Artisan Partners Asset Management Inc. Class A

Hello, and thank you for standing by. My name is Rocco, 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 Michaela Taphorn, Director, Investor Relations for Artisan Partners Asset Management.

Thank you. Welcome to the Artists and Partners Asset Management Business Update and Earnings Call. Today's calls will include remarks from Eric Colson, 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. These are subject to risks and uncertainties and 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 our remarks made today will include references to non-GAAP financial measures. you can find reconciliations of those measures to the most comparable GAAP measures in their release. And I will now turn the call over to Eric Holson.

Thank you, Michaela, and thank you, everyone, for taking the time to listen or read the transcript. We appreciate and value your time. We know that we cover the same topics and themes over and over. It is important that our stakeholders understand who we are and the fundamental principles that guide our decision-making. We think it's worth the time to go back over these points. High value-added investing, talent, and thoughtful growth. These are the most important things. That's why we talk about them all the time. Our flywheel is simple. Attract and partner with great investment talent. Provide the talent with the resources, autonomy, and time to generate and compound wealth for clients. Long-term growth for talent, the firm, and shareholders follows. Executing is more complicated, especially because we operate at the intersection of people and markets, both of which are constantly changing. All the more reason to have an articulate approach and process that keeps us grounded and guides our actions. Slide 2 outlines our repeatable process for partnering with investment leaders to develop successful, sustainable investment franchises. An investment team with the franchise traits listed on this slide is a powerful engine of value creation for clients, talent, and shareholders. Over our 25 years, we have developed this process and successfully executed with multiple investment leaders across numerous variables, including inception dates asset class, style, geography, resource model, and culture. It starts with finding the right talent for artisan. We seek unique investment leaders who are passionate about their investment philosophy and who want to operate with an ownership mentality. We are extremely patient in both identifying prospective new talent and the courtship process. The opportunity cost of moving forward with someone is high, We only move forward when we believe there is a high probability of long-term success. Once we bring on new investment leaders, we develop and resource a team, which includes people, research, data, technology, space, and guidance. We focus on building a strong foundation, a cohesive team, a repeatable investment process, and early results. We find the right business leader to find the right clients on the right terms Generally, after teams spend several years developing the foundation, a period of accelerated asset growth will follow. We seek to build businesses diversified by client type, vehicle, and geography. We focus on high-quality, long-duration clients. Eventually, organic growth moderates and a lion's share of future growth comes from compounding wealth for clients. Teams broaden out their investment capabilities and add greater depth of talent. Distinctive and recognizable brands emerge. This is not a linear process. It plays out differently for each team, but we always stack the deck in our favor. We design paths with high probabilities of long-term success. Via our model and culture, we buy time. As duration extends, so too does probability of success. Some investment teams and strategies take more time, due to a change in market environment, client preference, or something specific to the team or strategy. Before leaving this slide, I want to emphasize that the growth portion of the curve does not mean organic growth or net flows. It means much more than that. It means growing as investors, growing as a team, and further developing each of the franchise traits. It may mean AUM growth. but that growth will often be in the form of wealth creation for existing clients. We don't engineer products to feed a large sales force, see what hits, or smooth flows. We are targeted in our approach based on who we are. We operate outside the influence of short-termism, expect lumpy outcomes, and compound long-term results for clients, associates, and shareholders. The next slide summarizes two of our newest strategies, International Small Cap Value and China Post Venture. In September 2020, Beini Zhao and Annan Vasagiri joined Artisan International Value franchise. Subsupported by founding portfolio manager David Samra, Beini and Annan launched the Artisan International Small Cap Value strategy in October 2020. The strategy applies the value-oriented philosophy that David has been refining at Artisan for nearly 20 years to the large and inefficient international small cap space. Since inception, the strategy has returned 45.9% after fees, beating its benchmark index by more than 900 basis points. Also in 2020, Tiffany Hsiao and UNUMG joined Artisan to build a new investment group within our global equity franchise. We have worked with Tiffany and UNUN to build a team of five professionals, open a new office in Hong Kong, develop custom investment technology, access the China A-share market, and execute on early private transactions. As of the end of the quarter, since inception, the strategy had returned 11.2% after fees, beating its benchmark index by more than 500 basis points. While each of these new groups sits within an established investment franchise, each is building the strong foundation I described on the prior slide. These strategies also represent the high-value added space where we expect to continue to find opportunities for thoughtful growth consistent with who we are. Emerging and other less efficient international markets and private asset classes, especially those that can be paired with public assets, where we have a proven track record of success. Turning on to slide four, on July 1st, our sustainable emerging markets franchise marked its 15th anniversary at Artisan Partners. Including time at a prior firm for more than 20 years, Maria and her team have employed a consistent investment philosophy, identifying companies with sustainable competitive advantages and unique access to growth. Assessing sustainability has been part of the team's process since inception, but they take a differentiated approach to the concept. They look for companies committed to profits and progress. They acknowledge the realities of emerging markets and evaluate companies individually, but they focus on the long-term direction and degree of change. They dig deeper into ESG by assessing a company's ability and commitment to bring continuity to shareholders employees, customers, and communities, what they call the capacity to endure. They don't use negative screens or exclusion lists, which overlook positive change and forward-looking management. As the quantity and quality of ESG information has improved, the team has evolved the sustainability assessment. They now combine quantitative, incident-based reporting with their own qualitative assessment based on interviews, site visits, company files, and other ESG sources. The team's commitment to its core principle and dedication to continued improvement has paid off for clients and the firm. Over the trailing five years, the team has generated average annual returns of 14.8% after fees, beating the benchmark index by more than 175 basis points per year. The team is strong and the process is proven. The Artisan Sustainable Emerging Markets Franchise is poised for future growth. Our aggregate growth outcome is on slide five. Building and maintaining sustainable investment franchises results in long-term growth. Nearly all the growth shown on this slide has resulted from investment returns generated for clients. That's what we expect. Attract and retain great talent, developed investment franchises that compound wealth for clients. Long-term growth for the firm and shareholders will follow. Our purpose is to generate and compound wealth for our clients over the long term. Our clients use the dollars we compound on their behalf to achieve their objectives and goals. Over nearly 25 years, our U.S. mid-cap growth strategy has compounded client assets at a rate of over 15% per year after fees, generating nearly 5% per year of alpha over the index. Those results over that time period in a daily liquidity strategy stack up well against any investment strategy or asset class. Most importantly, it has worked for clients. Since inception, net of contributions, clients have taken over $10 billion out of the strategy. That gets recorded as cumulative net outflows of over $10 billion. But in fact, it represents considerable success in fulfilling our goal as an organization. Today, the Mid-Cap Growth Strategy has approximately $18 billion AUM, with a strong track record, a stable investment team, and a proven investment process. This is a high-quality outcome for our clients, our people, and our firms. And if measured solely by net flows, a different conclusion may be made. Our outcomes are not linear. They can't be engineered on a quarterly basis. But we have a repeatable process for developing investment franchises, compounding wealth for clients, and generating successful outcome for shareholders. We will continue to apply that process with both our existing investment franchises and new talent and teams we add over time. I will now turn it over to CJ to discuss our recent business and financial results.