Artisan Partners Asset Management Inc. Class A

Hello, and thank you for standing by. My name is Mike, 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 Ms. Michaela Taphorn, Director, Investor Relations for Artisan Partners Asset Management. Ms. Haporn, the floor is yours, ma'am.

Thank you. Welcome to the Artisan Partners Asset Management Business Update and Earnings Call. Today's call will include remarks from Eric Olson, Chairman and CEO, and CJ Daly, CFO. Our latest results and investor presentation are available on the Investor Relations section of our website. Following these remarks, we will open the line for questions. Before we begin, I'd like to remind you that comments made on today's call, including responses to questions, may deal with forward-looking statements which are subject to risks and uncertainties that are presented in the earnings release and detailed inter-filings with the SEC. We are not required to update or revise any of these statements following the call. In addition, some of our remarks made today will include references to non-GAAP financial measures. You can find reconciliations of those measures, the most comparable GAAP measures, in the earnings relief. And I will now turn the call over to Eric Coulson.

Thank you, Michaela. And thank you, everyone, for joining the call or reading the transcript. I hope you are well. First, a quick update on our operating environment. The health and safety of our people remains our highest priority. We continue to work mostly from home with some investment personnel back in the office. Despite the environment, we continue to operate well. Our investment teams have taken advantage of market volatility to invest opportunistically. Our distribution professionals have used technology to communicate with existing clients, prospects, and new relationships. and our operations professionals continue to support our mobile and flexible environment. At Artisan, we focus on people, investments, and trust. The pandemic and social unrest has resulted in more volatile and uncertain environment for people and investments. Responding well requires patience and trust, critical components of our thoughtful growth mentality. Our approach allows our teams to remain focused on their investments and utilize degrees of freedom to produce differentiated long-term performance. We allow our people to operate in trusted and autonomous working environments. And our patience and commitment to doing things right reassures clients and consultants. As we've always stated, the outcomes are lumpy over short periods. But over the long term, we compound capital for clients, create opportunities for our people, and grow business value for our shareholders. Slide two shows that we have consistently added value for clients for 25 years. Here today, 12 of 18 investment strategies have outperformed their benchmarks after fees. Across the firm, we have generated over 600 basis points of firm-wide gross alpha. That translates into approximately $7 billion of additional wealth for our clients. Our recent performance rivals that of any period in our history, except for around the TMT bubble, when we were a smaller, less diversified firm. Our performance over time demonstrates an ability to add value in all manner of markets. But in periods of heightened uncertainty, volatility, and dispersion, such as the TMT bubble, the great financial crisis, and most recently with the pandemic, Our investment teams have performed particularly well. In those times, experience, judgment, deep knowledge of company fundamentals, and the conviction to act through security selection make a big difference. And the value of Artisan Partners' active management clearly shows through. What we do works across investment teams and asset classes and through time and over market cycles. Turning to slide three, I want to recognize several recent milestones at Artisan Partners. First, we recently celebrated the fifth anniversary of Lewis Kauffman joining the firm and launching the Developing World Strategy. The Developing World team has outperformed their index by nearly 700% since inception after fees. The Artisan Developing World Fund is rated five stars by Morningstar ranks number two of 178 funds in its Morningstar category and has $5.4 billion in assets. Second, Chris Smith and the Thematic team recently passed their three-year mark at Artisan Partners. Since launch, the team's Thematic strategy has generated a cumulative return of 95% after fees compared to 39% for the S&P 500. The team's focus fund also has a five-star Morningstar rating and ranks in the top decile of its category. The thematic team also manages a long-biased private fund, which has performed well and has $747 million in AUM. Lastly, Reza Okanovic has now been with Artisan Partners for more than a year. Since inception, after fees, the Artisan International Small-Mid Growth Strategy has returned more than five times its index. Louis, Chris, and Rezzo are each unique investors. The portfolios they build are extremely differentiated from the index and from peers. What they do and what they produce cannot be replicated by an exposure or index-based strategy. We provide all of our investment teams with degrees of freedom in order to differentiate themselves, generate alpha, and manage risk. The teams use degrees of freedom in different ways. Some use cash more strategically. Others use market cap or geographical flexibility or concentration or new instruments or differentiated takes on ESG. It varies from team to team, but they are all using degrees of freedom and all doing so in pursuit of outstanding long-term outcomes for clients. Turning to slide four, the spectrum of business models in our industry continues to expand and evolve. Large integrated firms are evolving their structures into more segmented investment units. Cedar firms are developing more support functions and hedge fund platforms are growing their strategies and solutions. In this environment, we must communicate who we are and maintain an active dialogue with investment talent. Most importantly, We must continue to recognize that our greatest asset is our current investment teams. And we must continue to partner and work with them to maintain healthy and growing investment franchises. We use the franchise development framework on this slide for all of our investment teams. But what a franchise ultimately looks like and how it gets there is different in each case, usually very different. Our approach is personalized and patient. We provide autonomy to develop a culture, structure, and environment owned by the investment team. We treat people as individuals and remain flexible. We know that people value and manage things differently, and their preferences and priorities change over time. And we have a long-term horizon, giving talented people resources and time to generate successful outcomes. Our approach to talent is different. Compared to starting your own firm, Our model offers the support of a business management team with deep experience developing and sustaining investment franchises. In addition, we offer a strong brand and long-term client relationships for business development. Compared to large integrated asset managers, we offer investment autonomy, no centralized research or CIO, no overarching firm philosophy about how money should be managed. And compared to the hedge fund platforms, we are more partnership driven with a longer term, more patient mindset. We attract investment leaders who want to build something special and unique over an entire career and leave a legacy that endures. Slide five shows all of the investment teams we have ever launched. In 2009, we merged our U.S. small cap growth team into the growth team. And in late 2018, we evolved the global value team into two separate teams, global value and international value. We have never shuttered an investment team. All of our teams have performed well for clients over the long term. We work with each team to continue building and maintaining the franchise characteristics necessary for sustainable success. Having discussed some shorter term milestones, Let me point out two longer-term ones. The Artisan Small Cap Growth Strategy recently passed the 25-year mark, a quarter century. It's the firm's first strategy, originally managed by firm co-founder, Carlene Ziegler. Lead Portfolio Manager, Craig Seppekanis, has been a leader on the strategy since 2004, and Lead Portfolio Manager since 2009. Over the trailing 10-year period, The strategy has compounded capital at an average annual rate of nearly 18% after fees. That's more than 700 basis points of outperformance per year relative to the broad benchmark and more than 500 basis points relative to the growth benchmark. Craig and the growth team have done a tremendous job. The other milestone to mention is the Global Equity Strategy's 10-year anniversary. Since inception, the strategy has outpaced the benchmark by 447 basis points per year after fees. Portfolio manager Mark Yockey is approaching his 25th anniversary with Artisan. He and his team are applying the same philosophy and process used on their flagship international strategy to the global universe, and they are doing it very well. Our growth and global equity franchises are very different. but they have both built, developed, and maintained franchise characteristics for 20 plus years. The combination of net of fee alpha and investment franchises shown on this slide is a scarce and powerful combination. In closing on slide six, I want to return to the subject of thoughtful growth. Over the years, our business expansion has occurred when we matched our talent-based high value added model with secular change in the industry. We usually talk about these expansions by reference to our investment strategies, but there is much more to it than that. We align investment strategies with asset allocation trends, distribution resources, the right investment vehicles, and operational support. For example, with our second generation business, we expanded into global-oriented strategies, leveraging global institutional consultants, and using USIT's pooled vehicles. More recently, with our third-generation business, we have built out operational support for greater degrees of investment freedom, tapped further into the high net worth channel, and used private fund structures. Today, similar to the interesting investment opportunities our investment teams are finding, We are seeing interesting opportunities to partner with new talent, launch new strategies, and further develop our business. As exciting as these opportunities are, we will remain patient and thoughtful about talent, our model, and long-term trends. We will keep the artisan talent bar very high with a goal that each additional artisan investor ratifies our model and strengthens our brand across the business. We will refrain from entering perpetual transaction mode. We will keep a healthy amount of spare capacity, which helps us function through volatile times and capitalize on the best opportunities whenever they arise. This patient, thoughtful, long-term approach is serving us well right now. We are doing much more than keeping our heads above water. We are executing. Our investment teams are performing well. We closed more new business in the second quarter than ever before in our history. We are actively working on new investment ideas and engaging with talented investors looking for a long-term home. We see lots of disruption and we are confident in our ability to capitalize. I will now turn it over to CJ to discuss our financial results.