Hello, ladies and gentlemen. Thank you for standing by. Welcome to Artisan Partners Asset Management’s Fourth Quarter 2014 Earnings Conference Call. My name is Emily and I will be your conference operator today. At this time, all participants are in a listen-only mode. After the prepared remarks, management will conduct a question-and-answer session and conference participants will be given instructions at that time. As a reminder, this conference call is being recorded. At this time, I will turn the call over to Makela Taphorn with Artisan Partners.

Hi, everyone. Before we begin, I would like to remind you that our fourth quarter earnings release and the related presentation materials are available on the Investor Relations section of our website. I would also like to remind you that comments made on today’s call and some of the responses to your questions may deal with forward-looking statements and are subject to risks and uncertainties. Factors that may cause our actual results to differ from expectations are presented in the earnings release and are detailed in our filings with the SEC. We undertake no obligation to revise these statements following the date of this conference call. In addition, some of the remarks this afternoon include references to non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in our earnings release. And with that, I’ll now turn the call over to our Chief Executive Officer, Eric Colson.

Thanks, Makela. Welcome to the Artisan Partners Asset Management business update and quarterly earnings call. I’m Eric Colson, CEO and I’m joined today by C.J. Daley, CFO. Thank you for your time today and I hope you find this discussion useful. The end of 2014 marked our second year as a public company. More importantly it marked the 20th Anniversary of our firm. Having been in business 20 years, if we have learned anything, is that quarterly and annual business outcomes are less impactful to our success than the long-term strategy and philosophy. During this discussion, I will review our results for the quarter but emphasize the year. I’ll reinforce how the business development that occurred over those short time periods aligning with our long-term strategy and future plans. Once I am done, C.J. will take the lead and walk through our financials. On the firm’s fact page, page 2 of the presentation, I’ll make just two quick comments. First, our overall AUM increased nearly $108 billion at the end of the year from $106 billion at the end of the third quarter. This change was largely a result of market appreciation. Our net client cash outflows partially offset market gains, I will discuss that further later in the presentation. The second item worth noting is our distribution channel pie-chart. Last year we discussed our logic behind reporting three broad channels instead of the five channels that we historically reported. We are now consolidating the former financial advisor and broker dealer channels as the intermediary channel. And we rolled the defined contribution channel into our institutional channel. The retail channel remains unchanged. We believe these updated classifications are more appropriate representation of our client base and align better with our distribution model and team structure. Page 3, highlights the three…

Thanks Eric. Good morning everyone. The December quarter marked the end of our calendar and fiscal 2014 year. For the year, our results were very strong when compared to the full year of 2013. Revenues for the year were up 21% from calendar 2013, reflecting an increase in average AUM of 21%. Adjusted operating income for calendar 2014, were $371.7 million or 44.9% adjusted operating margin. The first two quarters of calendar 2014 were strong as flows into active strategies were robust and at Artisan we had strong flows from international mandates in the intermediary space. That activity trailed off in the last half of 2014 and we ended the year with two consecutive quarters of modest net outflows. Specifically, we experienced net outflows of $338 million in the fourth quarter of 2014, ending the year at $107.9 billion in AUM. Revenues for the December 2014 quarter decreased $6 million down 3% from September 2014 quarter and up 4% from the December quarter in 2013. Adjusted operating income in the December 2014 quarter was $90.4 million also down 3% from the September 2014 quarter and up 7% from the fourth quarter of 2013. We move into 2015 encouraged by the strong performance and continued client interest in our non-U.S. growth global equity, global opportunities and high income strategies but cautious as performance challenges in several of our strategies remain and the headwinds we experienced in the last half of 2014 continue into 2015. A summary of our fourth quarter and full year 2014 financial results is on slide 11. For the quarter, ending AUM increased 2% to $107.9 billion. The increase was driven by market appreciation partially offset by net client cash outflows of $538 million. Although ending AUM was up during the quarter, average AUM decreased 3% quareter-over-quarter with…

[Operator Instructions]. Our first question is from Michael Kim of Sandler O’Neill. Please go ahead.

Hi guys, good afternoon. First, just to follow-up on some of your comments earlier, but just curious to get your current thoughts on trends you may be seeing in the institutional landscape in terms of de-risking or shifting into passive from an asset allocation standpoint? And then how those trends might be impacting your pipeline, or RFP activity, or what you are seeing in terms of sort of decision timelines more broadly?

Sure, hi Mike, it’s Eric Colson. Yes, our current thoughts are about what they were in the third and the fourth quarter. Now we continue to see the institutional marketplace rebalancing. They still have an interest in passive primarily in the DC space you see more and more passive getting inserted in the target dates to protect the proprietary nature of those funds. And we continue to see some of our clients exploring options to customize, seeing some interest in the middle market area of the DC space or institutional space that is showing some positive signs. But overall, the continued trend is this passive investing. And I think we said on the call, momentum was a big factor last year, being in the index was a big factor and that supported passive returns even more so. Unfortunately we’ve seen these cycles over the years, various factors and trends. And the key for us is holding our ground and not chasing a short-term trend, it doesn’t fit our business model. But we would expect at some point there is a passive side of the equation would fill-up and you’ll see some bounce back in the market.

Yes, that’s helpful. And then just given sort of the decline in AUM for some of your franchises, just wondering if the teams have maybe started to see better investment opportunities out there, and what some of the potential implications could be for capacity across channels and strategies and possibly reopening some of the strategies to more fully capitalize on some of those opportunities?

No real change on capacity. And really, if you look at the teams and C.J. mentioned this on global equity and the growth team and the credit team are at really spot right now to capture trends for asset gathering, especially global equity and global opportunities, if you marry that with our overseas distribution, the credit teams and the early cycle there. The global value team is closed. We don’t see any reason to reopen there and really leave the US value team in the emerging markets. The U.S. value team, when you look at the mid-cap and the small cap still remain closed, even if you came up with a reopening on one of those, the strategy would be difficult to realize asset to this point. So we’ve always looked at realizable assets. And whether you’re open or closed one thing is, there is still asset, present a record and present trades that the assets would be realizable. So we have not made any decisions to open those two strategies.

Okay, and then maybe just one last one for C.J. The margins have held up more recently, but just sort of given some of the ongoing investment spending that you alluded to earlier and some of the AUM headwinds potentially in the near term, and kind of factoring in sort of the ramp-up in equity comp, just trying to get a sense of sort of the outlook for margins as you look out over the next year or two?

Yes, I mean, certainly our margin has improved nicely since we went public. I think we’re 40.6 around the IPO and we’ve trended up to 45, as we continue to layer in equity based comp grant, that’s going to drive the margin down couple of hundred basis points. And especially in this first quarter where we have these seasonal expenses, healthcare, 401(k) contributions, flair contributions, and the reset on FICA. Our first quarter always is eroded 100 basis points or so. So, over time we expect growth to offset those and work our way back up. In the short-term you’re going to see some margin pressure there down into the lower 40.

Okay, great. Thanks for taking my questions.

Our next question is from Bill Katz of Citi. Please go ahead.

Okay. Thanks everyone. Good morning and I appreciate taking the questions. Just on, you mentioned that you are going to do some cautious marketing around the high-yield platform. Can you talk about the strategy of doing so? And are you going to tie the portfolio manager to it, or is it more so a branding opportunity? I’m just trying to understand the opportunity there.

Bill, are you talking about the high income fund?

Yes.

Really, around the high income fund we see continued marketing and to the intermediary channel. We saw early success there last year and into continued into this year. As we hit the one-year track record the intermediary channel really looks for that one year period to be able to put it on to their platform. So I think we’ll see continued distribution efforts around the intermediary. And then also we’re starting to get some inquiries on the institutional side that we’re being reactive too. And I think with the one-year track record and over $500 million in the strategy, we’re starting to meet the hurdle for many of the centralized research to put our strategy into a buying position. So, we feel we’re in a good spot with that strategy and we’ll continue to see growth.

Okay. That’s helpful. My second question is, looking at the slide that you lay out the non-U.S., and you wanted to show us both the AUM and the number of different relationships you have, and certainly a very nice trend. And maybe this is just bad math, but if you look at like the average size of the AUM per relationship, that number looks like it’s sort of small, if you will. And I know you have markets and maybe FX dynamics affecting all that. Could you talk about how scalable that is at this point in time? I’m just sort of curious why, given the very strong ramp in the number of accounts and relationships, you haven’t seen a deeper, a steeper slope, if you will, in terms of the AUM lift against that?

We have a mixture of clients in that chart that shows the $13.9 billion in assets and 76 clients. And we’ve seen a few institutional clients go into the global opportunity strategy. And we’ve also seen us win some smaller accounts but they’re in the financial intermediary channel. So they feed those with some smaller allocations and then we’ll grow those with those advisors and brokers over time. So, I think the last couple of months, we’ve seen a little bit more interest by the intermediary channel outside the U.S. And they start with a smaller allocation. So, a few more accounts than normal and your average size is down somewhat bar-belled. Since you are new in this space, we are either getting attracted at the higher-end large institutional or starting to ease them to an intermediary.

Okay. And then last question, thanks for taking all my questions. You didn’t mention anything about the fee rate. It looks like it ticked down about a basis point sequentially. How much of that was maybe market forces versus mix? And what’s the outlook going forward?

Yes, I mean, we’ve been trending around 76 basis points, 77 basis points. It’s bit of rounding. We had some, redemptions. We’ve seen some outflows in the U.S. value space primarily in the fund. And that has a higher fee rate. So there isn’t anything wholesale going on there. Earlier in the year we saw assets flowing into our global equity team in the mutual fund space, intermediary space. And during the end of the year we saw it flowing out of the outflows and the value team work coming from that space.

Okay. Thanks for taking my questions.

Our next question is from Robert Lee of KBW. Please go ahead.

Thanks, and good morning everyone, just curious, and going back to follow-up to Bill’s question, non-U.S. AUM. If I think back with, say, global value, you first closed it to institutional relationships before you closed it to more broadly, I guess, to retail or in the fund business. So is there, as global equity grows, as global opportunities we said, has had good demand outside the U.S. Is there anything on the horizon that we should be thinking about that, some of those more successful strategies right now, given your desire to control the mix of clients that could be some limiting factor on kind of growth outside the U.S. for a period of time?

Robert, its Eric. No, right now the global opportunities, has a nice mix. It has had quite a bit of interests from larger institutional clients. But we wouldn’t, we’re right now not thinking about shutting down a segment or a channel to skew the mix. So that would continue. And the global equity strategy is really phases there with roughly $680 million in the strategy that has quite ways to go for that strategy. The global opportunity is a little over $5 billion. So, we’re not in a position on either one of those strategies that we would skew the mix versus global value today at over $15 billion. So, the short answer would be no.

Okay. And I’m just curious to know on the RSUs or RSAs, the career shares, I’m just curious how - when you award stock, how that, what the kind of mix is between those career shares and more traditional grants? And to make sure I understand it correctly, when you award a career share so you awarded one on January 1, those immediately start vesting, assuming there is some longevity criteria that’s been met?

Yes, I mean, from an accounting standpoint we start vesting the first year at the point of grant so that, that layer, if that layer is in the amortization layers in immediately. And the mix is generally on future grants, it’s going to be around 50-50. This grant was primarily to investment teams and they sort of met our threshold for receiving career shares. So it was largely 50-50.

Okay. And maybe one last question if I could. So, I mean, clearly, you distributed about 100% of the earnings this past year in 2014. But I mean, looking forward, as you grant more shares or you start to have kind of share count creep up, so to speak. At what point or how you start thinking about share repurchase as part of the capital management mix? Is that something we should be thinking could become more part of the conversation in 2015 and 2016, just kind of trying to get your thoughts on that?

Yes, I think it’s too early. We’re still trying to build our float. We’re only about 18 months into the IPO. So, right now we’re not discussing using any cash for share repurchase. I do think it will at some point probably another liquidity event or two, to be a conversation. And we’ll certainly try to give you guys a heads up when we’re thinking about that so you can sort of adjust your models. But either way, as a return of capital shareholder it’s just, in a different form. So, we certainly will consider in the future, but we’re not presently having those discussions.

Great. Thanks for taking my questions.

Our next question is from Michael Carrier of Bank of America, Merrill Lynch. Please go ahead.

Thanks guys. I just wanted to, a quick question just on the build-out of strategies. So you brought on the credit strategy, and obviously it’s relatively short, but it’s been pretty successful from a short period of time. I just wanted to get a sense on the outlook over the next one to three years, where the priorities are, how active you plan on being, looking for any gaps or new talent?

Michael, it’s Eric. And we feel that the credit team build-out has gone very well from back-office to distribution to the investment resources, as well as the talent that we recruited to join Bryan Krug. We’ve seen over the last 12 months, a very healthy dialogue going on in the marketplace with investment talent that resides either in the emerging markets or emerging markets equity or debt. We’ve seen a variety of alternative strategies that we feel fits them to the high value added space or high degrees of freedom that we would call it in, that would fit quite nicely into our business model. And we continue to make quite a few teams and individuals that weren’t follow-up discussions. So we’ll continue to meet with those groups. It takes time to find the right team with the right alignment of interest into our business model. And a strategy that we think fits long-term asset allocation. I think that last point, there is quite a bit of movement on in the asset allocation world of whether it’s going to be a risk based asset allocation or outcome based asset allocation. And the growth into the high network marketplace warrants, one of those two asset allocation models as opposed to the traditional asset allocation that we’ve probably grown up and experienced with over the last 15-20 years. So, we’re optimistic on it but obviously we want to make sure we get it right now, and that will take time.

Okay. Thanks. And just as a follow-up, C.J., just, in terms of the foreign exchange moves that we’ve been seeing in the market, just wanted to get a sense, each firm is a little different in terms of how they manage it or the impact that they can have. But both on the funds and then as you’re building out the international distribution, just how does that have an impact on the business?

Yes, there is a number of ways FX touches us. On the translation of our AUM, we certainly saw a negative impact in the fourth quarter given the strengthening of the dollar. And about 40% of our assets are overseas. So it was a bit more material this past quarter than it has historically been. Performance wise, it runs through our market appreciation line and really it’s part of the investment process. From a P&L perspective, obviously the lower AUM this quarter would impact that because the way we build on an average asset. But from a P&L perspective, our clients are largely built here in U.S. dollars and we only have handful that are built outside the U.S. So, it’s very immaterial from a P&L perspective.

Okay. Thanks a lot.

Our next question is from Eric Berg of RBC. Please go ahead.

Thanks very much. There was one concept that I was hoping, Eric, you could review from your prepared remarks. I just would like to deepen my understanding of this idea of securities in and out of the benchmark and how that affected your performance? If you could just maybe just walk me through again the table on slide 6, just maybe picking one or two numbers from the table and as illustrations for how this table works? I need a little help understanding it. Thank you.

Sure Eric. Now first on the in and out of index, and we did quite a bit of attribution across all of our strategies. And some of our strategies which we’ve highlighted in the past around emerging markets invest in quite a few names that are not in the MFCI emerging markets index. And given the asset flows into indexes and given the price momentum there has been a nice upward push on the returns of those names versus names outside of the index. So, if we had 30% of our portfolio of say of 100 stock portfolio, those out of the index and those 30 stocks underperformed the index names by quite a bit. And then we went across all of our strategies and took a look at in-index and out of index names. And to the most part across every one of our strategies, the out of index names dramatically underperformed on average versus the names in the index, which would sense them given last year’s factor weighing towards momentum. With regards to the chart there, we’ll just take small cap values because those are the most extreme. But that first column there on small cap value, if we took the, all the managers that ranked in the top quintile of their peer group during the bear market, so that April of ‘08 to March of ‘09. And took that group of managers and ranked them then during the current run, the current bull market run of March of ‘09 to now, that group of top cortile managers during the bear market on average was in the 88 percentile over the current run. And the managers that were performing in the bottom quintile of that bear market period during this bull-market run are in the 18th percentile. And the quintile spread there is obviously the differential of 71. It was the most extreme market or the most extreme peer group there. And that’s where we have seen our small cap values that did quite well during the bear market, has been lagging during this bull-market run. And we’ve always said we’re going to participate in the bull market but we’re, the small cap value strategy is not a momentum oriented strategy and has lagged quite a bit. And that’s been the case for quite a few small cap value managers. We’re not looking to make excuses here, but we clearly think there is an exaggerated fact during the marketplace that’s creating some end-point exaggeration across the group.

Very good. That helps me out a lot. Thank you again.

Our next question is from Chris Shutler of William Blair. Please go ahead.

Hi guys, good morning. First, I just want to get an update on the flows thus far in the month of January, recognizing that that’s a very short period of time. And on the institutional pipeline, just how that’s looking. So RFPs final is one, but not funded? Thanks.

Yes, certainly Chris, I think we’re releasing our January flows in a couple of days here. And what we’ve been seeing so far is pretty much a consistent trend of what we saw in the third and fourth quarter. And I would say that’s true for the pipeline as well that institutional marketplace has been rebalancing. And third and fourth quarter results that we saw from flows and the third and fourth quarter pipeline is carrying into January.

All right. Thanks, Eric. And then, you touched on the appetite for potential new teams and meeting with several individuals and teams. But any update on the appetite of your existing teams to roll out new strategies?

We’re always in constant dialogue with our existing teams. But we have no near-term plans here to rollout a new strategy within any of the six teams right now.

Okay. And then, just lastly, the global equity strategy is sitting here at $680 million. In a top-upper docile on a three-year basis, I think it hits its five-year here in April. I know you had the PM departure issue a couple of years ago, but what’s the catalyst in your view for that taking off because the long-term performance is very good?

We think you are correct. The five year number hits in March, at the end of March. So going into second quarter will have a five-year record. And typically in the mid-to-large cap categories you need a five-plus year record versus capacity constrained areas such as small cap. The trigger is a three-year record, sometimes shorter, given the strategy. And with the five-year record and now $680 million in the strategy and the performance over the last couple of quarters have been quite strong. And the time lapse from our portfolio manager turn that you brought up, there has been a couple of years. We think we’re pretty well positioned there for growth, especially outside the U.S.

All right. Thank you.

This concludes our question-and-answer and conference call. Thank you for attending today’s presentation. You may now disconnect.