Executive Summary / Key Takeaways

• Artisan Partners Asset Management (APAM) is a high value-added investment firm distinguished by its multi-asset class platform designed to attract, retain, and empower top investment talent through significant autonomy and resources. This model has consistently delivered strong, long-term investment performance, with over 70% of AUM outperforming benchmarks over three years.
• The firm is strategically reorienting its distribution towards the growing intermediated wealth channel, which now accounts for over 60% of its AUM, while also expanding its footprint in credit and alternatives. This shift is supported by enhanced digital marketing and a modernized vehicle lineup to meet evolving client preferences.
• Despite recent net client cash outflows, particularly from equity rebalancing in up markets, APAM's credit business has demonstrated robust growth with $1.8 billion in year-to-date net inflows, marking 13 consecutive quarters of positive flows. Emerging markets strategies are also experiencing renewed demand and positive flows.
• Financially, APAM reported an 8% year-over-year revenue increase in Q3 2025, reaching $301.3 million, driven by a 9% rise in average AUM. The company maintains a strong balance sheet with $300.2 million in cash and a commitment to returning capital, evidenced by a declared quarterly dividend of $0.88 per share for Q3 2025.
• Key risks include market volatility, client rebalancing, and regulatory changes impacting active management. However, APAM's disciplined capacity management and focus on differentiated, high-alpha strategies position it to capitalize on market disruptions and talent migration.

The Artisan Advantage: A Platform for Alpha Generation

Artisan Partners Asset Management Inc. (APAM) operates as a global multi-asset investment platform, distinguished by its unwavering focus on providing high value-added, active investment strategies to sophisticated clients worldwide. Founded in 1994, Artisan's journey has been one of methodical expansion and strategic evolution, transforming from a public equity manager with four teams and seven strategies in 2004 to an expansive platform boasting 11 autonomous investment teams managing 26 strategies across equities, fixed income, and alternatives by September 30, 2025. This growth trajectory, significantly accelerated following its 2013 IPO and corporate reorganization, underscores a core philosophy: creating an ideal home for investment talent by offering a unique blend of autonomy, extensive resources, direct financial incentives, and a long-term investment horizon.

The firm's overarching strategy is to generate and compound wealth for clients over the long term, a goal achieved by empowering investment professionals with "degrees of freedom"—a broad array of securities, instruments, and techniques to differentiate returns and manage risk. This talent-centric approach is foundational to Artisan's competitive positioning within the asset management industry.

Competitive Landscape and Strategic Differentiation

In a competitive landscape dominated by both large-scale asset managers and niche specialists, Artisan Partners carves out a distinct position. Compared to industry giants like BlackRock (BLK), which leverage extensive technological platforms such as Aladdin for operational efficiency and broad market access, Artisan emphasizes a more specialized, research-intensive, and client-tailored approach. While BlackRock excels in technology-driven solutions and scale, Artisan's strength lies in its proprietary research and deep fundamental analysis, fostering stronger client loyalty and potentially superior margins in specialized segments. This allows Artisan to compete effectively by offering significantly greater insight and customization, particularly in institutional and endowment investments.

Against firms like T. Rowe Price (TROW) and Franklin Templeton (BEN), which also emphasize active management, Artisan's client-focused model and specialized service offer greater flexibility in portfolio construction. T. Rowe Price, with its strong presence in retail and retirement services, often benefits from broader market share, while Franklin Templeton offers a wider array of alternative investments. Artisan, however, aims to lead in analytical rigor and client-specific execution, even if it may trail in overall product variety or broad market scalability.

Indirect competitors, including robo-advisors and fintech platforms, pose a challenge by offering low-cost, automated investment solutions. While these may pressure fee-based revenues, Artisan's focus on high value-added, active management for sophisticated investors helps mitigate direct competition in its core segments. The firm's strategic response includes modernizing its vehicle lineup to offer models, SMAs, ETFs, semi-liquid funds, and private funds, aligning with evolving client preferences and expanding its reach into the intermediated wealth space.

The Platform as a Technological Differentiator

Artisan Partners' core technological differentiation is not a single product but rather its "investment platform" itself, which acts as a force multiplier for its talent. This platform provides "best of breed and customized support across people, technology, data, execution, and capital," enabling investment teams to operate with high degrees of autonomy while benefiting from robust infrastructure. This "customized operating stack" supports their investment processes, execution, and analytics, minimizing distractions and allowing teams to focus on generating alpha.

The tangible benefits of this platform are evident in Artisan's consistent investment performance. All 12 Artisan strategies with track records over 10 years have outperformed their benchmarks since inception, achieving an average annual outperformance of 243 basis points. This consistent outperformance is a direct outcome of the platform's ability to empower talent and provide the necessary tools for differentiated investing.

In terms of innovation, Artisan is actively engaged in the "modernization of our vehicle lineup," aiming to align with evolving client preferences in the intermediated wealth channel. This includes developing "enhanced digital marketing and sales enablement capabilities." The strategic goal is to offer a broader range of investment vehicles, from separately managed accounts (SMAs) and exchange-traded funds (ETFs) to semi-liquid and private funds, thereby expanding access to its high-alpha strategies. For investors, this technological and operational platform contributes significantly to Artisan's competitive moat by attracting and retaining top talent, driving strong investment performance, and supporting its long-term growth strategy through diversified product offerings and distribution channels.

Financial Performance and Operational Momentum

Artisan Partners' financial performance in the third quarter of 2025 reflects a business model designed for durability, even amidst market fluctuations. Total revenues for the three months ended September 30, 2025, increased by 8% year-over-year to $301.3 million, primarily driven by a 9% increase in average Assets Under Management (AUM). For the nine months ended September 30, 2025, revenues grew 6% to $861.2 million, also on the back of a 7% rise in average AUM.

Despite this revenue growth, the weighted average investment management fee saw a slight decrease from 68.50 basis points in Q3 2024 to 67.50 basis points in Q3 2025. This shift is attributed to amendments in certain investment management agreements and an increased weighting of lower-fee credit strategies within the AUM mix. Profitability remained robust, with a GAAP operating margin of 33.8% and an adjusted operating margin of 36.2% for Q3 2025. Net income attributable to Artisan Partners Asset Management Inc. for Q3 2025 was $66.8 million, or $0.93 per basic and diluted share.

Operational expenses saw a mixed trend. Total compensation and benefits increased by 10% year-over-year in Q3 2025, reaching $163.2 million. This rise was primarily due to a $7.3 million increase in short-term incentive compensation, directly tied to higher revenues, and a $6.8 million increase in long-term incentive compensation, influenced by higher grant date value amortization and market valuation changes. Conversely, other operating expenses decreased by $1.2 million, driven by reduced general and administrative costs, including travel, entertainment, and professional fees. The effective income tax rate for Q3 2025 was 30%, significantly higher than 19.10% in Q3 2024, largely due to a $10.7 million deferred tax charge from the enactment of the One Big Beautiful Bill Act (OBBBA).

AUM reached an all-time high of $181.3 billion at the end of Q3 2025, primarily due to $8.3 billion in market appreciation. However, the firm experienced net client cash outflows of $2.3 billion in Q3 2025 and $7.032 billion for the nine months ended September 30, 2025. These outflows were mainly a result of rebalancing activities in up markets and, to a lesser extent, client terminations, including a notable $1.2 billion outflow from a separate account rebalancing in Q1 2025. Despite these outflows, 14 of Artisan's 26 investment strategies recorded net inflows year-to-date in 2025. The credit business demonstrated particular strength, achieving $1.8 billion in year-to-date net inflows, marking its 13th consecutive quarter of positive flows. All emerging markets strategies also experienced net inflows year-to-date.

Artisan maintains a strong liquidity position, with $300.2 million in cash and cash equivalents as of September 30, 2025. Seed investments totaled $142.4 million, with an additional $222.2 million invested in funded long-term incentive compensation plans. The company's debt profile includes $190 million in unsecured notes and an unused $100 million revolving credit facility. In August 2025, Artisan Partners Holdings LP issued $50 million in Series G Senior Notes to repay $60 million in maturing Series D Senior Notes.

The firm continues its commitment to returning capital to shareholders, declaring a quarterly dividend of $0.88 per share for Q3 2025, a 21% increase from the prior quarter. This aligns with the company's policy of paying approximately 80% of quarterly cash generation as dividends, with a special dividend considered from the remaining 20% and realized gains on seed capital redemptions. A notable example of seed capital realization occurred in Q1 2025, with the full redemption of $23 million from the Credit Opportunities Fund, generating $27 million in realized gains and a 13% annualized return.

Outlook and Strategic Initiatives

Artisan Partners' outlook is characterized by a continued focus on strategic growth and disciplined capital allocation. For Q4 2025, the company anticipates approximately $900 million in net client cash outflows due to mutual fund distributions not reinvested. Performance fees for Q4 2025 are projected to be similar to 2024 levels, approximately $17 million, though these remain subject to market and performance conditions.

Fixed expenses for 2025 are expected to increase in the mid-to-low single digits, primarily due to merit increases and the full-year impact of new hires from 2024. Long-term incentive amortization is projected to be around $75 million for 2025, excluding mark-to-market impacts. Looking further ahead, the effective tax rate is expected to increase by 1-3% starting in 2027 due to compensation deduction limitation rules under the OBBBA.

Strategically, Artisan is intensifying its efforts in the intermediated wealth channel, which now represents over 60% of its AUM. This involves aligning compensation with sales orientation, doubling its field staff for intermediaries, and expanding its regional footprint into markets like the UK and the Middle East. The firm is also modernizing its vehicle lineup to include SMAs, ETFs, semi-liquid funds, and private funds to cater to evolving client preferences.

M&A remains a "potent opportunity," particularly in alternatives such as real estate, private credit, and secondaries. Management emphasizes a talent-driven approach, seeking opportunities that align with its lift-out model rather than pursuing transformative deals. The firm's existing Credit team is exploring ways to expand its "degrees of freedom" into private markets, and the EMsights Capital Group is evaluating launching private funds around its Global Unconstrained strategy.

Risks and Challenges

Despite its strengths, Artisan Partners faces several risks. Market volatility and economic uncertainty remain primary concerns, directly impacting AUM and, consequently, revenue. Client rebalancing, particularly in successful equity strategies, and client terminations, sometimes driven by regulatory shifts in specific geographies (e.g., Australia), can lead to outflows. The firm also manages capacity constraints in high-performing strategies like International Value to protect investment results, which can limit AUM growth in those areas.

The effective tax rate is subject to changes from new legislation like the OBBBA, and payments under Tax Receivable Agreements (TRAs) could, in certain circumstances, exceed actual tax benefits, requiring funding from cash on hand or borrowed funds. Competition from passive management and in-house strategies also presents an ongoing challenge.

Conclusion

Artisan Partners Asset Management stands as a compelling investment opportunity, rooted in its differentiated model of empowering exceptional investment talent through a robust and adaptable platform. The firm's consistent long-term outperformance across a diverse range of strategies, coupled with its strategic pivot towards the high-growth intermediated wealth channel and expansion into credit and alternatives, underscores a clear path for future value creation. While market volatility and client rebalancing present ongoing challenges, Artisan's disciplined approach to capacity management, strong liquidity, and commitment to shareholder returns through a predictable dividend policy reinforce its resilience. The firm's ability to attract and retain world-class talent, supported by its evolving technological and operational framework, positions it to capitalize on market disruptions and continue compounding alpha for its clients and shareholders.