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Thursday, July 25, 2013

Three Things to Know From Artisan's Earnings

Reported by Casey Quinlan

This is Artisan Partners Asset Management's [profile] second earnings report since they went public in March of this year.

Assets under management at the Milwaukee-based mutual fund shop totaled $85.8 billion ending June 30, up more than $3 billion from $83 billion since the three months ended March 31. On June 30 of last year, the AUM was $64.1 billion.

Artisan's net income was $5.7 million or $0.38 per diluted share in the second quarter compared to $3 million or $0.19 per diluted share in the first quarter of 2013. Adjusted net income was $44.5 million compared to $33.2 million in the first quarter of 2013.

Reuters printed the press release and Seeking Alpha provided the earnings call for its second quarter results.

Looking through Artisan's earnings call transcript at Seeking Alpha, three issues were raised that merit being mentioned:

POINT 1: Artisan is trying to build its teams and expand into different asset classes.
POINT 2: Artisan's investor engagement is flat.
POINT 3: The defined contribution channel is down.
POINT 1: Artisan is trying to build its teams and expand into different asset classes. CEO Eric Colson in response to a question from Cynthia Mayer at Bank of America-Merrill Lynch:
We want new teams to fit the institutional mindset and their asset allocation. You know, for us, we look for strategies that will have a long duration in the marketplace. And the longest duration you can go to is that institutional mindset. So we certainly don't want to find, you know, certain strategies that may be a fad or a niche today and you invest an enormous amount of time to it and then it no longer fits a client asset allocation or manager structure.
POINT 2: Artisan's investor engagement is flat.

Colson answered a question from KBW analyst Robert Lee:
Lee: And lastly, and again I appreciate your indulgence here, just trying to get some sense of, you know, even though it was early on in the quarter, just, you know, any kind of early read on how the progression of new business trends, are you kind of seeing, you know, investor engagement, you know, pick up after maybe June or there hasn't really been an interruption? And I'm just trying to get a sense for your take on various investors' appetite for committing capital.

Colson: It's been fairly consistent from the last quarter to this quarter. I donít think we've seen any movement either direction. So I'd say it's fairly consistent following on from last quarter.
POINT 3: The defined contribution channel is down.

Colson responded to another question from BofA Merrill's Mayer:
Mayer: Hi. Thanks a lot. Just in terms of the sales overseas, what products are primarily, you know, picking up and what channel is that? And then you mentioned also I think that four out of five channels were positive so I'm wondering which one was not.

Colson: Certainly, Cynthia. Overseas it's really been our global strategies. We have our Global Value, our Global Opportunities and Global Equity. The performance has been strong across all three strategies. So we've been seeing quite a bit of activity with those three strategies in Europe. And we have seen continued interest in our US Value as well in Europe. We've seen a desire to increase their North America or US exposure there. Those have been the primary strategies overseas, specifically more in the European region. We've had some, you know, small interest in Asia, but I'd say that's down the road. With regards to the channels, you know, for this quarter our defined contribution channel was slightly negative for the quarter. And the institutional broker dealer, financial advisor and retail were all in positive territory.

We continue to see some challenges there of, you know, working with the target date funds and where net new dollars are going. We had a -- we still have positive flows for the year to date in defined contribution that just chalked it up for the quarter of dollars going into broader asset allocation products versus specific strategies such as ours.

That's been a flat area for the last couple of years though, which we talked about in the road show and we talked about last quarter, is just we're still waiting for that open architecture to really hit in the defined contribution channel. You're starting to see some of that effect occur in the press recently, and we still see quite a bit of interest from consultants around target dates.
See the Seeking Alpha. transcript of Artisan's earnings call and the earnings release for more on how Artisan'sdoing. 

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