Artisan Partners Asset Management Inc. (APAM)

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Artisan Partners Asset Management, Inc. (APAM)

Q4 2013 Earnings Conference Call

February 04, 2014 08:00 AM ET


Makela Taphorn - Investor Relations

Eric Colson - Chief Executive Officer

C.J. Daley - Chief Financial Officer


Bill Katz - Citigroup

Robert Lee - KBW

Michael Kim - Sandler O'Neill

Marc Irizarry - Goldman Sachs

Cynthia Mayer - Bank of America

Chris Shutler - William Blair



Good morning ladies and gentlemen. Thank you for standing by. Welcome to Artisan Partners Asset Management’s Fourth Quarter 2013 Earnings Conference Call. My name is Emily and I will be your conference operator today. At this time all participants are in a listen only mode. After the prepared remarks management will conduct a question-and-answer session and conference participants will be given instructions at that time. As a reminder this conference call is being recorded.

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

Makela Taphorn

Thank you, good morning everyone. Before we begin I would like to remind you that our fourth quarter earnings release and the related presentation materials are available on our Investor Relations section of our web site. 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. We undertake no obligation to revise these statements following the date of this conference call.

In addition some of their remarks this morning 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. And finally as you may have seen we have filed an initial registration statement for the follow on offer and we agree to conduct on behalf of our limited partners on or about the first anniversary of our initial public offering. We cannot discuss the offering on this call so please refer to the documents on file with the SEC if you would like more information.

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

Eric Colson

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

Like our first three updates, I want to spend time reinforcing our business strategy. So, given that this quarter concludes our first calendar year as a public company, I also want to spend some time framing the year in the context of our strategy. Key areas of emphasis for me will be the integrity of our investment results, the quality of our investment franchises and development of investment teams, the alignment of interest with our clients and professional talent and the help of our asset base.

Once I am done C.J. will take the lead walking through our financials before I conclude with some thoughts about the outlook for our business.

Let's start with a quick review of some of our static pages to give you a sense of how our year closed out. On the first slide, there are two points we're touching on. First AUM has increased to over a $105 billion from $97 billion last quarter and $74 billion last year. The growth in those numbers has been influenced by strength in the stock market, additional client cash flows and most importantly alpha generation from our investment teams.

We always make sure to put years like 2013 into perspective. In the past 189 years, the stock market has lost more than 30% in a calendar year only three times. And one of those years was 2008. The market has returned over 30% just 26 times and one of those years was 2013. More than two-thirds of the time, the stock market returns between plus and minus 20%.

The key takeaway is that we have seen some very unique outcomes from the market over the past six years. 2013 was a tail outcome that was beneficial to results, but it was outside the range of normal and we continue to plan of normalized assumptions. The second point we’re just touching on is the addition of a fixed investment team. As we noted in earlier press release, we hired Bryan Krug to start a credit team. I will elaborate further about Bryan, later in my discussions.

Our long-term investment results are illustrated on the next two slides in a consistent manner to past quarters. As of December 31, 2013, all of our strategies have followed their process with integrity and generated attractive absolute results since inception. Eight of our 11 investment strategies, excluding strategies that launched after December 2008, had added value relative to their broad performance benchmarks over the trailing five year period and since each strategy’s inception.

[All seven] of our investment strategies with a 10 year track record have added value relative to their broad performance benchmarks over the trailing 10 years.

Slide four, further reinforces the impact of our performance philosophy across their asset base. Our teams run active portfolios with high degrees of investment freedom, each adhere to a time tested investment process and execute the same over any market environment; none have a process or incentives that plays much value on very short timeframe. Therefore the return patterns of all of our teams will be lumpy. Year-over-year this is evidenced in annual results. More than 90% of our assets under management were in strategies outperforming the respective benchmarks over the trailing 3 year and 10 year periods and since each strategies inception.

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