Hello, and thank you for standing by. My name is Austin 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, Director of Management, Reporting at Artisan Partners.

Thank you. Welcome to the Artisan Partners Asset Management business update and earnings call. Today’s call will include remarks from Eric Colson, Chairman and CEO and C. J. Daley, CFO. Following these remarks, we will open the line for questions. 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 the earnings release. And I will now turn the call over to Eric Colson.

Thank you, Makela. Thank you everyone for joining the call. During the first nine months of this year, our AUM grew by $16.9 billion, a 17% increase from the beginning of the year. We finished the quarter with our highest ever quarter end AUM. We are managing more wealth on behalf of clients than ever before. That makes us a setting time to discuss how we think about growth. Obviously, our AUM has benefited from the prolonged bull market around the world. The size of our business though, is a products and who we are as a firm. The strong long-term investment performance of our teams and business decisions we have made over the years. At Artisan Partners we view growth at an outcome not a strategy. We believe that our firm will grow, if our investment team continue to generate returns that meet client goals and are consistent with client expectations. In running the business we constantly work to increase the odds that we get investments right, we are not focused on short-term AUM. We work with each of our team to develop and maintain an franchise capable of generating returns for clients over multiple generations. We manage investment capacity in the interest of our existing clients. We taka a deliberate and patient approach to adding new investment team and new investment strategies. This is what we mean by thoughtful growth, growth that is consistent with who we are, increases our ability to meet clients goals and expectations. As I will discussed at the end of my comments to make this approach work over that long-term, we try to be both consistent and are decision making and patient and allowing positive outcomes to materialize. Slide 2, shows a strong absolute and relative performance of our distinct investment strategies since…

Thanks, Eric. I will begin on Slide 6, our earnings release and presentation disclose both GAAP and adjusted financial results. My comments will focus on the adjusted results, which we use to evaluate our business operations. Since our IPO, the primary adjustment to our GAAP operating results has been the [removal] (Ph) of pre-IPO equity expense. Pre-IPO equity awards are now fully vested and the expense fully amortize as of the end of the second quarter of this year. So you will notice that for the first time our GAAP and adjusted operating margin are the same for the quarter. Moving forward, our GAAP net earnings and earnings per share will continue to differ from our adjusted results primarily because of our corporate structure and consolidated investment products. In the current quarter, strong market appreciation and Alpha generation grow our AUM to $113.7 billion our highest level of quarter ending AUM ever. As a result, revenues were as 4% and our operating margin increased to 39.4%. GAAP earnings were at $0.61 per share and adjusted earnings per adjusted share were $0.65. Taking a closer look at our AUM on Slide 7. Quarter end assets of $113.7 billion were up 4% compared to last quarter and up 14% compared to the same quarter of last year. The increase in the current quarter reflected market appreciation of $5.4 billion a portion of which from Alpha generation offset impart by $1.2 billion of net client cash out flows. Year-to-date, net client outflows were $3 billion. In the current quarter and year-to-date, net client cash outflows were driven primarily by the non-U.S. growth U.S. mid-cap growth and U.S. mid-cap value strategies. We continue to experience strong net client cash inflows in the global opportunities high income and Developing World strategies. As a reminder, next…

We will now begin the Question-and-Answer Session. [Operator Instructions]. Our first question comes from Kenneth Lee with RBC. Please go ahead.

Hi, thanks for taking my question. Just want to follow-up on remarks about potentially having more strategies maybe in smaller sizes in the future. Wondering if you could just expand a little bit further on what is driving this potential direction?

Sure Kenneth, this is Eric. I think we have talked over the last couple of quarters, about increasing degrees of freedom, which is allowing strategies to use difference to carried by its asset classes and providing more flexibility and to differentiate from the index. To do those, in some cases you lower your beta exposure and rely more on the flexibility. And asset size can work against you on that and as we move into newer strategy such as Long Short as well as other private vehicle strategies, we don't see the assets getting to the same level of a international growth strategy or some more long oriented strategy. So we will limit that size knowing that Alpha will be the primary driver for growth in the future and less dependent on asset flows for the smaller strategies.

Okay, great. Very helpful. And just to follow-up question. In terms of the non-U.S. distribution. How should we think about how the economics compare with the assets for client down the Southern U.S. Like more specifically within the EMEA region, is there potential to get more favorable economics from products being sold there versus ones in the U.S. Thank you.

Yes I think around the world fees are normalizing. If you look back 20 years ago, you had some discrepancies due to the cost of distribution in various regions. You see that coming down dramatically around the world impart just by information flow and the information age, impart by regulation. We don't see a major difference in our fee rates that we charge and pooled vehicles or separate accounts around the world it's one fee rate. The fee differential you are seeing is what we stated in the call and the data that there is a increasing shift towards separate account clients that's driving down the fee rate slightly from 75 basis points roughly a year ago to 73. And that's just really about the type of vehicle that clients are accessing as appose to regional differences in fee rates.

Okay, great. Thank you very much.

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

So first question is counter balance question, it seems like you are migrating to greater flexibility but smaller funds, while listening to C.J. it sounds like a lot of the operation spend is sort of in the past that’s sort of my perception maybe that’s wrong. So how you think about structurally buying versus margins as you look at so the next phase of growth for the Company.

Yes sure Bill, I think my remarks around our operational capabilities have really focused on the spend that we have incurred to add a fix income class to our line-up as well as more degrees of freedom with alternative products that we have launched recently this year. Form a margin prospective our P&L is variable in nature and the economics really from a margin prospective are about the same one additional asset because we have the same revenue share in place, the same distribution economics, our major expenses are formulaically driven and really tied off of the revenues.

And Bill on the stat on with regards to some cost that could come up. It is dependent on the team, if we expand deeper into credit, in emerging market debt strategy, the operations on emerging market debt is a lot of sub custodial work that is required and we would have to invest a little bit there. If we go deeper into the stress debt, there would be a little bit of spend there as well. If we find a team outside the United States and open up in a different region, you could see some additional cost there. So I agree with C.J. that there is just good leverage there off of what we have done already, with regard to putting in a credit team and putting that whole back office in place, putting in more technology to support from an information and data as well as looking at the increased prime brokerage relationships that we are building out for some of the more alternative oriented products. So there is this kind of balancing going on that we have some built up and we may have some additionally pending the strategy.

Okay thanks for that. Just my follow-up sort of ties together a couple of your charts, I'm sort of curious, if you think through what you said in terms of Page 4, that sort of next generation is going to be probably smaller funds at the end of the day, versus what is likely to be further run off in the first generation as market continue to sort of barb out which is on now Page 5 of the hand out. And I think about the area that in the page, which was right things what you are going after, what is the dimensions of the overall organic growth of the company, just in terms of the netting of those two dynamics and then the other part of the question is, by growing it denovo and waiting six to ten year to everything to fully season, are you going to miss the opportunity set as you sort of see the shift happen over next several years.

Sure Bill. The first part of that is just the run off there. And you are getting some run off which we have highlighted in the past in some of our traditional strategies. We do think that that there is a large block of assets and a large group of clients that stick with the current asset allocation model. And there is a quite a bit of assets that are built up in traditional categories. That the change in assets is caught everybody's eyes from going to active to passive. That won't go 100% we are starting to see that runoff slow down. And see strategies that are starting to normalize a little bit, we saw last quarter with our mid-cap value strategy. So we do think there is some natural balance there that will occur. And on the new strategy standpoint of letting time play out on that is that's the market. you can't short circuit a good track record and building a good faith and a good team. And that's what built this firm. So we are not going to try to short circuit that just to chase growth and try to come out with the growth rate that offset. We think it will match with play out each other, but right now it's just focusing on good teams.

Okay, thanks for taking my very long questions today.

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

Thanks good morning everyone. I got on the call little bit late so I apologize if you covered this in some prepared remarks, but with about that just over 20% of your assets now sourced from non-U.S. clients I guess you mentioned that 100 C.J. Can you may update us on your thoughts around method two cause and taking painful research out of your own pocket and clearly I'm assuming you have a bunch of EU clients does that have some impact?

Yes certainly Rob. We do have a fair amount of EU clients. It's kind of really hard to understand where this is all leading to for U.S. managers that's not under method two, given that all of our teams all of our trading operates here in United States, we are not subject to method two. But we clearly see where the market is going. Like a lot of things that we have done in distribution or in various operations, we are going to take a measured approach to it and watch how the market behave with regards to the transparency, the distribution of research the price of research and we are taking a wait and see approach to see how we are going move forward with that. So we are working with our EU clients and taking a wait and see approach.

Okay. And then maybe just sticking on kind a U.S. non-U.S. theme. Just curious I mean, you have obviously had a lot of success building business outside the U.S. at least in terms of a product placement so to speak. But curious your take on the whole passive active demand dynamic as you think of say, non-U.S. institutional investors versus U.S. main. Are you seeing the same kind of passive moment outside the U.S. among institutional client as a much more pronounce in the U.S., just trying to get a sense of your take on kind of broad region outside U.S. but you are take on differences may be in demand patterns.

Yes the U.S. is more pronounced with the passive moment, however there are many parts of the world that become more quantitative and passive oriented. So you do see various pockets around the world and the other conversation comes up everywhere, both regards to the general trends, the U.S. clearly leads the way.

Great. That was it. Thanks for taking my question.

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

Hi Eric, any updated thoughts on fulcrum fees and may be where the industry might be going with that another Feudality International gone down that route, it seems like this more momentum building in that direction at this point.

Yes there certainly more press, and the press happens to be more in Europe at the moment and we have certainly seen fulcrum fees our entire carrier is here in the industry gone back in forward. We have opened to fulcrum fees with many of our clients, specifically in the separate account space, and open to it. And again like most trends, you really don’t need to be first mover, you need to understand what is going to adopt into the marketplace and as client start demanding that move in that direction, so far we haven't seen that pressure to move into a fulcrum fees and further - they are difficult to operate in a daily price vehicle. You have to pick a time frame, you have to pick an index, you have to pick a hurdle and operate that in a vehicle that’s going to be priced daily. So we would like to see how that plays out, clearly if the market moves that way that something we could do.

Understood and then as kind of a follow-up, a number of people have asked about, and you have talked in the past about potentially your future products being smaller in size versus in scale versus may be let’s say the first generation strategies are. Does that also potentially change the way you think about adding new teams of the pace of new teams if a lot of the products are going to be notably smaller in size, do you kind have to pick up the pace of adding new teams or launching new products, how should we think about that and ultimately are you 30 product firm or 25 product firm or how should we think about that.

I don’t think the size of the teams or the change there will causes the thing differentially about bringing on new team, because a new team as we have talked about requires the right person, the right strategy and the right fit into to asset allocation and the asset allocation and the investment policy bucket opens up a bit for institutionally oriented clients that have a longer duration. And we also happen to find more talent that's fit that. Our new strategies will pick up. If we don't find that talent and the talent is not available in the marketplace, we are not fabricate or create a strategy just to fit market demand. So it really take that intersection and it's very hard to predict the pace given that approach.

I guess just to clarify something there, but all else equal. I assume the pace would pick up, you are trying to evaluate more strategies or is that just not true?

The only thing that’s picked up is that, we did a credit strategy for the first time. So when you do a credit strategy for the time, quite a few fixed income portfolio managers and teams calling in and saying I did know you guys would do fixed income, because we thought you were an equity shop. And then once you start doing some private vehicles and you start operating in the credit long short and the equity long short. Again, you have a whole new grouping of investors that did know that are someone go that route. And that opens up more opportunities. You still have to go through the process of adding those teams. But that's the only thing that's really changed as you venture into new spaces, you start see more and more teams calling you. As we have ventured overseas and are picking up non-U.S. clients even though we haven't put a team over time. We are starting to get more interest outside as well. So as we move forward and grow the firm, it gets exponential with regards to the interest of our model.

Understood, that's helpful. Thank you.

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

Hey guys. Good morning.

Good morning.

First on the emerging market team. The performance there has improved nicely. What I think you guys think you are in, in terms of reenergizing the marketing efforts and would it be more around retail or institutional clients.

We have been happy with the turnaround in the emerging markets performance. The team that we felt always had all the ingredients to be a strong team and its lived with the rollercoaster of the emerging market and you are starting to see the emerging market returns resurfacing year-to-date having strong performance in the asset class. So both the Emerging Markets team and the Developing World team are very well position with emerging markets having over 450 basis points of Alpha on the three year and a strong five year record as well along with Developing World having a good start. We see both these strategies positioned well for the institutional client. We don't focus too much on the retail space, as you can see with our asset mix. We primarily see the growth coming from institutionally oriented clients for the emerging markets and Developing World.

Okay and then Eric turning to the non-U.S. growth strategy is there any time there that the outflows could soon abate, I know performance has been a lot better this year and any thoughts around potentially reopening that strategy. Thanks.

The returns have been strong, we have seen a mix of people moving to passive as well as reallocating in that space, I think the returns will start slowing down some of the outflows. I don’t have the specific numbers with regards to how that’s been changing month-over-month, but the returns clearly have been very strong and we have started to see more interest on the new funding side as well, participating in a few searches more recently. And with regards to the reopening of that strategy, strategy is about 25 billion, 26 billion and we have a lot of opportunity in the global equity strategy with the same team and so we are looking to grow the global equity strategy and diversify the asset mix and product mix with that team.

Makes sense. Thank you.

Our next question is from Alex Blostein with Goldman Sachs. Please go ahead.

Great, thanks good morning guys. Question just another bigger picture question, I guess regarding some of the strategy ship is a big word but like a strategic - I guess towards some of the private funds that you are hoping to grow. Can you spend a minute I guess on distribution dynamics of that versus your more kind of traditional ways of distributed product and historically you guys obviously been, much were known in more kind of liquid wrapper. So how does that differ, where is the edge for you guys versus some of the larger competitors and again any addition you need to make in terms of investment on the distribution side of things for private funds.

Sure our model is very well set up moving into various strategies as well as market segment and the reason we are very well set up for that is because we hire business leaders for each team. We don’t have a large big structure on how to market to channels regions in certain segments of the market place, our model has always been bringing a strong investment team and pair them with the business leader. And so with regards to Chris Smith and the Thematic team and the Thematic Long Short strategy, we have brought in a very seasoned business leaders that will go out to the marketplace, sell, service and act as a products specialist for Chris. We hired that person a few months ago and she is very well positioned to market inside of the traditional private fund allocators. So we are in the midst of laying the ground work there through the business leader.

Okay that’s helpful thanks and just a quick follow-up around two. I think you answered the question earlier, I just want to make sure I got this, you guys still haven't decided fully whether it turns over but not given kind of the difference between and U.S. and EU regulators, but if you have to absorb, have you guys given us the number roughly of what that would be or what the impact on P&L is?

No, we haven't given you that number. And Eric commented earlier, we are going to take wait and see approach and see how all of this sort of plays out. and gets rationalized in the marketplace.

Got you, great. Fair enough thanks.

The next question is from Michael Carrier with Bank of America. Please go ahead.

Thanks. Eric, just on the third generation funds, when we think about the growth trajectory. And partially given some of the things that you guys have been working on the distribution. Given those types of the product, should we be thinking like anything differently in terms of the ramp versus the say second and the first generation whether it's more of the non-U.S. clients, and how they are up ticking to some of the more differentiated products. Just trying to get a sense relative to the past how that could potentially changes given the shift in distribution?

Yes Mike. The second generation strategies have actually surprised us a bit with regards to the asset flow. I think both the High Income strategy and the Developing World strategy have been our faster growing strategies in the history of the firm. So certainly those two strategies have grown nicely. And I think helping build out our brand in the marketplace with regards higher degrees of freedom and differentiation from the Index. And as we layer in more strategies and have success in the private vehicle space and build our brand inside of different client base that invest to private vehicles. I think we won't see the exact same ramp that we had with the second generation, because it's a little bit newer with regards to the distribution. But again, we have been somewhat surprised by our brand and success outside the U.S. And likewise when we look at the marketplace out there for alternative or higher degree of freedom strategies and people understand our model and how we operate, we have been getting a good reception.

Okay, thanks. And then as a quick follow-up. on growth in Global Value just given the inflection in the outflows. Was there anything unusual this quarter that drove that or just puts and takes in terms of sales and [indiscernible].

No. I think both the growth and the Global Value team are very well positioned with Global Opportunities and Global Value strategy. And given our success outside the U.S. and specifically into the pool vehicles that the used vehicles where we are opened for those strategies. We have seen some nice success with those two strategies.

Okay, thanks a lot.

Our next question is as follow-up from Bill Katz with Citigroup. Please go ahead. Mr. Katz your line is live. You may proceed with your questions.

Thanks for taking question, talking myself. So C.J as we get to in the year and you sort of think through the variable dividend if you will, can you just remind me in terms of, where you stand in terms of working capital and the tax advantage opportunity, in term of the balance sheet and any seasonal cash that might be going for compensation at the affiliate level.

For the most part we are in the same position, we keep about a 100 million of excess cash on the balance sheet which we use for sort of working capital, 100 million is in excess of what we need really to run the business, we have more recently have funded some of our private vehicles, you will that in the balance sheet, we funded credit opportunities with about 20 million and we funded the Thematic just here recently. So have used a little bit more cash but that really doesn’t effect on how think about the cash when we get to the end of the year, because there is fee dollars and we are able to be absorbed by the 100 million. So we will in January when then Board meets will consider and annual special dividend like we do every year and as of now we really haven't had those discussions.

Thanks.

Our next question is a follow-up from Robert Lee with KBW. Please go ahead.

Thanks for taking my follow-up. This is actually follow-up to may be some earlier questions about bringing on board meeting, I guess it was about a year ago where Mr. Gottlieb joined the firm and if I understand his role correctly, Eric it was the kind of help you and kind of may be some of the loads in terms of going out and looking at for new teams or exploring new teams. I'm just kind curious since he has come on board, how was that may lack for better way of putting it impacted the pipeline of potential new teams or may be also the types of teams you are looking at versus where you were may be a year ago.

Yes, sure Jason Gottlieb, did join us about a year ago, he has been extremely helpful with regards to helping implement our thought process on, expanding the degrees of freedom and he was joining and right about the same time Chris Smith was been on boarded, so Jason helped enormously in sharpening that team and integrating Chris into the firm. Jason has also taken a good role on the credit opportunities strategy in working with our credit team with Brian Krug and helping build out the credit long short strategy in those degrees of freedom and along the way we are integrating them into our existing teams. The primary focus we have is making sure that current team that under the RSM umbrella today are getting the resources needed to expand their degree to freedom as well as broaden out there teams. And so what we have done with the growth and what we done with the value team, Jason has been working with me on all those efforts.

Thanks Okay. Thank you.

This concludes our Question-and-Answer Session as well today's call. We thank you for attending today's presentation. And you may now disconnect your lines.