Artisan Partners Asset Management Inc. Class A

Hello and thank you for standing by. My name is Andrew 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. If you require operator assistance, please press star then zero. At this time, I will turn the call over to Michaela Taphorn, Director, Investor Relations for Artisan Partners Asset Management.

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

Thank you, Michaela, and thank you all for joining the call or reading the transcript. At Arson Partners, we bring together the consistency of who we are, constant change, and patience. Slide 1, which we included philosophy, and model for over 25 years. We are a high-value-added investment firm designed for investment talent to thrive and committed to thoughtfully growing over the long term. Over our history, we have remained true to these foundational business elements. While we are consistent in who we are, we also use judgment to navigate change and grow over the long term. Responding to evolving asset allocations we have added degrees of freedom and generated portfolios and outcomes that are less easily replicated. In order to maintain an ideal home for investment talent, we invest in technology, data, and infrastructure to support high-value-added investing. To find the right clients on the right terms, we regularly evolve our leveraged distribution model to include institutions, consultants, financial intermediaries, and non-U.S. regions. And to increase the sustainability and flexibility of our human capital business, we evolve our capital structure over time while retaining a variable P&L model that itself provides consistency, predictability, and stability. With these changes and many others, we have always remained patient. We have never felt compelled to be first to market. We prefer to observe. and to determine which changes will become long-term trends that fit who we are as an investment firm. We are willing to take an incremental approach in order to avoid mistakes. We call this process bringing together who we are, constant change, and patience, dynamic consistency. Turning to slide two, our firm's purpose is to generate and compound wealth for our clients. On the left, you can see our long-term results. Since inception, 16 of 17 strategies launched prior to 2020 have added value relative to their benchmarks after fees. Twelve strategies have outperformed by an average of more than 300 basis points per year since inception after fees. We have generated long-term alpha over multiple teams, asset classes, and time periods. We have sought the right clients on the right terms to build a durable client base. Our performance, relationships, and brand positioned us well coming into 2020, a year of historic uncertainty, turmoil, and volatility. During the year, we generated over $30 billion of investment returns for our clients. Approximately $11.3 billion of the $30 billion were returns in excess of benchmarks. We once again demonstrated the value of active management at Artisan Partners. Slide 3 shows our business performance in 2020 across teams, market returns, excess returns, and organic growth. We managed long-term investment performance, sustainable investment strategies, long-duration relationships, capacity management, fee discipline, and a trusted brand. When these elements are managed together over the long term, not just focusing on one factor at all costs, exceptional outcomes can result. The aggregate is a balance of consistency, change, and patience, consistency of people and long-term performance, change to develop and launch new strategies, patience in performance cycles and capacity management. With our value-oriented teams, strategies and managing a strong client base. We focus on the long-term. We avoid overreacting to short-term trends. Our firm wide flows were positive in 2020 because of years of high value-added investment returns, stable investment talent, our trusted brand, and long-term relationships. Our flows resulted from multiple long-term investments, We did well in 2020 because we have done well for 25 years. Over long time periods, we methodically build out our investment firm, change over time, and remain patient. Outcomes follow. As we have grown, we have continued to maintain a high-quality leveraged distribution model. Our model supports and complements our investment-first culture. We don't require a large fixed sales infrastructure. We avoid pressuring our firm to manufacture bad products and retain flexibility to hire great investors and retain them over their entire careers. Moving to slide four, we continue to invest in our business in 2020. We launched the select equity and international small cap value strategies. We are in the process of building out an investment group focused on post-venture investing in greater China, including public and private equity investments. We expect to launch the China post-venture strategy in the near future. These moves exemplify dynamic consistency. Twenty-five years ago, Artisan Partners recruited Mark Yockey to join the firm and launch the Artisan Non-U.S. Growth Strategy. At that time, U.S. investors were under-allocated to non-U.S. companies relative to the size of the global economy. We believed allocations to non-U.S. equities would grow over time, and investment style would also be applied outside the U.S. There were relatively few managers offering non-U.S. growth-oriented strategies. Talent was scarce, and there were a limited number of firms set up to invest and operate outside of the United States. Artisan partners identified the opportunity, and non-U.S. investing has fueled much of the firm's growth over the ensuing 25 years. Today, we see a similar opportunity with respect to China for existing and future investment teams. We believe the gap between Chinese share of GDP and the share of global assets allocated to Chinese equities will close over time as investors increase exposure to the Chinese growth story. Similarly, we believe that private investing is a long-term secular trend. The availability of capital allows businesses to remain private longer. Relative to the past, a greater portion of value creation is taking place outside public markets. Neither of these long-term trends is new. Many of our teams have invested in Chinese companies for years. Most recently, Lewis Hoffman and the Developing World team have emphasized Chinese companies in their portfolio, generating exceptional returns for clients. We have been patient as these changes have occurred. We have waited for the trends to cement, and we have waited to find the right investment talent. With the China post-venture strategy, we're taking our next incremental step into both China and private investing. Turning to slide five, since our firm's founding 25 years ago, we have always had a strong equity culture. Throughout our history, both as a private and public company, we have regularly awarded equity for value creation, with a lion's share going to investment professionals. Our equity awards have always been long duration and have always incentivized our at the end of their career. But the form of awards has changed over time as the firm has evolved and as our people have evolved. Our 2013 IPO created liquidity for partners and allowed us to use restricted shares for long-term incentives, which are more transparent, easily valued, and allow us to spread equity more broadly compared to pre-IPO partnership interests. In 2014, we added career vesting to 50% of the awards made to senior leaders. Career vesting creates long-term alignment between our senior leaders and our clients and shareholders. Things are not static. Our firm has continued to grow and diversify, which reduces the relationship between any one investment team's performance and the firm's overall performance. In order to provide more consistency, predictability, and objectivity to our long-term incentives, this year we have replaced some of our equity awards with franchise capital awards. These are cash-based awards made to investment teams equal to approximately 4% of the team's prior year revenues. The awards have the same vesting rules as restricted shares. Prior to vesting, though, the majority of the franchise capital will be invested in the investment team's strategy, not the firm's stock. further enhancing alignment between our investment professionals and our clients. We continue to determine the overall size of our annual awards to align our value creators with the firm and our clients, as we have done for 25 years. The overall size of this year's award was based on the value produced in 2020 and consistent with the size of prior grants. I will now turn it over to CJ to discuss our financial results.