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Dynamic quotes 
OFFON

ARTISAN PARTNERS ASSET MANAGEMENT INC.

(APAM)
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ARTISAN PARTNERS ASSET MANAGEMENT : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/04/2021 | 04:09pm EDT

Overview

We are an investment management firm focused on providing high-value added,
active investment strategies to sophisticated clients globally. As of June 30,
2021, our nine autonomous investment teams managed a total of 20 investment
strategies across multiple asset classes and investment styles. Over our firm's
history, we have created new investment strategies that can use a broad array of
securities, instruments, and techniques (which we call degrees of freedom) to
differentiate returns and manage risk.
We focus our distribution efforts on sophisticated investors and asset
allocators, including institutions and intermediaries that operate with
institutional-like decision-making processes. We offer our investment strategies
to clients and investors through multiple investment vehicles, including
separate accounts and different types of pooled vehicles. As of June 30, 2021,
approximately 79% of our assets under management were managed for clients and
investors domiciled in the U.S. and 21% of our assets under management were
managed for clients and investors domiciled outside of the U.S.
As a high-value added investment manager we expect that long-term investment
performance will be the primary driver of our long-term business and financial
results. If we maintain and evolve existing investment strategies and launch new
investment strategies that meet the needs of and generate attractive outcomes
for sophisticated asset allocators, we believe that we will continue to generate
strong business and financial results.
Over shorter time periods, changes in our business and financial results are
largely driven by market conditions and fluctuations in our assets under
management that may not necessarily be the result of our long-term investment
performance or the long-term demand for our strategies. For this reason, we
expect that our business and financial results will be lumpy over time.
We strive to maintain a financial model that is transparent and predictable.
Currently, we derive nearly all of our revenues from investment management fees,
most of which are based on a specified percentage of clients' average assets
under management. A majority of our expenses, including most of our compensation
expense, vary directly with changes in our revenues. We invest thoughtfully to
support our investment teams and future growth, while also paying out to
stockholders and partners a majority of the cash that we generate from
operations through distributions and dividends.
Business and financial highlights for the quarter included:
•During the three months ended June 30, 2021, our assets under management
increased to $175.2 billion, an increase of $12.3 billion, or 8%, compared to
$162.9 billion at March 31, 2021, as a result of $11.3 billion of investment
returns and $1.0 billion of net client cash inflows.
•Average assets under management for the three months ended June 30, 2021 were
$170.5 billion, an increase of 56% from the average of $109.3 billion for the
three months ended June 30, 2020, and an increase of 5% from the average of
$162.9 billion for the three months ended March 31, 2021.
•We earned $304.9 million in revenue for the three months ended June 30, 2021,
an increase of 50% from revenues of $203.0 million for the three months ended
June 30, 2020.
•Our GAAP operating margin was 45.2% for the three months ended June 30, 2021,
compared to 37.8% for the three months ended June 30, 2020.
•We generated $1.33 of earnings per basic and diluted share and $1.28 of
adjusted EPS.
•We declared and distributed dividends of $0.88 per share of Class A common
stock during the three months ended June 30, 2021.
•We declared, effective August 3, 2021, a quarterly dividend of $1.00 per share
of Class A common stock.

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COVID-19 Pandemic
The COVID-19 pandemic continues to impact the manner in which we operate. As of
the date of this filing, the majority of our employees are working from home and
our employees have significantly reduced business travel. Additionally, many
third-party vendors on whom we rely for certain critical functions are also
operating in remote environments. Given the continued uncertainty surrounding
the COVID-19 pandemic, it is difficult to predict how long such remote working
conditions and reduced business travel will last. We expect most operating costs
to return to pre-COVID-19 levels when employees fully return to the office and
resume business travel.
We believe we are operating well under these circumstances, benefiting from the
flexible and highly mobile operating environment we have built over 25 years.
However, market volatility, as well as changes in our operations and those of
our key vendors, may result in increased client redemptions; inefficiencies,
delays and decreased communication; and an increase in the number and
significance of operational and trade errors. In addition, we do not know what,
if any, longer-term impact the current operating circumstances (and/or the
extension of them) will have on our business and results.
Organizational Structure
Organizational Structure
Our operations are conducted through Artisan Partners Holdings ("Holdings") and
its subsidiaries. On March 12, 2013, Artisan Partners Asset Management Inc.
("APAM") and Artisan Partners Holdings LP completed a series of transactions
("the IPO Reorganization") to reorganize their capital structures in connection
with the initial public offering ("IPO") of APAM's Class A common stock. The IPO
Reorganization and IPO were completed on March 12, 2013. The IPO Reorganization
was designed to create a capital structure that preserves our ability to conduct
our business through Holdings, while permitting us to raise additional capital
and provide access to liquidity through a public company.
Our employees and other limited partners of Holdings held approximately 18% of
the equity interests in Holdings as of June 30, 2021. As a result, our results
reflect that significant noncontrolling interest.
We operate our business in a single segment.
2021 Follow-On Offering and Holdings Unit Exchanges
On March 1, 2021, the Company sold 963,614 shares of Class A common stock in an
underwritten offering and utilized all of the proceeds to purchase an aggregate
of 963,614 common units from certain limited partners of Holdings. In connection
with the offering, APAM received 963,614 GP units of Holdings.
During the six months ended June 30, 2021, certain limited partners of Holdings
exchanged 274,947 common units (along with a corresponding number of shares of
Class B or Class C common stock of APAM) for 274,947 shares of Class A common
stock. In connection with the exchanges, APAM received 274,947 GP units of
Holdings.
APAM's equity ownership interest in Holdings increased from 80% at December 31,
2020 to 82% at June 30, 2021, as a result of these transactions and other equity
transactions during the period.
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Financial Overview
Economic Environment
Global equity and debt market conditions materially affect our financial
performance. The following table presents the total returns of relevant market
indices for the three and six months ended June 30, 2021 and 2020:
                                            For the Three Months Ended June 

30, For the Six Months Ended June 30,

                                                 2021                 2020                  2021                   2020
S&P 500 total returns                               8.5  %               20.5  %               15.3  %                (3.1) %
MSCI All Country World total returns                7.4  %               19.2  %               12.3  %                (6.3) %
MSCI EAFE total returns                             5.2  %               14.9  %                8.8  %               (11.3) %
Russell Midcap® total returns                       7.5  %               24.6  %               16.2  %                (9.1) %
MSCI Emerging Markets Index                         5.0  %               18.1  %                7.4  %                (9.8) %
ICE BofA U.S. High Yield Master II Total            2.8  %                9.6  %                3.7  %                (4.8) %
Return Index


Key Performance Indicators
When we review our business and financial performance we consider, among other
things, the following:
                                                For the Three Months Ended June 30,               For the Six Months Ended June 30,
                                                     2021                   2020                     2021                     2020
                                                                           (unaudited; dollars in millions)
Assets under management at period end         $    175,214             $ 120,574             $     175,214               $ 120,574
Average assets under management (1)           $    170,489             $ 109,295             $     166,740               $ 111,638
Net client cash flows (2)                     $      1,049             $   3,363             $       2,452               $   2,945
Total revenues                                $      304.9             $   203.0             $       595.6               $   405.8
Weighted average management fee (3)                   70.8   bps            71.8   bps                70.8     bps            71.2   bps
Operating margin                                      45.2     %            37.8     %                43.6       %            36.4     %
Adjusted operating margin (4)                         45.3     %            37.8     %                43.6       %            36.4     %

(1) We compute average assets under management by averaging day-end assets under management for the applicable period. (2) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not reinvested. Prior period net client cash flows have been recast to exclude Artisan Funds' distributions. (3) We compute our weighted average management fee by dividing annualized investment management fees (which excludes performance fees) by average assets under management for the applicable period. (4) Adjusted measures are non-GAAP measures and are explained and reconciled to the comparable GAAP measures in "Supplemental Non-GAAP Financial Information" below.



Investment advisory fees and assets under management within our consolidated
investment products are excluded from the weighted average fee calculations and
from total revenues, since any such revenues are eliminated upon consolidation.
Assets under management within Artisan Private Funds are included in the
reported firm-wide, separate accounts and other, and institutional assets under
management figures reported below.
Assets Under Management and Investment Performance
Changes to our operating results from one period to another are primarily caused
by changes in the amount of our assets under management. Changes in the relative
composition of our assets under management among our investment strategies and
vehicles and the effective fee rates on our products also impact our operating
results.
The amount and composition of our assets under management are, and will continue
to be, influenced by a variety of factors including, among others:
•investment performance, including fluctuations in both the financial markets
and foreign currency exchange rates and the quality of our investment decisions;
•flows of client assets into and out of our various strategies and investment
vehicles;
•our decision to close strategies or limit the growth of assets in a strategy or
a vehicle when we believe it is in the best interest of our clients, as well as
our decision to re-open strategies, in part or entirely;
•our ability to attract and retain qualified investment, management, and
marketing and client service professionals;
•industry trends towards products, strategies, vehicles, or services that we do
not offer;
•competitive conditions in the investment management and broader financial
services sectors; and
•investor sentiment and confidence.
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The table below sets forth changes in our total assets under management:
                                               For the Three Months Ended June
                                                             30,                                  Period-to-Period
                                                   2021                 2020                   $                      %
                                                   (unaudited; in millions)
Beginning assets under management             $    162,883          $  95,224          $        67,659                71.1  %
Gross client cash inflows                            8,765             11,301                   (2,536)              (22.4) %
Gross client cash outflows                          (7,716)            (7,938)                     222                 2.8  %
Net client cash flows (1)                            1,049              3,363                   (2,314)              (68.8) %
Artisan Funds' distributions not reinvested
(2)                                                    (38)               (32)                      (6)              (18.8) %
Investment returns and other (3)                    11,320             22,019                  (10,699)              (48.6) %

Ending assets under management                $    175,214          $ 120,574          $        54,640                45.3  %
Average assets under management               $    170,489          $ 109,295          $        61,194                56.0  %

                                              For the Six Months Ended June 30,                   Period-to-Period
                                                   2021                 2020                   $                      %
                                                   (unaudited; in millions)
Beginning assets under management             $    157,776          $ 121,016          $        36,760                30.4  %
Gross client cash inflows                           18,872             18,380                      492                 2.7  %
Gross client cash outflows                         (16,420)           (15,435)                    (985)               (6.4) %
Net client cash flows (1)                            2,452              2,945                     (493)              (16.7) %
Artisan Funds' distributions not reinvested
(2)                                                    (75)               (63)                     (12)              (19.0) %
Investment returns and other (3)                    15,061             (3,324)                  18,385               553.1  %

Ending assets under management                $    175,214          $ 120,574          $        54,640                45.3  %
Average assets under management               $    166,740          $ 111,638          $        55,102                49.4  %

(1) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not reinvested. Prior
period net client cash flows have been recast to exclude Artisan Funds' distributions.
(2) Artisan Funds' distributions not reinvested represents the amount of income and capital gain distributions that were not
reinvested in the Artisan Funds, including in the Artisan High Income Fund.
(3) Includes the impact of translating the value of assets under management denominated in non-USD currencies into U.S.
dollars. The impact was immaterial for the periods presented.


During the quarter, our AUM increased by $12.3 billion due to $11.3 billion in
investment returns and $1.0 billion of net client cash inflows. 13 of our 20
investment strategies had net inflows, totaling $3.6 billion. Our ten strategies
with inception dates beginning in 2014 or later had $2.0 billion in net inflows.
We expect those strategies as a group to continue to experience net inflows.
Our Global Opportunities, Non-U.S. Growth, U.S. Mid-Cap Growth, Global Equity,
U.S. Mid-Cap Value, Value Equity and U.S. Small-Cap Growth strategies had a
total of $2.5 billion of net outflows during the quarter, which partially offset
the net inflows described above.
Over the long-term, we expect to generate the majority of our AUM growth through
investment returns, which has been our historical experience.
We monitor the availability of attractive investment opportunities relative to
the amount of assets we manage in each of our investment strategies. When
appropriate, we will close a strategy to new investors or otherwise take action
to slow or restrict its growth, even though our aggregate assets under
management may be negatively impacted in the short term. We may also re-open a
strategy, widely or selectively, to fill available capacity or manage the
diversification of our client base in that strategy. We believe that management
of our investment capacity protects our ability to manage assets successfully,
which protects the interests of our clients and, in the long term, protects our
ability to retain client assets and maintain our profit margins.
When we close or otherwise restrict the growth of a strategy, we typically
continue to allow additional investments in the strategy by existing clients and
certain related entities. We may also permit new investments by other eligible
investors in our discretion. As a result, during a given period we may have net
client cash inflows in a closed strategy. However, when a strategy is closed or
its growth is restricted we expect there to be periods of net client cash
outflows.
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As of the date of this filing, the Artisan High Income Fund, Artisan
International Value Fund and Artisan International Small-Mid Fund are closed to
most new investors and their respective strategies have limited availability to
most new client relationships. In addition, we are actively managing the
capacity of our Global Opportunities and U.S. Small-Cap Growth strategies with
respect to new client relationships.
The unaudited table on the following page sets forth the average annual total
returns for each composite (gross of fees) and its respective broad-based
benchmark (and style benchmark, if applicable) over a multi-horizon time period
as of June 30, 2021. Returns for periods less than one year are not annualized.
We measure investment performance based upon the results of our "composites",
which represent the aggregate performance of all discretionary client accounts,
including pooled investment vehicles, invested in the same strategy except those
accounts with respect to which we believe client-imposed investment restrictions
may have a material impact on portfolio construction and those accounts managed
in a currency other than U.S. dollars. The results of these excluded accounts,
which represented approximately 10% of our assets under management at June 30,
2021, are maintained in separate composites the results of which are not
included below.
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                                                                                                                                                                  Average Annual
                                                                                                                                                                  Value-Added(1)
                                  Composite Inception           Strategy AUM                       Average Annual Total Returns (Gross) (%)                       Since Inception
                                                                                                                                                                       (bps)
Investment Team and Strategy             Date                     (in $MM)               1 YR         3 YR          5 YR         10 YR       Inception
Growth Team
Global Opportunities Strategy                  2/1/2007       $      26,741             35.90%       22.30%        21.64%       15.83%        13.21%                    634
MSCI All Country World Index                                                            39.26%       14.55%        14.61%        9.89%         6.87%
Global Discovery Strategy                      9/1/2017       $       2,446             41.09%       26.62%         ---           ---         25.37%                   1,207
MSCI All Country World Index                                                            39.26%       14.55%         ---           ---         13.30%
U.S. Mid-Cap Growth Strategy                   4/1/1997       $      17,690             42.57%       29.58%        24.01%       16.98%        16.81%                    595
Russell Midcap® Index                                                                   49.80%       16.43%        15.61%       13.22%        11.13%
Russell Midcap® Growth Index                                                            43.77%       22.37%        20.51%       15.12%        10.86%
U.S. Small-Cap Growth Strategy                 4/1/1995       $       6,640             38.33%       27.00%        26.12%       18.22%        12.76%                    368
Russell 2000® Index                                                                     62.03%       13.51%        16.46%       12.33%        10.12%
Russell 2000® Growth Index                                                              51.36%       15.93%        18.75%       13.51%         9.08%
Global Equity Team
Global Equity Strategy                         4/1/2010       $       2,989             35.03%       19.89%        19.66%       14.97%        14.92%                    487
MSCI All Country World Index                                                            39.26%       14.55%        14.61%        9.89%        10.05%
Non-U.S. Growth Strategy                       1/1/1996       $      21,907             25.14%       11.54%        11.70%        8.62%        10.37%                    510
MSCI EAFE Index                                                                         32.35%       8.26%         10.27%        5.89%         5.27%
Non-U.S. Small-Mid Growth
Strategy                                       1/1/2019       $       9,123             43.20%        ---           ---           ---         31.83%                   1,375
MSCI All Country World Index Ex
USA Small Mid Cap                                                                       41.80%        ---           ---           ---         18.08%
China Post-Venture Strategy                    4/1/2021       $         147              ---          ---           ---           ---         13.05%                    763
MSCI China SMID Cap Index                                                                ---          ---           ---           ---          5.42%
U.S. Value Team
Value Equity Strategy                          7/1/2005       $       3,894             56.13%       14.59%        14.86%       12.27%         9.74%                    148
Russell 1000® Index                                                                     43.07%       19.14%        17.98%       14.88%        10.77%
Russell 1000® Value Index                                                               43.68%       12.41%        11.87%       11.60%         8.26%
U.S. Mid-Cap Value Strategy                    4/1/1999       $       4,035             55.87%       11.20%        12.31%       10.74%        12.97%                    280
Russell Midcap® Index                                                                   49.80%       16.43%        15.61%       13.22%        10.41%
Russell Midcap® Value Index                                                             53.06%       11.85%        11.78%       11.73%        10.17%
International Value Team
International Value Strategy                   7/1/2002       $      29,698             49.07%       12.80%        12.92%       10.26%        12.32%                    568
MSCI EAFE Index                                                                         32.35%       8.26%         10.27%        5.89%         6.64%
International Small Cap Value                 11/1/2020       $          22              ---          ---           ---           ---         49.00%                   1,230
MSCI All Country World Index Ex
USA Small Cap                                                                            ---          ---           ---           ---         36.70%
Global Value Team
Global Value Strategy                          7/1/2007       $      26,089             51.83%       12.12%        13.36%       11.93%         9.43%                    299
MSCI All Country World Index                                                            39.26%       14.55%        14.61%        9.89%         6.44%
Select Equity Strategy                         3/1/2020       $         426             50.54%        ---           ---           ---         30.24%                   (443)
S&P 500 Market Index                                                                    40.79%        ---           ---           ---         34.67%
Sustainable Emerging Markets
Team
Sustainable Emerging Markets
Strategy                                       7/1/2006       $         998             47.39%       14.39%        15.95%        5.81%         7.62%                    101
MSCI Emerging Markets Index                                                             40.90%       11.26%        13.02%        4.28%         6.61%
Credit Team
High Income Strategy                           4/1/2014       $       7,670             20.26%       9.32%         9.53%          ---          8.23%                    272
ICE BofA US High Yield Master
II Total Return Index                                                                   15.62%       7.14%         7.29%          ---          5.51%
Credit Opportunities Strategy                  7/1/2017       $         115             39.62%       15.49%         ---           ---         15.13%                   1,351
ICE BofA US Dollar LIBOR
3-month Constant Maturity Index                                                         0.25%        1.65%          ---           ---          1.62%
Developing World Team
Developing World Strategy                      7/1/2015       $      10,314             54.28%       37.12%        28.01%         ---         21.99%                   1,360
MSCI Emerging Markets Index                                                             40.90%       11.26%        13.02%         ---          8.39%
Antero Peak Group
Antero Peak Strategy                           5/1/2017       $       3,245             37.12%       23.28%         ---           ---         27.54%                   1,016


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S&P 500 Market Index                                                  40.79%     18.65%     ---     ---     17.38%
Antero Peak Hedge Strategy       11/1/2017       $   1,025            28.00%     18.34%     ---     ---     19.14%             197
S&P 500 Market Index                                                  40.79%     18.65%     ---     ---     17.17%

Total Assets Under
Management                                       $ 175,214

(1) Value-added is the amount, in basis points, by which the average annual gross composite return of each of our strategies has outperformed or underperformed its respective benchmark. Value-added for periods less than one year is not annualized. The High Income strategy holds loans and other security types that are not included in its benchmark, which, at times, causes material differences in relative performance. The Credit Opportunities strategy is benchmark agnostic and has been compared to the 3-month LIBOR for reference purposes only. The Antero Peak and Antero Peak Hedge strategies' investments in initial public offerings (IPOs) made a material contribution to performance. IPO investments may contribute significantly to a small portfolio's return, an effect that will generally decrease as assets grow. IPO investments may be unavailable in the future.




The tables below set forth changes in our assets under management by investment
team:
                                                                                                                 By Investment Team
                                                                                                                             Sustainable                                    Antero Peak
Three Months Ended                    Growth      Global Equity     U.S. Value     International Value     Global Value    Emerging Markets    Credit    Developing World      Group        Total
June 30, 2021                                                                                                 (unaudited; in millions)
Beginning assets under
management                          $ 50,464    $       32,326    $     7,713    $             27,013    $      24,468    $           735    $ 

7,010 $ 9,255 $ 3,899 $ 162,883 Gross client cash inflows

              2,042             1,146             99                   1,729            1,666                210        904                 718          251        8,765
Gross client cash outflows            (3,426)           (1,449)          (323)                   (750)            (839)               (10)      (277)               (554)         (88)      (7,716)
Net client cash flows (1)             (1,384)             (303)          (224)                    979              827                200        627                 164          163        1,049
Artisan Funds' distributions
not reinvested (2)                         -                 -              -                       -                -                  -        (38)                  -            -          (38)
Investment returns and other           4,437             2,143            440                   1,728            1,220                 63        186                 895          208       11,320

Ending assets under
management                          $ 53,517    $       34,166    $     7,929    $             29,720    $      26,515    $           998    $ 

7,785 $ 10,314 $ 4,270 $ 175,214 Average assets under management

                          $ 51,705    $       33,931    $     7,982    $             28,921    $      25,917    $           865    $ 7,317    $          9,700    $   4,151    $ 170,489
June 30, 2020
Beginning assets under
management                          $ 29,691    $       22,024    $     4,973    $             15,895    $      13,701    $           377    $ 

3,312 $ 3,366 $ 1,885 $ 95,224 Gross client cash inflows

              3,484             1,449            255                   2,705            1,075                 23        946                 942          422       11,301
Gross client cash outflows            (1,623)           (2,163)          (358)                 (2,139)            (922)                (7)      (319)               (331)         (76)      (7,938)
Net client cash flows (1)              1,861              (714)          (103)                    566              153                 16        627                 611          346        3,363
Artisan Funds' distributions
not reinvested (2)                         -                 -              -                       -                -                  -        (32)                  -            -          (32)
Investment returns and other           9,527             4,137          1,142                   2,732            2,159                 84        444               1,419          375       22,019

Ending assets under
management                          $ 41,079    $       25,447    $     6,012    $             19,193    $      16,013    $           477    $ 

4,351 $ 5,396 $ 2,606 $ 120,574 Average assets under management

                          $ 35,451    $       24,250    $     5,725    $             17,873    $      14,912    $           422    $ 3,960    $          4,406    $   2,296    $ 109,295
(1) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not reinvested. Prior period net client cash flows have been recast to exclude Artisan Funds'
distributions.
(2) Artisan Funds' distributions not reinvested represents the amount of income and capital gain distributions that were not reinvested in the Artisan Funds, including in the Artisan High Income
Fund.


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                                                                                                                 By Investment Team
                                                                                                                             Sustainable                                    Antero Peak
Six Months Ended                      Growth      Global Equity     U.S. Value     International Value     Global Value    Emerging Markets    Credit    Developing World      Group        Total
June 30, 2021                                                                                                 (unaudited; in millions)
Beginning assets under
management                          $ 52,685    $       32,056    $     7,149    $             24,123    $      22,417    $           679    $ 

6,338 $ 8,853 $ 3,476 $ 157,776 Gross client cash inflows

              4,199             2,670            189                   4,047            2,896                281      1,824               2,078          688       18,872
Gross client cash outflows            (6,549)           (2,646)          (768)                 (2,264)          (2,122)               (26)      (638)             (1,232)        (175)     (16,420)
Net client cash flows (1)             (2,350)               24           (579)                  1,783              774                255      1,186                 846          513        2,452
Artisan Funds' distributions
not reinvested (2)                         -                 -              -                       -                -                  -        (75)                  -            -          (75)
Investment returns and other           3,182             2,086          1,359                   3,814            3,324                 64        336                 615          281       15,061

Ending assets under
management                          $ 53,517    $       34,166    $     7,929    $             29,720    $      26,515    $           998    $ 

7,785 $ 10,314 $ 4,270 $ 175,214 Average assets under management

                          $ 52,384    $       33,245    $     7,705    $             27,392    $      24,540    $           805    $ 7,029    $          9,674    $   3,966    $ 166,740
June 30, 2020
Beginning assets under
management                          $ 34,793    $       27,860    $     7,402    $             22,000    $      19,707    $           234    $ 

3,850 $ 3,374 $ 1,796 $ 121,016 Gross client cash inflows

              4,904             2,759            696                   3,978            1,715                305      1,578               1,530          915       18,380
Gross client cash outflows            (3,780)           (3,509)        (1,044)                 (3,543)          (1,762)               (11)      (944)               (641)        (201)     (15,435)
Net client cash flows (1)              1,124              (750)          (348)                    435              (47)               294        634                 889          714        2,945
Artisan Funds' distributions
not reinvested (2)                         -                 -              -                       -                -                  -        (63)                  -            -          (63)
Investment returns and other           5,162            (1,663)        (1,042)                 (3,242)          (3,647)               (51)       (70)              1,133           96       (3,324)

Ending assets under
management                          $ 41,079    $       25,447    $     6,012    $             19,193    $      16,013    $           477    $ 

4,351 $ 5,396 $ 2,606 $ 120,574 Average assets under management

                          $ 34,603    $       25,252    $     6,037    $             18,980    $      16,452    $           387    $ 3,860    $          3,953    $   2,114    $ 111,638
(1) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not reinvested. Prior period net client cash flows have been recast to exclude Artisan Funds'
distributions.
(2) Artisan Funds' distributions not reinvested represents the amount of income and capital gain distributions that were not reinvested in the Artisan Funds, including in the Artisan High Income
Fund.


The goal of our marketing, distribution and client services efforts is to
establish and maintain a client base that is diversified by investment strategy,
investment vehicle and distribution channel. As distribution channels have
evolved to have more institutional-like decision making processes and
longer-term investment horizons, we have expanded our distribution efforts into
those areas.
The table below sets forth our assets under management by distribution channel
(1):
                                                          As of June 30, 2021                              As of June 30, 2020
                                                $ in millions             % of total             $ in millions            % of total
                                                 (unaudited)                                      (unaudited)
Institutional                                  $     110,994                      63.4  %       $     78,960                      65.5  %
Intermediary                                          56,618                      32.3  %             36,455                      30.2  %
Retail                                                 7,602                       4.3  %              5,159                       4.3  %
Ending Assets Under Management                 $     175,214                     100.0  %       $    120,574                     100.0  %

(1) The allocation of assets under management by distribution channel involves the use of estimates and the exercise of judgment.



Our institutional channel includes assets under management sourced from defined
contribution plan clients, which made up approximately 11% of our total assets
under management as of June 30, 2021.

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The following tables set forth the changes in our assets under management by
vehicle type:
                                                   Artisan Funds
                                                     & Artisan         Separate Accounts
Three Months Ended                                 Global Funds          and Other (1)             Total
June 30, 2021                                                      (unaudited; in millions)
Beginning assets under management                  $   78,789          $       84,094          $  162,883
Gross client cash inflows                               5,666                   3,099               8,765
Gross client cash outflows                             (4,005)                 (3,711)             (7,716)
Net client cash flows (2)                               1,661                    (612)              1,049
Artisan Funds' distributions not reinvested (3)           (38)                      -                 (38)
Investment returns and other                            5,316                   6,004              11,320
Net transfers (4)                                         (41)                     41                   -
Ending assets under management                     $   85,687          $       89,527          $  175,214
Average assets under management                    $   82,931          $       87,558          $  170,489
June 30, 2020
Beginning assets under management                  $   44,426          $       50,798          $   95,224
Gross client cash inflows                               6,818                   4,483              11,301
Gross client cash outflows                             (4,983)                 (2,955)             (7,938)
Net client cash flows (2)                               1,835                   1,528               3,363
Artisan Funds' distributions not reinvested (3)           (32)                      -                 (32)
Investment returns and other                           10,321                  11,698              22,019
Net transfers (4)                                           -                       -                   -
Ending assets under management                     $   56,550          $       64,024          $  120,574
Average assets under management                    $   51,262          $       58,033          $  109,295

                                                   Artisan Funds
                                                     & Artisan         Separate Accounts
Six Months Ended                                   Global Funds         and Other (1,2)            Total
June 30, 2021                                                      (unaudited; in millions)
Beginning assets under management                  $   74,746          $       83,030          $  157,776
Gross client cash inflows                              13,267                   5,605              18,872
Gross client cash outflows                             (9,026)                 (7,394)            (16,420)
Net client cash flows (2)                               4,241                  (1,789)              2,452
Artisan Funds' distributions not reinvested (3)           (75)                      -                 (75)
Investment returns and other                            6,853                   8,208              15,061
Net transfers (4)                                         (78)                     78                   -
Ending assets under management                     $   85,687          $       89,527          $  175,214
Average assets under management                    $   80,644          $       86,096          $  166,740
June 30, 2020
Beginning assets under management                  $   57,288          $       63,728          $  121,016
Gross client cash inflows                              11,543                   6,837              18,380
Gross client cash outflows                            (10,527)                 (4,908)            (15,435)
Net client cash flows (2)                               1,016                   1,929               2,945
Artisan Funds' distributions not reinvested (3)           (63)                      -                 (63)
Investment returns and other                           (1,626)                 (1,698)             (3,324)
Net transfers (4)                                         (65)                     65                   -
Ending assets under management                     $   56,550          $       64,024          $  120,574
Average assets under management                    $   52,563          $    

59,075 $ 111,638


(1) Separate account and other consists of AUM we manage in or through vehicles other than Artisan Funds or
Artisan Global Funds. This AUM includes assets we manage in traditional separate accounts, as well as assets
we manage in Artisan-branded collective investment trusts and in Artisan Private Funds. As of June 30, 2021,
AUM for certain strategies include the following amounts for which Artisan Partners provides investment
models to managed account sponsors (reported on a one-month lag): Artisan Sustainable Emerging Markets $24
million.


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(2) Net client cash flows excludes Artisan Funds' income and capital gain distributions that were not
reinvested. Prior period net client cash flows have been recast to exclude Artisan Funds' distributions.
(3) Artisan Funds' distributions not reinvested represents the amount of income and capital gain
distributions that were not reinvested in the Artisan Funds, including in the Artisan High Income Fund.
(4) Net transfers represent certain amounts that we have identified as having been transferred out of one
investment strategy, investment vehicle or account and into another strategy, vehicle or account.


Results of Operations
Three months ended June 30, 2021, Compared to Three months ended June 30, 2020
                                                           For the Three Months Ended June 30,                   For the Period-to-Period
                                                               2021                     2020                         $                       %
Statements of operations data:                                          

(unaudited; in millions, except share and per-share data) Revenues

                                               $            304.9          $      203.0          $         101.9                     50  %
Operating Expenses
Total compensation and benefits                                     138.0                 102.2                     35.8                     35  %

Other operating expenses                                             29.1                  24.2                      4.9                     20  %
Total operating expenses                                            167.1                 126.4                     40.7                     32  %
Total operating income                                              137.8                  76.6                     61.2                     80  %
Non-operating income (expense)
Interest expense                                                     (2.7)                 (2.7)                       -                      -  %

Other non-operating income                                           12.3                  14.1                     (1.8)                   (13) %
Total non-operating income (expense)                                  9.6                  11.4                     (1.8)                   (16) %
Income before income taxes                                          147.4                  88.0                     59.4                     68  %
Provision for income taxes                                           28.5                  16.2                     12.3                     76  %
Net income before noncontrolling interests                          118.9                  71.8                     47.1                     66  %
Less: Noncontrolling interests - Artisan Partners
Holdings                                                             25.7                  18.2                      7.5                     41  %
Less: Noncontrolling interests - consolidated
investment products                                                   5.0                   7.4                     (2.4)                   (32) %
Net income attributable to Artisan Partners Asset
Management Inc.                                        $             88.2          $       46.2          $          42.0                     91  %
Share Data
Basic earnings per share                               $             1.33          $       0.72
Diluted earnings per share                             $             1.33          $       0.72
Basic weighted average number of common shares
outstanding                                                    59,821,804   

55,884,366

Diluted weighted average number of common shares
outstanding                                                    59,838,374            55,884,366



Investment Advisory Revenues
Essentially all of our revenues consist of fees earned from managing clients'
assets. Our investment advisory fees, which are comprised of management fees and
performance fees, fluctuate based on a number of factors, including the total
value of our assets under management, the composition of assets under management
among investment vehicles and our investment strategies, changes in the
investment management fee rates on our products, the extent to which we enter
into fee arrangements that differ from our standard fee schedules, which can be
affected by custom and the competitive landscape in the relevant market, and,
for the accounts on which we earn performance fees, the investment performance
of those accounts.
Approximately 4% of our $175.2 billion of assets under management as of June 30,
2021 have performance fee billing arrangements. Performance fees of $4.1 million
were recognized in the three months ended June 30, 2021, compared to $8.0
million in the three months ended June 30, 2020.
The increase in revenues of $101.9 million, or 50%, for the three months ended
June 30, 2021, compared to the three months ended June 30, 2020, was driven
primarily by a $61.2 billion, or 56%, increase in our average assets under
management. The weighted average investment management fee, which excludes
performance fees, was 70.8 basis points for the three months ended June 30, 2021
compared to 71.8 basis points for the three months ended June 30, 2020. The
decrease in the weighted average investment management fee was primarily due to
a decrease in separate account fee rates resulting from tiered fee structures
and client mix.
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The following table sets forth the investment advisory fees and weighted average
management fee earned by investment vehicle. The weighted average management fee
for Artisan Funds and Artisan Global Funds reflects the additional services we
provide to these pooled vehicles.
                                                                            

Artisan Funds and Artisan Global

                                          Separate Accounts and Other                              Funds
For the Three Months Ended June 30,        2021                    2020                  2021                  2020
                                                              (unaudited; dollars in millions)
Investment advisory fees            $       116.2             $      85.9          $      188.7            $    117.1
Weighted average management fee(1)             51.4 bps             54.1 bps                91.3 bps            91.8 bps
Percentage of ending AUM                       51     %                53  %                 49    %               47  %

(1) We compute our weighted average management fee by dividing annualized management fees (which excludes performance fees) by average assets under management for the applicable period.



Separate accounts and other consists of assets we manage in or through vehicles
other than Artisan Funds or Artisan Global Funds, including assets we manage in
traditional separate accounts, Artisan-branded collective investment trusts and
Artisan Private Funds, as well as assets under advisement related to investment
models, for which we provide consulting advice but do not have full
discretionary investment authority.
Operating Expenses
Operating expenses increased $40.7 million for the three months ended June 30,
2021, compared to the three months ended June 30, 2020, primarily as a result of
higher incentive compensation and third-party distribution expense related to
increased revenues and increases in other compensation and benefits expenses.
Compensation and Benefits
                                              For the Three Months Ended June 30,                Period-to-Period
                                                   2021                 2020                    $                    %
                                                                (unaudited; in millions)
Salaries, incentive compensation and
benefits(1)                                   $      125.9          $     93.1          $          32.8               35  %
Long-term incentive compensation awards               12.1                 9.1                      3.0               33  %
Total compensation and benefits               $      138.0          $    102.2          $          35.8               35  %
(1) Excluding long-term incentive
compensation awards


The increase in salaries, incentive compensation and benefits was driven
primarily by a $28.6 million increase in quarterly incentive compensation for
our investment and marketing professionals as a result of the increase in
revenue.
Long-term incentive compensation award expense increased $3.0 million, as the
awards granted during 2020 and 2021 had a higher value than the awards that
became fully vested in 2020 and 2021. During the first quarter of 2021, the
Company's board of directors approved a grant of $79.4 million of long-term
incentive awards consisting of $44.4 million of restricted share-based awards
and $35.0 million of long-term cash awards. Long-term incentive compensation
award expense for all outstanding awards is expected to be approximately $11
million per quarter for the remainder of 2021, excluding the impact of
investment returns.
During the first quarter of 2021, we made our first grant of franchise capital
awards to investment professionals in lieu of additional grants of restricted
share-based awards. We designed the franchise capital awards as an added feature
to our long-term incentive program to enhance the alignment between our
investment professionals and clients, and to provide investment professionals
with greater control over their long-term economic outcome. Franchise capital
awards are cash awards that are subject to the same long-term vesting and
forfeiture provisions as our restricted share-based awards. Prior to vesting,
though, the franchise capital awards will generally be invested in one or more
of the investment strategies managed by the award recipient's investment team.
Total compensation and benefits was 45% and 50% of our revenues for the three
months ended June 30, 2021, and 2020, respectively. The percentage decreased as
revenue increased at a higher rate than compensation and benefits.
Other operating expenses
Other operating expenses increased $4.9 million for the three months ended June
30, 2021 compared to the three months ended June 30, 2020, primarily due to an
increase in third-party distribution expense as a result of an increase in AUM
subject to those fees.
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Non-Operating Income (Expense)
Non-operating income (expense) consisted of the following:

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