Artisan Partners Asset Management Inc (APAM) Q4 2025 Earnings Call Transcript

Artisan Partners Asset Management Inc (NYSE: APAM) Q4 2025 Earnings Call dated Feb. 04, 2026

Corporate Participants:

Ryan Bruhn — Head of Investor Relations

Jason A. Gottlieb — President, Chief Executive Officer

Charles Daley — Executive Vice President, Chief Financial Officer and Treasurer

Analysts:

Bill Katz — Analyst

Anthony Allen — Analyst

John Dunn — Analyst

Presentation:

operator

Good afternoon and welcome to the Artisan Partners Asset Management business update and fourth quarter 2025 earnings call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing Star then zero on your telephone keypad. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Artisan Partners Asset Management. Please go ahead.

Ryan Bruhn — Head of Investor Relations

Welcome to the Artisan Partners Asset Management Business Update and Earnings Call. Today’s call will include remarks from Jason Gottlieb, CEO and CJ Daly, cfo. Following these remarks, we will open the line for questions. Our latest results and investor presentation are available on the Investor Relations section of our website. Before we begin today, I would like to remind you that comments made during today’s call, including responses to questions, may include forward looking statements. These are subject to known and unknown risks and uncertainties, including but not limited to, the factors set forth in our earnings release and detailed in our SEC filings.

These risks and uncertainties may cause actual results to differ materially from those disclosed in the statement and we assume no obligation to update or revise any of these statements following the presentation. In addition, some of our remarks today will include references to non GAAP financial measures. You can find reconciliations of these measures to the most comparable GAAP measures in the Earnings Release and Supplemental Materials which can be found on our Investor Relations website. Also, please note that nothing on this call constitutes an offer or solicitation to purchase or sell an interest in any artisan investment product or a recommendation for any investment service. I will now turn it over to Jason.

Jason A. Gottlieb — President, Chief Executive Officer

Thank you Ryan and thank you for joining the call today. Since our founding in 1994, we have steadily expanded our capabilities across equities, credit and most recently, alternatives. We have done this while remaining true to a consistent business philosophy and approach, high value added investing, a talent driven business model and thoughtful growth all in the pursuit of generating and compounding wealth for our clients over the long term. 2025 we generated significant absolute returns for our clients, delivered strong results for our shareholders, and continued to expand our multi asset class platform. Firmwide asset weighted investment returns exceeded 20% net of fees.

Our investment strategies generated over $33 billion in returns for clients compared to 2024. We grew revenue by 8%, operating income and adjusted operating income by 9 and 12% respectively, and assets under management by nearly 12%. Turning to Slide 3 investment performance remains strong across our platform with 79% of our AUM outperforming benchmarks for the three year period, 74% for the five year period and 92% for the ten year period gross of fees. Several strategies generated particularly strong results in 2025 in equities. Six of our strategies generated over 500 basis points of outperformance net of fees including US mid cap growth, non US growth, global equity, Global Value, Select Equity and Sustainable Emerging Markets.

The Global Equity, Global Value and Select Equity strategies outperformed their benchmarks by 24, 22, 1188 and 1175 basis points respectively net of fees in credit. The Emerging Markets Local Opportunity strategy generated a calendar year return of over 24%, 527 basis points above its benchmark net of fees in alternatives. Credit opportunities returned nearly 8%, global unconstrained returned nearly 12% and Antero Peak returned over 20% each net of fees. Longer term performance across our platform is compelling and broad based. All 12 artisan strategies with track records over 10 years have outperformed their benchmarks since inception net of fees.

14 of 17 strategies in equity, 4 of 4 credit strategies and 3 of 5 alternative strategies have outperformed their respective benchmarks since inception net of fees trailing one year. Performance has been weighed down by underperformance in two of our largest equity strategies, International Value and Global Opportunities, both of which have very strong long term track records. Turning to Slide 4, we ended the year with $180 billion in assets under management, an all time high at year end driven by over $33 billion of investment gains. Our credit platform performed well in 2025. AUM grew by 29% compared to 2024 to $17.9 billion, net inflows totaled $2.8 billion and organic growth exceeded 20% for the third consecutive year.

Our Alternatives platform also experienced healthy growth with AUM growing 20% from 2024 to $4 billion with strong organic growth in Global unconstrained. In particular, our equity platform was impacted by higher than expected outflows of $15.6 billion. Outflows were primarily concentrated in global opportunities, US mid cap growth and non US small mid growth strategies driven by challenging short term performance, changing asset allocation preferences and profit taking on the back of strong long term performance. Maintaining and growing AUM in public equities requires differentiated and compelling investment performance, asset allocation demand, the right vehicles and pricing and effective sales and client service.

The bar is high but we believe we can continue to maintain and grow our equity businesses. In addition, we continue to make meaningful progress towards expanding the breadth of our platforms towards credit and alternatives. Slide 5 provides an overview of our newest investment franchise, Grandview Property Partners. Grandview is a real estate private equity firm specializing in originating, developing, acquiring and managing middle market properties across the United States and joins artisan as our 12th autonomous investment franchise. The Grandview team, led by founding partners Raj Menon, Dean Sauter, Eric Freeman and Jeff Eusses, has worked together for an average of 22 years since forming Brandview Partners in 2018.

The team has delivered top quartile results and consistent DPI realization. Brandview’s macro driven investment approach focuses on growth markets supported by shifting demographic trends and regional supply demand dynamics. Recent funds have emphasized industrial, residential and power land themes. Brandview has raised three discretionary closed end drawdown funds and currently manages approximately $880 million in institutional assets across its flagship fund series and co investment programs. The acquisition of Grandview advances our strategic expansion into alternative investments, establishes a foundation in private real estate and creates new pathways for growth. It also aligns with our long standing business model, high value added investing, talent driven and thoughtful growth.

We believe we can leverage our institutional and intermediated wealth relationships to further expand and develop Grandview’s business marketing. The team’s next fund will be high on the priority list in 2026. With Grandview’s acquisition, we have broadened the ways in which we can partner with and onboard differentiated investment talent. We intend to leverage our enhanced transactional and operational capacity to add additional capabilities across our platform with a disciplined focus on allocating capital towards our highest conviction opportunities. I will now turn it over to CJ to review our recent financial results.

Charles Daley — Executive Vice President, Chief Financial Officer and Treasurer

Thanks Jason. Our complete GAAP and adjusted results are presented in our earnings release. We are pleased with our financial results for the fourth quarter. 2025 assets under management as of December 31, 2025 for $180 billion, up 12% from year end 2024 revenues in the December quarter reached a new all time high of $336 million, up 11% compared to the September quarter and up 13% compared to the prior year. Fourth Quarter the December 2025 quarter reflects approximately $29 million of performance fees from six different strategies. Strong relative investment performance in the fourth quarter across three performance fee eligible accounts drove performance fees above our third quarter projections as of the end of 2025.

Approximately 3% of our AUM is subject to performance fee arrangements and the majority of those arrangements are annual fees with measurement dates at the end of December. Our weightage average fee rate for the fourth quarter was 74 basis points, which includes performance fee revenue. Our recurring management fee rate remained consistent with recent quarters. In the fourth quarter, the artisan funds completed their annual income and capital gain distributions. Distributions not reinvested in artisan funds totaled $1.5 billion for the quarter and $2 billion for the full year, representing an $800 million increase from 2024. This increase was driven primarily by strong absolute investment performance in our two largest equity mutual funds.

Adjusted operating expenses for the quarter were up 4% compared with the third quarter 2025 and up 7% compared with the fourth quarter 2024, primarily from higher variable incentive compensation expense due to increased revenues. While total adjusted operating expenses increased. Fixed compensation costs for the quarter declined modestly. Long term incentive compensation expense was lower in the quarter due to the forfeiture of unvested long term incentive awards associated with a small number of employee departures. Additionally, we benefited from the quarterly true up of self insurance liabilities which reflected updated estimates. Adjusted operating income increased 23% compared to both the prior quarter and the same quarter last year.

Adjusted operating margin for the quarter was 40.2%, an improvement of 400 basis points from the prior quarter. Adjusted net income per adjusted share was up 24% compared to last quarter and up 20% compared to the fourth quarter of 2024, largely consistent with operating income full year 2025 revenues were up 8% compared to 2024. On higher average AUM full year 2025 adjusted operating expenses increased 5% from 2024, primarily from higher incentive compensation while on elevated revenues and the impact of the addition of the January 2025 Long Term Incentive Award. Calculating our non GAAP measures, non operating income includes only interest expense and interest income.

As of December 31, we had $152 million of seed capital invested in emerging products. Those investments have produced solid returns. During the year we realized $20 million of gains from seed investment redemptions in products that no longer from firm capital. Those gains, which are excluded from our non GAAP earnings, provide capital to support dividends as well as future growth through reinvestment in new products. GP investment in private funds or acquisitions. Our balance sheet remains a source of strength. We ended the year with approximately $214 million of cash and a conservatively leveraged capital structure at approximately 0.4 times leverage.

Importantly, our $100 million revolver remains fully undrawn, providing additional liquidity and downside protection. As a result, we are in a position to return capital to shareholders on a consistent and predictable basis while maintaining the flexibility to invest in the business. Consistent with our dividend policy, the Board declared a quarterly dividend of $1.01cent per share with respect to the December 2025 quarter along with a 57cent year end special dividend. In total, dividends declared with respect to 2025 cash generation were $3.87 per share representing a 98% payout ratio relative to adjusted earnings and an 11% increase versus dividends declared on 2024 cash generation year end special dividend was 14% higher than the prior year reflecting stronger earnings and cash generation.

Based on our stock price on December 31st, this equates to a dividend yield of 9.5%. Importantly, even after funding the quarterly and special dividends and our near term growth initiatives including Grandview, we retain approximately $80 million of excess capital to fund organic growth and explore potential MA opportunities. Overall, our capital structure is intentionally designed to be durable through market cycles combining strong cash flows and liquidity, modest leverage and a variable cost model that generates attractive margins. Looking ahead to 2026, our Board approved the 2026 Annual Long Term Incentive Award of approximately $72 million consisting of $51 million of cash based franchise capital awards and $21 million of restricted stock awards.

Consistent with our long standing philosophy of retaining investment talent, the vast majority of the awards were awarded to our investment professionals. As a result of the 2026 grant. We expect long term incentive amortization expense to be approximately $85 million for 2026 excluding Mark to market impacts. The acquisition of Grandview closed on January 2nd is expected to have an immaterial impact on our 2026 earnings. We expect that the acquisition will be mildly accretive to earnings per share after the final closing of Grandview’s next flagship closed end drawdown fund including approximately $20 million of increased fixed expenses from the Long term Incentive Compensation Grant and the addition of Grandview expenses.

Fixed expenses are expected to increase low single digits in 2026. Low single digit increase primarily reflects merit based salary increases and inflationary market data and technology cost. As a reminder, we estimate our fixed compensation and benefits expenses will be approximately $6 million higher in the first quarter of 2026 compared to the fourth quarter of 2025. In closing, we believe our long standing investment led culture, disciplined allocation of resources and capital and expanding multi asset platform positions us well to continue to compound wealth for our clients and and shareholders over the long term. I will now turn the call back to the operator.

Questions and Answers:

operator

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you’re using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Please limit your questions to 2 in order to allow time for other questions. At this time, we will pause momentarily to assemble our roster. The first question comes from Bill Katz with TD Collins. Please go ahead.

Bill Katz

Okay, thank you very much for taking the questions. Maybe all things grandview to get started. There’s probably a cluster of questions here. Maybe it counts for my first question. So if you don’t mind. One, the AUM was a fairly lower level than I think maybe many of us were anticipating. Appreciate the close a little earlier. Maybe you could sort of explain why that happened. And then secondly, as you mentioned, in terms of the accretion guidance, looking ahead, how do we think about maybe the timeline for the next flagship fund and maybe what was the previous size of the fund as we can sort of try to lay that through our models.? Thank you.

Charles Daley

Hey, Bill, I’ll start. The AUM was down because in the fourth quarter there was some realizations on some properties in the first fund, the Grandview Fund 1, which was fully invested in the harvesting phase. So there were realized gains as well as distributions out to LPs, which is a good thing.

Jason A. Gottlieb

And Bill, on your question regarding fund, fund three was about 150 million in raised and committed assets. They’re almost through the investment period there. And so that’s obviously a lower bar than what we’re certainly expecting in Fund 4, which we’re going to be actively pursuing. As I mentioned in our prepared commentary, this will very much be a goal of ours, a top priority of the management teams as well as Grandviews to build out Fund four, which we’re effectively launching as we speak. And so we expect that to build throughout the course of the year. We hope to have a first close sometime in the early to mid part of the summer, which will be a good indication as to how we’re tracking. But we do expect it to be significantly higher than their last fund launch, which was Fund three.

Bill Katz

Great. Thank you for that. And then just sticking with. I was encouraged by some of your comments in the press release and in your prepared commentary. I was just sort of leaning into the M and A opportunity. I was wondering if you could maybe expand on your commentary a little bit, just sort of where you’re seeing the Greatest receptivity. How is the portfolio potentially seasoning maybe three months ago and then just given just everything that’s going on in the market, how are you sort of seeing the bid ask spread on expectations around purchase price? Thank you.

Jason A. Gottlieb

Yeah. So maybe I’ll just talk a little bit about the future pipeline. There’s a couple of things that I would highlight. We’re clearly not exclusively focused on ma. We’re really letting the the talent drive the outcome here and certainly there’s asset classes where we have an emphasis in terms of where we’re seeking opportunity. And I would continue to focus on the areas that you would expect. Private credit is one where we’ve been reasonably active both in the form of lift out and the potential for M and a private. Private equity in the form of secondaries has been an area that we remain pretty active.

We’ve seen some really interesting idiosyncratic opportunities within equity that has more recently come back. This is one in particular that we’ve been talking about five or six years ago we were very excited about. There was a little bit of a hesitation, I think more on their part just due to where they were in their career and what they wanted to achieve and get accomplished before they did something more entrepreneurial. But we’re now engaged with them and we’re talking. Another one in particular that is interesting is just the potential to broaden out our credit platform. Not necessarily just purely in privates, but also on the public side as well as the hybrid side.

I would go back to some of the comments I made around Grandview and most of their transactions are off market and I think that what we saw with Grandview, which was an off market transaction, I think that that will continue to be a more fertile hunting ground for us. The transactions that are being shown and prominently shopped are hard for us to really get excited about. Those tend to be more about dollars and cents as opposed to investments. And we really need to just stay true to who we are and focus on the investment side.

But the last thing I would say about the pipeline and it goes back to Grandview. We’re excited about Grandview for all of the reasons. We’re excited about the prior 11 teams and what’s great about Grandview is they already are a fully functioning investment platform. It’s not like we have to build something. The foundation’s been laid. The team has been working together for 20 plus years. They have had great deal of investment success and so it’s really up to us to collectively work with them to build in Some and layer in some growth. And so that’s different from when you go into a lift out where you have to really drop all your pencils and really focus on everything that’s required to make a team successful.

And so while, while we’re still going to be there and do that, I think there’s less that’s required of the middle of the firm given that this is a team that’s operating at a high level already.

Bill Katz

Thank you for taking both questions.

operator

The next question comes from Alex Blaustein with Goldman Sachs. Please go ahead.

Anthony Allen

Hey, good afternoon, this is Anthony Owen. For Alex, maybe just one two part question on the international value strategy has been one of the top flowing strategies at APAM for a while now. Yet we saw another quarter of elevated outflows despite what seems like an industry rotation out of growth and into value. So what’s driving this recent weakness and how have you seen client demand change recently? Thanks.

Jason A. Gottlieb

Yeah, I don’t. Hey Anthony, it’s Jason. I wouldn’t put too much emphasis on the elevated. The elevation of the outflows I think is primarily due to the fact that David and the team have just continued to deliver really exceptional absolute returns even in the face of a challenging market for them. They continue to produce great absolute returns with a slight relative headwind. So we haven’t seen anything notable in particular that gives us pause or concern or certainly David and the team. There’s been some institutional reductions just largely due to the impact of the equities book of several of our clients just outperforming.

And so we’re getting a little bit of that rebalance flow that you naturally expect. And we would expect some of that to continue to happen throughout the course of the first quarter in light of how strong markets were globally, especially ex us. So there’s nothing that we’re seeing in the trends or there’s nothing underlying that gives us concern or something that suggests that there’s an issue on the horizon.

Anthony Allen

Got it, thanks.

operator

The next question comes from John Dunn with Evercor isi. Please go ahead.

John Dunn

Hi. I wanted to maybe get an update on what you’re seeing as far as interest in and demand for non US strategies just given what a contributor is to your AUM base.

Jason A. Gottlieb

Yes. Hey John. Yeah, it’s a good question. I’d say there’s probably. There’s really four areas that I think there’s going to be some interesting opportunities for our platform and I think they align directly to your question. So right now I think our AUM is 70% ex us plus or minus a few percent. And when you think about the big trends that we’re seeing, number one, we think there’s a reemergence of emerging markets allocations coming on the horizon.

We spoke about something last quarter which was we were aligning some sales efforts and some sales focus and running a campaign specifically in emerging markets. And while it was early days, and it remains extremely early days, we’re seeing some green shoots and some direct allocations coming out of that. Coming out of that effort, I think we raised north of a billion dollars in the 5ish plus months that we enacted that campaign with. You know, we have four very distinct strategies that are able to capture that, and all four of them had over $100 million in net flows over that very short period of time.

We fully expect that that campaign will be in force throughout 2026 as we see the pipeline grow and build. And so we’re very much excited about that. That area in particular, you rightly point out the international markets and I would expand that out to global as well. I think a lot of people don’t want to give up the ghost on us. And the beauty of global clearly gives you the ability to toggle between us and non us. And we’ve had a great deal of success in our global franchises. So global value, as I mentioned in my prepared comments, has just shot the lights out performance wise.

Our global equity team with Mark Yaqui also had an outstanding year. I think they produced a 47% return in their global equity strategy. And then underneath that we also have some international capabilities that we’re excited about. Mark Yockey again produced a really outstanding return in 2025, which is on the heels of outstanding returns in prior years as well. And so his record is really compelling. We’re starting to see some real activity in that strategy as well. And so we think the engagement in international will remain elevated. And we expect that several of our strategies will be aligned to at least have conversations with the clients about the benefits of how they operate in those markets.

Some that are maybe a little less aligned to your question, but still relevant to, I think, the trends that we’re seeing in our conversations. We still think that there’s a long way to go in credit and you’re seeing that in all of our areas where we have exposure. So the high income team with Brian Krug and his the development of custom credit solutions, we’ve seen significant uptake and interest from our institutional marketplace where they’re really designing a bespoke solution around a specific need and Brian is able to accommodate those. So we’re seeing really good uptake there.

One thing that’s been sort of flying a little bit under the radar screen for quite a long time, but we’re starting to see some uptake as well as our we have a floating rate fund that is top quartile on a one year, top quartile on a three year. That’s being run out of Brian’s franchise. We’re starting to see some interesting opportunities coming from that. And then when you look at the cross section of emerging markets and credit with our MSights team, they’re firing on all cylinders. Emerging market debt opportunities, emerging market local opportunities, continuing to really deliver outcomes to the upside both in absolute as well as excess returns.

So they’re at the intersection of a couple of interesting themes for us. And then lastly something that we’ve talked about for quite a while which is alternatives. Certainly Grandview is going to play a very important current and future role in the growth and development of our alternatives platform. And then when you think about what’s going on again at M sites as well as in our high income team, MSights, the global unconstrained strategy through the end of the year I think we raised about 5 or $600 million in assets. And this again is a top quartile performer with a very, very differentiated return profile that you know, people are really, it’s really resonating with our intermediate wealth space as well as our institutional space.

And then lastly, credit opportunities, which I cited as a really strong performer over a multi year time horizon, is continuing to see incremental flows which we would expect to continue in 2026.

John Dunn

Got it. And then maybe just because it’s been a swing factor for flows lately, maybe could you just give us kind of the puts and takes looking forward of. The institutional side, particularly by region?

Jason A. Gottlieb

Yeah, I think institutionally, you know, we’re. If you look at the regions, I’d say where we’re probably a little bit more of, a little bit more at risk has probably been more in Europe in light of some of the regulatory changes that we’ve talked about for quite a while. We talked about it in Australia and it sort of impacted a couple of countries in Europe as well. The combination of some of the regulatory changes that are occurring, some short term performance where that is where we have a lot of global exposure specifically with our growth team and global opportunities, there’s going to be I think a little bit more of a challenge in that region specifically because of that, where clients are reallocating.

The active passive debate rages and then you’ve got that regulatory overhang causes it to be a little bit more challenging. But institutionally, in the US marketplace, we are still continuing to see pretty good opportunities, and it’s coming in our emerging markets franchises as well as in our credit franchises. So to your point, there’s going to be some puts and takes, so it’s going to be hard to tell exactly where it all shakes out, but I’d say US is probably a little bit more favorable in that regard institutionally relative to non U S.

John Dunn

Thanks very much.

operator

Again. If you have a question, please press Star then one. This concludes our question and answer session and the Artisan Partners Asset Management business update and fourth quarter 2025 earnings call. Thank you. You may now disconnect.