What Artisan Partners Asset Management (APAM) Said on Its Q3 Earnings Call

Key Points

• Net client outflows totaled $10.6 billion in Q3 2026, with $7.8 billion tied to the U.S. Value team wind-down and a large Global Value client rebalancing. AUM fell 8% sequentially to $169 billion, though management said the events had a relatively modest impact on revenue.
• Credit and alternatives remained growth areas, generating $1.1 billion in combined quarterly inflows and lifting their combined AUM to more than $26 billion, or 15% of firmwide assets. Artisan plans to expand public and private credit offerings and launch an interval fund for wealth clients in 2027.
• Despite equity-strategy performance challenges over shorter periods, revenue rose 4% year over year to $313 million, adjusted operating margin expanded to 35.5%, and adjusted EPS was $1.03. The board also approved a quarterly dividend of $0.88 per share, up 10% from the prior quarter.

Artisan Partners Asset Management NYSE: APAM reported third-quarter 2026 net client outflows of $10.6 billion, driven largely by two previously disclosed events, while the company highlighted continued inflows and expansion plans in its credit and alternatives businesses.

Chief Executive Officer Jason Gottlieb said approximately $7.8 billion of quarterly outflows related to the wind down of the U.S. Value team and a rebalancing by a large Global Value client. The amount included $1.9 billion tied to the U.S. Value team wind down and $5.9 billion from the Global Value client relationship.

Despite the outflows, credit and alternative strategies produced combined net inflows of $1.1 billion during the quarter and $3.2 billion year to date. Credit strategies generated about $290 million of inflows, marking the company’s 17th consecutive quarter of positive credit flows, while alternatives raised approximately $770 million, led by the Artisan Global Unconstrained Mutual Fund.

Assets, Revenue and Earnings

Assets under management ended the quarter at $169 billion, down 8% from the June quarter and 7% from a year earlier. Chief Financial Officer C.J. Daley said roughly 75% of the net outflows contributing to the sequential AUM decline were tied to the two discrete events, which had a relatively modest effect on quarterly revenue.

Average AUM was $180.5 billion, down 1% sequentially but up 2% from the September 2025 quarter. Revenue rose 1% from the prior quarter to $313 million, aided by an additional day in the quarter and a slightly higher average fee rate. Revenue increased 4% year over year, reflecting higher average AUM and a higher fee rate.

The weighted average fee rate increased to 69 basis points, primarily due to the impact of the two redemption events, Daley said. Adjusted operating expenses declined 2% sequentially, reflecting lower employee-related costs and the roll-off of seasonal expenses, partly offset by higher variable incentive compensation.

Adjusted operating income increased 9% sequentially, while adjusted operating margin expanded 260 basis points to 35.5%. Adjusted earnings per share were $1.03. Compared with the prior-year quarter, adjusted operating income rose 2% and adjusted EPS increased 1%.

For the first nine months of 2026, average AUM and revenue each rose 7% from the comparable 2025 period. Adjusted operating income increased 6% to $307 million, adjusted operating margin was 33%, and adjusted EPS increased 6% to $2.84.

Investment Performance and Equity Challenges

Gottlieb said investment performance remained strong over longer periods, with 92% of AUM outperforming benchmarks over 10 years and 99% outperforming since inception, gross of fees. However, short-term results were pressured by relative underperformance in several larger equity strategies, particularly International Value and Global Value.

As of Oct. 26, the company said 75% of AUM was outperforming over one year and 84% was outperforming over three years. Gottlieb said both International Value and Global Value had shown strong performance in October.

During the question-and-answer session, Gottlieb said market breadth had been unusually narrow. He noted that the S&P 500 was about 2% below its all-time high at the end of the third quarter, while the average stock was approximately 17% below its own all-time high. He said the company continued to emphasize the investment teams’ long-term philosophies and processes to clients.

Credit and alternatives continued to post stronger investment results. Gottlieb said 100% of credit AUM had outperformed its benchmark over the reported periods since the firm’s first credit franchise began in 2014. He also said all three EMsights Capital Group strategies had produced double-digit annualized returns since inception, gross of fees, along with excess returns against their benchmarks.

Credit, Alternatives and Distribution Initiatives

Combined AUM in credit and alternatives has nearly doubled over five years to more than $26 billion, rising from 8% to 15% of firmwide assets, according to Gottlieb. The company plans to continue expanding its credit capabilities across public and private credit, broaden its geographic reach, and develop new investment vehicles.

Management is developing an interval fund structure intended to bring public and private credit capabilities to wealth clients in 2027. Gottlieb said the firm has discussed the product with key relationships and has seen an initially “pretty warm” reception. He said the interval-fund strategy would leverage existing credit-platform strengths and address demand for more flexible solutions spanning public and private markets.

The company also plans to introduce UCITS versions of strategies for European investors. Gottlieb said Artisan expects to launch a UCITS version of the EMsights Global Unconstrained strategy in Europe on Nov. 2. He added that the firm has expanded distribution resources in the U.K., Europe and the Middle East and has seen increased activity and pipeline opportunities in those regions.

Artisan launched 13 new UCITS fund share classes during 2026. In the fourth quarter, it anticipates launching ETF share classes for the Artisan Select Equity Fund and Artisan Focus Fund, subject to remaining regulatory and board approvals. Gottlieb said the ETF offerings would be staged over several quarters and would provide another access vehicle rather than compete with existing strategies on price.

Outlook, Balance Sheet and Capital Return

Daley said the fourth quarter begins with lower AUM but a higher average fee rate because the two discrete outflows were in lower-fee mandates. He said the company expects non-reinvested annual mutual fund income and capital-gains distributions to reduce AUM by approximately $2.5 billion in the fourth quarter.

About 3% of AUM is subject to performance fees, most of which crystallize on Dec. 31. The company expects a performance-fee contribution similar to the approximately $29 million recorded in the fourth quarter of the prior year, although Daley said the result remains subject to market and investment performance through year-end.

Artisan ended the quarter with $352 million in cash and renewed and expanded its five-year revolving credit facility to $150 million. The facility was unused at quarter-end. The board declared a quarterly dividend of $0.88 per share for the September 2026 quarter, a 10% increase from the prior quarter and unchanged from a year earlier.

About Artisan Partners Asset Management (NYSE:APAM)

Artisan Partners Asset Management Inc is an investment management company that provides actively managed investment strategies to institutional and intermediary clients, as well as certain private wealth investors. The company operates through Artisan Partners, L.P. and related entities, offering investment expertise across equity, fixed-income and alternative asset classes.

Its products and services include strategies focused on U.S. and international equities, emerging markets, non-U.S.

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