Artisan Partners Asset Management Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Investment Performance: Firm-wide asset-weighted investment returns exceeded 20% net of fees in 2025. Investment strategies generated over $33 billion in client returns. 79% of AUM outperformed benchmarks over 3 years, 74% over 5 years, and 92% over 10 years gross of fees.
• AUM: Ended 2025 with $180 billion in assets under management, an all-time high, driven by $33 billion in investment gains. Equity AUM was impacted by outflows, while credit and alternatives saw growth.
• Grandview Property Partners: Acquired in January 2025, a real estate private equity firm specializing in middle market properties, with top quartile results since 2018 and managing approximately $880 million in institutional assets.
• Financial Results: Q4 2025 revenues were $336 million, up 13% year-over-year. Adjusted operating income increased 23% quarter-over-quarter. Dividends declared in 2025 totaled $3.87 per share, with a 98% payout ratio.

Segment Performance

• Equities: Experienced outflows of $15.6 billion in 2025, impacted by challenging short-term performance in some large strategies. However, 79% of AUM outperformed benchmarks over 3 years, 74% over 5 years, and 92% over 10 years gross of fees. Six equity strategies had over 500 basis points of outperformance net of fees in 2025.
• Credit: AUM grew 29% to $17.9 billion in 2025, with net inflows of $2.8 billion and organic growth exceeding 20% for the third consecutive year.
• Alternatives: AUM grew 20% to $4 billion in 2025, with strong organic growth in global unconstrained.
• Overall: Firm revenue grew 8% in 2025, with Q4 2025 revenues reaching $336 million, an all-time high.

Guidance

• 2026: Board approved a $72 million 2026 Annual Long-Term Incentive Award. The acquisition of Grandview is expected to have an immaterial impact on 2026 earnings but will be mildly accretive after Grandview's next flagship fund closes. Fixed expenses are expected to increase low single digits in 2026.
• Capital: Retains approximately $80 million of excess capital for organic growth and potential M&A opportunities.

Risks

• Market and Regulatory: Regulatory changes in regions like Europe could affect institutional demand. Short-term performance issues in certain strategies may impact fund flows.
• Client Allocation: Changing asset allocation preferences and profit taking can lead to outflows from specific strategies.

Question and Answer

Q: Explain why AUM was lower than anticipated and the timeline for Grandview Fund III A: AUM decline in Q4 2025 was due to realized gains and distributions from Grandview Fund I. Grandview Fund III was ~$150 million, with the goal of launching Fund IV, aiming for a first close in early to mid-2026 and expecting it to be larger than Fund III.

Q: Discuss M&A opportunities and receptivity A: Focus on private credit, private equity secondaries, equity idiosyncratic opportunities, and broadening the credit platform. Off-market transactions are a fertile area, and Grandview is a fully functioning platform with existing success.

Q: Address outflows in the international value strategy A: Outflows in the international value strategy were due to institutional rebalancing from strong absolute returns, with no underlying concerns as the team continues to deliver exceptional absolute returns.

Q: Talk about interest in non-U.S. strategies A: Emerging markets allocations are showing green shoots, global strategies (e.g., global value, global equity) are performing well, but Europe faces regulatory challenges affecting institutional demand compared to the U.S.