Key Highlights

  • Artisan Partners reported third quarter revenue of USD 312.5 million, up 4% year over year and roughly in line with estimates.
  • Adjusted earnings per share reached USD 1.03, up 1% from a year earlier, while GAAP earnings per share were USD 1.04.
  • Firmwide net outflows totaled USD 10.6 billion, driven by redemptions in public equity strategies and a large client rebalancing.
  • Credit and alternative strategies generated about USD 1.1 billion of net inflows, a 17% annualized growth rate for the quarter.

Revenue Grows as Assets Under Management Decline

Artisan Partners Asset Management (NYSE:APAM) ended the third quarter with assets under management of USD 168.7 billion, down from USD 183.4 billion at the start of the period. Revenue increased 4% year over year to USD 312.5 million, supported by average assets under management of USD 180.5 billion during the quarter.

On a GAAP basis, operating income increased 8% to USD 109.8 million, with an operating margin of 35.1% and earnings per share of USD 1.04. Adjusted operating income rose 2% to USD 110.9 million, though the adjusted operating margin contracted 70 basis points to 35.5%, with adjusted earnings per share of USD 1.03, up 1% from the prior year period.

Outflows in Public Equities Offset by Credit and Alternatives

Firmwide net outflows totaled USD 10.6 billion for the quarter, driven by redemptions in public equity strategies, including USD 1.9 billion tied to the previously announced wind down of the firm's U.S. Value team and USD 5.9 billion of rebalancing from a large client relationship. These two items accounted for the bulk of the quarter's outflows.

Credit and alternative strategies generated approximately USD 1.1 billion of net inflows during the quarter, representing a 17% annualized growth rate, including USD 747 million into the firm's Global Unconstrained strategy. Year to date, credit and alternative strategies have raised USD 3.2 billion on a net basis, a 20% annualized growth rate, as the company continues to expand its platform beyond traditional public equity products.

Platform Expansion and Flow Risk Factors

The company said it is progressing toward the launch of its first exchange traded fund share classes in the fourth quarter and is developing an interval fund structure intended to bring its public and private credit capabilities to wealth management clients. These initiatives represent an extension of the firm's credit and alternatives platform beyond its institutional client base.

Continued net inflows into credit and alternative strategies could offset further redemptions in public equity products, while additional large client rebalancing events or continued wind down activity in legacy strategies could pressure firmwide net flows in coming quarters. The pace of capital raised for the firm's newer vehicles, including its ETF share classes, remains a variable in the near term flow outlook.

Flow Trends to Track Ahead

The pace of credit and alternatives net inflows relative to continued public equity redemptions, progress on the planned fourth quarter ETF share class launch, and the scale of any further large client rebalancing are among the data points that may shape how net flows trend into year end. Assets under management, which ended the quarter at USD 168.7 billion, is the headline figure investors have used to track the net effect of these flows.