment talent and clients. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:04:41In 2013, Artisan identified Brian Krug and recruited him to join the firm and start the Artisan Partners credit team. The firm's decision to enter fixed income with Brian and the development of the credit franchise over the last twelve years was further validated earlier this month when Brian won Morningstar's 2025 Investment Excellence Award for Outstanding Fixed Income Portfolio Manager. The award covers the entire fixed income universe, not just high yield. The list of past winners includes multiple fixed income luminaries. Brian has proven himself as one of the very, very best. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:05:17Over the past eleven years, the credit team's flagship high income strategy has outperformed its benchmark by 170 basis points annually after fees. Since inception, the high income strategy is ranked number two of 154 products in its eVestment universe. In 2017, the credit team launched the Credit Opportunity Strategy, which has generated 10.23% annual returns net of fees since inception. In 2022, the team launched the Floating Rate Strategy, which has generated 6.68% annual returns net of fees since inception. And in 2024, the credit team closed Artisan's first drawdown fund, the Artisan Dislocation Opportunity Strategy, with $130,000,000 of commitments for the team to opportunistically invest in dislocation events. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:06:08Today, the credit team manages more than $13,000,000,000 across the franchise. We are currently onboarding two more institutional mandates for the team. We continue to prioritize business development for credit opportunities and floating rate strategies, and we are actively exploring ways to further expand the credit team's degrees of freedom and business. Congratulations to Brian and the team on the most recent recognition, your investment track record, and the franchise you have built. In addition to Brian and the credit team, Morningstar also recognized David Samra as one of three finalists for the 2025 U. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:06:46S. Morningstar Award for Investing Excellence Outstanding Equity Portfolio Manager. Along with Dan O'Keefe, David previously won Morningstar's International Stock Fund Manager of the Year Award in 2008 and 2013, an award they were nominated for five times between 2011 and 2016. DAVID's flagship international value strategy has compounded capital at nearly 11% annually for twenty three years, generating four eighteen basis points of average annual outperformance since inception and after fees. Over that period, the Artisan International Value Fund ranks number one in its Lipper category among 22 funds. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:07:28Almost five years ago, David expanded his team with the addition of Bene Zhao and Anand Vasegiri. The pair's international explorer strategy has compounded capital at a rate of 14.47% annually since inception, outperforming its index by four sixty five basis points annually on average since inception and after fees. Since inception, the International Explorer Fund ranks twelfth of 135 funds in its Lipper category, with approximately $800,000,000 in the International Explorer Strategy. As we have previously discussed, earlier this year, we launched the Global Special Situations strategy inside the International Value Group. Global Special Situations is the International Value Group's first fixed income strategy, and is off to a strong start. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:08:14Congratulations to David Sammer and the International Value Group on the recent recognition from Morningstar, the performance and the growth of the International Explorer, and the launch of Global Special Situations. Moving to slide five. On July 1, the Developing World Strategy became our twelfth strategy with a ten year track record. Since inception in 2015, Louis Kaufman and his team have compounded capital at an average annual rate of 11.59%, beating the index by six seventy eight basis points after fees. Since inception, the Artisan Developing World third of four thirty four funds in its Lipper category. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:08:56This is truly an exceptional outcome, which we believe will drive additional business expansion for Developing World. That expansion should be aided by the growing interest and demand we are seeing across our emerging market strategies. Across equities, fixed income, and alternatives, each of Artisan's five emerging market strategies has positive year to date net flows. In aggregate, we have raised a net $700,000,000 across the group so far this year. In addition to developing world's performance and ten year milestone, the sustainable emerging market strategy has outperformed the index by more than 100 basis points annually over each of the trailing one, three, five, and ten year periods after fees. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:09:38And each of the M Sites Capital Group's three strategies has or will soon surpass its three year anniversary, all with strong performance, anchor capital, and business momentum. Industry dynamics and leadership transitions at other managers are contributing to money in motion and a promising setup for us with strong teams and track records across all five emerging market strategies. More generally, the information on this slide is a further testament to the Artisan Partners model and its repeatability through time. Not only have we developed and expanded the investment platform, we have extended the duration of our existing strategies and franchises, compounded capital for clients, and generated positive outcomes for multiple generations of talent, as well as for our shareholders. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:10:27Thank you, Jason. Our ability to evolve around a core set of principles has been key to the repeatability of our success. 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. At the same time, we have evolved. We have methodically expanded degrees of freedom inside of existing strategies, and with new strategies. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:10:54We have gone from public equities to fixed income to alternatives to multi asset class. Broadening the opportunity set for our investment teams has enhanced their ability to differentiate and outperform. We have built out the platform that talented investors can plug into at Artisan. When we started, talent wanted to be left alone in an office with a Bloomberg. In today's environment, talent wants and needs a lot more: access to markets, instruments, and information, technology and data, and advice, guidance, support to build a sustainable investment franchise. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:11:33Lastly, we have evolved our distribution to align with clients who value what we offer and what we do. Clients with long term asset allocation for high value added investing, clients with duration that gives managers the time needed to pursue alpha, clients to do the hard work and research upfront to identify and partner with managers who will deliver over long periods. Increasingly, this has taken us into the direction of intermediated wealth clients, which today represents over half of our AUM. We are a very different firm than we were fifteen years ago, let alone thirty years ago. But at our core, we haven't changed. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:12:16We are a high value added investment firm driven by talent. We have simply evolved where and how we apply our principles, so that we remain relevant to investment talent and sophisticated asset allocators. These evolutions have taken us in the direction of an investment platform that fully resources talent, multi asset and alternative investments, and increasing focus on the opportunities in the intermediate wealth. I'm extremely proud of the evolution we have made. I expect it to continue under Jason's leadership, and I am confident we will continue to execute well for investment talent, clients and shareholders. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:12:56I will now turn it over to CJ to discuss our recent financial results. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:13:02Thanks, Eric. An overview of financial results begins on slide seven. Second quarter results reflect strong equity market returns across global markets, which drove our ending AUM to $176,000,000,000 up 8% compared to the March. Our business model continues to deliver durable growth and attractive long term returns for clients and shareholders. While ending AUM was up sharply, average AUM for the quarter was flat sequentially and up 5% compared to the June. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:13:39Year to date average AUM improved 7% over the prior year's six month period. Net client cash outflows during the June were 1,900,000,000 driven by a lower volume of gross equity inflows and outflows as compared to the prior quarter. Equity outflows were partially offset by continued positive fixed income flows. The second quarter represents the twelfth consecutive quarter of positive flows for our fixed income business. Year to date, net client cash outflows increased over the prior year, primarily due to a previously disclosed $1,200,000,000 outflow from a separate account rebalancing in the first quarter. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:14:23Our complete GAAP and adjusted results are presented in our earnings release. Revenues for the quarter were up 2% compared to the March and up 4% compared to the prior year second quarter. Our weighted average recurring fee rate for the quarter was 68 basis points, up slightly from the prior quarter. Adjusted operating expenses for the quarter were up 3% from the 2025 and five percent from the same quarter last year, primarily from higher incentive compensation expense due to increased revenues and market appreciation of long term incentive awards. Additionally, second quarter twenty twenty five reflects a $1,200,000 charge in connection with the closure of the China Post Venture strategy. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:15:12Adjusted operating income increased slightly compared to the prior quarter and 3% compared to the same quarter last year as a result of higher revenue. Adjusted net income per adjusted share was flat compared to last quarter and up slightly compared to the second quarter of twenty twenty four, consistent with operating income. Year to date, 2025 revenues were up 5% compared to the 2024 on higher average AUM. Year to date adjusted operating expenses increased 4% from 2024, primarily from higher incentive compensation on elevated revenues and the impact of the addition of the January 2025 long term incentive award grants. In calculating our non GAAP measures, non operating income includes only interest expense and interest income. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:16:06Although 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. Looking forward to Q3, revenue should benefit from 8% higher AUM. In addition, the September will benefit from the absence of approximately $2,400,000 of costs associated with the China Post Venture Team, including the $1,200,000 one time charge related to the closure of the China Post Venture Strategy. Turning to slide 11, our balance sheet remains strong. We currently have approximately $140,000,000 of seed capital invested in seeded products. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:16:55As strategies reach scale and our seed investments are redeemed, any redemption amounts realized are included in the cash available for corporate purposes, new seed investments, or as an addition to our year end special dividend. In addition, our $100,000,000 revolving credit facility remains unused. In August, dollars 60,000,000 of our senior notes will mature. Last month, we announced the closing of $50,000,000 new private placement debt on 08/15/2025. We will use the proceeds from the new debt along with cash on hand to retire the $60,000,000 of debt maturing in August 2025. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:17:38We 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 $0.73 per share with respect to the June 2025 quarter, a 7% increase over the prior quarter. That concludes my prepared remarks, and I will turn the call back to the operator. Operator00:18:06We will now begin the question and answer session. Please go ahead. Anthony CorbinEquity Research Analyst at Goldman Sachs00:18:53Hey, good afternoon guys. This is Anthony on for Alex. Maybe just to start on capital allocation and more specifically around M and A. You guys have expressed interest in M and A specifically around building out your ALPS capabilities. So what areas or asset classes are you most open to pursue? Anthony CorbinEquity Research Analyst at Goldman Sachs00:19:13And how should we think about the pipeline of deals today? Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:19:18Hi, it's Jason. Thanks for the question. We have spent some time talking about M and A. Guess I'd just take it back to first principles. Number one, it's always going to be a talent driven opportunity that's going to guide where to we're go. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:19:35There's an absolute standard. We're not going to change that standard whether it's lift out or M and A. But as you rightly pointed out, we do think M and A is a potent opportunity for us in the future, specifically in the alternatives to asset classes. There's a range of areas that we focus on, and we're not trying to be pigeonholing ourselves into any one specific area, but as you've heard us talk about, real estate is interesting because it's highly fragmented. There's multiple ways to win. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:20:11There's a lot of talent out there systematically. There's a lot of disruption going on, and certainly idiosyncratic at various firms there's opportunity to dislodge talent. We will focus on the, let's call it the areas where we think value can be driven. So we're not looking to do anything in the core or core plus from a lift out or M and A perspective. We would really focus on value add into the opportunistic categories where return differential is a lot higher and where we think our platform can be a benefit to talent. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:20:45We've looked at private equity more specifically. The secondaries business is interesting for us. It's an area where we think risk can be taken, risk can be rewarded. The duration and time to get your DPI is a lot shorter than what you typically see in your traditional buyout or venture funds. We think it plays well into the intermediate wealth space. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:21:12And again, there's a lot of talent out there in both lift out and M and A. We talked about private credit. We don't love doing something that's just a me too in the bulge bracket, sponsor driven area. We don't think we have the ability to compete there. But there are other areas where there's a vast TAM, big opportunity set, and high differentiation in areas like asset based lending. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:21:41And so that's just a flavor, but again, I don't want to say that that's where we're screening or looking for opportunities. That's where opportunities are finding us, and they seem really, really interesting and compelling. But we'll let the talent drive us and guide us in that regard. The last point I would make is we're continuing to see a high volume of activity. And given the build out of our investment strategy group over the last several years, it's allowed us the opportunity to really kind of focus on the external effort a little bit more than we have been in the past. Anthony CorbinEquity Research Analyst at Goldman Sachs00:22:18Great. Yeah, that's helpful. And then maybe for my follow-up just on capacity constraints. I know this has been a headwind headwind in a couple of strategies for a little while. So how should we think about the timing of these kind of reopening and the acceleration to the gross flow profile? Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:22:38Anthony, it's Eric. We are always managing capacity as you've highlighted. As we've always said, investments is the first thing we think about, and then we think about the distribution side. We'll always protect the investment results. There's a few strategies on the growth side that we're freeing up a little bit of capacity and managing that, given some of the trends we've seen in flows and a lot of the rebalancing we saw this last quarter was in the growth side of the equation. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:23:17With regards to the international value and the high income strategy, Really, we're working with a very strong embedded client base. Much of that client base is the intermediated wealth client. Intermediated client puts us in a model, and that model is refreshed for existing and new clients, and many of these intermediated wealth firms want to have consistency. So we really try to work with those groups on capacity and the large existing clients. And we'll continue to manage that and be judicious about that. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:24:02Or really how are we looking at the constraint strategies right now. Thanks, that's helpful. Operator00:24:11The next question comes from John Dunn Please go ahead. John DunnAnalyst at Evercore00:24:18Hey, thank you. You mentioned two institutional mandates. Maybe just if you could talk a little more about them, maybe the timing of when they might fund and also more generally just the temperature of the conversations you're having with institutional clients both in The U. S. And then overseas. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:24:40John, this is Eric. Yeah, the institutional clients, we did see some movement around rebalancing a little bit on the global equity side. And then on the positive front, we see quite a bit of interest in emerging markets at large. We had a nice uptick in our emerging markets local opportunities with the M Sites team. We also have some good opportunity to get funded with sustainable emerging markets. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:25:09And we're also hitting the ten year anniversary that we highlighted on the call with Developing World. So there's definitely a positive story around the fixed income strategies that we have, as well as the emerging markets. With regards to the institutional specifically, I think many of them are dealing with illiquid allocations and many of the private equity and other illiquid in real estate are creating evergreen funds and are really looking to extend the duration of those assets. Some clients are really focused on that. And then the secondly, with the institutional clients, we've just seen a little bit of backing off on risk, given the market environment. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:26:02And I think that's why I've been leaning more towards credit. But that back off of an analysis around risk, given the market environment, the tariffs, we saw really a muted gross flow this quarter. And if you looked at the gross levels, it was down quite a bit from previous quarters. And that signaled, I think, just a more cautious risk aware environment. And we're looking at credit as an area of growth. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:26:31Equity had some rebalancing and many people starting to revisit emerging markets as a place to allocate dollars. John DunnAnalyst at Evercore00:26:43Got you. And then maybe just to frame it again geographically in terms of distribution, any areas where you expect to see inflow demand or money at risk over the next the '25? Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:27:04I think from a geographical, don't think we've seen any specific spots geographically in The US has been the one area with regards to public equities on the institutional side that we've seen the rebalancing. Nothing's jumping out from a geographical standpoint that's causing us concerns. John DunnAnalyst at Evercore00:27:33Great, thank you very much. Operator00:27:37The next question comes from Bill Katz with TD Cowen. Please go ahead. William (Bill) katzSenior Equity Analyst at TD Cowen00:27:42Okay. Thank you. So just staying on the flow discussion for a moment. I apologize. I joined just as your comments were going on. William (Bill) katzSenior Equity Analyst at TD Cowen00:27:49Did you frame or size the institutional wins? I'm so curious, you mentioned that you're seeing a pickup in EM. It sounds like it might be coming from other equities. A, is that correct? And then B, if that does sustain itself, how do you sort of see the net impact flowing through to APEM, given you're skewed to some of the legacy mandates versus the more fertile opportunity in the EM business, but that being a little bit smaller? Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:28:16Yeah, we talked about two larger mandates. We're starting to see that on the EM side of the equation with M sites and sustain emerging markets. And we also mentioned Bill on the Developing World, but we're seeing a growing interest and growing opportunities with M Sites, with Sustainable Emerging Markets, with Developing World. And when we brought in the Emsights team the first couple of years, it was the largest outflow of emerging market debt in the institutional marketplace and the history of that asset class. And that was followed up with another down year. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:28:59You're starting to see a lot of people revisit that allocation, given Emsights just hit a three year number across all of its strategies, Developing Worlds at its ten year, and our Sustainable Emerging Markets had a very strong performance over the last one, three, five, ten, screening well. We're very optimistic on allocations there, as well as beyond the EM debt, the broader fixed income category is also up ticking for us. And how that offsets the equity side, it really depends on how our large clients on our international value, international equity and the global products rebalance and manage their risk. So it's hard to predict. Those are lumpy, episodic rebalancing that does occur. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:29:57That's been the bulk of the outflow this quarter. And as I said earlier, it's been a very muted gross flow across the board this quarter. So it's hard to actually frame the exchange of kicks on the inflow outflow story. William (Bill) katzSenior Equity Analyst at TD Cowen00:30:15All right. Well, I appreciate the perspective. And then maybe one tying in the opportunity for growth to CJ. As you think through maybe the OpEx outlook into the second half of the year, I appreciate the guidance that you won't have the elevated severance associated with the wind down of the China venture fund. How we think about maybe OpEx and particularly would you look to ramp any kind of spend just given that you're at sort of inflection on some of these flagship funds that could potentially scale pretty nicely? Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:30:46Yeah, Bill. Yeah, there's really no sort of update from an OpEx standpoint. I mean, we're still on target to be like mid single digits on the fixed side and of course, on the variable side, which is almost 55 of our expense base, that'll vary with revenues. So there is no expected expense ramping for any type of growth. I think we're well positioned to take advantage of the growth that exists within the system right now. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:31:18And it's just about executing on it, and we don't really need to put any kind of expense initiatives in place to capture that. William (Bill) katzSenior Equity Analyst at TD Cowen00:31:30Okay. Very good. Thank you. And Eric, congratulations again. I'm feeling very nostalgic today. William (Bill) katzSenior Equity Analyst at TD Cowen00:31:34But thank you for all your help along the years. Eric ColsonMD & Chair of the Board at Artisan Partners Asset Management00:31:36Thanks, Bill. Operator00:31:38The next question comes from Kenneth Lee with RBC Capital Markets. Please go ahead. Kenneth LeeVice President at RBC Capital Markets00:31:45Hey, good afternoon and thanks for taking my question. During the prepared remarks, mentioned potentially expanding some of the degrees of freedom on the credit side. I wonder if you could just further flesh out or outline what's in the pipeline for new products within the credit side over the near term. Thanks. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:32:10Yeah. Hey Ken, it's Jason. We are evaluating various structures and opportunities as it relates to the private markets. There could be the potential for interesting ways to access the private markets with our existing franchise, the credit team. We're certainly looking at those and evaluating those in the context of continuing to expand out those degrees of freedom and continue to grow and build what we think is a platform that has the right amount of resources and certainly the brand recognition to have that opportunity. Jason GottliebPresident, MD, CEO & Director at Artisan Partners Asset Management00:32:52I'd say that that's probably the nearest term opportunity, and within the M Sites business, we're continuing to evaluate whether there are opportunities to launch a private fund around our global unconstrained strategy more from an institutional perspective that they might not be interested in accessing a mutual fund. And so those are probably the two. One's a little bit more of an expansion of degrees of freedom, and one's just an opportunity to capitalize on the existing toolkit. Kenneth LeeVice President at RBC Capital Markets00:33:27Great. Very helpful there. And just one follow-up, if I may. Any updated outlook around seed capital needs for this year? Relatedly, any early indication around payout ratio for this year? Thanks. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:33:43Yes, I'll take that one, Ken. In seed capital, I think right now we're well positioned. Always are thinking about new products. But as sit here today, there's nothing no planned new seeds, although some are in the works. I'd say we're in a well positioned spot from a capital perspective as we've ever been. Charles DaleyEVP, CFO & Treasurer at Artisan Partners Asset Management00:34:09As you know, we've had a lot of seed capital that we expended over the last several years, and our book is now $140,000,000 We expect to see some opportunities over the next twelve to eighteen months to start to pull some of that back, redeploy that either for additional seed or acquisitions if something like that comes to fruition. So I feel like we're really well positioned from a seed perspective. And obviously, we're not a fan of debt, but if you think about M and A in context of buying an established firm, we do have capacity within our line of credit and additional debt capacity, obviously not our preference. But just to highlight, we're in a good capital position to execute on what we need to, whether it be seed or M and A. Kenneth LeeVice President at RBC Capital Markets00:35:10Great. Very helpful there. Thanks again. Operator00:35:14This concludes our question and answer session and the Artisan Partners Asset Management business update and second quarter twenty twenty five earnings call. Thank you. You may now disconnect.Read moreParticipantsExecutivesBrennan HughesHead - IREric ColsonMD & Chair of the BoardJason GottliebPresident, MD, CEO & DirectorCharles DaleyEVP, CFO & TreasurerAnalystsAnthony CorbinEquity Research Analyst at Goldman SachsJohn DunnAnalyst at EvercoreWilliam (Bill) katzSenior Equity Analyst at TD CowenKenneth LeeVice President at RBC Capital MarketsPowered by