Hello, ladies and gentlemen. Thank you for standing by. Welcome to Artisan Partners Asset Management’s First Quarter 2015 Earnings Conference Call. My name is Gary 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.

Good afternoon everyone. Before we begin, I would like to remind you that our first 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 our 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. And we undertake no obligation to revise these statements following the date of this call. In addition, some of our remarks made today include references to our non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in the earnings release. And with that, I’ll now turn the call over to our CEO, 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 by C.J. Daley, CFO. Time is a valuable asset, we hope to use this time wisely. As usual I want to discuss the quarter in relation to our long-term strategy and continue to reinforce the business philosophy that will drive our results over longer and more meaningful periods. This quarter I want to explain how our strategy of increasing degrees of investment freedom meets the demand of clients who are evolving their investment policies and asset allocations. Our focus on differentiated high value-added strategies design to meet the long-term demand of sophisticated clients it’s fundamental to our business model. Given that focus and our patience in executing our strategy we do not expect linear outcomes from quarter-to-quarter or year-to-year. Once I’m done with the business update C. J. will take the lead and discuss our financials. On slide 2, I would highlight that our total AUM increased to over $108 billion due to market appreciation. Our average AUM has steadily grown over the past three years leveling out over the past 12 months. Our asset diversifications by investment teams and distribution channels remain solid. As noted in the bullet we now have seven autonomous investment teams. Our new Developing World team is led by Lewis Kaufman, we have hired two investment professionals to join Lewis on the team. We plan to launch the team’s first strategy in the next few months. I will further discuss the Developing World team later in the call. Adding new investments talent is an important part of our thoughtful growth strategy. While growth is necessary patience and stability are equally important. We are extremely patient and searching for new talent. We wait for…

Thanks, Eric. Hello, everyone. The summary of our March quarter 2015 financial results is on Slide 14. For the quarter ending AUM increased 1% to $108.7 billion. The increase was driven by market depreciation substantially offset by net claim cash outflows of $2.2 billion. Average AUM also increased 1% quarter-over-quarter, but revenues declined 1% because of two last calendar days in the March quarter. Our adjusted operating margin for the March 2015 quarter was 38.4%, was impacted by several unique items in this first quarter. The most significant item with the startup cost associated with the onboarding of our seventh investment team the Developing World team. Those cost reduced operating margin by 320 basis points and reduced adjusted net income by $0.06 per share. In addition in the first quarter each year, we incurred seasonal compensation costs and we also began to recognize expense from our January 2015 equity grant. The seasonal cost decreased operating margin by 160 basis points or $0.03 per share and the grant of equity decreased adjusted operating margin by 40 basis points or $0.01 per adjusted share. Adjusted net income per adjusted share was $0.65. Our board of directors approved regular quarterly dividend of $0.60. The dividend will be paid May 29 to shareholders of record on May 15. Slide 15, details our AUM and client cash flows, ending assets under management of $108.7 billion that March quarter was up 1% from the December 2014 quarter, primarily due to strong equity market in the first quarter. Client cash flows were below our expectations as we experienced net outflows of $2.2 billion for the quarter. These net outflows were primarily the result our performance driven client redemptions in two of our U.S. value strategies. And asset allocation decisions across the number of other strategies. Overall, outflows…

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Michael Kim with Sandler ONeill. Please go ahead.

Hey, guys good afternoon. First just in terms of expanding for the investment degrees of freedom, can you just go into a little more color in terms of how you are planning on implementing that new, once if you will across your existing strategies and then any follow through as it relates to maybe being able to better recruit investment talent down the road?

Sure. Mike, its Eric Colson. Yes the - we’ve been talking about the expanding degrees of investment freedom for a couple of years and in fact I have to go all the way back to the launch of our global strategies of opening up the mandate and we’re starting to see clients give us degrees of freedom and to other assets classes so some of our teams been able to add more cash or include fixed income securities if they so choose. Likewise, we’ve seen a little bit more hedging occur in our strategies on a currency basis. And as we look out going forward and looking at asset allocations models allowing active managers to short securities or create a risk reward outcome or an outcome such as an emerging markets outcome with Developing World going to allow our teams to broaden the use of securities or hedging strategies for – future strategies or existing and we’ve been modifying guidelines over the last few years to take advantage of that. We do this in a evolutionary manner, you do have to get approval from a broad array of clients especially the separate account clients to modify those guidelines and we continue to see those trends reinforces with our client base and you can see the outcome with our two new strategies with new world, our Developing World and about with the high income strategy.

Got it, that’s helpful. And then maybe just following up on sort of the demand for more concentrated by active share strategies that you just mentioned. Just wondering how do you think you maybe able to capitalize on that trend in light of sort of the team’s investment approaches, but also in the context of some of the recent performance trend and maybe more limited capacity broadly speaking?

From an active share standpoint, we already have fairly high active share across majority of our strategies. And we will be rewarded that for that active share overtime. I think the higher use of passive strategies will continue for a little bit of time and the use of high active share or high value-added managers will get a little bit more concentrated and separate exposure oriented strategies with through active strategies and lately that’s measured by active share ratio or historically, there are many advisors and consultants were looking at tracking there to an index. I think that will continue or benefit, our current strategy of whether it’s the global small cap, which is the fairly new strategy is a concentrated portfolio, our large cap value is also concentrated with right now, 32, 33 securities. So we are already in that space right now and the concentrated high active share. We think the next step is really degrees of freedom with use of newer securities that we have used in the past.

Got it. And then just final question, now with the high income strategy has reached it’s one-year track record, just wondering if you expect to see a step up in demand or the three-year number is still more important and just from a scale perspective, does the fund still need to maybe get to a certain asset level in order for investors to be able to allocate bigger amounts into the strategy.

We still believe that for true realizable capacity, which is a term rates used in past years that a three-year track record with certain level of assets and more predictability of the strategy with underneath the Artisan umbrella is required for true large asset growth I think we’ll have a positive lean going forward. We could be surprised in the short-run just given the one year performance that the team that we’ve assembled so far Bryan’s past record and we have just hired a dedicated relationship manager to focus on the institutional channel and so start next quarter. So we are getting ready for anticipated interest but we truly think the asset that the true asset movement will occur more inline with the three year mark.

Got it, okay. Thanks for taking my questions.

Sure.

The next question comes from Bill Katz with Citi. Please go ahead.

Okay. Thanks so much. So just starting on that – on the last question as you think about the new world team you brought on and in fact they can launch fund over the next couple of months, is it a similar type of growth occur Eric, you think in terms of just help you guys to get the track record up and going or do you think similarly given the strong performance track record of that team it might accelerate the opportunity?

Bill, our base line assumptions are is that new strategies always take some time and given the great track record that we saw on the high income side with Bryan Krug. Bryan produced a similar alpha in his asset class certainly is created a great track record and has a strong reputation in the market place. I think the real question is around demand for emerging markets are enlarging over the last seven years. The emerging market index has produced I think 0.6% return people think there is going to be a version to mean towards a higher return and there is greater interest that could help us out in the short-run just as much as the last couple of years and high income or high yield but the overall flows have been muted versus pervious years.

Okay. So I appreciate you calling out some of the newer initiatives that are working high yields I think international and global. When you look at your way of the $109 billion if so of the AUM that you have I know a bunch has disclosed and how much of that do you think is style box centric that could be at risk for the structural change you talked about? I get the questions how quickly can you make this migration toward the solutions and outcome oriented portfolio was I think you’re on the way to doing versus just the general attrition or commoditization of that core business?

Those evolution in asset allocation, it move slowly, if you are current adhering to a traditional asset allocation model, someone doesn’t wake up that day until let’s terminate all those managers and move to this new outcome of risk based. You have some really strong managers in there. You may be just want to leave in place for a while and you are willing to tolerate a hybrid approach, because you have a good stronger manager in place. So I don’t think that our traditional or more matured strategies are going to go anywhere. And as time moves on those strategies will get more degrees of freedom, but we have that balancing act. We can’t go too far where we take the strategy outside of what was intended for within a client portfolio. So I think these trends move really slow and you have time to modify and just you have to do it at the right pace and not surprise anybody. And I think we’ve successfully done that over the years.

And just one more maybe for C.J. I’m so curious if even adding back all the adjustments that you highlighted in terms of the separate pressure on the margin in Q1, and looking over the last several quarter against the market where the equities are generally higher over the last year. So, the margins been trending lower so. How you thinking about the trade off between growth versus margins on a go-forward basis?

Yes, Bill. I think what we saw was we had some periods in the last several years of some significant growth in our margin trended up higher and faster than we would have originally anticipated. So I think some of the pull back you are seeing as reflective of just having gotten to where we thought we would get so quickly and we continue to believe that overtime our margins and will settle in the low-to-mid 40s and our comp ratio will settle in the mid-40s and our view hasn’t changed although, you guys can do the math on the modeling to understand what 10% growth in revenues would due to that. And I think that’s what we saw over the past couple of years which is why we’re trending down…

Okay. All right. Thanks for taking my questions.

The next question comes from Robert Lee with KBW. Please go ahead.

Thanks. Good morning or afternoon guys. My question is just shifting little bit to capital manager and the dividend and first couple of years pay a 100% of earnings pretty predictable in that sense but, with the stock having comeback some and maybe some new teams coming on and thinking about evolving portfolios. What juncture, particularly since liquidity on the stock is gone better and what time of juncture number one do you – the share repurchase start coming into the mix from a capital management perspective and secondly, you envision as the business evolves having to devote incrementally more capital to a seed at this point?

Yes, I’ll start with sort of the last point. You know, our use of cash has been - our thoughts around that really haven’t changed. We don’t see any sort of major capital commitments in regards to the business or see capital that would prevent us from returning back our capital in our earnings to our shareholders. Now the form of that at least for the short-term the next year I don’t see any change in our lean towards paying out a cash dividend versus stock repurchase. I would never say never but I clearly think that you should expect cash dividend versus stock repurchase over the next 12 months. And at some point I do think that stock repurchase will be part of the discussion. But it currently is much more in favor of cash dividend. And a 7% yield which is currently about where we are running.

Okay. Great, and then just curious I mean, understanding that non-U.S. is a long-term opportunity for the firm and what’s about I guess it’s $14 billion is or maybe just under in terms of asset at this point. But if you look at the exhibit and I lost the page that’s on, I mean, the organic growth at least last four, five quarters from that channel has been pretty muted. So considering that global at least my perception is that global strategies in general have been in demand and notwithstanding having one of those key strategies closed, can you may be talked a little bit about why you think may that organic growth has been more muted from that kind of key distribution channel since beginning of 2014, is there something about what do you think those clients are looking for or is it just not been really much of a distribution focus in the short-term, is maybe you want to focus on funds, trying to get a feel for that?

Sure, Rob. It’s Eric. The global equity space is fairly competitive and given the number of strategies that tend to be on by rated less for many of the consultants or various platform. It requires a little bit more time and enough dollars for to be realizable. So certainly, as you have an emerging market strategy with couple of $100 million in a three-year track record given the scarcity of that, availability of that strategy it lowers the hurdles there for realizable. With regards the global strategies in our global equity team just hit the five-year track record, it has I think the size now to be put on to many of the consultant list as well as platforms and as that five-year track record just hit this last quarter as of March 31. The global opportunity strategy is in a similar state for first couple of years we operated that strategy as what we call an opportunistic growth strategy and had a U.S. emphasis and then we evolved it to global and reality of just hit its true five-year record and both those strategies I think are right in the sweet spot for realizable assets global opportunities being the little bit ahead of it just on the maturity and in the size right now. And if you couple that with our distribution efforts in Europe as well as in Australia that we think the flows are a timing issue you are going to have some outflows and inflows and as you go after intuitional accounts we’ve always said its going to be lumpy and given specifically those two global strategies which we look at all three there on Slide 11 and couple that with our distribution outside the U.S. We’re fairly optimistic about the outcome over the next few years here as people realize our strategy. And you did bring up the distribution a bit. We do think our strategies are bought not sold. And we work on those sophisticated buyers as well as intermediaries to put us on those lists. So that makes even lumpier.

Okay, great. Just maybe one follow-up and this goes back to kind of the – your comments Eric, around kind of the evolving asset management industry and focusing on adding degrees of freedom to strategies is that. I just want to make sure I understand it correctly, if I – the focus is taking with existing strategies kind of migrating how those portfolios are run where you can to whether it’s using other you mentioned securities or somehow pretty more flexibility or freedom into those portfolios that you also touched on why that’s a touchy thing you could, it depends on the timing over time and you want to make sure you deliver what clients effect so. So what degree is that make sense so just start brand new strategies to just have the those degrees of freedom from day one get them started, get them feed them and build the track record that way so you’re – is that may be you’re doing some of that but with that why not goes through that approach if versus this kind of more it’s a little bit what you already have?

Rob, we do think about that exact trade off, in fact we looked years ago when we were looking at launching global opportunities that can we do this in our mid-cap growth strategy can we add degrees of freedom or for so convicted about growing degrees of freedom shouldn’t we just evolve the mid-cap into a pure global strategy. And then you look at your client base and that strategy is over half the assets or institutional it’s not DC oriented assets and we play a very specific role there and so pending that client base and asset base we’ll make a decision on the evolution or a brand new strategy back then we made the decision to launch a brand new strategy with higher degrees of freedom. Now over the years we also made simple evolutionary steps in mid-cap growth where we had ability to go 5% ADR’s 10 years ago now we’ve been made a step of 5% ADR’s in non-U.S. and then we moved to 10% non-U.S. so in areas where the strategies fit the very specific mandate in a structured allocation will be more mindful of that not to disrupt the flows and we’ll have to go slowly on the evolution and other cases will launch brand new strategies as something we discussed each of our investment teams as they asked for degrees of freedom or want to evolve.

Okay, great. Thanks for taking my questions guys.

The next question comes from Michael Carrier with Bank of America Merrill Lynch. Please go ahead.

Thanks guys. Just on the expenses in terms of the outlook. So I think you know I get the moving pieces particularly on the comp line when I think about you are going into second quarter, third quarter and the rest of the year. Are there any additional costs on the grant side or is that fully in the run rate at this point.

Yes, on the grant side its pretty much fully baked. We had a stub period in the first quarter for the January grant, but it was a partial grant. So that guidance we gave you is going to be within a couple of hundred thousand dollars. We do – we did last quarter sort of indicate that we’re going to uptick our technology spend and we got off to a slow start this year, so that will uptick a bit. And but otherwise, we’re going to be pretty consistent, trending down because of the seasonal expenses and obviously, the absence of those unique cost to the Developing World team in the first quarter on boarding them.

Okay, got it. And Eric, just - you hit on some of this, but I just want to understand when I think about the growth outlook over the next couple of years, it seems like on some of the core products based on the flow trends you’ve got little bit of the headwind on the performance side and then some on the allocation side. And then you’ve got a lot of new opportunities whether it’s on the new teams or the distribution front to offset some of those on the areas where performance or its new allocation based. Is there anything you guys can do on in distribution side or with those clients particularly obviously on the performance aspect of it? They given just the strategy its part of that cycle so clients can understand that versus you are seeing the lower redemptions or is it just part of the cycle that you deal with and then at some point that will start to shift.

The – when we look at the array of strategies that we have the two areas where we’ve seen some difficulties the U.S. value team in emerging markets and outside of that that the teams have been producing fairly strong results and are positioned quite well and some of the noise and asset flow, we think it’s exactly that noise. When it comes to the U.S. value team one of the statement we like to reemphasis is that we’re bought not sold and the clients that buy us look for the stability of our talents, the integrity of our process, and the expectations and the one thing that we do as we have a dedicated business leader for each one of our teams and those business leaders sole job is that one franchise. So and really strong performance period there to help amplify the asset gathering efforts and likewise when the strategy is out of favor like our U.S. value team who tend to be a little bit more absolute value have difficulty buying high PE stocks. And certainly, somewhat of an anti-momentum strategy, you lean on these client service professionals to educate the client base and given that their sole job is just one investment team. I think that commitment and dedication helps to extend the duration of that asset through the difficult performance periods.

Okay, that’s helpful. And then just last one, when you look at the teams that you have added, and then you look at the shift that you are talking about in terms of expanding the degrees of freedom. Do you still see quite a few like opportunities or gaps that you don’t have on the platform. And so over the next three to five years continue to be looking for those opportunities or is it more from the products that you have, building those out maybe tweaking some of the strategies.

It will be a combination of both. It will always be out in the marketplace looking for great talent that has a strategy that we think fits well in long-term asset allocation as well as organization, as well as the existing teams we have right now have an ability to launch new strategies. So it will clearly be a combination of both going forward.

Okay. Thanks.

The next question comes from Eric Berg with RBC Capital. Please go ahead.

Thanks very much. Eric, I understand your answer to immediately preceding question that the – the marketing people really need to so to speak lean into the pitch at this point in order to communicate the approach and discipline of the U.S. value team. You are very experienced person in the area, not only of managing your company, but of being a former consultant. What's your sense of whether the audience will even listen to this given the extent of both at the retail brokerage level and at the institutional consultant level given the extent of the under performance. Will they even care is what I’m asking?

It certainly will care, I mean there is always an array of clients on their willingness to tolerate under performance and what's their time horizon and a lot of factors come into play, inception date, so not all of the clients have the returns over a one, three, five, seven, and are not endpoint dependent on these exact numbers that we see in the book, that many of our clients have been with us for a long period of time that have strong absolute returns. If you look at certainly the three-year and five-year return, you are looking at returns of mid-teens well above their return hurdles they are looking for. So it depends on the client’s inception date, their view of absolute returns in this space and they are understanding of our strategy and conviction to our strategy. And we think the way we position a strategy and work with the consulting community as well as the broker dealer, who have built very strong internal research departments that think of the stability of the people and the process and the portfolio results. The best thing we can do is reinforce the people to process and let them understand and help them understand, why we are underperforming. And we think if we have heavily skewed institutional client base, which if you look the value team and we look more specifically at the mid-cap value. The mid-cap values around 60% institutional, with the remainder being in broker dealer and financial advisors that we think has done strong due diligence on our process. We think that skew will give us greater time than most, but there always is a time horizon that is unique for each client.

The next question comes from Chris Shutler with William Blair. Please, go ahead.

Hi, good afternoon. Just couple of real quick ones. First, just wondering how April is shaping up from a flow perspective. And second C.J., could you just review the comments again on the Developed World Team and the expenses there. I think it got $7.1 million in Q1, $6 million of which was one time, 1.5 per quarter from there. I just want to make sure that that's right and what the breakout by line item is. Thanks.

Sure. So on the startup cost for Developing World this quarter about $7.6 million, 6.5 with that was unique to the first quarter, and so the guidance of ongoing as kind of ramp up to about $1.5 million a quarter. We have yet to move them in permanent office space, so that’s going to occur over time. So hopefully, that’s helpful. In the flows, we are going to be lumpy. I mean, April has generally been better than the last several months up to now. But we tend to look out over things over a longer periods of time and try not to get over react or under react to any one quarter or several quarter period. So that’s it to that as much as I can say on that.

Yes, it makes sense. Thanks a lot.

This concludes our question-and-answer session. I like to turn the conference back over to Eric Colson for any closing remarks.

Thank you, everybody, for joining me into the call today. We look forward to our call next quarter.