Artisan Partners Asset Management Inc. (APAM)

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Artisan Partners Asset Management Inc. (APAM)

Q2 2013 Earnings Conference Call

July 24, 2013 5:00 p.m. ET


Makela Taphorn – IR

Eric Colson – CEO

C.J. Daley – CFO


Bill Katz - Citigroup

Robert Lee - KBW

Michael Kim - Sandler O'Neill

Cynthia Mayer - Bank of America-Merrill Lynch

Chris Shutler - William Blair



Good afternoon, ladies and gentlemen. Thank you for standing by.

Welcome to Artisan Partners Asset Management Second Quarter 2013 Earnings Conference Call.

My name is [Mike] and I will be your conference operator today. [Operator Instructions].

At this time I will turn the call over to Ms. Makela Taphorn with Artisan Partners.

Makela Taphorn

Thank you. Good afternoon everyone.

Before we begin, I would like to remind you that our second quarter earnings release and the related presentation materials are available on the Investor Relations section of our website.

I would also like to remind you that comments made on today’s call and some of the responses to your questions may deal with forward-looking statements and are subject to risks and uncertainties. Factors that may cause our actual results to differ from expectations are presented in the earnings release and are detailed in our filings with the SEC. And we undertake no obligations to revise these statements following the date of this conference call.

In addition, some of the remarks this afternoon include references to non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in the earnings release and exhibits which are posted on the Investor Relations section of our website.

And with that I will now turn the call over to our Chief Financial Officer Eric Colson.

Eric Colson

Thanks, Makela. Good afternoon and welcome to the Artisan Partners Asset Management business update and quarterly earnings call. I'm Eric Colson, CEO. And I'm joined today by C.J. Daley, CFO. Thank you for your time today. I hope you find this discussion useful.

During this time I want to make sure to reinforce our long-term business strategy and approach through a current presentation of our operational and financial statistics. But more importantly, I want to begin a pattern of diving a little deeper into one of our primary beliefs.

This quarter the deep-dive will focus on talent management. We are very committed to managing our business for passionate investors to deliver performance and results for our clients. Once I'm done, C.J. will take the lead on walking through our financials.

Beginning with slide two, we have a basic set of business facts. This is the first of several slides that will hopefully become familiar to all of our call participants. Markets can fluctuate a fair amount point to point, particularly over short timeframes such as quarterly reporting periods. Our view of our business and how we measure and think about progress does not. I will make sure to highlight changes that we believe are important to discuss as I page through the presentation.

Since our last reporting period, the change of note on this page are the change in assets under management and a number of investment strategies we offer. A relatively flat period for Global Equity markets. Our assets under management grew past $85 billion through a combination of organic growth and alpha generation from our investment teams.

At the end of the quarter we launched our 13th investment strategy and first since 2010, Artisan Global Small Cap Growth. This strategy is managed by our Global Equity team. It is a natural extension of the mix of strategies currently managed by the team and a great opportunity to leverage the broad decision-making capability on the team.

The next two slides provide a current view of our long-term investment results. As a reminder it is our goal to produce superior investment return on an absolute and relative basis, with integrity over a full market cycle. So when we look at investment performance, we answer three questions. Have we been faithful to the strategies' stated investment philosophy and process? Has the strategy produced good absolute performance? And how those strategies' performance compare to performance of its peers, competitors and the index?

As of June 30th, 10 of our 12 investment strategies added value relative to their broad performance benchmarks over the trailing five and 10-year periods and since each strategy's inception. All 12 strategies have good absolute performance and followed their objectives with integrity.

Slide four further reinforces the impact of our performance philosophy across our asset base. Our teams run active portfolios with high degrees of investment freedom. Each also adheres to a time-tested investment process. None have a process or incentive that pays much value on very short timeframes. Therefore the return patterns of all of our teams will be lumpy. That is evident in the one-year return. But each has proven to compound wealth for clients with 90% to 100% of assets, out-distancing the benchmarks over the five, 10 and since inception timeframes. Our mutual fund peer rating, which are highlighted at the bottom of the page, are a great illustration of how our results translate to peer ratings.

On slide five I want to highlight our asset diversification. Our distribution strategy is focused on sophisticated investors with a long-term horizon to manage a consistent asset base. We have a deliberate capacity realization strategy. Ideally we want to see strong asset diversification by team, distribution channel, investment vehicle and geography. And we have a disciplined approach to seize because it is critical to talent retention. Managed well together, this contributes to stability in our business mix and investment teams.

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