Artisan Partners Asset Management Inc. Q1 FY2026 earnings call

• Artisan Partners' purpose is to generate and compound wealth for clients long term by being an ideal home for investment talent, providing autonomy, freedom, resources, and support. - Long-term investment performance is strong: 74% of AUM outperformed benchmarks over three years, 76% over five years, and 99% over ten years gross of fees; 12 strategies with over ten-year track records have outperformed net of fees. - Recently, two investment teams were recognized by Morningstar and Lipper. - First quarter: firmwide net outflows of $3.1 billion; 13 strategies had net inflows year to date; Sustainable Emerging Markets raised $250 million; credit had $800 million net inflows for 15th consecutive quarter positive; alternatives raised $300 million. - Onboarded Grand View Property Partners in first quarter, added distribution talent in EMEA and intermediate wealth channel, filed exemptive relief application with SEC to offer ETF share classes of mutual funds; platform is compelling for investment talent, actively exploring expansion opportunities from individual lift outs to larger acquisitions.

In the first quarter, firmwide net outflows were $3.1 billion, concentrated in a few equity strategies. Year to date, 13 of the firm's investment strategies have net inflows. The Sustainable Emerging Markets strategy raised $250 million in the first quarter and assets under management are nearing $3 billion. Credit businesses had $800 million of net inflows in the first quarter, which was the fifteenth consecutive quarter of positive credit flows. Alternatives raised $300 million in the first quarter, primarily in the Global Unconstrained strategy.

• Full-year 2026 expense guidance remains unchanged. Excluding approximately $20 million of incremental fixed expenses related to long-term incentive compensation and Grand View, fixed expenses are expected to increase at a low single-digit rate in 2026. - Board of Directors declared a quarterly dividend of 77¢ per share for the March 2026 quarter, a 24% decrease from prior quarter and 13% increase year over year. After funding the dividend, approximately $150 million of excess capital was retained to support organic growth initiatives, evaluate potential M&A opportunities, and return to shareholders.

Comments made during the call include forward-looking statements subject to known and unknown risks and uncertainties, including factors set forth in earnings release and detailed in SEC filings, which may cause actual results to differ materially from disclosed statements; no obligation to update or revise statements; some remarks include non-GAAP financial measures, reconciliations to comparable GAAP measures can be found on Investor Relations website.

Q: Okay. Thank you very much for taking the questions. So first question, I guess in your prepared comments and also in the commentary yesterday with the release, you mentioned the equity attrition. Where do you think we stand in terms of that reallocation? And then within the $184 billion that you cited as of last week, can you frame what you are seeing in terms of that equity attrition? And maybe the broader question on the institutional pipeline at large is how has that been reshaped a bit between EM and credit versus what you are seeing on the equity side?

A: Hey, Bill. I will talk about the equity business for a second. There were two primary drivers. The first was rebalancing across our international strategies given the strength in the EM market being up 30% and a still relatively strong U.S. market. We experienced it across a number of teams and within our International Value franchise in particular, given the size and nature of their business. As you know, David and the International Value team have been soft closed for quite a long time, but he has always been able to manage capacity and the flow dynamics to a neutral to slight forward lean. We would expect that to remain in place. Everything we have seen in that business has been very much rebalance-oriented; there has not been any termination activity. The other piece is coming from our Growth business, which is another large component of our AUM. There are a lot of underlying dynamics occurring. Our Global Opportunities strategy remains a bit challenged on shorter- and intermediate-term performance, causing some headwinds with some of our institutional relationships globally. But there are important positive developments. The Franchise Fund we launched about a year or so ago raised net $400 million in the quarter from a global client, getting us close to $1 billion in AUM there. The Mid Cap Growth strategy, another large strategy on that team, has seen a meaningful performance turnaround that began in late 2024, accelerated into 2025, and we are continuing to see it in 2026, which we think will continue to help bolster that franchise. And Global Discovery, another meaningful opportunity within that franchise, is also seeing really good pipeline activity given its stable and good long-term performance. So from an equity perspective, the dynamics have been primarily institutionally focused given the rebalance and the challenges coming from Global Opportunities. In Emerging Markets, we are seeing really good opportunities. This was an asset class that was left for dead until 2025. We have seen strong performance from the asset class and, importantly, from our teams. Sustainable Emerging Markets in particular—the $250 million flow we saw for the quarter—is the beginning of what should be a good path to crystallize the great performance the team has put up over the last several quarters. We believe that will be a good opportunity for us as we look ahead as it relates to the pipeline.

Q: Thanks for that. And as a follow-up on the pipeline for team lift outs and acquisitions—appreciate you are working on Grand View right now—how does that look today versus a year ago or even last quarter in terms of the nature of the pipeline, where it is seasoned, and where you are leaning in terms of incremental opportunity? Thank you.

A: As I have mentioned in previous calls, our Investment Strategy Group and broader management team are operating extremely efficiently, not only with the existing platform and franchises, but also with the external opportunity set. There are two areas in particular where we are focused: expanding our credit business and expanding our alternatives platform. We are seeing really good opportunities to expand more traditional credit globally—so much so that there is a strong possibility we could get something done by the end of the year. We are excited about that, though you never say it is done until it is done—strange behavior always seems to happen near the end—but we feel very good about where we are and think this will be a big opportunity for our platform. On the M&A landscape, we are seeing a robust pipeline across the areas we have talked about: differentiated credit, secondaries in both private equity and real assets. Private credit, not surprisingly, is becoming incrementally more interesting. It is an area we have shied away from given the lack of a clear cycle; it is hard to tell whether what we are seeing is truly a cycle or just idiosyncratic situations, but we are very focused on having good conversations there. Relative to the past, the pipeline has incrementally strengthened, and we feel very good about the forward lean with the opportunity to globalize credit. We are also constantly evaluating and doing R&D with our existing business, and there are two incremental opportunities we are working through. If they come to fruition, they could be meaningful and interesting, but they are still in the R&D phase, so it is a little early to discuss those.

Q: I was wondering if there are any institutional client segments that historically you had not done much with that you are targeting now that you have a bunch of newer strategy areas?

A: I do not think, institutionally, there is any new client segment that has not been tapped or that we do not have a good handle on. The majority of where we are seeing opportunity is in the intermediate wealth space. We have built out the platform in terms of people and capabilities in the U.S., and more recently, we have recruited, hired, and onboarded in the U.K., the European market, and more broadly in EMEA. That is yielding interesting results even over the short term. The intermediate wealth platform having a slight positive flow for the quarter is a good indication. Breaking the flow pattern between gross in and gross out, it was our second-best gross inflow quarter dating back to 2021 when there was a lot of equity activity. We feel good that there is a correlation between the quality and talent we have brought on and the inflow outcomes. We obviously have to work through a few equity strategies we talked about from a rebalancing and performance perspective, but what we are seeing from an intermediate wealth perspective feels very good. Institutionally, we just have to continue to block and tackle with some of our larger relationships.

Q: Got it. And then on that, is there anything you can point to in terms of line of sight to any larger mandates that might be looking to exit, and maybe a quick wraparound on the regional factors impacting institutional demand?

A: I do not have a strong perspective on line of sight there. We are heavily engaged with all of our institutional relationships. The teams that sit alongside our investment franchises and service our clients are well equipped to provide us with intel, and we do not see any direct line of sight to massive outflows or massive inflows. It has been a steady state of staying close to clients—certainly when performance is more challenging—and continuing to build on those relationships, recognizing we have work to do. Where we have a strong forward lean in performance, we are leaning in, and we are seeing some green shoots. It could be a bit of an exchange of kicks where we have some attrition in areas with weaker performance, but we also have great capabilities. I mentioned Global Value. I am sure you have seen performance from Mark Yockey’s group and the Global Equity team, both International and Global. Our Sustainable Emerging Markets franchise is getting a lot of looks institutionally as well. We feel good about the positioning, recognizing that inevitably you will always have a strategy or two facing some challenges, and we are maintaining our discipline around those strategies.