Hello and thank you for standing by. My name is Jamie and I will be your conference operator today. [Operator Instructions]. As a reminder, today’s conference call is being recorded. At this time, I would like to turn the conference call over to Makela Taphorn with Artisan Partners.

Thank you. Welcome to the Artisan Partners Asset Management business update and earnings call. I'm joined today by Eric Colson, Chairman and CEO and C.J. Daley, CFO. Before Eric begins, I would like to remind you that our earnings release and the related presentation materials are available on the Investor Relations section of our website. Also the comments made on today's call and some of our responses to your questions may deal with forward-looking statements which 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 our remarks made today will include references to non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in their earnings release. I will now turn the call over to Eric.

Thank you, Makela. And thank you everyone for joining the call. We begin each of these calls with the same slide laying out who we are. Artisan Partners is a high value added investment firm designed for investment talent that thrives in a thoughtful growth environment. We design and operate our firm to create an ideal atmosphere for investment professionals. Thoughtful growth is a critical component of our culture. Growth provides new opportunities for talent, enhances the return for shareholders and partners and diversifies and stabilizes our business. In 1994, when Artisan Partners was founded, open architecture and portfolio manager free agency presented risk for some firms and opportunity for others such as Artisan. Today, changing investor preferences, new regulations and technology are all disrupting the investment management industry. As the industry has disrupted, investors are rethinking how their wealth is managed. They are moving to low cost exposure oriented products on the one hand and differentiated strategies with high degrees of freedom on the other. Active closet indexes are left behind. This presents us with an exciting opportunity just like the open architecture and free agency did 20 years ago. The key for us is to continue to deliver superior or long term investment outcomes that are differentiated from indexes and other managers. If we do that, we believe that the disruption that we see today will work in our favor over the long term. In order to deliver for our clients we must continue to recruit and incentivize the best investment talent. We must also continue to work with our talent and clients to design and run investment strategies with increasing degrees of freedom so that our teams have a broad set of tools to outperform and manage risk. On slide two we have highlighted some of the…

Thanks Eric. I’ll start with a review of our GAAP results on slide eight and then follow with a discussion of our adjusted results which we used to manage our business. On a GAAP basis operating income for the September 2016 quarter was $62 million up 5% from the June 2016 quarter and down 12% from the September 2015 quarter. Our GAAP operating margin which includes pre-IPO related compensation expense was 33.7% for the September 2016 quarter compared to 32.6% for the June 2016 quarter and 35.6% for the September 2015 quarter. Earnings per share on a GAAP basis was $0.41 per share for the September quarter, $0.38 per share for the June 2016 quarter and $0.44 per share for the September 2015 quarter. For the nine months ended September 30, 2016, GAAP operating income was $175.7 million, down 19% from the prior year nine months and earnings per share was $1.15 per share in 2016 compared to $1.38 per share in 2015. On an adjusted basis our operating margin increased this quarter at 37.3% from 36.6% in the June 2016 quarter. Adjusted earnings per adjusted share were $0.56 this quarter up from $0.53 in the June 2016. Moving on to slide nine, as of September 30, 2016 assets under management rose to $99.8 billion an increase of $4.8 billion from June 30, 2016 as a result of market appreciation offset in part by net client cash outflows. Net client cash outflows in the September 2016 quarter were $935 million a significant improvement from the 2.3 billion of outflows experienced last quarter. In flows from continued client demand and the global opportunities, global equity, non U.S. value, high incoming developing world strategies were more than offset by continued outflows in the non U.S. growth and mid cap value and mid…

[Operator Instructions] And our first question comes from Alex Blostein from Goldman Sachs. Please go ahead with your question.

Great. Good morning. Thanks everybody. So, first question around the trends you guys seeing in the intermediary channel and Artisan's position I guess within that channel. So, maybe help us with just a breakdown between the assets and advisor accounts versus other accounts? And that's part one. I guess. And part two, as we think about implementation of DOL from various platforms. Maybe you spend a minute on how you envision economics to Artisan evolved in the post-DOL world within the – again the intermediary channel, both I guess from a growth management fee perspective, revenue share agreement, etcetera?

Sure, Alex. As you can see on slide seven, we had 30% of assets are in the intermediary channel, roughly split pretty equally between broker dealer and financial advisors maybe a leaning a little bit more towards the broker dealer side. Inside those broker dealers you have a mix of clients discretionary and non-discretionary and our focus is really off of the centralized research platforms and looking for those discretionary assets that follow institutional model in a high standard. And with regards to the DOL, you have one side there of the DOL outcome that is putting quite a bit of scrutiny on the managers use in those programs, and so we think those high barriers are quite helpful for us. On the other side of the equation there, which is somewhat getting to your second part is, the impact will be looking at fees. And fees are really around the administrative side of the equation of what are people paying? Whether it's in a 401-K or whether it’s in a wealth platform. What does third party fees are paying from administrative side. We have seen obviously the fiduciary question of, will you negotiate your fees down. Our fees have been very stable and remains stable. I think the moving component you see in the marketplace is around the administrative fee component.

Got it. That's helpful. And then looking individual strategy, so global equity seems to be getting pretty nice moment here, I guess the strategies over $1 billion for couple of months now and I think in the past you guys have talked about get into critical mass being a pretty important driver of flows within that strategy. So maybe you spend a minute I guess on the opportunities you guys see for the growth given looks the flows in the near term actually picked up nicely in that product?

Yes. We have three global strategies and I think you can see the path we've taken on each one global value build up a nice client base and we've also followed up with global opportunities, and we think at this point that global opportunities is probably in the strongest position for growth given the performance and the assets around that strategy in the team. And global equity had a nice pick up here. It's past the five-year track record. We also had some early changes on the investment team that slowed growth for a little bit and at this point the team is solidify, the performance is very competitive. The tenure of the track record meet most screens institutional investors, so we're passing the hurdles that it takes to get in to institutional and sophisticated clients opportunities and we think global equity just has a big runway in front of it given the depth of that team and positioning of that product. So its primary been occurring outside the U.S. which we feel well positioned than as C.J. mentioned earlier we have a good pipeline outside the U.S.

Great. Thanks so much.

Our next question comes from Ari Ghosh from Credit Suisse. Please go ahead with your question.

Hey, good morning guys.

Good morning.

So based on your conversations with your distribution partners, how is the topics of performance and fees been evolving. So, is there a greater focus now on your one and three-year track versus the 10-year, just given the DOL rule. And then you just mentioned a little bit about fees, but actually admin portion of that, are you seeing any increased pressure from distribution platform partners on maybe the management fee component. Can you just talk a little bit about that?

Yes. Certainly the intermediary channel is obviously been under a lot of scrutiny lately and with the new DOL rule people are looking for outcomes that will get clients into the lowest share class acceptable for the client and that's where the pressure. And we made a move little over a year ago, where we had two share classes we had an investor share class and institutional share class. We added the third share class that put a cap on the administrative fees that would go into the total expense ratio when we saw a fairly significant move of assets towards that and I think you'll see a continued trends towards a lower share class by many intermediary clients and that may even move all the way to an institutional share class with no third party revenue attach to it. I think that will be the growing trend there with regards to our management fee. We have – obviously fielded a lot questions because that's fiduciary's responsibility is to ask the cost of those services and we've responded with our typical arguments around that and we believe that our fees are quite competitive when we rank them against peers and look at the various peers groups for the type of strategies we're as that we're making available to clients. It’s a noisy peer group and it's getting noisier with regard to the smart beta products getting inserted into the peer groups and you have to distinguish yourself versus passive or smart beta or high value added and we're in the high value added category and I think our fees are going to be quite stable where they're at.

Got it. That's helpful. And then you mentioned continued demand from institutional channel, and although this channel tends to be a little more longer term focus, I think we've been seeing an increasing number for mandates rotate out of active into passive over here. I just wanted to get your thoughts on this and if you been experience any similar trends with your institutional funds?

I think the institutional clients we've had are much more long term thinking and you have seen some rotation in assets on the institutional side, but it’s a lot of defined pension plans moving to liability matching or going into passive as those DB plans are maturing out. So you'll see lumpy flows in there and a push towards passive or liability matching. We've seen growth outside the U.S. in the institutional market for our global equity strategies. We've seen an uptick in our institutional assets. On slide seven you can see that our institutional assets are 65%, that's uptick the couple of percent over the last few quarters and we see a continued trend towards the institutional client and that uptick which we think it's healthy because it creates a much more longer duration assets inside of our firm.

Great. Thanks guys. And actually, if I could just squeeze on one quick one here. You mentioned $3 million to $4 million for quarter of additional costs. Is that per quarter or is that the annual run rate, sorry if I miss that?

Yes. It's an annual run rate that you'll see a spike next quarter for the onboarding piece of it and then ongoing will have about $3 million to $4 million spread over the next full year as well.

Got it. Thanks for taking my questions.

And our next question comes from Chris Shutler from William Blair. Please go ahead with your question.

Hey, guys, good morning.

Good morning, Chris.

You mentioned the addition of Jason Gottlieb is going to help you add, will be part of the process of adding degrees of freedom to existing strategy, so maybe Eric, could you just talk about that a little bit more on how you see that playing out, what teams. And then when it comes to alternative investing, I mean, alternative investing that kind of catch all for lot of things maybe dive into what areas of alt you see as most interesting? Thanks.

Sure, Chris. I've known Jason for over a decade. Jason and I have spend time over the years talking about trends in the industry, investment talent and just the general direction of Artisan and the direction of Artisan has been towards higher degrees of freedom where the line of traditional meets alternatives we're not sure anymore. We see that blending of those two areas and Jason and I both believe that all of the investment teams will continue to add degrees of freedom. You look at what's happened in the U.S. equity markets, there are just a number of securities that have declined, so will teams need to use more synthetic opportunities whether its derivatives or options, clearly more hedging will be involved to manage risk. You've seen some firms out in the marketplace go into private. I think there is more acceptance by institutional clients that give broader guidelines than we experience when we started the firm. And I see Jason helping out to work with each of the investment team to say, where is their natural skill set and where can we expand their opportunities so they can differentiate, navigate the markets as oppose to just delivering exposures in a category. And the definition of alternative for us is -- its pretty wide open. It's looking at investment talent that has a philosophy of process and a strategy that we think will fit the asset allocation on a go forward basis. Jason has been very involved with Goldman Sachs and their asset allocation whether it’s a risk based or an outcome based or traditional mean variance and that background is extremely helpful to figure out the long terms demand of alternative oriented strategies that fit those investment policies and asset allocation categories for the future.

All right. Thanks. And just one more on the, the comment about maybe using private vehicles, can you dive into that a little bit more and when could we potentially see you do something on that front? Thanks a lot.

Yes, certainly. With obviously Chris Smith joining us our expectation that next year we'll be launching a long short strategy. We'll be putting together a limited partnership next year and we would expect that Chris and potentially other teams would also have an LP which gives more degrees of freedom and more opportunity to navigate and build liquid and strategies that require a longer time frame.

Okay. Thanks a lot.

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

Okay. Thank you very much. Appreciate it. So, when I step back I think about the platform, very good performance, some sort of cyclical growth patterns in terms of net new assets, seem to be lot of M&A picking up in the industry, a lot of chatter around scale in terms of needing to have size to really stay on distribution platforms. How do you think about strategically a potential merger with a larger entity to potentially aim through this strategic positioning of the company, I think that's a fair assertion and secondly maybe amplify organic growth?

Hi, Bill. It's Eric. I think we'll always be thoughtful about our growth. You've seen our thoughtful approach over the years of how we've managed capacity and strategies whether it's just the ultimately size of a strategy or the growth of that strategy or just the velocity of assets that we've looked at with in the strategies and we've manage the mix to control growth. And if there's an opportunity in the marketplace that we think is a thoughtful opportunity for ourselves that we think in our evaluation would benefit our investment teams to perform better and that would benefit our clients. We certainly would be looking at that and take a look to see if it works for us where we have been presented with that and currently I think we have a really strong firm and culture and brand and at the end of the day I think it really comes down as to delivering performance. We're in the information age, we're in a digital age. Everybody knows each other’s performance and that's out there in the marketplace which negates some of that size and scale discussion. So delivering performance providing a transparent and open structure for your firm given the information age, I think negates some of that size and scale argument, but that being said, we're always going to be thoughtful about how we look at opportunities.

Okay. That's helpful. And just a follow-up question, just based on conceptual slides and the discussion behind the slides looking at the dynamics of the domestic equity, is that a zero longer term for the industry based on just the dynamics going on, or could you see that stabilize at some point in time and what it will take to do so?

Maybe I see that stabilizing. There's going to be always I think our role for active management. I think that definition of U.S. equity strategy will evolved in creating more opportunities. There is numerous companies in the United States that have well over 50%, 60%, 70% of their revenue outside the U.S. where our company is domicile, is really meaningless today. And the U.S. equity opportunities will evolve allowing more degrees of freedom and you'll see more concentrated conviction weighted portfolios what's going away is that 200, 300, 400 active U.S. equity strategy in the marketplace.

Got you. And just one last one. Thanks for taking my question this morning. Maybe a discussion sort of buyings versus margins if you will. So, looking at your quarterly flow pattern, it looks like both high yield and developing world have slowed from this so their earliest start levels, and your very good performance. So how do you think about maybe what's driving that slowdown and how you think about maybe marketing or margin to grow the business from here? Thank you.

I'll hit that the first part there. The high income will become on its three-year record early next year. We typically see excitement the first during the strategy, a little bit of lag in some of the broker dealer where there's some hurdles we have to cross to on the platform. And then the institutional marketplace tend to wait for about the three-year track record and the team solidified and then you get a growth spurt if you have the team in place, the assets in place and the performance is strong, which we'll see the high income looking into next year we feel quite positive to increase the institutional assets and diversify that strategy. So the lull is a pretty typical pattern as you approach the institutional hurdles, the developing world is in the early phase if you're not quite into that second year, so there's still good interest around the developing world, but both of those strategies I think have performed phenomenally well given our expectation and our history for new strategies, so we're quite pleased on it. And the pace of growth is always going to be lumpy in many of these strategies that we approach an institutional client base.

Okay. Thank you very much.

Our next question comes from Surinder Thind from Jefferies. Please go ahead with your questions.

Hi, Eric. So are any of the existing capacity constrained teams such as like global value. Are you guys evaluating any new products or ideas at this point with maybe more than just a passing thought?

We have not solidified any type of new strategy on the global value. We're always in dialogue back and forth and opportunity are batted around, but there is no serious plans right now to launch a new strategy with that team. The team is focused on the global value and international value and delivering on that performance and building out their franchise with regards to the depth of their team and solidifying their profits. So, I guess it's probably just a passing thought right now, usual risk.

That's helpful. And then in your prepared remarks you talked about the current environment generally been unfavorable for active managers and that something also we're seeing quite a bit in media reports. What do you think would constitute, what a favorable environment would be. It seems like the definition keep changing, I mean you rewind a couple of years and its correlation is too high and then there is discussion market beta being too high and then volatility is too low. I mean, it just seems like there is always something that's kind of a headwind, I mean, it’s an kind of job of active management to be kind of thinking about this and just kind of working through this or is it just simply – just absolutely that much more difficult now given the competition level generating alpha?

In remarks there is a lot of active management dollars available out there, and there is still I think quite a few exposure oriented strategies that are moving in to passive which is feeling that passive trend, but as we look at our teams and our strategies and I look across our performance, our performance is positioned very well, and especially that the strategies that we've been working in those degrees of freedom and with regards to defending active management across the whole industry I don't know what's going to cost that change except for maybe just the index return following off or having some type of event in the marketplace where a cap weighted moment based strategy is no longer in favor. And you certainly get some noise on the fixed income side too on the feasibility of passive investing. So I don't have a direct answer for you Surinder, it's I think our focus is on our teams and delivering performance and if we can deliver performance we know assets follow.

Fair enough. And then just maybe a really quick question on just trying to clarify comment you made in your prepared remarks, you talked a little bit about the growth of passive potentially negatively impacting price discovery especially over maybe shorter timeframes? So it sounded like that from your perspective that was a – and correct me if I'm wrong, but that was a bad for active managers. I would ever thought the opposite, which is, doesn't price dislocation actually represent more of an opportunity to find – to so call gems?

Certainly, dislocation, well, right now we've had a very powerful trend of assets fuelling a one-way trend when that abates then we'll certainly see more disruption and disruption certainly is an opportunity for us with regards to price discoveries with the point we're making as even active buyer and seller out in the marketplace to fundamentally determine a price and that's more passive as it gets in to the marketplace that will create distortion, I think there is distortion and opportunity in our minds is out there in the marketplace and we'll continue to be.

Thanks. That's it from me.

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

Thanks guys. Eric, just on the – when you look at the teams that you have and then also bringing on Gottlieb, just when you think about the products that are say, close to new investors versus what you have on the line up, and then allocating resources to new investments versus maybe focusing more on distribution basically you gain assets in some of these strategies, where are you at maybe in – I don't know if you want call it a cycle or like the growth outlook of the firm because it seems like there is a decent number of teams that are as you mentioned either approaching three years or within start to three years. Just wanted to see on the distribution side particularly if you're focusing more on the institutional channel where things are there?

We’ve been focusing quite a bit on the distribution side of the equation with new strategies and what's on the slides are the investment teams and the portfolio managers and the performance, we take just as much time thinking about the business leader of each of the investment teams and over the last few years we've hired some really strong business leaders to represent the developing world team to develop the high income team who are out in the marketplace. And we'll be looking for a really strong business leader to represent the Artisan thematic team with Chris Smith. And those individual helps us navigate the institutional marketplace and that client based that's in the endowment foundation D.C. marketplace and then we also leverage our intermediary team that’s been doing a very strong job right now in the market place in navigating the trends. So we have been spending quite a bit of time on distribution and those business leaders also focus on the world not just on a segment of the worlds and so that’s why I think we have had a strong outcome in Europe and in Australia and parts of the Middle East to build our asset base and I would expect that to continue given the business leaders we’ve hired.

Okay, thanks. And C.J. just a quick one. I think just want to make sure we understand just heading into the fourth quarter, you were just saying with some of these new hires expect three to four million and as we get into 2017 that will moderate and go somewhere around like maybe a million a quarter for that full run rate for the year.

That’s exactly correct.

Okay, all right, thanks a lot.

And ladies and gentlemen that does conclude today’s question-and-answer session. At this time, I would like to turn the call back over to management for any closing remarks.

Well I want to thank everybody for their time. I know it’s valuable and we appreciate everybody being on the call. Thank you.

Ladies and gentlemen that does conclude today’s conference call. We do thank you for attending. You may now disconnect your lines.