UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
☑
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission file number: 001-35826
Artisan Partners Asset Management Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
875 E. Wisconsin Avenue, Suite 800
Milwaukee, WI
(Address of principal executive offices)
45-0969585
(I.R.S. Employer
Identification No.)
53202
(Zip Code)
(414) 390-6100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, $0.01 par value
APAM
The New York Stock Exchange
(Title of each class)
(Trading Symbol)
(Name of each exchange on which registered)
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Non-accelerated filer o
Accelerated filer o
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
The aggregate market value of common equity held by non-affiliates of the registrant at June 30, 2020, which was the last business day of the registrant’s
most recently completed second fiscal quarter, was approximately $2.0 billion based on the closing price of $32.50 for one share of Class A common stock, as
reported on the New York Stock Exchange on that date. For purposes of this calculation only, it is assumed that the affiliates of the registrant include only
directors and executive officers of the registrant.
The number of outstanding shares of the registrant’s Class A common stock, par value $0.01 per share, Class B common stock, par value $0.01 per share,
and Class C common stock, par value $0.01 per share, as of February 19, 2021 were 62,981,300, 4,457,958 and 10,983,145, respectively.
Table of Contents
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
TABLE OF CONTENTS
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Information about our Executive Officers
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Qualitative and Quantitative Disclosures Regarding Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 15.
Item 16.
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
Except where the context requires otherwise, in this report:
PART IV
Page
1
12
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28
29
30
31
55
57
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108
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120
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“Artisan Funds” refers to each series of Artisan Partners Funds, Inc., an open-ended management investment company,
registered with the Securities and Exchange Commission.
“Artisan Global Funds” refers to each sub-fund of Artisan Partners Global Funds plc, an open-ended investment
company registered with the Central Bank of Ireland pursuant to the European UCITS Directive.
“Artisan Private Funds” refers to private investment funds sponsored by Artisan.
“Client” and “clients” refer to investors who access our investment management services by investing in funds,
including Artisan Funds, Artisan Global Funds, Artisan Private Funds, or other pooled investment vehicles (including
collective investment trusts) for which we serve as investment adviser, or by engaging us to manage a separate account
in one or more of our investment strategies.
“Company”, “Artisan”, “we”, “us” or “our” refer to Artisan Partners Asset Management Inc. (“APAM”) and its direct
and indirect subsidiaries, including Artisan Partners Holdings LP (“Artisan Partners Holdings” or “Holdings”), and, for
periods prior to our IPO, “Artisan,” the “company,” “we,” “us” and “our” refer to Artisan Partners Holdings and, unless
the context otherwise requires, its direct and indirect subsidiaries. On March 12, 2013, APAM closed its IPO and
related IPO Reorganization. Prior to that date, APAM was a subsidiary of Artisan Partners Holdings. The IPO
Reorganization and IPO are described in the notes to our consolidated financial statements included in Part II of this
Form 10-K.
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Table of Contents
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“IPO” means the initial public offering of 12,712,279 shares of Class A common stock of Artisan Partners Asset
Management Inc. completed on March 12, 2013.
“IPO Reorganization” means the series of transactions Artisan Partners Asset Management Inc. and Artisan Partners
Holdings completed on March 12, 2013, immediately prior to the IPO, in order to reorganize their capital structures in
preparation for the IPO.
“2018 Follow-On Offering” means the registered offering of 644,424 shares of Class A common stock of Artisan
Partners Asset Management Inc. completed on February 27, 2018.
“2020 Follow-On Offering” means the registered offering of 1,802,326 shares of Class A common stock of Artisan
Partners Asset Management Inc. completed on February 24, 2020.
Forward-Looking Statements
This report contains, and from time to time our management may make, forward-looking statements within the meaning of the
safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements regarding future events and our
future performance, as well as management’s current expectations, beliefs, plans, estimates or projections relating to the future,
are forward-looking statements within the meaning of these laws. In some cases, you can identify these statements by forward-
looking words such as “may”, “might”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”,
“predicts”, “potential” or “continue”, the negative of these terms and other comparable terminology. Forward-looking statements
are only predictions based on current expectations and projections about future events. Forward-looking statements are subject to
a number of risks and uncertainties, and there are important factors that could cause actual results, level of activity, performance,
actions or achievements to differ materially from the results, level of activity, performance, actions or achievements expressed or
implied by the forward-looking statements. These factors include: the loss of key investment professionals or senior management,
adverse market or economic conditions, poor performance of our investment strategies, change in the legislative and regulatory
environment in which we operate, operational or technical errors or other damage to our reputation, the long-term impact of the
COVID-19 pandemic and other factors disclosed in the Company’s filings with the Securities and Exchange Commission,
including those factors listed under the caption entitled “Risk Factors” in Item 1A of this Form 10-K. We undertake no obligation
to publicly update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this
report, except as required by law.
Forward-looking statements include, but are not limited to, statements about:
•
•
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•
•
•
•
•
•
•
•
our anticipated future results of operations;
our potential operating performance and efficiency; including our ability to operate under different and unique
circumstances;
our expectations with respect to the performance of our investment strategies;
our expectations with respect to future levels of assets under management, including the capacity of our strategies and
client cash inflows and outflows;
our expectations with respect to industry trends and how those trends may impact our business;
our financing plans, cash needs and liquidity position;
our intention to pay dividends and our expectations about the amount of those dividends;
our expected levels of compensation of our employees, including equity- or cash-based long-term incentive
compensation;
our expectations with respect to future expenses and the level of future expenses;
our expected tax rate, and our expectations with respect to deferred tax assets; and
our estimates of future amounts payable pursuant to our tax receivable agreements.
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Table of Contents
Performance and Assets Under Management Information Used in this Report
We manage investments primarily through pooled investment funds and separate accounts. We serve as investment adviser to
Artisan Funds, Artisan Global Funds and Artisan Private Funds. We refer to funds and other accounts that are managed by us
with a broadly common investment objective and substantially in accordance with a single model account as being part of the
same investment “strategy”.
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 (such as socially-based 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 December 31, 2020, are maintained in
separate composites the results of which are not presented in this report).
The performance of accounts with investment restrictions differs from the performance of accounts included in our principal
composite for the applicable strategy because one or more securities may be omitted from the portfolio in order to comply with
client restrictions and the weightings in the portfolio of other securities are correspondingly altered. The performance of non-U.S.
dollar accounts differs from the performance of the principal composite for the applicable strategy because of the fluctuations in
currency exchange rates between the currencies in which portfolio securities are traded and the currency in which the account is
managed or U.S. dollars, respectively. Our assets under management in accounts with investment restrictions and non-U.S. dollar
accounts represented approximately 2% and 8%, respectively, of our assets under management as of December 31, 2020. Results
for any investment strategy described herein, and for different investment vehicles within a strategy, are affected by numerous
factors, including: different material market or economic conditions; different investment management fee rates, brokerage
commissions and other expenses; and the reinvestment of dividends or other earnings.
The returns for any strategy may be positive or negative, and past performance does not guarantee future results. In this report,
we refer to the date on which we began tracking the performance of an investment strategy as that strategy’s “inception date”.
In this report, we present the average annual returns of our composites on a “gross” basis, which represent average annual returns
before payment of fees payable to us by any portfolio in the composite and are net of commissions and transaction costs. We also
present the average annual returns of certain market indices or “benchmarks” for the comparable period. The indices are
unmanaged and have differing volatility, credit and other characteristics. You should not assume that there is any material
overlap between the securities included in the portfolios of our investment strategies during these periods and those that comprise
any of the strategy’s comparator index in this report. At times, this can cause material differences in relative performance. It is
not possible to invest directly in any of the indices. The returns of these indices, as presented in this report, have not been reduced
by fees and expenses associated with investing in securities, but do include the reinvestment of dividends.
The MSCI EAFE Index, the MSCI EAFE Growth Index, the MSCI ACWI ex-USA SMID Index, the MSCI EAFE Value Index,
the MSCI ACWI Index, the MSCI ACWI ex-USA Small Cap and the MSCI Emerging Markets Index are trademarks of MSCI
Inc. MSCI Inc. is the owner of all copyrights relating to these indices and is the source of the performance statistics of these
indices that are referred to in this report. MSCI makes no express or implied warranties or representations and shall have no
liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to
create indices or financial products. This document is not approved or produced by MSCI.
The Russell 2000® Index, the Russell 2000® Value Index, the Russell Midcap® Index, the Russell Midcap® Value Index, the
Russell 1000® Index, the Russell 1000® Value Index, the Russell Midcap® Growth Index, the Russell 1000® Growth Index and
the Russell 2000® Growth Index are trademarks of Russell Investment Group. Russell Investment Group is the source and owner
of the Russell Index data contained or reflected in this report and all trademarks and copyrights related thereto.
The S&P 500 Index is a product of S&P Dow Jones Indices LLC (S&P DJI) and/or its affiliates and has been licensed for use.
Copyright© 2021 S&P Dow Jones Indices LLC, a division of S&P Global, Inc. All rights reserved. Redistribution or reproduction
in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. S&P® is a registered trademark of
S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones). None of S&P DJI,
Dow Jones, their affiliates or third party licensors makes any representation or warranty, express or implied, as to the ability of
any index to accurately represent the asset class or market sector that it purports to represent and none shall have any liability for
any errors, omissions, or interruptions of any index or the data included therein.
The ICE BofA US High Yield Master II Total Return Index is owned by ICE Data Indices, LLC, used with permission. ICE Data
Indices, LLC permits use of the ICE BofA indices and related data on an "as is" basis, makes no warranties regarding same, does
not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofA indices or any data included in,
related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse,
or recommend Artisan Partners or any of its products or services.
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In this report, we present ratings from Morningstar, Inc., for the series of Artisan Funds. The Morningstar RatingTM for funds, or
"star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts,
exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and
open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar
Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more
emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category
receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10%
receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance
figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year
rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50%
10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star
rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest
impact because it is included in all three rating periods. The ratings which form the basis for the information reflected in this
report, and the fund categories in which they are rated, relating to each Fund's Investor Share Class are: Artisan Developing
World Fund—Diversified Emerging Markets; Artisan Focus Fund—Large Growth; Artisan Global Discovery—World Large
Stock; Artisan Global Equity Fund—World Large Stock; Artisan Global Opportunities Fund—World Large Stock; Artisan
Global Value Fund—World Large Stock; Artisan High Income Fund—High Yield Bond; Artisan International Fund—Foreign
Large Growth; Artisan International Small-Mid Fund—Foreign Small/Mid Growth; Artisan International Value Fund—Foreign
Large Blend; Artisan Mid Cap Fund—Mid-Cap Growth; Artisan Mid Cap Value Fund—Mid-Cap Value; Artisan Small Cap
Fund—Small Growth; Artisan Sustainable Emerging Markets Fund—Diversified Emerging Markets; and Artisan Value Fund—
Large Value. Morningstar ratings are initially given on a fund's three year track record and change monthly.
Throughout this report, we present historical information about our assets under management, including information about
changes in our assets under management due to client cash flows, investment returns and transfers between investment vehicles
(e.g., pooled investment vehicles and separate accounts). Client cash flows represent client fundings, terminations and client
initiated contributions and withdrawals (which could be in cash or in securities), but generally exclude Artisan Funds’ income
and capital gain distributions not reinvested. Investment returns and other represents realized gains and losses, the change in
unrealized gains and losses, net income and certain miscellaneous items, immaterial in the aggregate, which may include
payment of Artisan’s management fees or payment of custody expenses to the extent a client causes these fees to be paid from the
account we manage. The effect of translating into U.S. dollars the value of portfolio securities denominated in currencies other
than the U.S. dollar is included in investment returns and other. We also present information about our average assets under
management for certain periods.
We use our information management systems to track our assets under management, the components of investment returns, and
client cash flows, and we believe the information set forth in this report regarding our assets under management, investment
returns, and client cash flows is accurate in all material respects. We also present information regarding the amount of our assets
under management and client cash flows sourced through particular investment vehicles and distribution channels. The allocation
of assets under management and client cash flows sourced through particular distribution channels involves estimates because
precise information on the sourcing of assets invested in Artisan Funds or Artisan Global Funds through intermediaries is not
available on a complete or timely basis and involves the exercise of judgment because the same assets, in some cases, might
fairly be said to have been sourced from more than one distribution channel. We have presented the information on our assets
under management and client cash flows sourced by distribution channel in the way in which we prepare and use that information
in the management of our business. Non-financial data, including information about our investment performance, client cash
flows, and assets under management sourced by distribution channel are not subject to our internal controls over financial
reporting.
None of the information in this report constitutes either an offer or a solicitation to buy or sell any fund securities, nor is
any such information a recommendation for any fund security or investment service.
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Table of Contents
PART I
Item 1. Business
Overview
Founded in 1994, Artisan is an investment management firm focused on providing high valued added, active investment
strategies to sophisticated clients globally. Our autonomous investment teams manage a broad range of U.S., non-U.S. and global
investment strategies that are diversified by asset class, market cap and investment style.
Since our founding, we have maintained a business model that is designed to maximize our ability to produce attractive
investment results for our clients, and we believe this model has contributed to our success in doing so. We focus on attracting,
retaining and developing talented investment professionals by creating an environment in which each investment team is
provided ample resources and support, transparent and direct financial incentives, and a high degree of investment autonomy.
Each of our investment teams is led by one or more experienced portfolio managers and applies its own unique investment
philosophy and process. We believe this autonomous investment team structure promotes independent analysis and accountability
among our investment professionals, which we believe promotes superior investment results.
Each of our investment teams manages one or more investment strategies, each of which is designed to have a clearly articulated,
consistent and replicable investment process that is well-understood by clients and managed to achieve long-term performance.
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 launch a new strategy when we believe it has the potential to achieve superior investment performance in an area that we
believe will have sustained client demand at attractive fee rates over the long term. We strive to maintain the integrity of the
investment process followed in each of our strategies by rigorous adherence to the investment parameters we have communicated
to our clients. We also carefully monitor our investment capacity in each investment 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. In order to better achieve our long-term goals, we
are willing to close a strategy to new investors or otherwise take action to slow or restrict its growth, even though our short-term
results may be impacted.
In addition to our investment teams, we have a management team that is focused on our business objectives of achieving
profitable growth, expanding our investment capabilities, diversifying the sources of our assets under management, delivering
superior client service, developing our investment teams into investment franchises with multiple decision-makers and
investment strategies, and maintaining the firm’s fiduciary mindset and culture of compliance. Our management team supports
our investment management capabilities and manages our operational infrastructure, which allows our investment professionals
to focus primarily on making investment decisions and generating returns for our clients.
We offer our investment management capabilities primarily to institutions and through intermediaries that operate with
institutional-like decision-making processes by means of separate accounts and pooled vehicles. We access traditional
institutional clients primarily through relationships with investment consultants. We access other institutional-like investors
primarily through consultants, alliances with major defined contribution/401(k) platforms and relationships with financial
advisors and broker-dealers.
We derive essentially all of our revenues from investment management fees, which primarily are based on a specified percentage
of clients’ average assets under management. A small but growing percentage of our revenues is derived from performance fees,
which primarily are based on the performance of clients’ accounts relative to a benchmark. These investment advisory fees are
determined by the investment advisory and sub-advisory agreements that are terminable by clients upon short notice or no notice.
Investment Teams
We offer clients a broad range of actively managed investment strategies diversified by asset class, market cap and investment
style. Each strategy is managed by one of the investment teams described below. The table below sets forth total assets under
management and certain performance information for our investment teams and strategies as of December 31, 2020.
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Table of Contents
Investment Team and Strategy
AUM as of
December 31, 2020
Composite
Inception Date
Value-Added
Since Inception Date (1)
as of December 31, 2020
Fund Rating(2) as
of December 31, 2020
Growth Team
Global Opportunities
Global Discovery
US Mid-Cap Growth
US Small-Cap Growth
Global Equity Team
Global Equity
Non-US Growth
Non-US Small-Mid Growth
US Value Team
Value Equity
US Mid-Cap Value
International Value Team
International Value
International Small Cap Value (3)
Global Value Team
Global Value
Select Equity
(in millions)
26,487
2,148
17,504
6,546
2,829
21,684
7,543
3,479
3,670
24,107
16
22,400
17
February 1, 2007
September 1, 2017
April 1, 1997
April 1, 1995
April 1, 2010
January 1, 1996
January 1, 2019
July 1, 2005
April 1, 1999
July 1, 2002
October 1, 2020
July 1, 2007
March 1, 2020
Sustainable Emerging Markets Team
Sustainable Emerging Markets
679
July 1, 2006
6,241
97
April 1, 2014
July 1, 2017
Credit Team
High Income
Credit Opportunities (3)
Developing World Team
Developing World
Antero Peak Group (4)
Antero Peak
Antero Peak Hedge (3)
690
1,551
616
414
545
528
1,975
134
282
544
182
285
-646
97
270
759
«««««
«««««
««««
«««««
«««««
««
«««
«««
«««
««««
Not Applicable
«««
Not yet rated
«««
«««««
Not Applicable
8,853
July 1, 2015
1,482
«««««
2,573
903
May 1, 2017
November 1, 2017
1,348
551
««««
Not Applicable
157,776
Total AUM as of December 31, 2020
(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 the benchmark most commonly used by our separate account clients to compare the performance of the relevant strategy. The
benchmark most commonly used by clients in the US Mid-Cap Growth, US Small-Cap Growth, Value Equity and US Mid-Cap Value strategies
is the style benchmark and for all other strategies is the broad market benchmark. Reporting on this metric prior to September 30, 2020,
compared all composite performance to the broad benchmark. Value-added for periods less than one year is not annualized. The Artisan High
Income and Credit Opportunities strategies hold loans and other security types that are not be included in the ICE BofA U.S. High Yield Master
II Total Return Index. At times, this causes material differences in relative performance. 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.
(2) The Overall Morningstar RatingTM applicable to the Artisan Fund managed to each investment strategy is derived from a weighted average
of the performance figures associated with its three-year, five-year, and ten-year (if applicable) Morningstar Ratings metrics.
(3) Prior to this report, assets under management in the International Small Cap Value, Credit Opportunities and Antero Peak Hedge strategies
were aggregated and reported as “other assets under management” and performance information was intentionally omitted.
(4) Effective October 1, 2020, the Thematic investment team was renamed Antero Peak Group. The team's investment strategies and investment
products were also renamed during 2020.
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Table of Contents
Growth Team
Our Growth team, which was formed in 1997 and is based in Milwaukee, Wisconsin, manages four investment strategies: Global
Opportunities, Global Discovery, US Mid-Cap Growth and US Small-Cap Growth. James D. Hamel, Matthew H. Kamm, Craigh
A. Cepukenas, and Jason L. White are the portfolio managers of all four strategies. Mr. Hamel is the lead portfolio manager of
the Global Opportunities strategy; Mr. White is the lead portfolio manager of the Global Discovery strategy; Mr. Kamm is the
lead portfolio manager of the US Mid-Cap Growth strategy; and Mr. Cepukenas is the lead portfolio manager of the US Small-
Cap Growth strategy.
Investment Strategy (Composite Inception Date)
1 Year
3 Years
5 Years
10 Years
Inception
As of December 31, 2020
Global Opportunities (February 1, 2007)
Average Annual Gross Returns
MSCI ACWI® Index
Global Discovery (September 1, 2017)
Average Annual Gross Returns
MSCI ACWI® Index
US Mid-Cap Growth (April 1, 1997)
Average Annual Gross Returns
Russell Midcap® Index
Russell Midcap® Growth Index
US Small-Cap Growth (April 1, 1995)
Average Annual Gross Returns
Russell 2000® Index
Russell 2000® Growth Index
Global Equity Team
41.48 % 21.28 % 20.09 % 16.03 % 13.14 %
16.25 %
10.05 %
12.24 %
9.12 %
6.24 %
47.94 % 27.90 %
16.25 %
10.05 %
— %
— %
— % 26.98 %
— %
11.47 %
59.81 % 29.49 % 21.56 % 17.22 % 16.79 %
17.10 %
11.60 %
13.38 %
12.40 %
10.67 %
35.59 %
20.48 %
18.64 %
15.03 %
10.63 %
62.99 % 33.75 % 26.83 % 20.12 % 13.04 %
19.96 %
10.24 %
13.24 %
11.19 %
34.63 %
16.18 %
16.34 %
13.47 %
9.64 %
8.90 %
Our Global Equity team was formed in 1996 and is primarily based in San Francisco and New York. The Global Equity team
currently manages three investment strategies: Global Equity, Non-US Growth, and Non-US Small-Mid Growth.
Mark L. Yockey serves as portfolio manager of the Global Equity and Non-US Growth strategies. Charles-Henri Hamker and
Andrew J. Euretig are also portfolio managers of the Global Equity strategy and associate portfolio managers of the Non-US
Growth strategy. Rezo Kanovich serves as the sole portfolio manager of the Non-US Small-Mid Growth strategy.
During the fourth quarter of 2020, Tiffany Hsiao and Yuanyuan Ji joined Artisan’s Global Equity team. Ms. Hsiao and Ms. Ji are
building a group and designing an investment strategy that will invest in post-venture firms in greater China. We currently expect
the new investment strategy will launch during the first half of 2021.
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Table of Contents
Investment Strategy (Composite Inception Date)
1 Year
3 Years
5 Years
10 Years
Inception
As of December 31, 2020
Global Equity (April 1, 2010)
Average Annual Gross Returns
MSCI ACWI® Index
Non-US Growth (January 1, 1996)
Average Annual Gross Returns
MSCI EAFE® Index
30.10 % 19.20 % 17.57 % 14.57 % 14.80 %
16.25 %
10.05 %
12.24 %
9.12 %
9.35 %
8.61 %
7.82 %
8.59 %
4.28 %
9.11 %
7.44 %
8.62 % 10.30 %
5.50 %
5.02 %
Non-US Small-Mid Growth (January 1, 2019)
Average Annual Gross Returns
MSCI All Country World Index Ex USA Small Mid Cap (Net)
35.36 %
12.01 %
— %
— %
— %
— %
— % 36.80 %
— %
17.05 %
US Value Team
Our US Value team, which was formed in 1997 and is based in Atlanta and Chicago, manages two investment strategies: Value
Equity and US Mid-Cap Value. Thomas A. Reynolds, Daniel L. Kane, and Craig Inman are the portfolio managers for both
strategies. James C. Kieffer, who has been with the US Value team since its founding, relinquished portfolio management
responsibilities effective February 1, 2021. Mr. Kieffer remains a managing director of Artisan Partners and an active member of
the US Value team.
Investment Strategy (Composite Inception Date)
Value Equity (July 1, 2005)
Average Annual Gross Returns
Russell 1000® Index
Russell 1000® Value Index
US Mid-Cap Value (April 1, 1999)
Average Annual Gross Returns
Russell Midcap® Index
Russell Midcap® Value Index
International Value Team
As of December 31, 2020
1 Year
3 Years
5 Years
10 Years
Inception
10.86 %
7.90 % 13.85 % 11.15 %
8.78 %
20.96 %
14.80 %
15.58 %
14.00 %
10.14 %
2.80 %
6.06 %
9.73 %
10.49 %
7.44 %
6.90 %
5.27 % 10.43 %
9.88 % 12.34 %
17.10 %
11.60 %
13.38 %
12.40 %
4.96 %
5.36 %
9.72 %
10.48 %
9.90 %
9.52 %
Our International Value team, led by N. David Samra, is based in San Francisco. N. David Samra serves as lead portfolio
manager of the International Value strategy and Ian P. McGonigle and Joseph Vari serve as co-portfolio managers.
In September 2020, Beini Zhou and Anand Vasagiri joined Artisan’s International Value team and, together with Mr. Samra,
designed and launched the International Small Cap Value strategy. Mr. Zhou and Mr. Vasagiri serve as co-portfolio managers of
the International Small Cap Value strategy.
Investment Strategy (Composite Inception Date)
International Value (July 1, 2002)
Average Annual Gross Returns
MSCI EAFE® Index
International Small Cap Value (October 1, 2020)1
Average Annual Gross Returns
MSCI All Country World Index Ex USA Small Cap (Net)
1 Periods less than one year are not annualized.
As of December 31, 2020
1 Year
3 Years
5 Years
10 Years
Inception
9.76 %
7.82 %
5.56 %
4.28 %
9.42 %
7.44 %
9.26 % 11.78 %
5.50 %
6.34 %
— %
— %
— %
— %
— %
— %
— % 23.62 %
— % 21.80 %
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Global Value Team
Our Global Value team, led by Daniel J. O’Keefe, is primarily based in Chicago. Mr. O’Keefe serves as lead portfolio manager
and Michael J. McKinnon serves as portfolio manager of the team’s Global Value and Select Equity strategies. In January 2021,
Justin V. Bandy, who previously served as a co-portfolio manager on the team, stepped down from portfolio management and
provided notice of his intent to retire in June 2021.
Investment Strategy (Composite Inception Date)
Global Value (July 1, 2007)
Average Annual Gross Returns
MSCI ACWI® Index
As of December 31, 2020
1 Year
3 Years
5 Years
10 Years
Inception
7.74 %
16.25 %
5.93 % 10.31 % 10.98 %
9.12 %
12.24 %
10.05 %
8.62 %
5.77 %
Select Equity (March 1, 2020)
Average Annual Gross Returns
S&P 500 Index
Sustainable Emerging Markets Team
— %
— %
— %
— %
— %
— %
— % 22.61 %
29.07 %
— %
Our Sustainable Emerging Markets team, which was formed in 2006 and is based in New York, manages a single investment
strategy. Maria Negrete-Gruson is the portfolio manager for the Sustainable Emerging Markets strategy.
Investment Strategy (Composite Inception Date)
1 Year
3 Years
5 Years
10 Years
Inception
As of December 31, 2020
Sustainable Emerging Markets (July 1, 2006)
Average Annual Gross Returns
MSCI Emerging Markets Index
Credit Team
23.06 %
18.31 %
8.81 % 16.29 %
6.17 %
12.79 %
4.41 %
3.63 %
7.28 %
6.31 %
Our Credit team, which was formed in 2014 and is based in Denver, manages two investment strategies: High Income and Credit
Opportunities. Bryan L. Krug is the portfolio manager for both strategies.
Investment Strategy (Composite Inception Date)
1 Year
3 Years
5 Years
10 Years
Inception
High Income (April 1, 2014)
Average Annual Gross Returns
11.00 %
8.24 % 10.03 %
ICE BofA U.S. High Yield Master II Total Return Index
6.17 %
5.88 %
8.43 %
— %
— %
8.05 %
5.35 %
As of December 31, 2020
Credit Opportunities (July 1, 2017)
Average Annual Gross Returns
23.71 % 12.98 %
ICE BofA U.S. High Yield Master II Total Return Index
6.17 %
5.88 %
---
---
---
---
13.33 %
5.74 %
Developing World Team
Our Developing World team, which was formed in 2015 and is based in San Francisco, manages a single investment strategy.
Lewis S. Kaufman is the portfolio manager for the Developing World strategy.
Investment Strategy (Composite Inception Date)
1 Year
3 Years
5 Years
10 Years
Inception
As of December 31, 2020
Developing World (July 1, 2015)
Average Annual Gross Returns
MSCI Emerging Markets Index
83.46 % 30.98 % 28.29 %
— % 22.59 %
18.31 %
6.17 %
12.79 %
— %
7.77 %
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Antero Peak Group
Antero Peak Group (formerly named the Artisan Thematic team) was formed in 2016 and is based in Denver and New York. The
Antero Peak Group manages two investment strategies: Antero Peak and Antero Peak Hedge (formerly, Thematic and Thematic
Long/Short strategies, respectively). Chris Smith is the portfolio manager for both strategies.
Investment Strategy (Composite Inception Date)
1 Year
3 Years
5 Years
10 Years
Inception
As of December 31, 2020
Antero Peak (May 1, 2017)
Average Annual Gross Returns
S&P 500 Index
Antero Peak Hedge (November 1, 2017)
Average Annual Gross Returns
S&P 500 Index
30.81 % 25.05 %
18.40 %
14.17 %
— %
— %
— % 28.88 %
— %
15.40 %
22.97 % 20.32 %
18.40 %
14.17 %
— %
— %
— % 20.37 %
— %
14.86 %
Distribution, Investment Products and Client Relationships
The goal of our marketing, distribution and client service efforts is to grow and maintain a client base that is diversified by
investment strategy, investment vehicle (for example, across mutual funds and separate accounts), distribution channel and
geographic region. We focus our distribution and marketing efforts on sophisticated investors and asset allocators, including
institutions and intermediaries that operate with institutional-like, centralized decision-making processes and longer-term
investment horizons. We have designed our distribution strategies and structured our distribution teams to use knowledgeable,
seasoned marketing and client service professionals in a way intended to limit the time our investment professionals spend on
marketing and client service activities. We believe that minimizing other demands allows our portfolio managers and other
investment professionals to focus their energies and attention on the investment decision-making process, which we believe
enhances the opportunity to achieve superior investment returns. Our distribution efforts are centrally managed by our head of
Global Distribution, who oversees and coordinates the efforts of our marketing and client service professionals.
Institutional Channel
Our institutional distribution channel includes institutional clients, such as U.S.-registered mutual funds, non-U.S. funds and
collective investment trusts we sub-advise; state and local governments; employee benefit plans including Taft-Hartley plans;
foundations; and endowments. Our institutional channel also includes assets under management sourced from defined
contribution plans. We offer our investment products to institutional clients directly and by marketing our services to the
investment consultants and advisors that advise them. As of December 31, 2020, approximately 43% of our assets under
management were attributed to clients represented by investment consultants.
As of December 31, 2020, 65% of our assets under management were sourced through our institutional channel.
Intermediary Channel
We maintain relationships with a number of major brokerage firms and larger private banks and trust companies at which the
process for identifying which funds to offer has been centralized to a relatively limited number of key decision-makers that
exhibit institutional-like decision-making behavior. We also maintain relationships with a number of financial advisory firms and
broker-dealer advisors that offer our investment products to their clients. These advisors range from relatively small firms to large
organizations.
As of December 31, 2020, approximately 31% of our assets under management were sourced through our intermediary channel.
Retail Channel
We primarily access retail investors indirectly through mutual fund supermarkets through which investors have the ability to
purchase and redeem fund shares. U.S. investors can also invest directly in Artisan Funds. Our subsidiary, Artisan Partners
Distributors LLC, a registered broker-dealer, distributes shares of Artisan Funds. Publicity and ratings and rankings from
Morningstar, Lipper and others are important in building the Artisan Partners brand, which is important in attracting retail
investors. As a result, we publicize the ratings and rankings received by Artisan Funds and work to ensure that potential retail
investors have appropriate information to evaluate a potential investment in Artisan Funds. We do not generally use direct
marketing campaigns as we believe that their cost outweighs their potential benefits.
As of December 31, 2020, approximately 4% of our assets under management were sourced from investors we categorize as
retail investors.
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Access Through a Range of Investment Vehicles
Our clients access our investment strategies through a range of investment vehicles, including separate accounts and pooled
vehicles. As of December 31, 2020, approximately 53% of our assets under management were in separate accounts, and Artisan
Funds and Artisan Global Funds accounted for approximately 47% of our total assets under management. Separate accounts
include Artisan Private Funds, which comprise less than 1% of our assets under management in the aggregate.
Separate Accounts
We manage separate account assets within most of our investment strategies. As of December 31, 2020, we managed 228
separate accounts spanning 138 client relationships and our largest separate account relationship represented approximately 7%
of our assets under management. Our separate account clients include both institutional and intermediary channel relationships,
such as pension and profit sharing plans, corporations, trusts, endowments, foundations, charitable organizations, high net worth
individuals, governmental entities, insurance companies, commingled investment vehicles, investment advisers and other
financial institutions, trustees of collective investment trusts and investment companies and similar pooled investment vehicles.
We also offer access to a number of our strategies through Artisan-branded collective investment trusts and Artisan Private
Funds. We generally require a minimum relationship of $20 million to $100 million, depending on the strategy, to manage a
separate account. The fees we charge on separate accounts vary by client, investment strategy and the size of the account. Fees
are accrued monthly, but generally are paid quarterly in arrears.
In our reporting materials, unless otherwise stated, our separate account AUM includes assets we manage in traditional separate
accounts, as well as assets we manage in Artisan-branded collective investment trusts and Artisan Private Funds.
Artisan Funds and Artisan Global Funds
U.S. investors that do not meet our minimum account size for a separate account, or who otherwise prefer to invest through a
mutual fund, can invest in our strategies through Artisan Funds. We serve as the investment adviser to each series of Artisan
Funds, SEC-registered mutual funds that offer no-load, no 12b-1 share classes designed to meet the needs of a range of investors.
Each series of Artisan Funds corresponds to an investment strategy we offer to clients. We earn management fees, which are
based on the average daily net assets of each Artisan Fund and are paid monthly, for serving as investment adviser to these funds.
As of December 31, 2020, Artisan Funds represented approximately 44% of our assets under management.
We also serve as investment manager of Artisan Global Funds, a family of Ireland-based UCITS funds. Artisan Global Funds
provides non-U.S. investors with access to a number of our investment strategies in a pooled vehicle structure. We earn
investment management fees, which are based on the average daily net assets of each sub-fund and are generally paid monthly,
for serving as investment adviser to these funds. As of December 31, 2020, Artisan Global Funds represented approximately 3%
of our assets under management.
Regulatory Environment and Compliance
Our business is subject to extensive regulation in the United States at the federal level and, to a lesser extent, the state level, as
well as by self-regulatory organizations and regulators located outside the United States. Under these laws and regulations,
agencies that regulate investment advisers, investment funds and other entities have broad administrative powers, including the
power to limit, restrict or prohibit the regulated entity from conducting business in the event that it fails to comply with such laws
and regulations. Possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging
in certain lines of business for specified periods of time, revocation of investment adviser and other registrations, censures and
fines. A regulatory proceeding, regardless of whether it results in a sanction, can require substantial expenditures and can have an
adverse effect on our reputation or business.
We are subject to various domestic, international and extra-territorial laws and regulations that are applicable to our business,
including securities, compliance, corporate governance, disclosure, privacy and data protection, information security, anti-bribery
and anti-corruption, anti-money laundering and anti-terrorist financing laws and regulations. These laws and regulations continue
to change and evolve over time. As a result, there is uncertainty associated with the regulatory environments in which we operate.
The rules and regulations applicable to investment management organizations are very detailed and technical. Accordingly, the
discussion below is general in nature, does not purport to be complete and is current only as of the date of this report.
U.S. Regulation
As a publicly traded company, we are subject to U.S. federal securities laws, state securities and corporate laws, and the rules and
regulations of U.S. regulatory and self-regulatory organizations. In particular, we are subject to the Securities Act of 1933, the
Securities Exchange Act of 1934, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), the
Sarbanes-Oxley Act of 2002 and, because we are listed on the New York Stock Exchange, the NYSE listed company rules.
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Artisan Partners Limited Partnership and Artisan Partners UK LLP are registered with the SEC as investment advisers under the
Investment Advisers Act of 1940, or Advisers Act, and Artisan Funds and several of the investment companies we sub-advise are
registered under the Investment Company Act of 1940, or 1940 Act. The Advisers Act and the 1940 Act, together with other
applicable securities laws and the SEC’s regulations and interpretations thereunder, impose substantive and material restrictions
and requirements on the operations of investment advisers and mutual funds. The SEC is authorized to institute proceedings and
impose sanctions for violations, ranging from fines and censures to, in the case of investment advisers, the termination of an
adviser’s registration.
Artisan Partners Distributors LLC, our SEC-registered limited purpose broker-dealer subsidiary, is subject to the Securities
Exchange Act of 1934, the SEC’s rules promulgated thereunder and the rules and regulations of the Financial Industry
Regulatory Authority, which generally relate to sales practices, registration of personnel, compliance and supervision, and
compensation and disclosure. FINRA has the authority to conduct periodic examinations of member broker-dealers, and may
initiate administrative proceedings. Artisan Partners Distributors LLC is also subject to the SEC’s Uniform Net Capital Rule and
the National Securities Clearing Corporation’s excess net capital requirement, which require that at least a minimum part of a
registered broker-dealer’s assets be kept in relatively liquid form.
Artisan Partners Limited Partnership is a fiduciary under the Employee Retirement Income Security Act of 1974, as amended,
with respect to assets that we manage for benefit plan clients subject to ERISA. ERISA imposes duties on persons who are
ERISA fiduciaries, and prohibits certain transactions between related parties to a retirement plan. The U.S. Department of Labor
administers ERISA and regulates plan fiduciaries, including investment advisers who service retirement plan clients.
The legislative and regulatory environment in the U.S. is subject to continual change. New legal or regulatory requirements may
add further complexity to our business and operations, and addressing such new requirements may require substantial
expenditures of time and capital. Certain regulatory reforms in the U.S. that have, or may in the future, impact our business
include the following items:
•
•
In recent years there has been an increased focus on the protection of customer privacy and data, and the need to secure
sensitive information. We are currently subject to the California Consumer Privacy Act, which took effect in January
2020, and provides for enhanced consumer protections for California residents. We anticipate that additional
jurisdictions will adopt similar laws in the future with which we will be required to comply.
The SEC has, in recent years, proposed and/or adopted several new rules impacting registered investment advisers (e.g.
amended advertising rule, proxy voting guidance) and registered investment companies (e.g. new or amended rules on
mutual fund use of derivatives, liquidity risk management, reporting modernization, valuation). These rules impact us
and the mutual funds we manage to varying degrees.
Non-U.S. Regulation
In addition to the extensive regulation we are subject to in the United States, a number of our subsidiaries and certain of our non-
U.S. operations are subject to regulation in non-U.S. jurisdictions. Some laws in non-U.S. jurisdictions are also extra-territorial
and may apply to our business.
Artisan Partners UK LLP is authorized and regulated by the U.K. Financial Conduct Authority, which is responsible for the
conduct of business and supervision of financial firms in the United Kingdom. The FCA imposes a comprehensive system of
regulation that is primarily principles-based (compared to the primarily rules-based U.S. regulatory system).
Artisan Partners Europe is authorized and regulated by the Central Bank of Ireland, which regulates our Irish business activities.
Artisan Partners Europe has a branch office in Sweden, which is also regulated by the Central Bank of Ireland and is further
subject to the regulation of the Swedish financial supervisory authority.
Artisan Global Funds, a family of Ireland-domiciled UCITS funds, are regulated by the Central Bank of Ireland. Artisan Global
Funds are registered for sale in many countries around the world, both in the EU and beyond, and thus are also subject to the laws
of, and supervision by, the governmental authorities of those countries.
Artisan Partners Hong Kong Limited, our Hong Kong subsidiary, is in the process of applying for an asset management license
with the Hong Kong Securities and Futures Commission. Once the license is obtained, our subsidiary will be subject to the
Securities and Futures Ordinance as administered by the SFC, and its employees conducting any regulated activities will be
required to be licensed by the SFC and subject to the relevant rules, codes and guidelines.
Artisan Partners Australia Pty Ltd has historically operated in Australia on the basis of a “sufficient equivalence relief”
exemption from local licensing with the Australian Securities and Investments Commission. This relief is expiring for foreign
financial service providers like us and, as a result, Artisan Partners Australia Pty Ltd will need to apply for and obtain a securities
license by April 1, 2022.
Certain Artisan Private Funds are regulated as mutual funds under the Mutual Funds Law (as amended) of the Cayman Islands,
and the Cayman Islands Monetary Authority has supervisory and enforcement powers to ensure the funds’ compliance with the
Mutual Funds Law.
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Our business is also subject to the rules and regulations of the countries in which we conduct distribution or investment
management activities. As of December 31, 2020, we had over 200 relationships with clients located outside of the United States,
which relationships may be subject to laws and regulations of the jurisdictions in which the client is domiciled. Separately, 42%
of our assets under management were invested in securities denominated in currencies other than the U.S. dollar as of December
31, 2020. Our investments in these non-U.S. securities may subject us to certain laws and regulations of the jurisdictions in which
the issuer resides. We may also be subject to U.S. laws and regulations regarding our distribution or investment management
activities in non-U.S. markets, including in jurisdictions that may be considered higher risk.
Further expansion of our business into new international jurisdictions and regulatory reforms in jurisdictions in which we
currently operate or invest, further complicate our compliance efforts. Addressing these legal and regulatory matters may require
substantial time and expense. Certain non-U.S. regulatory reforms or guidance regarding such regulations that have, or may in the
future, impact our business include the following items:
•
•
In October 2020, the Central Bank of Ireland issued further guidance regarding the fund company management
effectiveness framework (“CP86”). As a result of the guidance, fund management companies, including Artisan Global
Funds, are assessing their operational resources and governance arrangements and considering how best to increase
their level of resources to meet the new minimum requirements. Increasing Artisan Global Funds’ resources in Ireland
will require time and will result in additional expense to the Company.
The EU’s Markets in Financial Instruments Directive II regulates the use of soft dollars to pay for research and other
soft dollar services. MiFID II’s soft dollar rules do not directly apply to our business because we currently conduct our
investment management activities in the United States. However, in response to MiFID II and the industry-wide
changes prompted by it, we have experienced requests from clients to bear research expenses that are currently paid for
using soft dollars. In response to such requests or as a result of changes in our operations, we may eventually bear a
significant portion or all of the costs of research that are currently paid for using soft dollars, which would increase our
operating expenses materially.
We may become subject to additional regulatory demands in the future to the extent we expand our business in existing and new
jurisdictions. See “Risk Factors—Risks Related to our Industry—We are subject to extensive, complex and sometimes
overlapping rules, regulations and legal interpretations.” and “Risk Factors—Risks Related to our Industry—The regulatory
environment in which we operate is subject to continual change, and regulatory developments may adversely affect our
business.”
Competition
In order to grow our business, we must be able to compete effectively for assets under management. We compete to attract clients
and investors principally on the basis of:
•
•
•
•
•
the performance of our investment strategies
the continuity of our investment and distribution professionals
the quality of the service we provide to our clients
the range of investment strategies and vehicles we offer
our brand recognition and reputation within the investing community
We compete in all aspects of our business with a large number of investment management firms, commercial banks, broker-
dealers, insurance companies and other financial institutions. For additional information concerning the competitive risks that we
face, see “Risks Factors—Risks Related to Our Industry—The investment management industry is intensely competitive.”
Human Capital Resources
Since Artisan Partners was founded in 1994, we have recognized that our success as an investment management firm is
predicated on having talented associates throughout the organization in every role, at every level. We understand that attracting,
developing and retaining talented professionals is an essential component of our business strategy. As a result, we are committed
to providing an environment that is attractive to our current and prospective associates and that allows our talented associates to
be successful throughout the course of their careers.
We commit significant energy to the recruitment of our associates as they are critical to ensuring the long-term success of our
firm. We strive to recruit and hire outstanding associates who thrive in broad roles and want the freedom to grow their talents and
careers. We are also committed to seeking professionals from different backgrounds, experiences and locations to foster creative
thinking and differentiated perspectives that remain a pillar of the firm’s culture. We have built relationships with a variety of
recruitment partners and community organizations to broaden our candidate pools and increase our access to diverse talent.
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We actively support associate development, both formally and informally, and encourage advancement from within the firm. Our
tuition reimbursement program is available to associates who are pursuing applicable undergraduate and graduate degrees or
certifications or licenses relevant to the business. We also actively support a number of associate-led groups including the
Diversity and Inclusion Committee, the Training, Education and Development (T.E.D.) program, the Mentoring Program and the
Women’s Networking Initiative. These programs provide our associates with a variety of educational and cross-functional
knowledge sharing opportunities and professional development. Our support of these and other associate-led programs are part of
our ongoing commitment to providing an environment that allows our talented associates to thrive.
In terms of retention of our associates, we believe it is critical that we continue to foster an engaging environment and provide
attractive compensation and benefits programs. We regularly review compensation paid to associates to ensure it is competitive
and fair for the role, experience, location and individual contribution. We provide equity or equity-linked incentives to all of our
associates in order to align their economic interests with those of our clients and stockholders. We encourage our associates to
save for retirement. In the U.S., we match 100% of associate 401(k) contributions dollar for dollar (fully vested), up to the IRS
limit. We also maintain competitive retirement programs or benefits for all non-U.S. associates. In addition, we offer a
comprehensive benefits program that is available to all associates regardless of title, role, or responsibility. As of December 31,
2020, we employed 453 employees.
Our Structure and Reorganization
Holding Company Structure
We are a holding company and our assets principally consist of our ownership of partnership units of Artisan Partners Holdings,
deferred tax assets and cash. As the sole general partner of Artisan Partners Holdings, we operate and control all of its business
and affairs, subject to certain voting rights of its limited partners. We conduct all of our business activities through operating
subsidiaries of Artisan Partners Holdings. Net profits and net losses are allocated based on the ownership of partnership units of
Artisan Partners Holdings. As of December 31, 2020, we owned approximately 80% of Artisan Partners Holdings, and the other
20% was owned by the limited partners of Artisan Partners Holdings.
IPO Reorganization
In March 2013, we completed our IPO. In connection with the IPO, we and Artisan Partners Holdings completed a series of
reorganization transactions, which we refer to as the IPO Reorganization, in order to reorganize our capital structures in
preparation for the IPO. The IPO Reorganization included, among other changes, the following:
•
•
•
•
Our appointment as the sole general partner of Artisan Partners Holdings.
The modification of our capital structure into three classes of common stock and a series of convertible preferred stock.
We issued shares of our Class B common stock, Class C common stock and convertible preferred stock to pre-IPO
partners of Artisan Partners Holdings. Each share of Class B common stock corresponds to a Class B common unit of
Artisan Partners Holdings. Each share of Class C common stock corresponds to either a Class A, Class D or Class E
common unit of Artisan Partners Holdings. Subject to certain restrictions, each common unit of Artisan Partners
Holdings (together with the corresponding share of Class B or Class C common stock) is exchangeable for a share of
our Class A common stock.
A corporation (“H&F Corp”) merged with and into Artisan Partners Asset Management, which we refer to in this
document as the H&F Corp Merger. As consideration for the merger, the shareholder of H&F Corp received shares of
our convertible preferred stock, contingent value rights, or CVRs, issued by Artisan Partners Asset Management and
the right to receive an amount of cash. In November 2013, the CVRs issued by Artisan Partners Asset Management
were terminated with no amounts paid or payable thereunder. In June 2014, the shareholder of H&F Corp converted all
of its then-remaining shares of convertible preferred stock into shares of Class A common stock and sold those shares.
We no longer have any outstanding shares of convertible preferred stock, and Artisan Partners Holdings no longer has
any outstanding preferred units.
The voting and certain other rights of each class of limited partnership units of Artisan Partners Holdings were
modified. In addition, Artisan Partners Holdings separately issued CVRs to the holders of the preferred units. In
November 2013, the CVRs issued by Artisan Partners Holdings were terminated with no amounts paid or payable
thereunder.
• We entered into two tax receivable agreements (“TRAs”), one with a private equity fund (the “Pre-H&F Corp Merger
Shareholder”) and the other with each limited partner of Artisan Partners Holdings. Pursuant to the first TRA, APAM
pays to the assignees of the Pre-H&F Corp Merger Shareholder a portion of certain tax benefits APAM realizes as a
result of the H&F Corp Merger. Pursuant to the second TRA, APAM pays to current or former limited partners of
Artisan Partners Holdings (or their assignees) a portion of certain tax benefits APAM realizes as a result of the
purchase or exchange of their limited partnership units of Artisan Partners Holdings.
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The diagram below depicts our organizational structure as of December 31, 2020:
(1)
Our employees to whom we have granted equity have entered into a stockholders agreement with respect to all shares of
our common stock they have acquired from us and any shares they may acquire from us in the future, pursuant to which
they granted an irrevocable voting proxy to a stockholders committee currently consisting of Eric R. Colson (Chairman
and Chief Executive Officer), Charles J. Daley, Jr. (Chief Financial Officer) and Gregory K. Ramirez (Executive Vice
President). The stockholders committee, by vote of a majority of its members, will determine the vote of all of the shares
subject to the stockholders agreement. In addition to owning all of the shares of our Class B common stock, our
employee-partners, together with our other employees, owned unvested restricted shares of our Class A common stock
representing approximately 8% of our outstanding Class A common stock as of December 31, 2020.
(2)
Each class of common units generally entitles its holders to the same economic and voting rights in Artisan Partners
Holdings as each other class of common units, except that the Class E common units have no voting rights except as
required by law.
Available Information
Our website address is www.artisanpartners.com. We make available free of charge through our website all of the materials we
file or furnish with the SEC as soon as reasonably practicable after we electronically file or furnish such materials with the SEC.
Information contained on our website is not part of, nor is it incorporated by reference into, this Form 10-K. The company was
incorporated in Wisconsin on March 21, 2011 and converted to a Delaware corporation on October 29, 2012.
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Item 1A. Risk Factors
An investment in our Class A common stock involves substantial risks and uncertainties. You should carefully consider each of
the risks below, together with all of the other information contained in this document, before deciding to invest in our Class A
common stock. If any of the following risks occurs, our business, financial condition or results of operations could be negatively
affected, the market price of your shares could decline and you could lose all or part of your investment.
Risks Related to our Business
The loss of key investment professionals or senior members of our distribution and management teams could have a material
adverse effect on our business.
Our success depends on our ability to retain the portfolio managers who manage our investment strategies and have been
primarily responsible for the historically strong investment performance we have achieved. Because of the long tenure and
stability of many of our portfolio managers, our clients generally attribute the investment performance we have achieved to these
individuals. The departure of a portfolio manager, even for strategies with multiple portfolio managers, could cause clients to
withdraw funds from the strategy which would reduce our assets under management, investment advisory fees and our net
income, and these reductions could be material if our assets under management in that strategy and the related revenues were
material. The departure of a portfolio manager or other senior members of investment teams also could cause consultants and
intermediaries to stop recommending a strategy, and clients to refrain from allocating additional funds to a strategy or delay such
additional funds until a sufficient new track record has been established.
In addition to our key investment professionals, we also depend on the contributions of our senior management team led by Eric
R. Colson and Jason A. Gottlieb, and our senior marketing and client service personnel who have direct contact with our
institutional clients, consultants, intermediaries and other key individuals within each of our distribution channels. The loss of
any of these key professionals could limit our ability to successfully execute our business strategy or adversely affect our ability
to retain existing and attract new client assets and related revenues.
Any of our key professionals may resign at any time, join our competitors or form a competing company. Although many of our
portfolio managers and each of our named executive officers are subject to post-employment non-compete obligations, these non-
competition provisions may not be enforceable or may not be enforceable to their full extent. In addition, we may agree to waive
non-competition provisions or other restrictive covenants applicable to former key professionals in light of the circumstances
surrounding their relationship with us. We do not carry “key man” insurance that would provide us with proceeds in the event of
the death or disability of any of our key professionals.
Changes to our investment environment or compensation structures could cause instability within our investment teams and/
or have an adverse effect on the performance of our investment strategies, our financial results and our ability to grow.
Attracting, developing and retaining talented investment professionals is an essential component of our business strategy. To do
so, it is critical that we continue to foster an environment and provide compensation that is attractive for existing and prospective
investment professionals. If we are unsuccessful in maintaining such an environment or compensation levels or structures for any
reason, our existing investment professionals may leave our firm or fail to produce their best work on a consistent, long-term
basis and/or we may be unsuccessful in attracting talented new investment professionals, any of which could negatively impact
the performance of our investment strategies, our financial results and our ability to grow.
Over our firm’s history we have sought to successfully design and implement compensation structures that align our investment
professionals’ economic interests with those of our clients, investors, partners, and stockholders. We believe our historical
structures have been important to our long-term growth and that objective, predictable, and transparent structures work best to
incentivize investment professionals to perform over the long-term.
With respect to asset-based revenues, we use a single revenue share arrangement across all of our investment teams. Under the
revenue share, each team shares a bonus pool consisting of 25% of the asset-based revenues earned by the strategies managed by
the respective team. The revenue share directly links the majority of the investment teams’ cash compensation to long-term
growth in revenues, which, over the long-term, we believe is primarily linked to investment performance. The asset-based
revenue share is objective, predictable, transparent, and the same for all teams. In addition, each team is generally entitled to a
share of performance-based revenues earned by the strategies managed by the team. In the future, we expect that performance
fees will represent a higher proportion of our total revenues.
Over our firm’s history we have used a variety of equity incentives to align the long-term interests of our investment
professionals with the interests of clients, investors, partners and stockholders. Prior to our IPO in 2013, firm equity awards
consisted of partnership profits interests. Award recipients had the right to cash out their profits interests only after the end of
their careers, and 50% of the awards were subject to forfeiture if the recipient left Artisan without proper notice or was
terminated. Prior to the IPO Reorganization, the profits interests were converted into partnership units and, as part of the IPO
Reorganization, the 50% forfeiture feature was eliminated and employee-partners were given the right to liquidate a portion of
their partnership units during each year that they remained employed by Artisan.
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Since our IPO, the equity we’ve awarded to our investment professionals has consisted of APAM restricted share-based awards.
In general, equity awarded to our investment professionals consists of a mix of standard restricted shares which vest pro rata over
five years from the date of grant, and career or franchise shares that generally only vest on, or 18 months after, a qualified
retirement. Franchise shares are further subject to the Franchise Protection Clause, which applies to current or former portfolio
managers and may reduce the number of shares ultimately vesting to the extent that cumulative net client cash outflows from the
portfolio manager’s investment team during a 3-year measurement period beginning on the date of the portfolio manager’s
retirement notice exceeds a set threshold.
Beginning in 2021, under our new capital alignment program, our long-term incentive awards for investment professionals will
consist of both APAM restricted share-based awards and franchise capital awards. Under this program, we will continue to grant
restricted share-based awards, which we believe are an effective way to align the interests of our investment professionals with
those of our stockholders. In addition, in 2021 we will make our first award of franchise capital awards to investment
professionals. 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 the restricted share-based awards described above. 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.
As we have since our founding, we continue to assess the effectiveness of our compensation arrangements and equity structures
in aligning the long-term interests of our investment professionals, clients, investors, partners, and stockholders and whether
different types of, or modified, awards or structures would enhance incentives for long-term growth and succession planning.
The implementation of new or modified compensation arrangements or equity programs could cause instability within our
investment teams and/or impact our ability to attract and retain new investment talent. As with our historical and current
compensation arrangements and equity programs, any new arrangements or structures could materially impact our financial
performance and results (or expectations about our future financial performance and results), reduce the amount of cash available
for dividends and distributions to our stockholders and partners, or result in dilution to other stockholders.
Poor investment performance could lead to a loss of assets under management which could reduce our revenues and
negatively impact our financial condition.
The performance of our investment strategies is critical in retaining existing client assets and in attracting new client assets. Poor
performance may cause financial intermediaries, advisors and consultants to remove our investment products from recommended
lists and may result in lower Morningstar and Lipper ratings and rankings. Our existing clients may decide to withdraw funds
from, or refrain from allocating additional funds to, our investment strategies or to end their relationships with us entirely. In
addition, our ability to attract new client assets could also be adversely affected. A decrease in the value of our assets under
management as a result of poor performance would have an adverse impact on our revenues, as nearly all of the investment
management fees we earn are based on a specified percentage of clients' average assets under management. Poor performance
would also adversely affect the portion of our revenues attributed to performance-based fees.
Our investment strategies can perform poorly for a number of reasons, including general market conditions; investor sentiment
about market and economic conditions; investment styles and philosophies; investment decisions; the performance of the
companies in which our investment strategies invest and the currencies in which those investments are made; the liquidity of
securities or instruments in which our investment strategies invest; and our inability to identify sufficient appropriate investment
opportunities for existing and new client assets on a timely basis. In addition, while we seek to deliver long-term value to our
clients, volatility may lead to under-performance in the near term, which could adversely affect our results of operations.
In contrast, when our strategies experience strong results relative to the market, clients’ allocations to our strategies typically
increase relative to their other investments and we sometimes experience withdrawals as our clients rebalance their investments
to fit their asset allocation preferences despite our strong results.
While clients do not have legal recourse against us solely on the basis of poor investment results, if our investment strategies
perform poorly, we are more likely to become subject to litigation brought by dissatisfied clients. In addition, to the extent clients
are successful in claiming that their losses resulted from fraud, negligence, willful misconduct, breach of contract or similar
misconduct, these clients may have remedies against us, the mutual funds and other funds we advise and/or our investment
professionals under various U.S. and non-U.S. laws.
Difficult market conditions can adversely affect our business in many ways, including by reducing the value of our assets
under management and causing clients to withdraw funds, each of which could materially reduce our revenues and impact
our financial condition.
Difficult market conditions may cause investors in the mutual funds we advise to redeem their investments in those funds which
they can do at any time and without prior notice. Our separate account clients may also reduce the aggregate amount of assets
under management with us with minimal or no notice for any reason, including due to declining financial market conditions. In
addition, the prices of the securities held in the portfolios we manage may decline for any number of reasons beyond our control,
including, among others, a declining market, general economic downturn, political uncertainty, natural disasters, acts of
terrorism, or other unpredictable events such as a global pandemic.
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In connection with the severe market dislocations of 2008 and 2009, for example, the value of our assets under management
declined substantially due primarily to the sizable decline in stock prices worldwide. In the period from June 30, 2008 through
March 31, 2009, our assets under management decreased by approximately 43%, primarily as a result of general market
conditions. More recently, during the first quarter of 2020, AUM levels fell from $125.4 billion on February 19, 2020 to $95.2
billion on March 31, 2020, as a result of the sharp global equity market declines as a result of the COVID-19 pandemic.
The fees we earn under our investment management agreements are typically based on the market value of our assets under
management, and to a much lesser extent based directly on investment performance. If difficult market conditions, however
caused, lead to a decline in our assets under management, our investment advisory fees would decline as well. If our revenues
decline without a commensurate reduction in our expenses, our net income will be reduced.
Our efforts to establish and develop new teams and strategies may face challenges or ultimately be unsuccessful, which could
impact our results of operations, our reputation and culture.
We seek to recruit new investment teams that manage high value-added investment strategies and would allow us to grow
strategically. We also look to develop and offer new, differentiated strategies managed by our existing teams. We expect the costs
associated with establishing a new team or strategy to initially exceed the revenues generated, which will negatively impact our
results of operations. New strategies, whether managed by a new team or by an existing team may make investments or present
operational, legal, regulatory, or distribution-related issues and risks with which we have little or no experience. Our lack of
experience could strain our resources and increase the likelihood of an error or failure. The establishment of new teams or
strategies (in particular, alternative investment teams or strategies) may also cause us to depart from our traditional compensation
and economic model, which could reduce our profitability and harm our firm’s culture.
Historical returns of our existing investment strategies may not be indicative of the investment performance of any new strategy
and new strategies may have higher performance expectations that are more difficult to meet. Poor performance of any new
strategy could negatively impact our reputation and the reputation of our other investment strategies.
We generally support the development of new strategies by making one or more seed investments using capital that would
otherwise be available for our general corporate purposes. Making such seed investments exposes us to capital losses.
Failure to properly address conflicts of interest could harm our reputation or cause clients to withdraw funds, each of which
could adversely affect our business and results of operations.
The SEC and other regulators have continued to focus on potential conflicts of interest. We have implemented procedures and
controls that we believe are reasonably designed to address these issues. However, appropriately dealing with conflicts of interest
is complex and if we fail, or appear to fail, to deal appropriately with conflicts of interest, we could face reputational damage,
litigation or regulatory proceedings or penalties, any of which may adversely affect our results of operations.
As we expand the scope of our business and our client base, we must continue to monitor and address any conflicts between the
interests of our stockholders and those of our clients. Our clients may withdraw funds if they perceive conflicts of interest
between the investment decisions we make for strategies in which they have invested and our obligations to our stockholders. For
example, we may limit the growth of assets in or close strategies when we believe it is in the best interest of our clients even
though our assets under management and investment advisory fees may be negatively impacted in the short term. Similarly, we
may establish new investment teams or strategies or expand operations into other geographic areas if we believe such actions are
in the best interest of our clients, even though our profitability may be adversely affected in the short term. Although we believe
such actions enable us to retain client assets and maintain our profitability, which benefits both our clients and stockholders, if
clients perceive a change in our investment or operations decisions in favor of a strategy to maximize short term results, they may
withdraw funds, which could reduce our revenue and impact our financial condition.
Several of our investment strategies invest principally in the securities of non-U.S. companies, which involve foreign currency
exchange, tax, political, social and economic uncertainties and risks.
As of December 31, 2020, approximately 50% of our assets under management were invested in strategies that primarily invest in
securities of non-U.S. companies. Some of our other strategies also invest on a more limited basis in securities of non-U.S.
companies. Approximately 42% of our assets under management were invested in securities denominated in currencies other than
the U.S. dollar. Fluctuations in foreign currency exchange rates could negatively affect the returns of our clients who are invested
in these strategies. In addition, an increase in the value of the U.S. dollar relative to non-U.S. currencies is likely to result in a
decrease in the U.S. dollar value of our assets under management, which, in turn, would likely result in lower revenue and profits.
See “Qualitative and Quantitative Disclosures Regarding Market Risk-Exchange Rate Risk” in Item 7A of this report for more
information about exchange rate risk.
Investments in non-U.S. issuers may also be affected by tax positions taken in countries or regions in which we are invested as
well as political, social and economic uncertainty. Declining tax revenues may cause governments to assert their ability to tax the
local gains and/or income of foreign investors, which could adversely affect clients’ interests in investing outside their home
markets. Many financial markets are not as developed, or as efficient, as the U.S. financial markets and, as a result, those markets
may have limited liquidity and higher price volatility, and may lack established regulations.
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Liquidity may also be adversely affected by political or economic events, government policies, and social or civil unrest within a
particular country, and our ability to dispose of an investment may also be adversely affected if we increase the size of our
investments in smaller non-U.S. issuers. Non-U.S. legal and regulatory environments, including financial accounting standards
and practices, may also be different, and there may be less publicly available information about such companies. These risks
could adversely affect the performance of our strategies that are invested in securities of non-U.S. issuers and may be particularly
acute in the emerging or less developed markets in which we invest. In addition to our Sustainable Emerging Markets and
Developing World strategies, a number of our other investment strategies are permitted to invest, and do invest, in emerging or
less developed markets.
We may not be able to maintain our current fee rates as a result of poor investment performance, competitive pressures, as a
result of changes in our business mix or for other reasons, which could have a material adverse effect on our profit margins
and results of operations.
We may not be able to maintain our current fee rates for any number of reasons, including as a result of poor investment
performance, competitive pressures, changes in global markets and asset classes, or as a result of changes in our business mix.
Although our investment management fees vary by client and investment strategy, we historically have been successful in
maintaining an attractive overall rate of fee and profit margin due to the strength of our investment performance and our focus on
high value-added investment strategies. In recent years, however, there has been a general trend toward lower fees in the
investment management industry as a result of competition and regulatory and legal pressures. In order to maintain our fee
structure in a competitive environment, we must retain the ability to decline additional assets to manage from potential clients
who demand lower fees even though our revenues may be adversely affected in the short term. In addition, we must be able to
continue to provide clients with investment returns and service that our clients believe justify our fees.
We may be forced to lower our fees in order to retain current, and attract additional, assets to manage. We may also make fee
concessions in order to attract early investors in a new strategy or increase marketing momentum in a strategy. Downward
pressure on fees may also result from the growth and evolution of the universe of potential investments in a market or asset class.
Changes in how clients choose to access asset management services may also exert downward pressure on fees. Some investment
consultants, for example, have implemented programs in which the consultant provides a range of services, including selection, in
a fiduciary capacity, of asset managers to serve as sub-adviser at lower fee rates than the manager’s otherwise applicable rates,
with the expectation of a larger amount of assets under management through that consultant. The expansion of those and similar
programs could, over time, make it more difficult for us to maintain our fee rates. In addition, plan sponsors of 401(k) and other
defined contribution assets that we manage may choose to invest plan assets in vehicles with lower cost structures than mutual
funds (such as a collective investment trust) or may choose to access our services through a separate account. We provide fewer
services to collective investment trusts and separate accounts than we provide to Artisan Funds and we receive fees at lower rates.
The investment management agreements pursuant to which we advise mutual funds are subject to an annual process of review
and renewal by the funds’ boards. As part of that process, the fund board considers, among other things, the level of
compensation that the fund has been paying us for our services. That process may result in the renegotiation of our fee structure
or an increase in the cost of the performance of our obligations. Any fee reductions on existing or future new business could have
an adverse effect on our profit margins and results of operations.
We derive substantially all of our revenues from contracts and relationships that may be terminated upon short or no notice.
We derive substantially all of our revenues from investment advisory and sub-advisory agreements, all of which are terminable
by clients upon short notice or no notice. Our investment management agreements with mutual funds, as required by law, are
generally terminable by the funds’ boards or a vote of a majority of the funds’ outstanding voting securities on not more than 60
days’ written notice. After an initial term, each fund’s investment management agreement must be approved and renewed
annually by that fund’s board, including by its independent members. In addition, all of our separate accounts and some of the
mutual funds that we sub-advise have the ability to re-allocate all or any portion of the assets that we manage away from us at
any time with little or no notice. The decrease in revenues that could result from the termination of a material client relationship
or the re-allocation of assets away from us could have a material adverse effect on our business.
Investors in most of the pooled vehicles that we advise can redeem their investments in those funds at any time without prior
notice, which could adversely affect our earnings.
Investors in the mutual funds, UCITS funds, and some other pooled investment vehicles that we advise may redeem their
investments in those funds at any time without prior notice or on fairly limited prior notice, thereby reducing our assets under
management. These investors may redeem for any number of reasons, including general financial market conditions, the absolute
or relative investment performance we have achieved, or their own financial condition and requirements. In a declining stock
market, the pace of redemptions could accelerate. Poor investment performance tends to result in decreased purchases and
increased redemptions. For the year ended December 31, 2020, we generated approximately 79% of our revenues from advising
mutual funds and other pooled vehicles (including Artisan Funds, Artisan Global Funds, Artisan Private Funds, and other entities
we advise). The redemption of investments in those funds could adversely affect our revenues.
We depend on third parties to market our investment strategies.
Our ability to attract additional assets to manage is highly dependent on our access to third-party intermediaries. We gain access
to investors primarily through consultants, 401(k) platforms, mutual fund platforms, broker-dealers and financial advisors
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through which shares of the funds are sold. We have relationships with some third-party intermediaries through which we access
clients in multiple distribution channels. Our two largest intermediary relationships across multiple distribution channels
represented approximately 9% and 7% of our total assets under management as of December 31, 2020.
We compensate most of the intermediaries through which we gain access to investors in Artisan Funds by paying fees, most of
which are a percentage of assets invested in Artisan Funds through that intermediary and with respect to which that intermediary
provides shareholder and administrative services. The allocation of such fees between us and Artisan Funds is determined by the
board of Artisan Funds, based on information and a recommendation from us, with the goal of allocating to us, at a minimum, all
costs attributable to marketing and distribution of shares of Artisan Funds. In the future, our expenses in connection with those
intermediary relationships could increase if the portion of those fees determined to be in connection with marketing and
distribution, or otherwise allocated to us or payable by us, increased.
Industry pressure to increase transparency and reduce or eliminate inducements for distribution continues to impact
intermediaries’ business models and the manner in which they charge fees. As intermediaries continue to see reduced revenue
from funds, and consistent with the experience of other investment managers, we have seen increased requests from
intermediaries for alternative forms of compensation. To date, such alternative forms of compensation have not been material, but
they could be over time. Clients of these intermediaries may not continue to be accessible to us on terms we consider
commercially reasonable, or at all. The absence of such access could have a material adverse effect on our results of operations.
Recently, a number of intermediaries have significantly culled the number of products available on their platforms, making it
increasingly challenging for smaller funds with shorter track records or highly differentiated strategies to gain platform access. If
we are unable to gain access to such platforms, our ability to attract new assets for our funds and strategies will be impaired.
We access institutional clients primarily through consultants upon whose referrals our institutional business is highly dependent.
Many of these consultants review and evaluate our products and our firm from time to time. As of December 31, 2020, the
investment consultant advising the largest portion of our assets under management represented approximately 7% of our total
assets under management. Poor reviews or evaluations of either a particular strategy or us as an investment management firm
may result in client withdrawals or may impair our ability to attract new assets through these consultants.
Substantially all of our existing assets under management are managed in primarily long-only, equity investment strategies,
which exposes us to greater risk than certain of our competitors who may manage assets in more diverse strategies.
17 of our 19 existing investment strategies invest primarily in publicly-traded equity securities. Our Credit team, which primarily
invests in fixed income securities, manages the High Income strategy and the Credit Opportunities strategy. Together, these
strategies accounted for $6.3 billion of our $157.8 billion in total assets under management as of December 31, 2020. Under
market conditions in which there is a general decline in the value of equity securities, the assets under management in each of our
17 equity strategies is likely to decline. The amount of assets that we manage in strategies that can take short positions in equity
securities, which could offset some of the poor performance of our long-only equity strategies under such market conditions,
accounted for less than $1.0 billion of our total assets under management as of December 31, 2020. Even if our investment
performance remains strong during such market conditions relative to other long-only, equity strategies, investors may choose to
withdraw assets from our management or allocate a larger portion of their assets to non-long-only or non-equity strategies. In
addition, the prices of equity securities may fluctuate more widely than the prices of other types of securities, making the level of
our assets under management and related revenues more volatile.
Our failure to comply with clients’ investment guidelines and applicable legal limitations could result in damage awards
against us and a loss of assets under management, either of which could adversely affect our financial condition.
When clients retain us to manage assets on their behalf, they generally specify certain investment guidelines that we are required
to follow in managing their portfolios. In addition, some of our clients are subject to laws that impose restrictions and limitations
on the investment of their assets. For example, U.S. mutual fund assets that we manage must be invested in accordance with
limitations under the 1940 Act and applicable provisions of the Internal Revenue Code of 1986, as amended. Our failure to
comply with any of these guidelines and other limitations could result in losses to clients or fund investors which, depending on
the circumstances, could result in our obligation to reimburse clients or fund investors for such losses. If we believed that the
circumstances did not justify a reimbursement, or clients and investors believed the reimbursement we offered was insufficient,
they could seek to recover damages from us or could withdraw assets from our management or terminate their investment
management agreement with us. Any of these events could harm our reputation and adversely affect our business.
Operational risks may disrupt our business, result in losses, damage our reputation or limit our growth.
We are heavily dependent on the capacity and reliability of the communications and information technology systems supporting
our operations, whether developed, owned and operated by us or by third parties. We also rely on manual workflows and a
variety of manual user controls. Operational risks such as trading or other operational errors or interruption or failure of our
financial, accounting, trading, compliance and other data processing systems, whether caused by human error, power or
telecommunications failure, cyber-attack or viruses, natural disaster, fire, pandemic, act of terrorism or war or otherwise, could
result in a disruption of our business, liability to clients, regulatory intervention or reputational damage, and thus materially
adversely affect our business. The potential for some types of operational risks, including trading errors, may be increased in
periods of increased volatility, which can magnify the cost of an error. Although we have not suffered material operational errors,
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including material trading errors, in the past, we may experience such errors in the future, the losses related to which we would
absorb. Insurance and other safeguards might not be available or might only partially reimburse us for our losses.
Although we have back-up systems and a business continuity plan in place, these procedures and capabilities may not be
adequate in the event of a significant interruption or failure of the systems or operations that are critical to our business.
As our client base, number and complexity of investment strategies, client relationships, and physical locations increase, and as
our employees become increasingly mobile, developing and maintaining our operational systems and infrastructure, as well as
back-up capabilities for such systems and infrastructure, may become increasingly challenging.
We rely on a number of key vendors for trading, middle- and back-office functions, various fund administration, accounting,
custody and transfer agent roles and other operational needs. These key vendors may themselves rely on third party service
providers to support their own operations. The failure of any key vendor, or of any service provider to a key vendor, to fulfill its
obligations, for any reason, could cause us reputational damage, legal liability and regulatory issues, and financial losses for us
and our clients.
Any changes, upgrades or expansions to our operations and/or technology or implementation of new systems to replace manual
workflows or to accommodate increased volumes or complexity of transactions or otherwise may require significant expenditures
and may increase the probability that we will experience operational errors or suffer system degradations and failures.
We depend substantially on our Milwaukee, Wisconsin offices, where a majority of our employees, operations and technology
resources are located, for the continued operation of our business. Any significant disruption to those offices could have a
material adverse effect on us.
Any significant limitation, failure or security breach of the information security infrastructure, software applications, or other
systems that are critical to our operations could disrupt our business, damage our reputation, and result in regulatory
penalties or other additional costs to us.
We are heavily reliant upon internal and third party technology systems and networks to view, process, transmit and store
information, including sensitive client and proprietary information, and to conduct many of our business activities and
transactions with our clients, vendors/service providers (collectively, “vendors”) and other third parties. In addition, in recent
years we have increased our use of and reliance on mobile and cloud technologies, including the complete migration of our
information technology infrastructure to Amazon Web Service. Maintaining the integrity of these systems, networks and
technologies is critical to the success of our business operations. We rely on our (and our vendors’) information and cybersecurity
infrastructure, policies, procedures and capabilities to protect these systems, networks and technologies and the data that reside
on or are transmitted through them.
To date, we have not experienced any known material breaches of or interference with our systems, networks or technologies or
of those of our vendors. However, we routinely encounter and address such threats. Our experiences with and preparation for
cybersecurity and other technology threats have included phishing scams, introductions of malware, attempts at electronic break-
ins, and unauthorized payment requests. Any such breaches or interference that may occur in the future could have a material
adverse impact on our business, financial condition or results of operations.
Despite the measures we have taken and may in the future take to address and mitigate cybersecurity and other technology risks,
we cannot guarantee that our systems, networks and technologies, and those of third parties on whom we rely, will not be subject
to disruptions, system failures or outages, unauthorized access, breaches or other interference. Any such event may result in
operational disruptions as well as unauthorized access to or the disclosure, corruption or loss of our proprietary information or
our clients’ or employees’ information, which in turn may result in legal claims, regulatory scrutiny and liability, reputational
damage, the incurrence of costs to eliminate or mitigate further exposure, the loss of clients or other damage to our business. In
addition, any required public notification of such incidents could exacerbate the harm to our business, financial condition or
results of operations. Even if we successfully protect our technology infrastructure and the confidentiality of sensitive data, we
may incur significant expense in connection with our response to any such attacks and the adoption and maintenance of
additional appropriate security measures. Although we maintain insurance to mitigate the expense associated with a potential
incident, the damage or claims arising from an incident may not be covered or may exceed the amount of any insurance available.
We cannot be certain that advances in criminal capabilities, discovery of new vulnerabilities, attempts to exploit vulnerabilities in
our or our vendors’ systems, data thefts, physical system or network break-ins or inappropriate access, or other developments will
not compromise or breach the technology or other security measures protecting the networks and systems we use.
Our newest investment strategies and strategies we may establish in the future present certain investment, operational,
distribution and other risks that are different in kind and/or degree from those presented by our earlier investment strategies,
and we have less experience with those risks.
Our newest investment strategies have the ability to make investments that present different risks and/or degrees of risk than our
other strategies, which invest primarily in publicly traded equity securities. In particular, investments made by our newest
strategies may be less liquid, which can make it more difficult to accurately value these securities and, under certain
circumstances, may make it more difficult to manage investors’ redemption requests. Our newest investment strategies may also
acquire restricted securities in private placements, which are generally subject to strict restrictions on resale, and there may be no
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liquid secondary market or ready purchaser for such securities. As a result, we may be unable to dispose of such securities when
desired, or at a favorable time or price.
Several of our newest investment strategies are primarily offered through private funds. Offering private funds presents unique
operational, regulatory and distribution-related risks. Our private funds may invest in instruments (such as derivative securities
and private investments) and engage in activities (such as shorting and use of leverage) with which we previously had no or
limited operational experience.
These instruments and activities present different types and higher degrees of investment risk than our other investment
strategies. In addition, our lack of experience with these instruments and activities could strain our resources and increase the
likelihood of an operational error, which could damage our reputation or result in legal liability.
Offering private funds also poses risks associated with side by side management and the potential for real or perceived conflicts
of interest, which, if not managed correctly, could cause reputational damage, litigation or regulatory issues. Although we have
established policies and procedures to manage potential conflicts of interest, we are unable to completely eliminate these risks.
Our newer investment strategies and investment vehicles and those that we establish in the future may have more limited capacity
and provide less room for growth than our earlier large capacity investment strategies. Despite their limited capacity, these newer
strategies, with broader degrees of freedom may require increased access to specialized technology, market data with advanced
data analytic capabilities, and operational resources, including bespoke operational solutions. Requests for resources that are
disproportionate to the size of the investment team may put pressure on the resource allocation model among teams and cause
friction and instability among the investment teams.
New investment strategies and investment vehicles that we establish in the future will likely present different investment,
regulatory, operational, distribution and other risks than those presented by our existing products. Any real or perceived problems
with future strategies or vehicles could cause a disproportionate negative impact on our business and reputation.
Employee misconduct, or perceived misconduct, could expose us to significant legal liability and/or reputational harm.
We are vulnerable to reputational harm because we operate in an industry in which integrity and the confidence of our clients are
of critical importance. Our employees or other third parties that are affiliated with us could engage in misconduct, or perceived
misconduct, that adversely affects our business. For example, if an employee were to engage in illegal or suspicious activities, we
could be subject to regulatory sanctions and suffer serious harm to our reputation, financial position, client relationships and
ability to attract new clients. It is not always possible to deter employee misconduct, and the precautions we take to detect and
prevent this activity may not always be effective. Misconduct or perceived misconduct by our employees, or even unsubstantiated
allegations of such conduct, could result in significant legal liability and/or an adverse effect on our reputation and our business.
If our techniques for managing risk are ineffective, we may be exposed to material unanticipated losses.
In order to manage the significant risks inherent in our business, we must maintain effective policies, procedures and systems that
enable us to identify, monitor and mitigate our exposure to operational, legal and reputational risks. Our risk management
methods may prove to be ineffective due to their design or implementation, or as a result of the lack of adequate, accurate or
timely information or otherwise. If our risk management efforts are ineffective, we could suffer losses that could have a material
adverse effect on our operating results or financial condition. Additionally, we could be subject to litigation, particularly from our
clients or investors, and sanctions or fines from regulators.
Our techniques for risks may not fully mitigate the risk exposure in all economic or market environments, including exposure to
risks that we might fail to identify or anticipate. Because our clients invest in our strategies in order to gain exposure to the
portfolio securities of the respective strategies, we have not adopted corporate-level risk management policies to manage market,
interest rate, or exchange rate risks that would affect the value of our overall assets under management.
Our indebtedness may expose us to material risks.
We have substantial indebtedness outstanding in the amount of $200 million in unsecured notes, which exposes us to risks
associated with the use of leverage. In addition, we maintain a $100 million revolving credit agreement, though no amounts are
outstanding as of the date of this filing. Our substantial indebtedness may make it more difficult for us to withstand or respond to
adverse or changing business, regulatory and economic conditions or to take advantage of new business opportunities or make
necessary capital expenditures. To the extent we service our debt from our cash flow, such cash will not be available for our
operations or other purposes. Because our debt service obligations are fixed, the portion of our cash flow used to service those
obligations could be substantial if our revenues have declined, whether because of market declines or for other reasons.
Our Series C, Series D and Series E notes bear interest at a rate equal to 5.82%, 4.29%, and 4.53% per annum, respectively, and
each rate is subject to a 100 basis point increase in the event Artisan Partners Holdings receives a below-investment grade rating.
Each series requires a balloon payment at maturity. Any substantial decrease in net operating cash flows or any substantial
increase in expenses could make it difficult for us to meet our debt service requirements or force us to modify our operations. Our
ability to repay the principal amount of our notes or any outstanding loans under our revolving credit agreement, to refinance our
debt or to obtain additional financing through debt or the sale of additional equity securities will depend on our performance, as
well as financial, business and other general economic factors affecting the credit and equity markets generally or our business in
particular, many of which are beyond our control. Any such alternatives may not be available to us on satisfactory terms or at all.
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Our note purchase agreements and revolving credit agreement contain, and our future indebtedness may contain, various
covenants that may limit our business activities.
Our note purchase agreements and revolving credit agreement contain financial and operating covenants that limit our business
activities, including restrictions on our ability to incur additional indebtedness and pay dividends to our stockholders. The
agreements also restrict Artisan Partners Holdings from making distributions to its partners (including us), other than tax
distributions or distributions to fund our ordinary expenses, if a default (as defined in the respective agreements) has occurred and
is continuing or would result from such a distribution. In addition, if our average assets under management for a fiscal quarter
falls below $45 billion, Artisan Partners Holdings will generally be required to offer to pre-pay the unsecured notes. Failure to
comply with any of these restrictions could result in an event of default, giving our lenders the ability to accelerate repayment of
our obligations. As of December 31, 2020, we believe we are in compliance with all of the covenants set forth in the agreements.
We provide a range of services to Artisan Funds, Artisan Global Funds, Artisan Private Funds and sub-advised funds which
may expose us to liability.
We provide a broad range of administrative services to Artisan Funds, including providing personnel to serve as directors and
officers of Artisan Funds and to serve on the valuation and liquidity committee of Artisan Funds. We prepare or supervise the
preparation of Artisan Funds’ regulatory filings and financial statements, and manage compliance and regulatory matters. We
provide shareholder services, accounting services including the supervision of the activities of Artisan Funds’ accounting services
provider in the calculation of the funds’ net asset values, and tax services including calculation of dividend and distribution
amounts. We also coordinate the audits of financial statements and supervise tax return preparation. Although less extensive than
the range of services we provide to Artisan Funds, we also provide a range of similar services to Artisan Global Funds and
Artisan Private Funds. In addition, from time to time we provide information to other funds we advise (or to an entity providing
services to such a fund) which may be used by those funds in their efforts to comply with various regulatory requirements.
The services we provide to Artisan Funds, Artisan Global Funds, Artisan Private Funds, and other funds we advise may expose
us to liability. For example, if we make a mistake in the provision of such services, a fund could incur costs for which we might
be liable. If it were determined that a fund failed to comply with applicable regulatory requirements as a result of our action or
our employees’ failure to act, we could be responsible for losses suffered or penalties imposed. In addition, we could have
penalties imposed on us, be required to pay fines or be subject to private litigation, any of which could decrease our future
income or negatively affect our current business or our future growth prospects.
The expansion of our business inside and outside of the United States raises tax and regulatory risks, may adversely affect our
profit margins and places additional demands on our resources and employees.
We have expanded and continue to expand our distribution efforts into non-U.S. markets, including the United Kingdom, other
European countries, Canada, Australia and certain Middle Eastern, Asian, and African countries. Our client relationships outside
the U.S. have grown from 32 as of December 31, 2012 to 201 as of December 31, 2020. Clients outside the U.S. may be
adversely affected by political, social and economic uncertainty in their respective home countries and regions, which could
result in a decrease in the net client cash flows that come from such clients. These clients also may be accustomed to certain
practices that differ from and may conflict with practices that are customary in the U.S.
While a majority of our operations take place in the U.S., we do maintain offices in a number of other countries including the
U.K., Ireland, Singapore, Australia and Hong Kong. Operating our business in non-U.S. markets is generally more expensive
than in the U.S. Among other expenses, the effective tax rates applicable to our income allocated to some non-U.S. markets may
be higher than the effective rates applicable to our income allocated to the U.S. In addition, costs related to our distribution and
marketing efforts in non-U.S. markets have often been more expensive than comparable costs in the U.S. To the extent that our
revenues do not increase to the same degree our expenses increase in connection with our continuing expansion outside the U.S.,
our profitability could be adversely affected. Expanding our business into non-U.S. markets may also place significant demands
on our existing infrastructure and employees.
Regulators in non-U.S. jurisdictions in which we currently operate could also change their laws or regulations, or change the way
they interpret existing laws and regulations, in a manner that might restrict or otherwise impede our ability to operate in their
respective markets. Any such changes could increase the costs we incur in a specific jurisdiction without any corresponding
increase in revenues and income from operating in the jurisdiction. For example, in response to Brexit, we established an Irish
subsidiary regulated by the Central Bank of Ireland, to carry out distribution efforts in the EU after Brexit. Although the
government of the United Kingdom and the European Union reached a Trade and Cooperation Agreement, additional
negotiations are needed to establish a framework for regulatory cooperation with respect to financial services, including
asset managers. Brexit has added complexity to our global operations, imposed additional risks and resulted in additional legal
and compliance costs. However, we do not currently expect it to have a major impact on our business.
Our employees routinely travel inside and outside the U.S. as a part of our investment research process, to market our services
and to supervise and manage our business. Their activities in the jurisdictions they travel to on our behalf may raise both tax and
regulatory issues. If and to the extent we are incorrect in our analysis of the applicability or impact of state or non-U.S. taxes or
regulatory requirements, we could incur costs, penalties or be the subject of an enforcement or other action.
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Changes in tax laws or exposure to additional tax liabilities could have a material impact on our financial condition, results
of operations and liquidity.
We are subject to income taxes, as well as non-income based taxes, in both the United States and various foreign jurisdictions at
the federal, state and local levels of government. We cannot predict future changes in the tax laws, regulations, administrative
guidance or judicial decisions to which we are subject or could apply to our business. Any such tax changes could have a material
impact on our tax liability, materially impact our effective tax rate, result in additional tax reporting obligations, or result in
increased costs associated with our tax compliance efforts.
From time to time, we are subject to income and non-income based tax audits in the jurisdictions in which we operate. The
calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax rules and regulations in a
number of jurisdictions. Tax authorities may disagree with certain positions we have taken and assess additional taxes and, in
certain cases, interest, fines or penalties. We evaluate whether to record tax liabilities for possible tax audit issues based on our
estimate of whether, and the extent to which, additional income taxes will be due. We adjust these liabilities in light of changing
facts and circumstances as well as consult with our outside tax advisors. However, due to the complexity of some of these
uncertainties, the ultimate resolution may result in a payment that is materially different from our estimates.
A change of control could result in termination of our investment advisory agreements with SEC-registered mutual funds and
could trigger consent requirements in our other investment advisory agreements.
Under the U.S. Investment Company Act of 1940, as amended, or the 1940 Act, each of the investment advisory agreements
between SEC-registered mutual funds and our subsidiary, Artisan Partners Limited Partnership, will terminate automatically in
the event of its assignment, as defined in the 1940 Act. Upon the occurrence of such an assignment, our subsidiary could continue
to act as adviser to any such fund only if that fund’s board and shareholders approved a new investment advisory agreement,
except in the case of certain funds that we sub-advise for which only board approval would be necessary. In addition, as required
by the U.S. Investment Advisers Act of 1940, as amended, or the Advisers Act, each of the investment advisory agreements for
the separate accounts we manage provides that it may not be assigned, as defined in the Advisers Act, without the consent of the
client. An assignment occurs under the 1940 Act and the Advisers Act if, among other things, Artisan Partners Limited
Partnership undergoes a change of control as recognized under the 1940 Act and the Advisers Act. If such an assignment were to
occur, we cannot be certain that we will be able to obtain the necessary approvals from the boards and shareholders of the mutual
funds we advise or the necessary consents from our separate account clients.
The outbreak of COVID-19, and the reaction thereto, has negatively affected the global economy and has disrupted our
normal business operations.
The COVID-19 pandemic, together with resulting voluntary and government-imposed actions, has disrupted the global economy,
increased market volatility and resulted in significant fluctuations in the valuation of investment securities. Market fluctuations
and volatility may cause clients to choose to redeem their investments in our strategies (upon short or no notice), as well as
increase the likelihood and consequences of trading, valuation, or other operational errors.
The COVID-19 pandemic has also impacted the manner in which we operate. As of the date of this filing, the majority of our
employees are working from home and we have significantly reduced business travel. Additionally, many third-party vendors on
whom we rely for certain critical functions are also operating in remote environments.
We believe we are operating well under these circumstances. We are benefiting from the flexible and highly mobile operating
environment we have built over 25 years. However, we do not know what, if any, longer-term impact the current circumstances
(and/or the extension of them) will have on our business and results. Most of our associates have never operated remotely for
extended periods of time. And many of our associates typically travel extensively to conduct investment research; interact with
clients, prospects and intermediaries; and/or manage our global business.
In addition, despite the precautions we have taken to protect the safety and well-being of our associates, no assurance can be
given that our associates will not contract COVID-19. The loss of any of our key professionals (including portfolio managers and
other senior leaders at our firm) for an extended period may prevent us from sustaining the historically strong investment
performance we have achieved; adversely affect our ability to retain existing and attract new clients; and/or negatively impact our
ability to operate our business and execute our long-term strategy.
The COVID-19 pandemic may create risks to us in the future (delayed onset risks) that cannot be foreseen and the adverse effects
of such risks may be significant and long-term. As the COVID-19 pandemic continues to evolve, it is not possible to predict the
full extent to which the coronavirus will adversely impact our business, which will depend on numerous developing factors that
are highly uncertain and rapidly changing. The impacts and risks described herein relating to COVID-19 augment the discussion
of overlapping risks in our other risk factors, which may be heightened by the COVID-19 pandemic.
Risks Related to our Industry
We are subject to extensive, complex and sometimes overlapping rules, regulations and legal interpretations.
The investment management industry in which we operate is subject to extensive and frequently changing regulation and has
seen increased focus in recent years. We are subject to extensive regulation in the United States, primarily at the federal level,
including regulation by the SEC, the U.S. Department of Labor, and the Financial Industry Regulatory Authority. Our business is
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also subject to the rules and regulations of other countries in which we operate or conduct distribution or investment management
activities. For a more extensive discussion of certain laws and regulations to which we’re subject, see “Item 1—Business—
Regulatory Environment and Compliance” in Part I of this report.
As a result of the extensive and complex regulatory environment in which we operate, we face risk of regulatory actions and
litigation, which could consume substantial expenditures of time and capital. Our regulatory and compliance obligations impose
significant operational and cost burdens on us and cover a broad range of topics including, investment advisory matters, securities
and other financial instruments, financial reporting and other disclosure matters, accounting, tax, data protection, and privacy. As
our business expands into new geographic regions and introduces new investment products with expanded degrees of freedom,
the regulatory requirements to which we’re subject will increase. While we have focused significant attention and resources on
the development and implementation of compliance policies, procedures and practices, non-compliance with applicable laws,
rules or regulations, either in the U.S. or abroad could result in various legal proceedings, including civil litigation, governmental
investigations and enforcement actions that could result in fines, penalties, suspensions of individual employees, or limitations on
particular business activities, any of which could have an adverse impact on our reputation and business.
The regulatory environment in which we operate is subject to continual change, and regulatory developments may adversely
affect our business.
We operate in a legislative and regulatory environment that is subject to continual change, the nature of which we cannot predict.
We may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S. or non-U.S.
governmental regulatory authorities or self-regulatory organizations that supervise the financial markets. We also may be
adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities
and self-regulatory organizations, as well as by courts. It is impossible to determine the extent of the impact of any new U.S. or
non-U.S. laws, regulations or initiatives that may be proposed, or whether any of the proposals will become law. Compliance
with any new laws or regulations, or changes in the interpretation or enforcement of existing laws or regulations, could be more
difficult and expensive and affect the manner in which we conduct business. Non-compliance with applicable new laws, rules or
regulations, either in the U.S. or abroad could result in litigation, governmental investigations and enforcement actions that could
result in fines, penalties, suspensions of individual employees, or limitations on particular business activities, any of which could
have an adverse impact on our reputation and business.
The investment management industry is intensely competitive.
The investment management industry is intensely competitive, with competition based on a variety of factors, including
investment performance, investment management fee rates, continuity of investment professionals and client relationships, the
quality of client service, corporate positioning and business reputation, continuity of selling arrangements with intermediaries and
differentiated products. A number of factors, including the following, serve to increase our competitive risks:
•
•
•
•
Unlike some of our competitors, we do not currently offer passive investment strategies or “solutions” products like
target-date funds.
A number of our competitors have greater financial, technical, marketing and other resources, more comprehensive
name recognition and more personnel than we do.
Potential competitors have a relatively low cost of entering the investment management industry.
Some investors may prefer to invest with an investment manager that is not publicly traded based on the perception that
a publicly-traded asset manager may focus on the manager’s own growth to the detriment of investment performance.
Other industry participants may seek to recruit our investment professionals.
•
• Many competitors charge lower fees for their investment management services than we do.
For example, the trend in favor of low-fee passive products such as index and certain exchange-traded funds will favor those of
our competitors who provide passive investment strategies. In recent years, across the investment management industry, passive
products have experienced inflows and traditional actively managed products have experienced outflows, in each case, in the
aggregate. That trend has presented, and will continue to present, a headwind to our business. Separately, intermediaries through
which we distribute our mutual funds may also sell their own proprietary funds and investment products, which could limit the
distribution of our investment strategies. If we are unable to compete effectively, our earnings would be reduced and our business
could be materially adversely affected.
The investment management industry faces substantial litigation risks which could materially adversely affect our business,
financial condition or results of operations or cause significant reputational harm to us.
We depend to a large extent on our network of relationships and on our reputation in order to attract and retain client assets. We
make investment decisions on behalf of our clients that could result in substantial losses to them. If our clients suffer significant
losses, or are otherwise dissatisfied with our services, we could be subject to legal liability or actions alleging negligence, breach
of fiduciary duty, breach of contract, unjust enrichment and/or fraud. These risks are often difficult to assess or quantify and their
existence and magnitude often remain unknown for substantial periods of time, even after an action has been commenced.
We may incur significant legal expenses in defending against litigation whether or not we engaged in conduct as a result of which
we might be subject to legal liability. Substantial legal liability or significant regulatory action against us could materially
adversely affect our business, financial condition or results of operations or cause significant reputational harm to us.
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Risks Related to Our Structure
Control by our stockholders committee of approximately 14% of the combined voting power of our capital stock and the rights
of holders of limited partnership units of Artisan Partners Holdings may give rise to conflicts of interest.
As of February 19, 2021, our employees to whom we have granted equity (including our employee-partners) held approximately
14% of the combined voting power of our capital stock. These employees have entered into a stockholders agreement pursuant to
which they granted an irrevocable voting proxy with respect to all shares of our common stock they have acquired from us and
any shares they may acquire from us in the future to a stockholders committee. Any additional shares of our common stock that
we issue to our employees will be subject to the stockholders agreement so long as the agreement has not been terminated. Shares
held by an employee cease to be subject to the stockholders agreement upon termination of employment.
The stockholders committee currently consists of Eric R. Colson (Chairman and Chief Executive Officer), Charles J. Daley, Jr.
(Chief Financial Officer) and Gregory K. Ramirez (Executive Vice President). All shares subject to the stockholders agreement
are voted in accordance with the majority decision of those three members. The stockholders committee’s control of
approximately 14% of the combined voting power gives the committee considerable influence in determining the outcome of any
stockholder vote, including the election of directors and the approval of certain transactions.
Our employee-partners (through their ownership of Class B common units), AIC (through its ownership of Class D common
units) and the holders of Class A common units have the right, each voting as a single and separate class, to approve or
disapprove certain transactions and matters, including material corporate transactions, such as a merger, consolidation,
dissolution or sale of greater than 25% of the fair market value of Artisan Partners Holdings’ assets. These voting and class
approval rights may enable our employee-partners, AIC or the holders of Class A common units to prevent the consummation of
transactions that may be in the best interests of holders of our Class A common stock.
In addition, because the majority of our pre-IPO owners (including members of our board of directors) hold all or a portion of
their ownership interests in our business through Artisan Partners Holdings, rather than through Artisan Partners Asset
Management, these pre-IPO owners may have conflicting interests with holders of our Class A common stock. For example, our
pre-IPO owners may have different tax positions from us which could influence their decisions regarding whether and when we
should dispose of assets, whether and when we should incur new or refinance existing indebtedness, especially in light of the
existence of the tax receivable agreements, and whether and when Artisan Partners Asset Management should terminate the tax
receivable agreements and accelerate its obligations thereunder. In addition, the structuring of future transactions may take into
consideration these pre-IPO owners’ tax or other considerations even where no similar benefit would accrue to us.
Our ability to pay regular dividends to our stockholders is subject to the discretion of our board of directors and may be
limited by our structure and applicable provisions of Delaware law.
We intend to pay dividends to holders of our Class A common stock as described in “Dividend Policy”. Our board of directors
may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. In
addition, as a holding company, we are dependent upon the ability of our subsidiaries to generate earnings and cash flows and
distribute them to us so that we may pay dividends to our stockholders. We expect to cause Artisan Partners Holdings, which is a
Delaware limited partnership, to make distributions to its partners, including us, in an amount sufficient for us to pay dividends.
However, its ability to make such distributions will be subject to its and its subsidiaries’ operating results, cash requirements and
financial condition, the applicable provisions of Delaware law that may limit the amount of funds available for distribution to its
partners, its compliance with covenants related to existing or future indebtedness, including our notes and revolving credit
agreement, its other agreements with third parties, as well as its obligation to make tax distributions under its partnership
agreement (which distributions would reduce the cash available for distributions by Artisan Partners Holdings to us).
In addition, each of the companies in our corporate chain must manage its assets, liabilities and working capital in order to meet
all of its cash obligations, including the payment of dividends or distributions. As a result of these limitations and restrictions, we
may not be able to pay, or may have to reduce, the dividends on our Class A common stock. Any change in the level of our
dividends or the suspension of the payment thereof could adversely affect the market price of our Class A common stock.
Our ability to pay taxes and expenses, including payments under the tax receivable agreements (“TRAs”), may be limited by
our holding company structure.
As a holding company, our assets principally consist of our ownership of partnership units of Artisan Partners Holdings, deferred
tax assets and cash and we have no independent means of generating revenue. Artisan Partners Holdings is a partnership for U.S.
federal income tax purposes and, as such, is not subject to U.S. federal income tax. Instead, Artisan Partners Holdings’ taxable
income is allocated to holders of its partnership units, including us. Accordingly, we incur income taxes on our proportionate
share of Artisan Partners Holdings’ taxable income and also may incur expenses related to our operations. Under the terms of its
amended and restated limited partnership agreement, Artisan Partners Holdings is obligated to make tax distributions to holders
of its partnership units, including us. In addition to tax expenses, we are also required to make payments under the TRAs, which
will be significant, and we incur other expenses related to the TRAs and our operations. We intend to fund the payment of
amounts due under the TRAs out of the reduced tax payments that APAM realizes in respect of the tax attributes to which the
TRAs relate. We also intend to cause Artisan Partners Holdings to make distributions in an amount sufficient to allow us to pay
our taxes and pay any additional operating expenses. However, its ability to make such distributions will be subject to various
limitations and restrictions as set forth in the preceding risk factor. If, as a consequence of these various limitations and
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restrictions, we do not have sufficient funds to pay tax or other liabilities or to fund our operations, we may have to borrow funds
and thus our liquidity and financial condition could be materially adversely affected. To the extent that we are unable to make
payments when due under the TRAs for any reason, such payments will be deferred and will accrue interest at a rate equal to one-
year LIBOR plus 300 basis points until paid.
We will be required to pay the TRA beneficiaries for certain tax benefits we claim, and we expect that the payments we will be
required to make will be substantial.
We are party to two TRAs. The first TRA generally provides for the payment by APAM to the assignees of the Pre-H&F Corp
Merger Shareholder of 85% of the applicable cash savings, if any, of U.S. federal, state and local income taxes that APAM
actually realizes (or is deemed to realize in certain circumstances) as a result of (i) the tax attributes of the preferred units APAM
acquired in the merger of a wholly-owned subsidiary of the Pre-H&F Corp Merger Shareholder into APAM in March 2013, (ii)
net operating losses available as a result of the merger, and (iii) tax benefits related to imputed interest.
The second TRA generally provides for the payment by APAM to current or former limited partners of Artisan Partners Holdings
or their assignees of 85% of the applicable cash savings, if any, of U.S. federal, state and local income taxes that APAM actually
realizes (or is deemed to realize in certain circumstances) as a result of (i) certain tax attributes of their partnership units sold to
us or exchanged (for shares of Class A common stock, convertible preferred stock or other consideration) and that are created as
a result of such sales or exchanges and payments under the TRAs and (ii) tax benefits related to imputed interest.
The payment obligation under the TRAs is an obligation of APAM, not Artisan Partners Holdings, and we expect that the
payments we will be required to make under the TRAs will be substantial. Assuming no material changes in the relevant tax law
and that APAM earns sufficient taxable income to realize all tax benefits that are subject to the TRAs, we expect that the
reduction in tax payments for us associated with (i) the merger described above; (ii) the purchase or exchange of partnership units
from March 2013 through December 31, 2020; and (iii) projected future purchases or exchanges of partnership units would
aggregate to approximately $711 million over generally a minimum of 15 years, assuming the future purchases or exchanges
described in clause (iii) occurred at a price of $50.34 per share of our Class A common stock, the closing price of our Class A
common stock on December 31, 2020. Under such scenario we would be required to pay the other parties to the TRAs 85% of
such amount, or approximately $637 million, over generally a minimum of 15 years. The actual amounts may materially differ
from these hypothetical amounts, as potential future reductions in tax payments for us and TRA payments by us will be
calculated using the market value of our Class A common stock at the time of purchase or exchange and the prevailing tax rates
applicable to us over the life of the TRAs and will be dependent on us generating sufficient future taxable income to realize the
benefit. As of December 31, 2020, we recorded a $412.5 million liability, representing amounts payable under the TRAs equal to
85% of the tax benefit we expected to realize from the H&F Corp merger described above, our purchase of partnership units from
limited partners of Holdings and the exchange of partnership units from March 2013 through December 31, 2020, assuming no
material changes in the related tax law and that APAM earns sufficient taxable income to realize all tax benefits subject to the
TRAs.
The liability will increase upon future purchases or exchanges of limited partnership units with the increase representing amounts
payable under the TRAs equal to 85% of the estimated future tax benefits, if any, resulting from such purchases or exchanges.
Payments under the TRAs are not conditioned on the counterparties’ continued ownership of us. The actual increase in tax basis,
as well as the amount and timing of any payments under these agreements, will vary depending upon a number of factors,
including the timing of sales or exchanges by the holders of limited partnership units, the price of the Class A common stock at
the time of such sales or exchanges, whether such sales or exchanges are taxable, the amount and timing of the taxable income
APAM generates in the future and the tax rate then applicable and the portion of APAM’s payments under the TRAs constituting
imputed interest or depreciable basis or amortizable basis. Payments under the TRAs are expected to give rise to certain
additional tax benefits attributable to either further increases in basis or in the form of deductions for imputed interest, depending
on the TRA and the circumstances. Any such benefits are covered by the TRAs and will increase the amounts due thereunder. In
addition, the TRAs provide for interest, at a rate equal to one-year LIBOR plus 100 basis points, accrued from the due date
(without extensions) of the corresponding APAM tax return to the actual payment date, provided that the actual payment date is
on or before the payment due date, as specified in the TRAs. In addition, to the extent that we are unable to make payments when
due under the TRAs for any reason, such payments will be deferred and will accrue interest at a rate equal to one-year LIBOR
plus 300 basis points until paid.
Payments under the TRAs will be based on the tax reporting positions that we determine. Although we are not aware of any issue
that would cause the IRS or other taxing authority to challenge a tax basis increase or other tax attributes subject to the TRAs, we
will not be reimbursed for any payments previously made under the TRAs if such basis increases or other benefits are
subsequently disallowed (however, any such additional payments may be netted against future payments (if any) that are made
under the TRAs). As a result, in certain circumstances, payments could be made under the TRAs in excess of the benefits that we
actually realize in respect of the attributes to which the TRAs relate.
In certain cases, payments under the TRAs may be accelerated and/or significantly exceed the actual benefits we realize in
respect of the tax attributes subject to the TRAs.
The TRAs provide that (i) upon certain mergers, asset sales, other forms of business combinations or other changes of control,
(ii) in the event that we materially breach any of our material obligations under the agreements, whether as a result of failure to
make any payment within six months of when due (provided we have sufficient funds to make such payment), failure to honor
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any other material obligation required thereunder or by operation of law as a result of the rejection of the agreements in a
bankruptcy or otherwise, or (iii) if, at any time, we elect an early termination of the agreements, our (or our successor’s)
obligations under the agreements (with respect to all units, whether or not units have been exchanged or acquired before or after
such transaction) would be based on certain assumptions. In the case of a material breach or if we elect early termination, those
assumptions include that we would have sufficient taxable income to fully utilize the deductions arising from the increased tax
deductions and tax basis and other benefits related to entering into the TRAs. In the case of a change of control, the assumptions
include that in each taxable year ending on or after the closing date of the change of control, our taxable income (prior to the
application of the tax deductions and tax basis and other benefits related to entering into the TRAs) will equal the greater of
(i) the actual taxable income (prior to the application of the tax deductions and tax basis and other benefits related to entering into
the TRAs) for the taxable year and (ii) the highest taxable income (calculated without taking into account extraordinary items of
income or deduction and prior to the application of the tax deductions and tax basis and other benefits related to entering into the
TRAs) in any of the four fiscal quarters ended prior to the closing date of the change of control, annualized and increased by 10%
for each taxable year beginning with the second taxable year following the closing date of the change of control. In the event we
elect to terminate the agreements early or we materially breach a material obligation, our obligations under the agreements will
accelerate. As a result, (i) we could be required to make payments under the TRAs that are greater than or less than the specified
percentage of the actual benefits we realize in respect of the tax attributes subject to the agreements and (ii) if we materially
breach a material obligation under the agreements or if we elect to terminate the agreements early, we would be required to make
an immediate payment equal to the present value of the anticipated future tax benefits, which payment may be made significantly
in advance of the actual realization of such future benefits. In these situations, our obligations under the TRAs could have a
substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset
sales, other forms of business combinations or other changes of control. There can be no assurance that we will be able to finance
our obligations under the TRAs. If we were to elect to terminate the TRAs associated with (i) the merger described above; (ii) the
purchase or exchange of partnership units from March 2013 through December 31, 2020; and (iii) projected future purchases or
exchanges of partnership units, as of December 31, 2020, based on an assumed discount rate equal to one-year LIBOR plus 100
basis points and a price of $50.34 per share of our Class A common stock (the closing price of our Class A common stock on
December 31, 2020), we estimate that we would be required to pay approximately $581 million in the aggregate under the TRAs.
If we were deemed an investment company under the 1940 Act as a result of our ownership of Artisan Partners Holdings,
applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material
adverse effect on our business.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for
purposes of the 1940 Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the
business of investing, reinvesting or trading in securities or (ii) it engages, or proposes to engage, in the business of investing,
reinvesting, owning, holding or trading in securities and, absent an applicable exemption, it owns or proposes to acquire
investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and
cash items) on an unconsolidated basis. We do not believe that we are an “investment company”, as such term is defined in either
of those sections of the 1940 Act.
As the sole general partner of Artisan Partners Holdings, we control and operate Artisan Partners Holdings. On that basis, we
believe that our interest in Artisan Partners Holdings is not an “investment security” as that term is used in the 1940 Act.
However, if we were to cease participation in the management of Artisan Partners Holdings, our interest in Artisan Partners
Holdings could be deemed an “investment security” for purposes of the 1940 Act.
We and Artisan Partners Holdings intend to continue to conduct our operations so that we will not be deemed an investment
company. However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations
on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as
contemplated and could have a material adverse effect on our business.
Risks Related to Our Class A Common Stock
The market price and trading volume of our Class A common stock may be volatile, which could result in rapid and
substantial losses for our stockholders.
The market price of our Class A common stock may be highly volatile and could be subject to wide fluctuations. In addition, the
trading volume of our Class A common stock may fluctuate and cause significant price variations to occur. If the market price of
our Class A common stock declines significantly, investors may be unable to sell shares of Class A common stock at or above
their purchase price, if at all. The market price of our Class A common stock may fluctuate or decline significantly in the future.
Future sales of our Class A common stock in the public market could lower our stock price, and any future sale of equity or
convertible securities may dilute existing stockholders’ ownership in us.
The market price of our Class A common stock could decline as a result of future sales of a large number of shares of our Class A
common stock, or the perception that such sales could occur. These sales, or the possibility that such sales may occur, may make
it more difficult for us to raise capital by selling equity securities in the future, at a time and price that we deem appropriate.
We are party to a resale and registration rights agreement pursuant to which the shares of our Class A common stock issued upon
exchange of limited partnership units are eligible for resale. Such shares of Class A common stock may be transferred only in
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accordance with the terms and conditions of the resale and registration rights agreement, which our Board may waive or modify
at any time. The common units of Artisan Partners Holdings discussed below are exchangeable for shares of our Class A
common stock on a one-for-one basis.
There is no limit on the number of shares of our Class A common stock that our Class A limited partners or AIC are permitted to
sell. As of December 31, 2020, our Class A limited partners owned approximately 4.9 million Class A common units and AIC
owned approximately 3.5 million Class D common units.
For an employee-partner, in each one-year period, the first of which began in the first quarter of 2014, the partner is generally
permitted to sell up to (i) a number of vested shares of our Class A common stock representing 15% of the aggregate number of
common units and shares of Class A common stock received upon exchange of common units he or she held as of the first day of
that period or, (ii) if greater, shares of our Class A common stock having a market value as of the time of sale of approximately
$250,000, as well as, in either case, the number of shares such holder could have sold in any previous period or periods but did
not sell in such period or periods. In February 2018, our Board approved the sale of additional shares by certain employee-
partners, including several portfolio managers and our Chief Executive Officer. These employee-partners were permitted to sell
20% of the aggregate number of common units and shares of Class A common stock received upon exchange of common units
each held as of February 1, 2018. We allowed them to sell the same number of common units and shares of Class A common
stock received upon exchange of common units during the first quarter of 2019 and 2020, and will permit them to sell the same
number during the first quarter of 2021 and 2022, subject to their maintaining a minimum dollar amount of firm equity. As of
December 31, 2020, our employee-partners owned 5.4 million Class B common units and Class A common shares received upon
exchange of Class B common units during the fourth quarter of 2020. Approximately 3.0 million of those units and shares are
eligible for sale in the first quarter of 2021. An additional 2.6 million Class E common units are eligible for exchange and sale by
former employee-partners in the first quarter of 2021. As of the date of this filing, we expect approximately 137 thousand units to
be exchanged on February 25, 2021.
We may also purchase limited partnerships units of Holdings at any time and may issue and sell additional shares of our Class A
common stock to fund such purchases. We cannot predict the size of future issuances of our Class A common stock or the effect,
if any, that any such future issuances and sales may have on the market price of our Class A common stock. Sales or distributions
of substantial amounts of our Class A common stock (including shares issued in connection with an acquisition), or the
perception that such sales could occur, may cause the market price of our Class A common stock to decline.
In addition, we have filed a registration statement registering 15,000,000 shares of our Class A common stock for issuance
pursuant to our 2013 Omnibus Incentive Compensation Plan and 2013 Non-Employee Director Plan. Pursuant to these plans, we
have granted 10,416,017 restricted share-based awards consisting of a mix of restricted stock units, performance share units and
restricted shares of Class A common stock. We may increase the number of shares registered for this purpose from time to time.
Once shares issued pursuant to these plans have vested, they will be able to be sold in the public market.
Anti-takeover provisions in our restated certificate of incorporation and amended and restated bylaws and in the Delaware
General Corporation Law, as well as the terms of our equity awards, could discourage a change of control that our
stockholders may favor, which could negatively affect the market price of our Class A common stock.
Provisions in our restated certificate of incorporation, amended and restated bylaws and in the Delaware General Corporation
Law, as well as the terms of our equity awards, may make it more difficult and expensive for a third party to acquire control of us
even if a change of control would be beneficial to the interests of our stockholders. Those provisions include:
•
•
•
•
•
•
•
The right of the various classes of our capital stock to vote, as separate classes, on certain amendments to our restated
certificate of incorporation and certain fundamental transactions.
The ability of our board of directors to determine to issue shares of preferred stock and to determine the price and other
terms of those shares, which could be used to thwart a takeover attempt.
Advance notice procedures that stockholders must comply with in order to nominate candidates to our board of
directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential
acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting
to obtain control of us.
A limitation that, generally, stockholder action may only be taken at an annual or special meeting or by unanimous
written consent.
A requirement that a special meeting of stockholders may be called only by our board of directors or our Chairman and
Chief Executive Officer, which may delay the ability of our stockholders to force consideration of a proposal or to take
action, including the removal of directors.
The ability of our board of directors to adopt, amend and repeal our amended and restated bylaws by majority vote,
while such action by stockholders would require a super majority vote, which makes it more difficult for stockholders
to change certain provisions described above.
Except with respect to awards held by our named executive officers, single trigger vesting upon a change in control for
all unvested employee equity awards, including all unvested equity awards held by investment team members. Prior to
February 2019, our awards generally included double-trigger vesting upon a change in control.
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The market price of our Class A common stock could be adversely affected to the extent that the above discourage potential
takeover attempts that our stockholders may favor.
Our restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive
forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our
stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Our restated certificate of incorporation provides that, unless we consent in writing to an alternative forum, the Court of Chancery
of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf,
(ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or
our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law,
our restated certificate of incorporation or our amended and restated bylaws or (iv) any action asserting a claim that is governed
by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable
parties named as defendants therein and the claim not being one which is vested in the exclusive jurisdiction of a court or forum
other than the Court of Chancery or for which the Court of Chancery does not have subject matter jurisdiction. Any person
purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have
consented to this provision of our restated certificate of incorporation. This choice of forum provision may limit our stockholders’
ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or
agents, which may discourage such lawsuits against us and our directors, officers, employees and agents. Alternatively, if a court
were to find this provision of our restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more
of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other
jurisdictions, which could adversely affect our business and financial condition.
Our indemnification obligations may pose substantial risks to our financial condition.
Pursuant to our restated certificate of incorporation, we will indemnify our directors and officers to the fullest extent permitted by
Delaware law against all liability and expense incurred by them in their capacities as directors or officers of us. We also are
obligated to pay their expenses in connection with the defense of claims. Our bylaws provide for similar indemnification of, and
advancement of expenses to, our directors, officers, employees and agents and members of our stockholders committee. We have
also entered into indemnification agreements with each of our directors and executive officers and each member of our
stockholders committee, pursuant to which we will indemnify them to the fullest extent permitted by Delaware law in connection
with their service in such capacities. Artisan Partners Holdings will indemnify and advance expenses to AIC, as its former
general partner, the former members of its pre-IPO Advisory Committee, the members of our stockholders committee, our
directors and officers and its officers and employees against any liability and expenses incurred by them and arising as a result of
the capacities in which they serve or served Artisan Partners Holdings.
We have obtained liability insurance insuring our directors, officers and members of our stockholders committee against liability
for acts or omissions in their capacities as directors, officers or committee members subject to certain exclusions. These
indemnification obligations may pose substantial risks to our financial condition, as we may not be able to maintain our insurance
or, even if we are able to maintain our insurance, claims in excess of our insurance coverage could be material. In addition, these
indemnification obligations and other provisions of our restated certificate of incorporation, and the amended and restated
partnership agreement of Artisan Partners Holdings, may have the effect of reducing the likelihood of derivative litigation against
indemnified persons, and may discourage or deter stockholders or management from bringing a lawsuit against such persons,
even though such an action, if successful, might otherwise have benefited us and our stockholders.
Our restated certificate of incorporation provides that certain of our investors do not have an obligation to offer us business
opportunities.
Our restated certificate of incorporation provides that, to the fullest extent permitted by applicable law, certain of our investors
and their respective affiliates (including affiliates who serve on our board of directors) have no obligation to offer us an
opportunity to participate in the business opportunities presented to them, even if the opportunity is one that we might reasonably
have pursued (and therefore they may be free to compete with us in the same business or similar business). Furthermore, we
renounce and waive and agree not to assert any claim for breach of any fiduciary or other duty relating to any such opportunity
against those investors and their affiliates by reason of any such activities unless, in the case of any person who is our director or
officer, such opportunity is expressly offered to such director or officer in writing solely in his or her capacity as an officer or
director of us. This may create actual and potential conflicts of interest between us and certain of our investors and their affiliates
(including certain of our directors).
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
We lease all of our office space, including our largest office in Milwaukee, Wisconsin, where a majority of our employees are
based. We believe our existing and contracted-for facilities are adequate to meet our requirements.
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Item 3. Legal Proceedings
In the normal course of business, we may be subject to various legal and administrative proceedings. Currently, there are no legal
or administrative proceedings that management believes may have a material adverse effect on our consolidated financial
position, cash flows or results of operations.
Item 4. Mine Safety Disclosures
Not applicable
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Information about our Executive Officers
Information regarding our executive officers is as follows:
Eric R. Colson, age 51, has been chief executive officer and a director of Artisan Partners Asset Management since March 2011
and has served as chairman of the Company's board of directors since August 1, 2015. From March 2011 to January 2021, Mr.
Colson also served as the president of Artisan Partners Asset Management. Mr. Colson has served as the chief executive officer
of Artisan Partners since January 2010. Prior to January 2010, Mr. Colson served as chief operating officer of investment
operations from March 2007 through January 2010. Mr. Colson has been a managing director of Artisan Partners since he joined
the firm in January 2005.
Charles J. Daley, Jr., age 58, has been executive vice president, chief financial officer and treasurer of Artisan Partners Asset
Management since March 2011. He has served as the chief financial officer of Artisan Partners since August 2010 and has been a
managing director since July 2010 when he joined the firm.
Jason A. Gottlieb, age 51, has been president of Artisan Partners Asset Management since January 2021. From February 2017 to
January 2021, he served as executive vice president of Artisan Partners Asset Management. Mr. Gottlieb joined Artisan Partners
in October 2016 as a managing director and the chief operating officer of investments. Prior to joining the firm in October 2016,
Mr. Gottlieb was a partner and managing director at Goldman Sachs where, since 2005, he was a leader in Goldman Sachs’
Alternative Investment & Manager Selection Group. He also served as a portfolio manager on the Goldman Sachs Multi-
Manager Alternatives Fund from the fund’s inception in April 2013 until he left the firm in August 2016.
Sarah A. Johnson, age 49, has been executive vice president, chief legal officer and secretary of Artisan Partners Asset
Management and general counsel of Artisan Partners since October 2013. From April 2013 to October 2013 she served as
assistant secretary of Artisan Partners Asset Management. Ms. Johnson was named a managing director of Artisan Partners in
March 2010.
Christopher J. Krein, age 48, has been executive vice president of Artisan Partners Asset Management and Artisan Partners' head
of Global Distribution since January 2020. Prior to becoming head of Global Distribution, Mr. Krein was responsible for
institutional marketing and client service for the Artisan Developing World team. Mr. Krein has been a managing director of
Artisan Partners since he joined the firm in September 2015. Prior to joining the firm, Mr. Krein was head of institutional
distribution at WisdomTree Asset Management.
Eileen L. Kwei, age 42, has been executive vice president of Artisan Partners Asset Management and Artisan Partners’ chief
administrative officer since January 2021. From February 2018 to January 2021, Ms. Kwei was responsible for institutional
marketing and client service for the Artisan Credit team. Prior to February 2018, Ms. Kwei was a relationship manager for the
Artisan Global Equity team. Ms. Kwei joined Artisan Partners in June 2013 and has been a managing director of Artisan Partners
since 2018.
Gregory K. Ramirez, age 50, was appointed executive vice president of Artisan Partners Asset Management in February 2016.
From October 2013 to February 2016, he served as senior vice president and from April 2013 to October 2013 as assistant
treasurer. Mr. Ramirez is currently head of vehicle administration for Artisan Partners and serves as chair of the Artisan Risk and
Integrity Committee. Mr. Ramirez was named a managing director of Artisan Partners in April 2003.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Shares of our Class A common stock have been listed and traded on the NYSE under the symbol “APAM” since March 7, 2013.
As of February 19, 2021, there were approximately 112 stockholders of record of our Class A common stock, 30 stockholders of
record of our Class B common stock, and 29 stockholders of record of our Class C common stock. These figures do not reflect
beneficial ownership or shares held in nominee name, nor do they include holders of any restricted stock units. There is no
trading market for shares of our Class B common stock or Class C common stock.
Performance Graph
The following graph compares the year-end cumulative total stockholder return on our Class A common stock during the five-
year period ended December 31, 2020, with the year-end cumulative total return of the S&P 500® and the Dow Jones U.S. Asset
Managers Index. The graph assumes the investment of $100 in our common stock and in the market indices and the reinvestment
of all dividends.
For the years ended December 31,
2016
2017
2018
2019
2020
Artisan Partners Asset Management Inc.
$
91.54 $ 132.79 $
82.16 $ 136.83 $ 233.92
S&P 500 Index
$ 111.23 $ 134.70 $ 128.04 $ 167.35 $ 197.05
Dow Jones U.S. Asset Managers Index
$ 111.22 $ 144.20 $ 108.08 $ 136.96 $ 157.71
The above table is provided pursuant to SEC regulations and the outcomes are impacted significantly by beginning- and end-
point stock price, as well as the price at which dividends are reinvested. A stockholder who invested in APAM at its IPO on
March 7, 2013, at the IPO price of $30 per share, and retained all dividends (instead of reinvesting them) would have experienced
a 12.2% annual total return as of December 31, 2020.
Dividend Policy
During the first quarter of 2021, our board of directors declared a variable quarterly dividend of $0.97 per share with respect to
the fourth quarter of 2020 and a special annual dividend of $0.31 per share. The variable quarterly dividend of $0.97 per share
represents approximately 80% of the cash generated in the fourth quarter of 2020. The introduction of franchise capital awards in
2021 reduced the 2020 special annual dividend by approximately $0.44 per share. Subject to Board approval each quarter, we
currently expect to pay a quarterly dividend of approximately 80% of the cash the Company generates each quarter. We expect
cash generation will generally equal adjusted net income plus equity-based compensation expense, less cash reserved for future
franchise capital awards (which we expect will approximate 4% of investment management revenues each quarter), with
additional adjustments made for certain other sources and uses of cash, including capital expenditures. After the end of the year,
our Board will consider paying a special dividend after determining the amount of cash needed for general corporate purposes
and investments in growth and strategic initiatives. Although we expect to pay dividends according to our dividend policy, we
may not pay dividends according to our policy or at all.
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Index ValueStock Performance GraphArtisan Partners Asset Management Inc.S&P 500 IndexDow Jones U.S. Asset Managers Index201620172018201920200100200
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We intend to fund dividends from our portion of distributions made by Artisan Partners Holdings from its available cash
generated from operations. The holders of our Class B common stock and Class C common stock are not entitled to any cash
dividends in their capacity as stockholders but, in their capacity as holders of limited partnership units of Artisan Partners
Holdings, they generally participate on a pro rata basis in distributions by Artisan Partners Holdings.
The declaration and payment of all future dividends, if any, will be at the sole discretion of our board of directors. In determining
the amount of any future dividends, our board of directors will take into account: (i) our financial results, (ii) our available cash,
as well as anticipated cash requirements (including debt servicing), (iii) our capital requirements and the capital requirements of
our subsidiaries (including Artisan Partners Holdings), (iv) contractual, legal, tax and regulatory restrictions on, and implications
of, the payment of dividends by us to our stockholders or by our subsidiaries (including Artisan Partners Holdings) to us,
including the obligation of Artisan Partners Holdings to make tax distributions to the holders of partnership units (including us),
(v) general economic and business conditions and (vi) any other factors that our board of directors may deem relevant.
As a holding company, our assets principally consist of our ownership of partnership units of Artisan Partners Holdings, deferred
tax assets and cash. Accordingly, we depend on distributions from Artisan Partners Holdings to fund any dividends we may pay.
We intend to cause Artisan Partners Holdings to distribute cash to its partners, including us, in an amount sufficient to cover
dividends, if any, declared by us. If we do cause Artisan Partners Holdings to make such distributions, holders of Artisan Partners
Holdings limited partnership units will be entitled to receive equivalent distributions on a pro rata basis.
Our dividend policy has certain risks and limitations, particularly with respect to liquidity. Although we expect to pay dividends
according to our dividend policy, we may not pay dividends according to our policy, or at all, if, among other things, Artisan
Partners Holdings is unable to make distributions to us as a result of its operating results, cash requirements and financial
condition, the applicable laws of the State of Delaware (which may limit the amount of funds available for distribution), its
compliance with covenants and financial ratios related to indebtedness (including the notes and the revolving credit agreement)
and its other agreements with third parties. Our note purchase and revolving credit agreements contain covenants limiting Artisan
Partners Holdings’ ability to make distributions if a default has occurred and is continuing or would result from such a
distribution. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and
Capital Resources”.
Under the Delaware General Corporation Law, we may only pay dividends from legally available surplus or, if there is no such
surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Surplus is
defined as the excess of the fair value of our total assets over the sum of the fair value of our total liabilities plus the par value of
our outstanding capital stock. Capital stock is defined as the aggregate of the par value of all issued capital stock. To the extent
we do not have sufficient cash to pay dividends, we may decide not to pay dividends.
Unregistered Sales of Equity Securities
As described in Note 8, “Stockholders’ Equity”, to the Consolidated Financial Statements included in Item 8 of this report, upon
termination of employment with Artisan, an employee-partner’s Class B common units are exchanged for Class E common units
and the corresponding shares of Class B common stock are canceled. APAM issues the former employee-partner a number of
shares of Class C common stock equal to the former employee-partner’s number of Class E common units. Class E common units
are exchangeable for Class A common stock subject to the same restrictions and limitations on exchange applicable to the other
common units of Holdings. There were no such issuances during the three months ended December 31, 2020.
Item 6. Selected Financial Data
Not applicable.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview and Recent Highlights
We are an investment management firm focused on providing high-value added, active investment strategies to sophisticated
clients globally. As of December 31, 2020, our nine autonomous investment teams managed a total of 19 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 December 31, 2020,
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 2020 included:
•
•
•
•
Beini Zhou and Anand Vasagiri joined the Artisan International Value team and launched the International Small Cap
Value strategy. Separately, Tiffany Hsiao and Yuanyuan Ji joined the Artisan Global Equity team to design and launch
a new strategy focused on post-venture firms in greater China.
The Global Value team launched its second strategy, the Select Equity strategy.
During the year ended December 31, 2020, our assets under management increased to $157.8 billion, an increase of
$36.8 billion, or 30%, compared to $121.0 billion at December 31, 2019, as a result of $30.3 billion of market
appreciation and $7.2 billion of net client cash inflows, partially offset by $0.7 billion of Artisan Funds’ distributions
that were not reinvested.
Average assets under management for the year ended December 31, 2020 was $124.9 billion, an increase of 12.5%
from the average of $111.0 billion for the year ended December 31, 2019.
• We earned $900 million in revenue for the year ended December 31, 2020, a 13% increase from revenues of $799
million for the year ended December 31, 2019.
Our operating margin was 39.8% in 2020, compared to 35.5% in 2019.
•
• We generated $3.40 of earnings per basic and diluted share and $3.33 of adjusted EPS.
• We declared and distributed dividends of $3.39 per share of Class A common stock during 2020.
• We declared, effective February 2, 2021, a quarterly dividend of $0.97 per share of Class A common stock with respect
to the December 2020 quarter and a special annual dividend of $0.31 per share, for a total of $3.39 of dividends per
share with respect to 2020.
COVID-19 Pandemic
During 2020, the COVID-19 pandemic contributed to significant volatility in global markets and corresponding fluctuations in
the valuation of our assets under management. Because most of the revenue we earn is based on the market value of our assets
under management, fluctuations in global markets impact our revenues and earnings. Our assets under management declined
from $125.4 billion on February 19, 2020 to $95.2 billion on March 31, 2020, and have subsequently rebounded to $157.8 billion
as of December 31, 2020. The COVID-19 pandemic will likely continue to impact global economies and markets and disrupt
economic activities, services, travel and supply chains in ways that cannot necessarily be foreseen.
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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 travel
restrictions will last. We expect most operating costs to return to pre-COVID-19 levels when employees 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 20% of the equity interests in Holdings as of
December 31, 2020. As a result, our results reflect that significant noncontrolling interest.
We operate our business in a single segment.
2020 Follow-On Offering and Holdings Unit Exchanges
On February 24, 2020, APAM completed an offering of 1,802,326 shares of Class A common stock and utilized all of the
proceeds to purchase an aggregate of 1,802,326 common units from certain limited partners of Holdings. In connection with the
offering, APAM received 1,802,326 GP units of Holdings.
During the year ended December 31, 2020, certain limited partners of Holdings exchanged 4,128,600 common units (along with
a corresponding number of shares of Class B or Class C common stock of APAM, as applicable) for 4,128,600 shares of Class A
common stock. In connection with the exchanges, APAM received 4,128,600 GP units of Holdings.
APAM’s equity ownership interest in Holdings increased from 73% at December 31, 2019 to 80% at December 31, 2020, as a
result of these transactions and other equity transactions during the period.
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 years ended December 31, 2020, 2019 and 2018:
S&P 500 total returns
MSCI All Country World total returns
MSCI EAFE total returns
Russell Midcap® total returns
MSCI Emerging Markets Index
ICE BofA U.S. High Yield Master II Total Return Index
For the Years Ended December 31,
2020
2019
2018
18.4 %
16.3 %
7.8 %
17.1 %
18.3 %
6.2 %
31.5 %
26.6 %
22.0 %
30.5 %
18.4 %
14.4 %
(4.4) %
(9.4) %
(13.8) %
(9.1) %
(14.6) %
(2.3) %
32
Table of Contents
Key Performance Indicators
When we review our business and financial performance we consider, among other things, the following:
For the Years Ended December 31,
2020
2019
2018
(unaudited; dollars in millions)
$ 121,016
$ 124,901
$ 157,776
Assets under management at period end
Average assets under management(1)
Net client cash flows(2)
Total revenues
Weighted average fee(3)
Operating margin
(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. The weighted average management fee for prior periods have been recast to
exclude performance fee revenue.
$ 111,023
$ 113,769
70.9 bps
71.6 bps
(6,497)
(2,658)
96,224
35.5 %
39.8 %
7,154
799
829
900
$
$
$
$
$
$
$
72.6 bps
36.8 %
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 firmwide, separate account, 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.
33
Table of Contents
The table below sets forth changes in our total assets under management:
For the Years Ended December 31,
2020
2019
2018
(unaudited; dollars in millions)
Beginning assets under management
$
121,016 $
96,224 $
115,494
Gross client cash inflows
Gross client cash outflows
Net client cash flows(1)
Artisan Funds’ distributions not reinvested(2)
Investment returns and other(3)
Ending assets under management
36,338
(29,184)
7,154
(690)
30,296
17,594
(20,252)
(2,658)
(630)
28,080
18,693
(25,190)
(6,497)
(922)
(11,851)
$
157,776 $
121,016 $
96,224
Average assets under management
(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 US dollars. The impact was
immaterial for the periods presented.
124,901 $
111,023 $
113,769
$
During 2020 our AUM increased by $36.8 billion due to $30.3 billion of investment returns and $7.2 billion of net client cash
inflows, partially offset by $0.7 billion of Artisan Funds’ distributions that were not reinvested. Sixteen of our 19 investment
strategies had net inflows, totaling $11.8 billion. Our nine strategies with inception dates beginning in 2014 or later had $9.5
billion in net inflows, representing an organic growth rate of 78%. We expect those strategies as a group to continue to
experience net inflows.
The net inflows across most of our business were offset by $4.7 billion of net outflows across the remaining three of our 19
strategies, including the Non-US Growth, Global Opportunities, and US Mid-Cap Value strategies, where we generally expect
net outflows as a group to continue in the near term.
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.
As of the date of this filing, all of our strategies are open to new investors and client relationships. Our US Small-Cap Growth
and Global Opportunities strategies have limited availability to most new client relationships.
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.
The 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 December 31, 2020. Returns
for periods less than one year are not annualized.
34
Table of Contents
Composite
Inception
Strategy
AUM
Average Annual Total Returns (Gross)
Investment Team and Strategy
Date
(in $MM)
1 YR
3 YR
5 YR
10 YR Inception
Growth Team
Average Annual
Value-Added(1)
Since Inception
(bps)
Global Opportunities Strategy
2/1/2007
$
26,487
41.48% 21.28% 20.09% 16.03% 13.14%
690
MSCI All Country World Index
16.25% 10.05% 12.24% 9.12%
6.24%
Global Discovery Strategy
9/1/2017
2,148
47.94% 27.90%
16.25% 10.05%
---
---
---
---
26.98%
11.47%
1,551
4/1/1997
17,504
59.81% 29.49% 21.56% 17.22% 16.79%
616
17.10% 11.60% 13.38% 12.40% 10.67%
35.59% 20.48% 18.64% 15.03% 10.63%
4/1/1995
6,546
62.99% 33.75% 26.83% 20.12% 13.04%
414
19.96% 10.24% 13.24% 11.19% 9.64%
34.63% 16.18% 16.34% 13.47% 8.90%
4/1/2010
2,829
30.10% 19.20% 17.57% 14.57% 14.80%
Non-US Growth Strategy
1/1/1996
21,684
MSCI EAFE Index
Non-US Small-Mid Growth Strategy
1/1/2019
7,543
35.36%
16.25% 10.05% 12.24% 9.12%
9.35%
8.61%
7.82%
8.59% 9.11% 8.62% 10.30%
4.28% 7.44% 5.50%
5.02%
12.01%
---
---
---
---
---
---
36.80%
17.05%
7/1/2005
3,479
10.86%
7.90% 13.85% 11.15% 8.78%
134
4/1/1999
3,670
20.96% 14.80% 15.58% 14.00% 10.14%
2.80%
6.90%
6.06% 9.73% 10.49% 7.44%
5.27% 10.43% 9.88% 12.34%
282
17.10% 11.60% 13.38% 12.40% 9.90%
4.96%
5.36% 9.72% 10.48% 9.52%
MSCI All Country World Index
US Mid-Cap Growth Strategy
Russell® Midcap Index
Russell® Midcap Growth Index
US Small-Cap Growth Strategy
Russell® 2000 Index
Russell® 2000 Growth Index
Global Equity Team
Global Equity Strategy
MSCI All Country World Index
MSCI ACWI ex US SMID Index
US Value Team
Value Equity Strategy
Russell® 1000 Index
Russell® 1000 Value Index
US Mid-Cap Value Strategy
Russell® Midcap Index
Russell® Midcap Value Index
International Value Team
International Value Strategy
7/1/2002
24,107
10/1/2020
16
MSCI EAFE Index
International Small Cap Value Strategy (2)
MSCI All Country World Index Ex
USA Small Cap (Net)
Global Value Team
Global Value Strategy
MSCI All Country World Index
9.76%
7.82%
---
---
5.56% 9.42% 9.26% 11.78%
4.28% 7.44% 5.50%
6.34%
---
---
---
---
---
---
23.62%
21.80%
Select Equity Strategy
3/1/2020
17
S&P 500 Market Index (Total Return)
Sustainable Emerging Markets Team
7/1/2007
22,400
7.74%
5.93% 10.31% 10.98% 8.62%
16.25% 10.05% 12.24% 9.12%
5.77%
---
---
---
---
---
---
---
---
22.61%
29.07%
Sustainable Emerging Markets Strategy
7/1/2006
679
23.06%
8.81% 16.29% 4.41%
MSCI Emerging Markets Index
Credit Team
High Income Strategy
ICE BofA US High Yield Master II Total
Return Index
Credit Opportunities Strategy (2)
ICE BofA U.S. High Yield Master II Total
Return Index
Developing World Team
Developing World Strategy
MSCI Emerging Markets Index
Antero Peak Group (3)
Antero Peak Strategy
S&P 500 Index
18.31%
6.17% 12.79% 3.63%
4/1/2014
6,241
11.00%
8.24% 10.03%
6.17%
5.88% 8.43%
7/1/2017
97
23.71% 12.98%
6.17%
5.88%
---
---
7/1/2015
8,853
83.46% 30.98% 28.29%
18.31%
6.17% 12.79%
5/1/2017
2,573
30.81% 25.05%
18.40% 14.17%
---
---
---
---
---
---
---
---
---
---
7.28%
6.31%
8.05%
5.35%
13.33%
5.74%
22.59%
7.77%
28.88%
15.40%
35
545
528
1,975
544
182
285
(646)
97
270
759
1,482
1,348
Table of Contents
Antero Peak Hedge Strategy (2)
11/1/2017
903
22.97% 20.32%
S&P 500 Index
18.40% 14.17%
---
---
---
---
20.37%
14.86%
551
Total Assets Under Management
$
157,776
(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 the benchmark most commonly used by our separate account clients to compare the performance of the relevant strategy. The
benchmark most commonly used by clients in the US Mid-Cap Growth, US Small-Cap Growth, Value Equity and US Mid-Cap Value strategies
is the style benchmark and for all other strategies is the broad market benchmark. Reporting on this metric prior to September 30, 2020,
compared all composite performance to the broad benchmark. Value-added for periods less than one year is not annualized. The Artisan High
Income and Credit Opportunities strategies hold loans and other security types that may not be included in the ICE BofA U.S. High Yield
Master II Total Return Index. At times, this causes material differences in relative performance. 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.
(2) Prior to this report, assets under management in the International Small Cap Value, Credit Opportunities, and Antero Peak Hedge strategies
were aggregated and reported as “other assets under management” and performance information was intentionally omitted.
(3) Effective October 1, 2020, the Thematic investment team was renamed Antero Peak Group. The team's investment strategies and investment
products were also renamed in 2020.
36
Table of Contents
The tables below set forth changes in our assets under management by investment team:
Year Ended
December 31, 2020
Beginning assets under
management
Gross client cash
inflows
Gross client cash
outflows
Net client cash flows(2)
Artisan Funds’
distributions not
reinvested (3)
Investment returns and
other
Ending assets under
management
Average assets under
management
December 31, 2019
Beginning assets under
management
Gross client cash
inflows
Gross client cash
outflows
By Investment Team
Growth
Global
Equity
US Value
International
Value
Global
Value
Sustainable
Emerging
Markets
Credit
Developing
World
Antero
Peak
Group (1)
Total
(unaudited; in millions)
$ 34,793 $ 27,860 $ 7,402 $
22,000 $ 19,707 $
234 $ 3,850 $
3,374 $ 1,796 $ 121,016
9,532
6,479
786
6,165
4,681
349
3,438
3,527
1,381
36,338
(8,616)
(5,885)
(1,687)
(6,101)
(3,535)
(25)
(1,415)
(1,487)
(433)
(29,184)
916
594
(901)
64
1,146
324
2,023
2,040
948
7,154
(222)
(115)
(12)
(46)
—
—
(130)
(142)
(23)
(690)
17,198
3,717
660
2,105
1,564
121
595
3,581
755
30,296
$ 52,685 $ 32,056 $ 7,149 $
24,123 $ 22,417 $
679 $ 6,338 $
8,853 $ 3,476 $ 157,776
$ 40,806 $ 26,991 $ 6,266 $
20,045 $ 17,780 $
476 $ 4,493 $
5,465 $ 2,579 $ 124,901
$ 26,251 $ 22,967 $ 6,577 $
17,681 $ 17,113 $
179 $ 2,860 $
1,993 $
603 $ 96,224
4,207
3,557
644
3,607
1,412
29
1,791
1,305
1,042
17,594
(5,251)
(5,214)
(1,435)
(3,474)
(2,806)
(14)
(1,138)
(780)
(140)
(20,252)
Net client cash flows (2)
(1,044)
(1,657)
(791)
133
(1,394)
15
653
525
902
(2,658)
Artisan Funds’
distributions not
reinvested (3)
Investment returns and
other
Ending assets under
management
Average assets under
management
December 31, 2018
Beginning assets under
management
Gross client cash
inflows
Gross client cash
outflows
Net client cash flows (2)
Artisan Funds’
distributions not
reinvested (3)
Investment returns and
other
Ending assets under
management
(134)
(133)
(33)
(199)
(8)
9,720
6,683
1,649
4,385
3,996
—
40
(112)
—
(11)
(630)
449
856
302
28,080
$ 34,793 $ 27,860 $ 7,402 $
22,000 $ 19,707 $
234 $ 3,850 $
3,374 $ 1,796 $ 121,016
$ 31,861 $ 25,744 $ 7,113 $
20,072 $ 18,559 $
203 $ 3,586 $
2,634 $ 1,251
111,023
$ 30,628 $ 29,235 $ 8,765 $
21,757 $ 19,930 $
282 $ 2,554 $
2,253 $
90 $ 115,494
5,121
3,466
1,027
3,758
2,405
28
1,443
893
552
18,693
(7,736)
(6,776)
(2,107)
(4,188)
(2,510)
(97)
(1,004)
(742)
(30)
(25,190)
(2,615)
(3,310)
(1,080)
(430)
(105)
(69)
439
151
522
(6,497)
(231)
(268)
(70)
(246)
(30)
—
(75)
—
(2)
(922)
(1,531)
(2,690)
(1,038)
(3,400)
(2,682)
(34)
(58)
(411)
(7)
(11,851)
$ 26,251 $ 22,967 $ 6,577 $
17,681 $ 17,113 $
179 $ 2,860 $
1,993 $
603 $ 96,224
$ 30,967 $ 27,908 $ 8,207 $
Average assets under
management
(1) Effective October 1, 2020, the Artisan Partners Thematic Team was renamed Antero Peak Group.
(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.
20,962 $ 19,909 $
237 $ 2,945 $
2,379 $
255
113,769
37
Table of Contents
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:
As of December 31,
2020
As of December 31,
2019
As of December 31,
2018
$ in
$ in
$ in
millions % of total
millions % of total
millions % of total
(unaudited)
(unaudited)
(unaudited)
$ 102,189
64.8 % $
80,274
66.3 % $
63,543
48,657
6,930
30.8 %
35,574
29.4 %
28,363
4.4 %
5,168
4.3 %
4,318
66.0 %
29.5 %
4.5 %
$ 157,776
100.0 % $ 121,016
100.0 % $
96,224
100.0 %
Institutional
Intermediary
Retail
Ending Assets Under Management(1)
(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 14% of our total assets under management as of December 31, 2020.
38
Table of Contents
The following tables set forth the changes in our assets under management for Artisan Funds and Artisan Global Funds in the
aggregate, and separate accounts:
Year Ended
December 31, 2020
Artisan Funds &
Artisan Global Funds
Separate Accounts(2)
(unaudited; in millions)
Total
Beginning assets under management
$
57,288 $
63,728 $
Gross client cash inflows
Gross client cash outflows
Net client cash flows(3)
Artisan Funds’ distributions not reinvested(4)
Investment returns and other
Net transfers(1)
Ending assets under management
Average assets under management
December 31, 2019
Beginning assets under management
Gross client cash inflows
Gross client cash outflows
Net client cash flows(3)
Artisan Funds’ distributions not reinvested(4)
Investment returns and other
Net transfers(1)
Ending assets under management
Average assets under management
December 31, 2018
Beginning assets under management
Gross client cash inflows
Gross client cash outflows
Net client cash flows(3)
Artisan Funds’ distributions not reinvested(4)
Investment returns and other
Net transfers(1)
Ending assets under management
Average assets under management
$
$
$
$
$
$
$
$
22,510
(18,110)
4,400
(690)
14,259
(511)
13,828
(11,074)
2,754
—
16,037
511
74,746 $
58,629 $
83,030 $
66,272 $
46,654 $
49,570 $
12,545
(13,911)
(1,366)
(630)
13,003
(373)
57,288 $
52,974 $
5,049
(6,341)
(1,292)
—
15,077
373
63,728 $
58,049 $
57,349 $
58,145 $
13,863
(17,233)
(3,370)
(922)
(6,065)
(338)
4,830
(7,957)
(3,127)
—
(5,786)
338
46,654 $
56,792 $
49,570 $
56,977
121,016
36,338
(29,184)
7,154
(690)
30,296
—
157,776
124,901
96,224
17,594
(20,252)
(2,658)
(630)
28,080
—
121,016
111,023
115,494
18,693
(25,190)
(6,497)
(922)
(11,851)
—
96,224
113,769
(1) 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.
(2) Separate account AUM consists of the assets we manage in or through vehicles other than Artisan Funds or Artisan Global Funds. Separate
account 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.
(3) 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.
(4) 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.
39
Table of Contents
Artisan Funds and Artisan Global Funds
As of December 31, 2020, Artisan Funds comprised $69.6 billion, or 44%, of our assets under management. For the year ended
December 31, 2020, fees from Artisan Funds represented $503.6 million, or 56%, of our revenues. Our contractual tiered fee
rates for the series of Artisan Funds range from 0.625% to 1.05% of fund assets, depending on the investment strategy, the
amount invested and other factors.
As of December 31, 2020, Artisan Global Funds comprised $5.2 billion, or 3%, of our assets under management. For the year
ended December 31, 2020, fees from Artisan Global Funds represented $33.6 million, or 4%, of our revenues. Our contractual fee
rates for Artisan Global Funds range from 0.75% to 1.85% of assets under management.
The weighted average management fee rate paid by our Artisan Funds and Artisan Global Funds clients in the aggregate was
0.916%, 0.915%, and 0.919%, for the years ended December 31, 2020, 2019 and 2018, respectively.
Separate Accounts
Separate accounts comprised $83.0 billion, or 53%, of our assets under management as of December 31, 2020. For the year ended
December 31, 2020, fees from separate accounts represented $362.4 million, or 40%, of our revenues. Separate account assets
under management consist of the assets we manage in or through vehicles other than Artisan Funds or Artisan Global Funds,
including assets that we manage in traditional separate accounts, as well as assets we manage in Artisan-branded collective
investment trusts and in Artisan Private Funds.
For traditional separate account clients, we generally impose standard fee schedules that vary by investment strategy and, through
the application of standard breakpoints, reflect the size of the account and client relationship, with tiered rates of fee currently
ranging from 0.40% of assets under management to 1.00% of assets under management. There are a number of exceptions to our
standard fee schedules, including exceptions based on the nature of our relationship with the client and the value of the assets
under our management in that relationship. In general, our effective rate of fee for a particular client relationship declines as the
assets we manage for that client increase, which we believe is typical for the asset management industry.
The weighted average management fee rate, which excludes performance fees, paid by our separate account clients in the
aggregate was 0.526%, 0.534% and 0.533% for the years ended December 31, 2020, 2019 and 2018, respectively. Because, as is
typical in the asset management industry, our rates of fee decline as the assets under our management in a relationship increase,
and because of differences in our fees by investment strategy, a change in the composition of our assets under management, in
particular a shift to strategies, clients or relationships with lower effective rates of fees, could have a material impact on our
overall weighted average rate of fee. See “—Qualitative and Quantitative Disclosures Regarding Market Risk—Market Risk” for
a sensitivity analysis that demonstrates the impact that certain changes in the composition of our assets under management could
have on our revenues.
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.
The different fee structures associated with Artisan Funds, Artisan Global Funds and separate accounts and the different fee
schedules of our investment strategies make the composition of our assets under management an important determinant of the
investment management fees we earn. Historically, we have received higher effective rates of investment management fees from
Artisan Funds and Artisan Global Funds than from our separate accounts, reflecting, among other things, the different array of
services we provide to Artisan Funds and Artisan Global Funds. Investment management fees for non-U.S. funds may also be
higher because they include fees to offset higher distribution costs. Our investment management fees also differ by investment
strategy, with higher-capacity strategies having lower standard fee rates than strategies with more limited capacity.
Certain separate account clients pay us fees based on the performance of their accounts relative to agreed-upon benchmarks,
which typically results in a lower base fee, but allows us to earn higher fees if the performance we achieve for that client is
superior to the performance of an agreed-upon benchmark. We may also receive performance fees or incentive allocations from
Artisan Private Funds. Approximately 3% of our $157.8 billion of assets under management as of December 31, 2020 have
performance fee billing arrangements. Performance fees of $14.7 million, $4.6 million, and $3.0 million were recognized in the
years ended December 31, 2020, 2019 and 2018, respectively. While performance fees may be earned and recognized in each
quarter of the year, the majority of our performance fees in 2020 were recognized during the June quarter. As of the date of this
filing, $6.5 million of performance fee revenue has been recognized during the first quarter of 2021.
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The following table sets forth revenues we earned under our investment management agreements with Artisan Funds and Artisan
Global Funds in the aggregate, and on the separate accounts that we managed for the years ended December 31, 2020, 2019 and
2018:
Revenues
Management fees
For the Years Ended December 31,
2020
2019
2018
(in millions)
Artisan Funds & Artisan Global Funds
$
537.2 $
484.9 $
Separate accounts
Performance fees
Total revenues
Average assets under management for period
$
$
347.7
14.7
309.5
4.6
899.6 $
799.0 $
124,901 $
111,023 $
113,769
522.0
303.6
3.0
828.6
Management fees, performance fees and incentive allocations earned from consolidated investment products are eliminated from
revenue upon consolidation. For the years ended December 31, 2020, 2019 and 2018, approximately 83%, 83%, and 84%,
respectively, of our investment advisory fees were earned from clients located in the United States.
Operating Expenses
Our operating expenses consist primarily of compensation and benefits, distribution and marketing, occupancy, communication
and technology, and general and administrative.
Our expenses may fluctuate due to a number of factors, including the following:
•
•
variations in the level of total compensation expense due to, among other things, incentive compensation, equity
awards, changes in our employee count (including the addition of new investment teams) and product mix and
competitive factors; and
expenses, such as distribution fees, rent, professional service fees, technology and data-related costs, incurred, as
necessary, to operate and grow our business.
A significant portion of our operating expenses are variable and fluctuate in direct relation to our assets under management and
revenues. Even if we experience declining revenues, we expect to continue to make the expenditures necessary for us to manage
our business. As a result, our profits may decline.
Compensation and Benefits
Compensation and benefits includes (i) salaries, incentive compensation and benefits costs and (ii) long term incentive
compensation expense related to equity and cash awards granted to employees.
Incentive compensation is one of the most significant parts of the total compensation of our senior employees. The amount of
cash incentive compensation paid to members of our investment teams and senior members of our marketing and client service
teams is based in large part on formulas that are tied directly to revenues. For each of our investment teams, incentive
compensation generally represents 25% of the asset-based management fees and a share of performance-based fees generated by
assets under management in the team’s strategy or strategies. Incentive compensation paid to other employees is discretionary
and subjectively determined based on individual performance and our overall results during the applicable year.
Certain compensation and benefits expenses are generally higher in the beginning of the year, such as employer funded
retirement and health care contributions and payroll taxes. We expect these costs to add approximately $4 million to $5 million to
our expenses in the first quarter of 2021, compared to the fourth quarter of 2020.
We grant equity awards to our employees pursuant to the Artisan Partners Asset Management Inc. 2013 Omnibus Incentive
Compensation Plan. The awards consist of standard restricted awards that generally vest on a pro rata basis over 5 years and
career awards that vest when both of the following conditions are met (1) pro-rata annual time vesting over 5 years and (2)
qualifying retirement (as defined in the award agreements). Investment team members generally receive franchise awards rather
than career awards. Franchise awards are identical to career awards, except with respect to the Franchise Protection Clause,
which applies to current or future portfolio managers. The Franchise Protection Clause provides that the total number of franchise
awards ultimately vesting will be reduced to the extent that cumulative net client cash outflows from the portfolio manager’s
investment team during a 3-year measurement period beginning on the date of the portfolio manager’s retirement notice exceeds
a set threshold. We expect to continue to grant franchise awards to members of our investment teams. In 2020, we began issuing
performance share units to certain executive officers of the Company.
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The estimated grant date fair value of equity awards is recognized as compensation expense on a straight-line basis over the
requisite service period of the award. The initial requisite service period is generally three years for performance share units and
five years for all other awards that have been granted to date. Compensation expense for performance share units is only
recognized if it is probable that the performance conditions will be achieved. For all awards, if a service or performance condition
is not achieved, the corresponding awards are forfeited and any previously recognized compensation expense is reversed.
On January 26, 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 to certain employees
pursuant to the Company’s 2013 Omnibus Incentive Compensation Plan. The grant will be effective March 1, 2021. The share-
based awards include standard restricted awards, career awards, franchise awards and performance share units.
The long-term cash awards, which are referred to as franchise capital awards, were made to investment team members in lieu of
additional grants of restricted share-based awards. The franchise capital awards are subject to the same long-term vesting and
forfeiture provisions as restricted share-based awards. Prior to vesting, franchise capital awards will be invested in one or more
Artisan Partners investment strategies. The underlying investment holdings and franchise capital award liability will be marked to
market value each quarter. The change in value of the award liability will be included in compensation expense. The change in
value of the underlying investment holdings will be included in non-operating income/(expense).
Because franchise capital awards are cash-based awards, they will reduce cash available for dividends. With respect to the 2020
special dividend, the franchise capital awards reduced the dividend by approximately $0.44 per share. Going forward, we expect
to reserve approximately 4% of our management fee revenues each quarter for future franchise capital awards, which we expect
to make after the conclusion of each year.
Over the long-term, we believe the economic impact of the reduced cash available for dividends will be offset by a corresponding
reduction in dilution, as we expect to grant fewer restricted share-based awards in lieu of franchise capital awards.
Since the IPO and including the grant in the first quarter of 2021, our board of directors has approved the grant of 10,416,017
restricted share-based awards. Total unrecognized non-cash compensation expense for these awards is $123.2 million. As of the
date of this filing, unvested equity awards are comprised of the following:
Standard Pro Rata Time Vesting
Qualified Retirement
Total Unvested
Service Only
2,351,894
2,806,181
5,158,075
Service &
Performance
Conditions
Service &
Market
Conditions
34,596
977,758
1,012,354
34,597
33,017
67,614
Total
2,421,087
3,816,956
6,238,043
Including the franchise capital awards and the equity grant in the first quarter of 2021, total unrecognized long-term incentive
compensation expense is $158.2 million. We expect long-term incentive compensation expense to be approximately $11 million
per quarter in 2021.
We expect to continue to make equity grants each year, though the form and structure of equity awards may change as we seek to
maximize alignment between our employees and our clients, investors, partners and stockholders. The actual size of the expense
over time will depend primarily on the number of awards granted and our stock price at the time the grants are made. The amount
of equity granted will vary from year to year and will be influenced by our results and other factors. From time to time, we may
make individual equity grants to people we hire.
Distribution, Servicing and Marketing
Distribution, servicing and marketing expenses primarily represent payments we make to broker-dealers, financial advisors,
defined contribution plan providers, mutual fund supermarkets and other intermediaries for selling, servicing and administering
accounts invested in shares of Artisan Funds. Artisan Funds authorizes intermediaries to accept purchase, exchange and
redemption orders for shares of Artisan Funds on behalf of Artisan Funds. Many intermediaries charge a fee for those services.
Artisan Funds pays a portion of some of those fees, which portion is intended to compensate the intermediary for its provision of
services of the type that would be provided by Artisan Funds’ transfer agent or other service providers if the shares were
registered directly on the books of Artisan Funds’ transfer agent. Like the investment management fees we earn as adviser to
Artisan Funds, distribution, servicing and marketing fees typically vary with the value of the assets invested in shares of Artisan
Funds. The allocation of such fees between us and Artisan Funds is determined by the board of Artisan Funds, based on
information and a recommendation from us, with the goal of allocating to us, at a minimum, all costs attributable to the marketing
and distribution of shares of Artisan Funds. A significant portion of Artisan Funds’ shares are held by investors through
intermediaries to which we pay distribution, servicing and marketing expenses.
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Total distribution, servicing and marketing fees will increase as we increase our assets under management sourced through
intermediaries that charge these fees or similar fees. The amount we pay to intermediaries for distribution and administrative
services varies by share class. As assets have transferred from the Investor share class to the Advisor and Institutional share
classes, the amount we have paid for distribution, servicing and marketing has decreased. Consistent with the experience of other
investment managers, as the foregoing expenses have decreased, we have seen increased requests from intermediaries for
alternative forms of compensation. To date, such alternative forms of compensation have not been material, but they could be
over time.
Occupancy
Occupancy expenses include operating leases for facilities, furniture and office equipment, miscellaneous facility related costs
and depreciation expense associated with furniture purchases and leasehold improvements. We expect 2021 occupancy expenses
will be approximately $23 million.
Communication and technology
Communication and technology expenses include information and print subscriptions, telephone costs, information systems
consulting fees, equipment and software maintenance expenses, operating leases for information technology equipment and
depreciation and amortization expenses associated with computer hardware and software. Information and print subscriptions
represent the costs we pay to obtain investment research and other data we need to operate our business. A portion of these
expenses generally increase or decrease in relative proportion to the number of our employees and the overall size and scale of
our business operations. We expect to continue our measured investments in technology to support our investment teams,
distribution efforts, and scalable operations.
On behalf of our mutual fund and separate account clients, we make decisions to buy and sell securities for each portfolio, select
broker-dealers to execute trades and negotiate brokerage commission rates. In connection with these transactions, we receive
research products and services from broker-dealers in exchange for the business we conduct with such firms. Some of those
research products and services could be acquired for cash and our receipt of those products and services through the use of client
commissions, or soft dollars, reduces cash expenses we would otherwise incur. In response to the Markets in Financial
Instruments Directive II and industry changes prompted by it, we have experienced requests from clients to bear research
expenses that are currently paid for using soft dollars. In response to such requests or as a result of changes in our operations, we
may eventually bear a significant portion or all of the costs of research that are currently paid for using soft dollars, which would
increase our operating expenses materially.
General and Administrative
General and administrative expenses include professional fees, travel and entertainment, certain state and local taxes, directors’
and officers’ liability insurance, director fees, and other miscellaneous expenses we incur in operating our business. Travel
expenses decreased significantly in 2020 due to the COVID-19 pandemic. We expect most operating costs, including travel
expense, to return to or exceed pre-COVID-19 levels when employees return to the office and resume business travel.
Non-Operating Income (Expense)
Interest Expense
Interest expense primarily relates to the interest we pay on our debt. For a description of the terms of our debt, see “—Liquidity
and Capital Resources”. Interest expense also includes interest on TRA payments, which is incurred between the due date
(without extension) for our federal income tax return and the date on which we make TRA payments.
Net Investment Gain (Loss) of Consolidated Investment Products
Net investment gain (loss) of consolidated investment products represents the realized and unrealized investment gains (losses)
related to investment products that are included in our consolidated financial statements because Artisan holds a controlling
financial interest in the respective investment entities. Significant portions of net investment gain (loss) of consolidated
investment products are offset by noncontrolling interests in our Consolidated Statements of Operations.
Net Investment Income
Net investment income includes realized and unrealized investment gains (losses) related to nonconsolidated investment
products, income earned on excess cash balances, and dividends earned on nonconsolidated equity securities.
Net Gain (Loss) on the Tax Receivable Agreements
Non-operating income (expense) also includes gains or losses related to the changes in our estimate of the payment obligation
under the TRAs, including the impact of tax rate changes. The effect of changes in our estimate of amounts payable under the
TRAs, including the effect of changes in enacted tax rates and in applicable tax laws, is included in net income.
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Net Income (Loss) Attributable to Noncontrolling Interests
Net Income (Loss) Attributable to Noncontrolling Interests - Holdings
Net income (loss) attributable to noncontrolling interests - Holdings represents the portion of earnings or loss attributable to the
ownership interests in Artisan Partners Holdings held by the limited partners of Artisan Partners Holdings.
Net Income (Loss) Attributable to Noncontrolling Interests - Consolidated Investment Products
Net income (loss) attributable to noncontrolling interests - consolidated investment products represents the portion of earnings or
loss attributable to third-party investors’ ownership interests in consolidated investment products.
Provision for Income Taxes
The provision for income taxes primarily represents APAM’s U.S. federal, state and local income taxes on its allocable portion of
Holdings’ income, as well as foreign income taxes payable by Holdings’ subsidiaries. Our effective income tax rate is dependent
on many factors, including a rate benefit attributable to the fact that a portion of Holdings’ taxable earnings are not subject to
corporate level taxes. Thus, income before income taxes includes amounts that are attributable to noncontrolling interests and not
taxable to APAM and its subsidiaries, which reduces the effective tax rate. The effective tax rate is also lower than the statutory
rate due to dividends paid on unvested share-based awards. These favorable impacts are partially offset by the impact of
permanent items, including certain executive compensation expenses, that are not deductible for tax purposes.
As APAM’s equity ownership in Holdings increases, the effective tax rate will likewise increase as more income will be subject
to corporate-level taxes.
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Results of Operations
Year Ended December 31, 2020, Compared to Year Ended December 31, 2019
Statements of operations data:
Revenues
Operating Expenses
Total compensation and benefits
Other operating expenses
Total operating expenses
Total operating income
Non-operating income (expense)
Interest expense
Other non-operating income
Total non-operating income (expense)
Income before income taxes
Provision for income taxes
Net income before noncontrolling interests
Less: Noncontrolling interests - Artisan Partners Holdings
Less: Noncontrolling interests - consolidated investment
products
Net income attributable to Artisan Partners Asset
Management Inc.
Share Data
Basic earnings per share
Diluted earnings per share
$
$
$
For the Years Ended
December 31,
Period-to-Period
2020
2019
$
%
(in millions, except share and per-share data)
$
899.6 $
799.0 $
100.6
13 %
435.8
105.5
541.3
358.3
(10.8)
21.8
11.0
369.3
60.8
308.5
81.1
14.8
400.5
115.0
515.5
283.5
(11.1)
(3.1)
(14.2)
269.3
27.8
241.5
80.1
35.3
(9.5)
25.8
74.8
0.3
24.9
25.2
100.0
33.0
67.0
1.0
9 %
(8) %
5 %
26 %
3 %
803 %
177 %
37 %
119 %
28 %
1 %
4.9
9.9
202 %
212.6 $
156.5 $
56.1
36 %
3.40 $
3.40 $
2.65
2.65
Basic weighted average number of common shares outstanding 55,633,529
51,127,929
Diluted weighted average number of common shares
outstanding
55,637,922
51,127,929
Revenues
The increase in revenues of $100.6 million, or 13%, for the year ended December 31, 2020, compared to the year ended
December 31, 2019, was driven primarily by a $13.9 billion, or 13%, increase in our average assets under management and a
$10.1 million increase in performance fee revenue. The weighted average investment management fee, which excludes
performance fees, was 70.9 basis points for the year ended December 31, 2020, compared to 71.6 basis points for the year ended
December 31, 2019.
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.
Separate Accounts
Artisan Funds and Artisan Global
Funds
For the Years Ended December 31,
2020
2019
2020
2019
(dollars in millions)
Investment advisory fees
Weighted average management fee(1)
$
362.4
$
314.1
$
537.2
$
484.9
52.6 bps
53.4 bps
91.6 bps
91.5 bps
Percentage of ending AUM
(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. The weighted average management fee for prior periods have been recast to exclude
performance fee revenue.
47 %
53 %
53 %
47 %
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Operating Expenses
The increase in total operating expenses of $25.8 million, or 5%, for the year ended December 31, 2020, compared to the year
ended December 31, 2019, was primarily a result of higher incentive compensation expense related to increased revenues and
higher salary and benefits expenses on an increased number of employees. The increases were partially offset by lower equity-
based compensation expense and a decrease in travel expenses in response to the COVID-19 pandemic.
Compensation and Benefits
Salaries, incentive compensation and benefits (1)
Restricted share-based award compensation expense
Total compensation and benefits
(1) Excluding restricted share-based award compensation expense
For the Years Ended
December 31,
Period-to-Period
2020
2019
$
%
(in millions)
$
399.3 $
358.4 $
36.5
42.1
$
435.8 $
400.5 $
40.9
(5.6)
35.3
11 %
(13) %
9 %
The increase in salaries, incentive compensation and benefits was driven primarily by a $34.1 million increase in incentive
compensation paid to our investment and marketing professionals as a result of the increase in revenue and higher salary and
benefits expenses on an increased number of employees.
Restricted share-based award compensation expense decreased $5.6 million as the awards that became fully amortized during
2019 and 2020 had a higher value than the awards granted in 2019 and 2020.
Total compensation and benefits was 48% and 50% of our revenues for the years ended December 31, 2020 and 2019,
respectively.
Other operating expenses
Other operating expenses decreased $9.5 million for the year ended December 31, 2020, compared to the year ended December
31, 2019, primarily due to an $8.4 million decrease in travel expenses in response to the COVID-19 pandemic.
Non-Operating Income (Expense)
Non-operating income (expense) consisted of the following:
For the Years Ended
December 31,
Period-to-Period
2020
2019
$
%
Interest expense
Net investment gain (loss) of consolidated investment products
Other investment gain (loss)
Net gain (loss) on the tax receivable agreements
(in millions)
$
(10.8) $
(11.1) $
26.2
0.3
(4.7)
10.1
6.4
(19.6)
Total non-operating income (expense)
$
11.0 $
(14.2) $
0.3
16.1
(6.1)
14.9
25.2
3 %
159 %
(95) %
(76) %
(177) %
Non-operating income (expense) for the year ended December 31, 2020 includes a $4.7 million loss relating to a change in
estimate of the payment obligation under the tax receivable agreements, compared to a $19.6 million loss for the year ended
December 31, 2019. The effect of changes in that estimate after the date of an exchange or sale is included in net income. The
changes in estimate in 2020 and 2019 were due to the remeasurement of deferred tax assets relating to an increase in estimated
state income tax rates.
Provision for Income Taxes
APAM’s effective income tax rate for the years ended December 31, 2020 and 2019 was 16.5% and 10.3%, respectively. The
increase in effective tax rate was primarily due to a larger remeasurement of deferred tax assets in 2019 compared to 2020,
resulting from an increase in estimated state income tax rates. An increase in Artisan's state deferred income tax rates results in an
increase to deferred tax assets with a corresponding decrease to the provision for income taxes.
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Several factors contribute to the effective tax rate, including a rate benefit attributable to the fact that approximately 24% and
31% of Holdings’ full year projected taxable earnings were not subject to corporate-level taxes for the years ended December 31,
2020 and 2019, respectively. Thus, income before income taxes includes amounts that are attributable to noncontrolling interests
and not taxable to APAM and its subsidiaries, which reduces the effective tax rate. As APAM’s equity ownership in Holdings
increases, the effective tax rate will likewise increase as more income will be subject to corporate-level taxes. The effective tax
rate was favorably impacted in both periods due to tax deductible dividends paid on unvested restricted share-based awards.
Earnings Per Share
Weighted average basic and diluted shares of Class A common stock outstanding were higher for the year ended December 31,
2020, compared to the year ended December 31, 2019, as a result of stock offerings, unit exchanges, and equity award grants. See
Note 12, “Earnings Per Share” in the Notes to the Consolidated Financial Statements in Item 8 of this report for further
discussion of earnings per share.
Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
Statements of operations data:
Revenues
Operating Expenses
Total compensation and benefits
Other operating expenses
Total operating expenses
Total operating income
Non-operating income (expense)
Interest expense
Other non-operating income
Total non-operating income (expense)
Income before income taxes
Provision for income taxes
Net income before noncontrolling interests
Less: Noncontrolling interests - Artisan Partners Holdings
Less: Noncontrolling interests - consolidated investment
products
Net income attributable to Artisan Partners Asset
Management Inc.
Share Data
Basic and diluted earnings per share
For the Years Ended
December 31,
For the Period-to-Period
2019
2018
$
%
(in millions, except share and per-share data)
$
799.0 $
828.6 $
(29.6)
(4) %
400.5
115.0
515.5
283.5
(11.1)
(3.1)
(14.2)
269.3
27.8
241.5
80.1
413.2
110.5
523.7
304.9
(11.2)
8.1
(3.1)
301.8
47.6
254.2
91.1
(12.7)
4.5
(8.2)
(21.4)
0.1
(11.2)
(11.1)
(32.5)
(19.8)
(12.7)
(11.0)
4.9
4.8
0.1
156.5 $
158.3 $
(1.8)
2.65 $
2.84
$
$
(3) %
4 %
(2) %
(7) %
1 %
(138) %
(358) %
(11) %
(42) %
(5) %
(12) %
2 %
(1) %
Basic and diluted weighted average number of common
shares outstanding
51,127,929
48,862,435
A detailed discussion of the year-over-year results for the year ended December 31, 2019 compared to the year ended December
31, 2018 can be found in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” of
our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 18, 2020.
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Supplemental Non-GAAP Financial Information
Our management uses non-GAAP measures (referred to as “adjusted” measures) of net income to evaluate the profitability and
efficiency of the underlying operations of our business and as a factor when considering net income available for distributions
and dividends. These adjusted measures remove the impact of (1) net gain (loss) on the tax receivable agreements (if any), (2) net
investment gain (loss) of investment products, and (3) the remeasurement of deferred taxes. These adjustments also remove the
non-operational complexities of our structure by adding back noncontrolling interests and assuming all income of Artisan
Partners Holdings is allocated to APAM. Management believes these non-GAAP measures provide more meaningful information
to analyze our profitability and efficiency between periods and over time. We have included these non-GAAP measures to
provide investors with the same financial metrics used by management to manage the Company.
Non-GAAP measures should be considered in addition to, and not as a substitute for, financial measures prepared in accordance
with GAAP. Our non-GAAP measures may differ from similar measures used by other companies, even if similar terms are used
to identify such measures. Our non-GAAP measures are as follows:
•
•
•
Adjusted net income represents net income excluding the impact of (1) net gain (loss) on the tax receivable agreements
(if any), (2) net investment gain (loss) of investment products, and (3) the remeasurement of deferred taxes. Adjusted
net income also reflects income taxes assuming the vesting of all unvested Class A share-based awards and as if all
outstanding limited partnership units of Artisan Partners Holdings had been exchanged for Class A common stock of
APAM on a one-for-one basis. Assuming full vesting and exchange, all income of Artisan Partners Holdings is treated
as if it were allocated to APAM, and the adjusted provision for income taxes represents an estimate of income tax
expense at an effective rate reflecting APAM's current federal, state, and local income statutory tax rates. The adjusted
tax rate was 24.7%, 24.1% and 23.5% for the years ended December 31, 2020, 2019 and 2018, respectively.
Adjusted net income per adjusted share is calculated by dividing adjusted net income by adjusted shares. The number
of adjusted shares is derived by assuming the vesting of all unvested Class A share-based awards and the exchange of
all outstanding limited partnership units of Artisan Partners Holdings for Class A common stock of APAM on a one-
for-one basis.
Adjusted EBITDA represents adjusted net income before interest expense, income taxes, depreciation and amortization
expense.
Net gain (loss) on the tax receivable agreements represents the income (expense) associated with the change in estimate of
amounts payable under the tax receivable agreements entered into in connection with APAM’s initial public offering and related
reorganization.
Net investment gain (loss) of investment products represents the non-operating income (expense) related to the Company’s seed
investments, in both consolidated investment products and nonconsolidated investment products. Excluding these non-operating
market gains or losses on seed investments provides greater transparency to evaluate the profitability and efficiency of the
underlying operations of the business.
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The following table sets forth, for the periods indicated, a reconciliation from GAAP financial measures to non-GAAP measures:
For the Years Ended December 31,
Reconciliation of non-GAAP financial measures:
Net income attributable to Artisan Partners Asset Management Inc.
(GAAP)
$
Add back: Net income attributable to noncontrolling interests - Artisan
Partners Holdings
Add back: Provision for income taxes
Add back: Net (gain) loss on the tax receivable agreements
Add back: Net investment (gain) loss of investment products attributable
to APAM
Less: Adjusted provision for income taxes
Adjusted net income (Non-GAAP)
Average shares outstanding
Class A common shares
Assumed vesting or exchange of:
Unvested Class A restricted share-based awards
Artisan Partners Holdings units outstanding (noncontrolling interests)
Adjusted shares
Basic and diluted earnings per share (GAAP)
Adjusted net income per adjusted share (Non-GAAP)
Net income attributable to Artisan Partners Asset Management Inc.
(GAAP)
Add back: Net income attributable to noncontrolling interests - Artisan
Partners Holdings
Add back: Net (gain) loss on the tax receivable agreements
Add back: Net investment (gain) loss of investment products attributable
to APAM
$
$
$
Add back: Interest expense
Add back: Provision for income taxes
Add back: Depreciation and amortization
Adjusted EBITDA (Non-GAAP)
2020
2019
(unaudited; in millions, except per share data)
2018
212.6
$
156.5
$
158.3
81.1
60.8
4.7
(10.3)
86.2
80.1
27.8
19.6
(9.9)
66.1
91.1
47.6
(0.3)
(1.1)
69.5
$
262.7
$
208.0
$
226.1
55.6
5.4
17.9
78.9
3.40
3.33
$
$
51.1
5.1
21.8
78.0
2.65
2.67
$
$
48.9
4.8
23.3
77.0
2.84
2.94
212.6
$
156.5
$
158.3
81.1
4.7
(10.3)
10.8
60.8
6.6
80.1
19.6
(9.9)
11.1
27.8
6.8
91.1
(0.3)
(1.1)
11.2
47.6
5.7
$
366.3
$
292.0
$
312.5
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Liquidity and Capital Resources
Our working capital needs, including accrued incentive compensation payments, have been and are expected to be met primarily
through cash generated by our operations. The assets and liabilities of consolidated investment products attributable to third-party
investors do not impact our liquidity and capital resources. We have no right to the benefits from, nor do we bear the risks
associated with, the assets and liabilities of consolidated investment products, beyond our direct equity investment and any
investment advisory fees earned. Accordingly, assets and liabilities of consolidated investment products attributable to third-party
investors are excluded from the amounts and discussions below. The following table shows our liquidity position as of
December 31, 2020 and December 31, 2019:
Cash and cash equivalents
December 31,
2020
December 31,
2019
(in millions)
$
155.0 $
134.6
Accounts receivable
Seed investments(1)
Undrawn commitment on revolving credit facility
(1) Seed investments include Artisan's direct equity investments in consolidated and nonconsolidated Artisan-sponsored investment products.
100.0 $
62.6 $
99.9 $
$
$
$
81.9
57.8
100.0
We manage our cash balances in order to fund our day-to-day operations. Accounts receivable primarily represent investment
advisory fees that have been earned, but not yet received from our clients. We perform a review of our receivables on a monthly
basis to assess collectability. As of December 31, 2020, none of our receivables were considered uncollectable.
We utilize capital to make seed investments in Artisan-sponsored investment products to support the development of new
investment strategies and vehicles. As of December 31, 2020, the balance of all seed investments, including investments in
consolidated investment products, was $62.6 million. The seed investments are generally redeemable at our discretion.
We have $200 million in unsecured notes outstanding and a $100 million revolving credit facility with a five-year term ending
August 2022. The notes are comprised of three series, Series C, Series D, and Series E, each with a balloon payment at maturity.
The $100 million revolving credit facility was unused as of and for the year ended December 31, 2020.
The fixed interest rate on each series of unsecured notes is subject to a 100 basis point increase in the event Holdings receives a
below-investment grade rating and any such increase will continue to apply until an investment grade rating is received. Holdings
maintained an investment grade rating for the year ended December 31, 2020.
These borrowings contain certain customary covenants including limitations on Artisan Partners Holdings’ ability to: (i) incur
additional indebtedness or liens, (ii) engage in mergers or other fundamental changes, (iii) sell or otherwise dispose of assets
including equity interests, and (iv) make dividend payments or other distributions to Artisan Partners Holdings’ partners (other
than, among others, tax distributions paid to partners for the purpose of funding tax liabilities attributable to their interests) when
a default occurred and is continuing or would result from such a distribution. In addition, in the event of a Change of Control (as
defined in the Note Purchase Agreement) or if Artisan’s average assets under management for a fiscal quarter is below $45
billion, Holdings is generally required to offer to pre-pay the notes. Artisan Partners Limited Partnership, a wholly-owned
subsidiary of Holdings, has guaranteed Holdings’ obligations under the terms of the Note Purchase Agreement.
In addition, covenants in the note purchase and revolving credit agreements require Artisan Partners Holdings to maintain the
following financial ratios:
•
•
leverage ratio (calculated as the ratio of consolidated total indebtedness on any date to consolidated EBITDA for
the period of four consecutive fiscal quarters ended on or prior to such date) cannot exceed 3.00 to 1.00 (Artisan
Partners Holdings’ leverage ratio for the year ended December 31, 2020 was 0.5 to 1.00); and
interest coverage ratio (calculated as the ratio of consolidated EBITDA for any period of four consecutive fiscal
quarters to consolidated interest expense for such period) cannot be less than 4.00 to 1.00 for such period (Artisan
Partners Holdings’ interest coverage ratio for the year ended December 31, 2020 was 39.7 to 1.00).
Our failure to comply with any of the covenants or restrictions described above could result in an event of default under the
agreements, giving our lenders the ability to accelerate repayment of our obligations. We were in compliance with all debt
covenants as of December 31, 2020.
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Distributions and Dividends
Artisan Partners Holdings’ distributions, including distributions to APAM, for the years ended December 31, 2020 and 2019
were as follows:
Holdings Partnership Distributions to Limited Partners
Holdings Partnership Distributions to APAM
Total Holdings Partnership Distributions
For the Years Ended
December 31,
2020
2019
(in millions)
$
85.8
$
94.8
270.0
226.3
$
355.8
$
321.1
APAM, acting as the general partner of Artisan Partners Holdings, declared, effective February 2, 2021, a distribution of $60.4
million payable by Artisan Partners Holdings on February 19, 2021 to holders of its partnership units, including APAM.
APAM declared and paid the following dividends per share during the years ended December 31, 2020 and 2019:
Type of Dividend
Quarterly
Special Annual
Class of Stock
For the Years Ended
December 31,
2020
2019
Common Class A
Common Class A
$
$
2.79 $
0.60 $
2.36
1.03
Our board of directors declared, effective February 2, 2021, a variable quarterly dividend of $0.97 per share of Class A common
stock with respect to the December quarter of 2020 and a special dividend of $0.31. The combined amount, $1.28 per share of
Class A common stock, will be paid on February 26, 2021 to stockholders of record as of the close of business on February 12,
2021. The variable quarterly dividend of $0.97 per share represents approximately 80% of the cash generated in the December
quarter of 2020 and a pro-rata portion of 2020 tax savings related to our tax receivable agreements. The special dividend
represents the remainder of undistributed cash generated during the year ended December 31, 2020, less the cash reserved for the
2021 franchise capital award, which reduced the 2020 special dividend by approximately $0.44 per share.
Subject to Board approval each quarter, we currently expect to pay a quarterly dividend of approximately 80% of the cash the
Company generates each quarter. We expect cash generation will generally equal adjusted net income plus equity-based
compensation expense, less cash reserved for future franchise capital awards (which we expect will approximate 4% of
investment management revenues each quarter), with additional adjustments made for certain other sources and uses of cash,
including capital expenditures. After the end of the year, our Board will consider paying a special dividend after determining the
amount of cash needed for general corporate purposes and investments in growth and strategic initiatives. Although we expect to
pay dividends according to our dividend policy, we may not pay dividends according to our policy or at all.
Tax Receivable Agreements (“TRAs”)
In addition to funding our normal operations, we will be required to fund amounts payable under the TRAs that we entered into in
connection with the IPO, which resulted in the recognition of a $412.5 million liability as of December 31, 2020. The liability
generally represents 85% of the tax benefits APAM expects to realize as a result of the merger of an entity into APAM as part of
the IPO Reorganization, our purchase of partnership units from limited partners of Holdings and the exchange of partnership
units (for shares of Class A common stock or other consideration). The estimated liability assumes no material changes in the
relevant tax law and that APAM earns sufficient taxable income to realize all tax benefits subject to the TRAs. An increase or
decrease in future tax rates will increase or decrease, respectively, the expected tax benefits APAM would realize and the
amounts payable under the TRAs. Changes in the estimate of expected tax benefits APAM would realize and the amounts
payable under the TRAs as a result of change in tax rates have been and will be recorded in net income.
The liability will increase upon future purchases or exchanges of limited partnership units with the increase representing amounts
payable under the TRAs equal to 85% of the estimated future tax benefits, if any, resulting from such purchases or exchanges.
We intend to fund the payment of amounts due under the TRAs out of the reduced tax payments that APAM realizes in respect of
the tax attributes to which the TRAs relate.
The actual increase in tax basis, as well as the amount and timing of any payments under these agreements, will vary depending
upon a number of factors, including the timing of sales or exchanges by the holders of limited partnership units, the price of the
Class A common stock at the time of such sales or exchanges, whether such sales or exchanges are taxable, the amount and
timing of the taxable income APAM generates in the future and the tax rate then applicable and the portion of APAM’s payments
under the TRAs constituting imputed interest or depreciable basis or amortizable basis.
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In certain cases, payments under the TRAs may be accelerated and/or significantly exceed the actual benefits we realize in
respect of the tax attributes subject to the TRAs. In such cases, we intend to fund those payments with cash on hand, although we
may have to borrow funds depending on the amount and timing of the payments. During the year ended December 31, 2020, we
made payments of $27.0 million, related to the TRAs, including interest. We expect to make payments of approximately $32
million in 2021 related to the TRAs.
Cash Flows
For the Years Ended December 31,
2020
2019
2018
(in millions)
Cash, cash equivalents and restricted cash as of January 1
$
144.3 $
175.5 $
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash used in financing activities
Net impact of deconsolidation of consolidated investment products
318.7
18.7
(282.2)
—
292.9
(17.5)
(306.6)
—
Cash, cash equivalents and restricted cash as of December 31,
$
199.5 $
144.3 $
159.8
333.3
(14.3)
(263.5)
(39.8)
175.5
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Net cash provided by operating activities increased $25.8 million for the year ended December 31, 2020, compared to the year
ended December 31, 2019, primarily due to an increase in operating income resulting from higher average AUM and revenues,
partially offset by decreases resulting from income tax payments and timing differences in other working capital accounts. For
the year ended December 31, 2020 compared to the year ended December 31, 2019, our operating income, excluding noncash
share-based related compensation expense, increased $69.2 million. Cash paid for income taxes increased $16.9 million and
changes in other working capital negatively impacted operating cash flows by $16.9 million primarily due to an increase in
accounts receivable and the timing of executive bonus payments. Operating cash flows were also negatively impacted by a $9.3
million reduction in cash provided by consolidated investment products.
Investing activities consist primarily of acquiring and selling property and equipment, leasehold improvements and the purchase
and sale of investment securities. Net cash provided by investing activities increased $36.2 million during the year ended
December 31, 2020, primarily due to a $21.5 million increase in net proceeds from the sale of investment securities and a $14.7
million decrease in the acquisition of property and equipment and leasehold improvements.
Financing activities consist primarily of partnership distributions to non-controlling interests, dividend payments to holders of our
Class A common stock, proceeds from the issuance of Class A common stock in follow-on offerings, payments to purchase
Holdings partnership units, and payments of amounts owed under the tax receivable agreements. Net cash used in financing
activities decreased $24.4 million during the year ended December 31, 2020, primarily due to a $34.4 million increase in
contributions from noncontrolling interests in our consolidated investment products and a $9.0 million decrease in distributions
paid to limited partners. These lower cash uses were partially offset by a $14.8 million increase in dividends paid.
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Contractual Obligations
The following table sets forth our contractual obligations under certain contracts as of December 31, 2020:
Payments Due by Period
Total
Less than
1 year
1-3 Years
3-5 Years
(in millions)
More than 5
Years
Principal payments on borrowings
TRAs (1)
Interest payable
Lease obligations
$
200.0 $
— $
90.0 $
60.0 $
412.5
39.5
109.9
—
10.3
16.7
—
15.0
29.2
—
9.7
27.0
50.0
—
4.5
37.0
Total Contractual Obligations
(1) The estimated payments under the TRAs as of December 31, 2020 are described above under “Liquidity and Capital Resources — Tax
Receivable Agreements (“TRAs”)”. However, amounts payable under the TRAs will increase upon exchanges of Holdings units for our Class A
common stock or sales of Holdings units to us, with the increase representing 85% of the estimated future tax benefits, if any, resulting from the
exchanges or sales. The actual amount and timing of payments associated with our existing payable under our tax receivable agreements or
future exchanges or sales, and associated tax benefits, will vary depending upon a number of factors as described above. As a result, the timing
of payments by period is currently unknown. We expect to pay approximately $32 million in 2021 related to the TRAs.
134.2 $
761.9 $
96.7 $
27.0 $
91.5
$
The table above does not include income tax liabilities for unrecognized tax benefits due to the uncertainty regarding the timing
and amount of future cash outflows. As of December 31, 2020, the liability was $1.3 million, which included accrued interest of
$0.2 million.
Off-Balance Sheet Arrangements
As of December 31, 2020, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a
material current or future effect on our financial condition, results of operations, liquidity or capital resources.
Critical Accounting Policies and Estimates
The accompanying consolidated financial statements were prepared in accordance with GAAP, and related rules and regulations
of the SEC. The preparation of financial statements in conformity with GAAP requires management to make estimates or
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates or assumptions
and may have a material effect on the consolidated financial statements.
Accounting policies are an integral part of our financial statements. A thorough understanding of these accounting policies is
essential when reviewing our reported results of operations and our financial condition. Management believes that the critical
accounting policies and estimates discussed below involve additional management judgment due to the sensitivity of the methods
and assumptions used.
Consolidation
We consolidate all subsidiaries or other entities in which we have a controlling financial interest. We assess each legal entity in
which we hold a variable interest on a quarterly basis to determine whether consolidation is appropriate. We determine whether
we have a controlling financial interest in the entity by evaluating whether the entity is a voting interest entity (“VOE”) or a
variable interest entity (“VIE”) under GAAP. Assessing whether an entity is a VIE or VOE and if it requires consolidation
involves judgment and analysis. Factors considered in this assessment include the legal organization of the entity, our equity
ownership and contractual involvement with the entity and any related party or de facto agent implications of our involvement
with the entity.
Voting Interest Entities - A VOE is an entity in which (i) the total equity investment at risk is sufficient to enable the entity to
finance its activities independently and (ii) the equity holders at risk have the obligation to absorb losses, the right to receive
residual returns and the right to direct the activities of the entity that most significantly impact the entity’s economic
performance, whereby the equity investment has all the characteristics of a controlling financial interest. As a result, voting rights
are a key driver of determining which party, if any, should consolidate the entity. Under the VOE model, controlling financial
interest is generally defined as a majority ownership of voting interests.
Variable Interest Entities - A VIE is an entity that lacks one or more of the characteristics of a VOE. In accordance with GAAP,
an enterprise must consolidate all VIEs of which it is the primary beneficiary. We determine if a legal entity meets the definition
of a VIE by considering whether the fund’s equity investment at risk is sufficient to finance its activities without additional
subordinated financial support and whether the fund’s at-risk equity holders absorb any losses, have the right to receive residual
returns and have the right to direct the activities of the entity most responsible for the entity’s economic performance.
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Under the VIE model, controlling financial interest is defined as (i) the power to direct activities that most significantly impact
the economic performance of the entity and (ii) the right to receive potentially significant benefits or the obligation to absorb
potentially significant losses. We will generally consolidate VIEs in which we meet the power criteria and hold an equity
ownership interest of greater than 10%.
We serve as the investment adviser for Artisan Funds, a family of mutual funds registered with the SEC under the Investment
Company Act of 1940, and investment manager of Artisan Global Funds, a family of Ireland-based UCITS funds. Artisan Funds
and Artisan Global Funds are corporate entities the business and affairs of which are managed by their respective boards of
directors. The shareholders of the funds retain voting rights, including the right to elect and reelect members of their respective
boards of directors. Each series of Artisan Funds is a VOE and is separately evaluated for consolidation under the VOE model.
The shareholders of Artisan Global Funds lack simple majority liquidation rights, and as a result, Artisan Global Funds is
evaluated for consolidation under the VIE model. Artisan Private Funds are also evaluated for consolidation under the VIE model
because third-party equity holders of the funds lack the ability to remove Artisan as the general partner, or otherwise divest
Artisan of its control of the funds.
Seed Investments - We generally make seed investments in sponsored investment portfolios at the portfolio’s formation. If the
seed investment results in a controlling financial interest, we will consolidate the investment, and the underlying individual
securities will be accounted for based on their classification at the underlying fund. If the seed investment results in significant
influence, but not control, the investment will be accounted for as an equity method investment. Significant influence is generally
considered to exist with equity ownership levels between 20% and 50%, although other factors are considered. Seed investments
in which we do not have a controlling financial interest or significant influence are accounted for as investment securities. These
investments are measured at fair value in the Consolidated Statement of Financial Condition. Realized and unrealized gains
(losses) on investment securities are recorded in net investment income in the Consolidated Statements of Operations. Dividend
income from these investments is recognized when earned and is included in net investment income in the Consolidated
Statements of Operations.
Revenue Recognition
Investment management fees are generally computed as a percentage of assets under management and are recognized as revenue
at the end of each distinct service period. Fees for providing investment management services are computed and billed in
accordance with the underlying investment management agreements, which is generally on a monthly or quarterly basis.
Investment management fees are presented net of cash rebates to certain Artisan Global Fund investors and expense
reimbursements pursuant to contractual expense limitations of pooled investment vehicles.
A number of investment management agreements provide for performance-based fees or incentive allocations, collectively
“performance fees”. Performance fees, if earned, are recognized upon completion of the contractually determined measurement
period, which is generally quarterly or annually. Performance fees generally are not subject to claw back as a result of
performance declines subsequent to the most recent measurement date.
Artisan accounts for asset management services as a single performance obligation that is satisfied over time, using a time-based
measure of progress to recognize revenue. Customer consideration is variable due to the uncertainty of the value of assets under
management during each distinct service period. At the end of each quarter, Artisan records revenue for the actual amount of
investment management fees for that quarter because the uncertainty has been resolved.
Performance fees are subject to the uncertainty of market volatility, and as a result, the entire amount of the variable
consideration related to performance fees is constrained until the end of each measurement period. At the end of the quarterly or
annual measurement period, revenue is recorded for the actual amount of performance fees earned during that period because the
uncertainty has been resolved.
The portfolios of Artisan Funds and Artisan Global Funds, as well as the portfolios we manage for our separate account clients,
are invested principally in securities for which market values are readily available, with a portion of each portfolio held in cash or
cash-like instruments. With the exception of the assets managed by our Credit team (which represented approximately 4.0% of
our assets under management at December 31, 2020), the portfolios are invested principally in publicly-traded equity securities.
The investment management fees that we receive are calculated based on the values of the securities held in the accounts that we
manage for our clients. For our U.S.-registered mutual fund and UCITS funds clients, including Artisan Funds and Artisan
Global Funds, and for Artisan Private Funds, our fees are based on the values of the funds’ assets as determined for purposes of
calculating their net asset values. Securities held by Artisan Funds, Artisan Global Funds, and Artisan Private Funds are generally
valued at closing market prices, or if closing market prices are not readily available or are not considered reliable, at a fair value
determined under procedures established by the fund’s board (fair value pricing). Values of securities determined using fair value
pricing are likely to be different than they would be if only closing market prices were used.
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For separate account clients, our fees may be based, at the client’s option, on the values of the securities in the portfolios we
manage as determined by the client (or its custodian or other service provider) or by us in accordance with valuation procedures
we have adopted. The valuation procedures we have adopted generally use closing market prices in the markets in which the
securities trade, without adjustment for subsequent events except in unusual circumstances. We believe that our fees based on
valuations determined under our procedures are not materially different from the fees we receive that are based on valuations
determined by clients, their custodians or other service providers.
Income Taxes
We operate in numerous states and countries and must allocate our income, expenses, and earnings under the various laws and
regulations of each of these taxing jurisdictions. Accordingly, our provision for income taxes represents our total estimate of the
liability for income taxes that we have incurred in doing business each year in all of our locations. Annually, we file tax returns
that represent our filing positions with each jurisdiction and settle our tax return liabilities. Each jurisdiction has the right to audit
those tax returns and may take different positions with respect to income and expense allocations and taxable earnings
determinations. Because the determination of our annual income tax provision is subject to judgments and estimates, actual
results may vary from those recorded in our financial statements. We recognize additions to and reductions in income tax expense
during a reporting period that pertains to prior period provisions as our estimated liabilities are revised and our actual tax returns
and tax audits are completed.
Our management is required to exercise judgment in developing our provision for income taxes, including the determination of
deferred tax assets and liabilities and any valuation allowance that might be required against deferred tax assets. As of December
31, 2020, we have not recorded a valuation allowance on any deferred tax assets. In the event that sufficient taxable income of the
same character does not result in future years, among other things, a valuation allowance for certain of our deferred tax assets
may be required.
Payments pursuant to the Tax Receivable Agreements (“TRAs”)
We have recorded a liability of $412.5 million as of December 31, 2020, representing 85% of the estimated future tax benefits
subject to the TRAs. The actual amount and timing of any payments under these agreements will vary depending upon a number
of factors, including the timing of sales or exchanges by the holders of limited partnership units, the price of the Class A common
stock at the time of such sales or exchanges, whether such sales or exchanges are taxable, the amount and timing of the taxable
income APAM generates in the future and the tax rate then applicable and the portion of APAM’s payments under the TRAs
constituting imputed interest or depreciable basis or amortizable basis.
New or Revised Accounting Standards
See Note 2, “Summary of Significant Accounting Policies — Recent accounting pronouncements” to the Consolidated Financial
Statements included in Item 8 of Part II of this Form 10-K.
Item 7A. Qualitative and Quantitative Disclosures Regarding Market Risk
Market Risk
Our exposure to market risk is directly related to the role of our operating company as an investment adviser for the pooled
vehicles and separate accounts it manages. Essentially all of our revenues are derived from investment management agreements
with these vehicles and accounts. Under these agreements, the investment advisory fees we receive are generally based on the
value of our assets under management, our fee rates and, for the accounts on which we earn performance based fees, the
investment performance of those accounts. Accordingly, if our assets under management decline as a result of market
depreciation, our revenues and net income will also decline. In addition, such a decline could cause our clients to withdraw their
funds in favor of investments believed to offer higher returns or lower risk, which would cause our revenues to decline further.
The value of our assets under management was $157.8 billion as of December 31, 2020. A 10% increase or decrease in the value
of our assets under management, if proportionately distributed over all our investment strategies, products and client
relationships, would cause an annualized increase or decrease in our revenues of approximately $111.9 million at our current
weighted average fee rate of 71 basis points. Because of our declining rates of fee for larger relationships and differences in our
rates of fee across investment strategies, a change in the composition of our assets under management, in particular an increase in
the proportion of our total assets under management attributable to strategies, clients or relationships with lower effective rates of
fees, could have a material negative impact on our overall weighted average rate of fee. The same 10% increase or decrease in the
value of our total assets under management, if attributed entirely to a proportionate increase or decrease in the assets of each of
the Artisan Funds and Artisan Global Funds, to which we provide a range of services in addition to those provided to separate
accounts and therefore charge a higher rate of fee, would cause an annualized increase or decrease in our revenues of
approximately $144.5 million at the Artisan Funds and Artisan Global Funds aggregate weighted average fee of 92 basis points.
If the same 10% increase or decrease in the value of our total assets under management was attributable entirely to a
proportionate increase or decrease in the assets of each separate account we manage, it would cause an annualized increase or
decrease in our revenues of approximately $83.0 million at the current weighted average fee rate across all of our separate
accounts of 53 basis points.
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As is customary in the asset management industry, clients invest in particular strategies to gain exposure to certain asset classes,
which exposes their investment to the benefits and risks of those asset classes. Because we believe that our clients invest in each
of our strategies in order to gain exposure to the portfolio securities of the respective strategies and may implement their own risk
management program or procedures, we have not adopted a corporate-level risk management policy regarding client assets, nor
have we attempted to hedge at the corporate level or within individual strategies the market risks that would affect the value of
our overall assets under management and related revenues. Some of these risks (e.g., sector risks and currency risks) are inherent
in certain strategies, and clients may invest in particular strategies to gain exposure to particular risks. While negative returns in
our investment strategies and net client cash outflows do not directly reduce the assets on our balance sheet (because the assets
we manage are owned by our clients, not us), any reduction in the value of our assets under management would result in a
reduction in our revenues.
We also are subject to market risk from a decline in the prices of marketable securities that we own. The total value of marketable
securities we owned, including our direct equity investments in consolidated investment products, was $62.6 million as of
December 31, 2020. We invested in certain Artisan Private Funds, Artisan Funds and Artisan Global Funds in amounts sufficient
to cover certain organizational expenses and to ensure that the funds had sufficient assets at the commencement of their
operations to build a viable investment portfolio. Assuming a 10% increase or decrease in the values of our total marketable
securities, the fair value would increase or decrease by $6.3 million at December 31, 2020. Management regularly monitors the
value of these investments; however, given their nature and relative size, we have not adopted a specific risk management policy
to manage the associated market risk. Due to the nature of our business, we believe that we do not face any material risk from
inflation.
Exchange Rate Risk
A substantial portion of the accounts that we advise, or sub-advise, hold investments that are denominated in currencies other
than the U.S. dollar. Movements in the rate of exchange between the U.S. dollar and the underlying foreign currency affect the
values of assets held in accounts we manage, thereby affecting the amount of revenues we earn. The value of the assets we
manage was $157.8 billion as of December 31, 2020. As of December 31, 2020, approximately 50% of our assets under
management were invested in strategies that primarily invest in securities of non-U.S. companies and approximately 42% of our
assets under management were invested in securities denominated in currencies other than the U.S. dollar. To the extent our
assets under management are denominated in currencies other than the U.S. dollar, the value of those assets under management
will decrease with an increase in the value of the U.S. dollar, or increase with a decrease in the value of the U.S. dollar. Each
investment team monitors its own exposure to exchange rate risk and makes decisions on how to manage that risk in the
portfolios managed by that team.
We have not adopted a corporate-level risk management policy to manage exchange rate risk in the assets we manage. Assuming
that 42% of our assets under management is invested in securities denominated in currencies other than the U.S. dollar and
excluding the impact of any hedging arrangements, a 10% increase or decrease in the value of the U.S. dollar would decrease or
increase the fair value of our assets under management by $6.6 billion, which would cause an annualized increase or decrease in
revenues of approximately $47.0 million at our current weighted average fee rate of 71 basis points.
We operate in several foreign countries of which the United Kingdom is the most prominent. We incur operating expenses and
have foreign currency-denominated assets and liabilities associated with these operations. In addition, we have revenue
arrangements that are denominated in non-U.S. currencies. We do not believe that foreign currency fluctuations materially affect
our results of operations.
Interest Rate Risk
We generally invest our available cash balances in money market mutual funds that invest primarily in U.S. Treasury or agency-
backed money market instruments. These funds attempt to maintain a stable net asset value but interest rate changes or other
market risks may affect the fair value of those funds’ investments and, if significant, could result in a loss of investment principal.
Interest rate changes affect the income we earn from our excess cash balances. As of December 31, 2020, $25.9 million of our
available cash was invested in money market funds that invested solely in U.S. Treasuries. Given the current yield on these funds,
interest rate changes would not have a material impact on the income we earn from these investments. The remaining portion of
our cash was held in demand deposit accounts.
Interest rate changes may affect the amount of our interest payments in connection with our revolving credit agreement, and
thereby affect future earnings and cash flows. As of December 31, 2020, there were no borrowings outstanding under the
revolving credit agreement.
The strategies managed by our Credit Team, which had $6.3 billion of assets under management as of December 31, 2020, invest
in fixed income securities. The values of debt instruments held by the strategy may fall in response to increases in interest rates,
which would reduce our revenues. We have considered the potential impact of a 100 basis point movement in market interest
rates on the portfolios of the strategies managed by our Credit Team. Based on our analysis, we do not expect that such a change
would have a material impact on our revenues or results of operations in the next twelve months.
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Item 8. Financial Information and Supplementary Data
Index to Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Condition as of December 31, 2020 and 2019
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements as of and for the years ended December 31, 2020, 2019 and 2018
Page
58
60
61
62
63
65
67
57
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Artisan Partners Asset Management Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial condition of Artisan Partners Asset Management Inc.
and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of
comprehensive income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended
December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have
audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
Report of Management on Internal Control over Financial Reporting appearing under Item 9A “Controls and Procedures”. Our
responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control
over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of
the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Income Taxes – Deferred Tax Assets and Amounts Payable Under Tax Receivable Agreements
As described in Notes 2 and 11 to the consolidated financial statements, the Company has recorded a deferred tax assets (“DTA”)
balance of $482 million at December 31, 2020 while the amount payable under the tax receivable agreements (“TRA”) was $412
million. DTAs are determined by management based upon the future tax consequences attributable to temporary differences
between the financial statement carrying amounts and tax bases of assets. The TRAs generally provide for payment of 85% of the
applicable cash savings, if any, of U.S. federal, state and local income taxes that the Company actually realizes (or is deemed to
realize in certain circumstances) as a result of certain tax attributes or benefits. The cash savings are calculated by comparing the
Company’s actual income tax liability to the amount it would have been required to pay had it not been able to utilize any of the
tax benefits subject to the TRAs. The increase in tax basis, which results in a DTA, as well as the amount and timing of any
payments under these agreements, will vary depending on a number of factors, which include the timing of sales or exchanges by
the holders of limited partnership units, the price of the Class A common stock at the time of such sales or exchanges, whether
such sales or exchanges are taxable, the amount and timing of the taxable income the Company generates in the future and the tax
rate then applicable, and the portion of the Company’s payments under the TRAs constituting imputed interest or depreciable
basis or amortizable basis.
The principal considerations for our determination that performing procedures relating to deferred tax assets and amounts payable
under tax receivable agreements is a critical audit matter are (1) the significant audit effort necessary in performing procedures
related to the aforementioned factors utilized in the estimate and the assessment of the application of the tax laws, and (2) the use
of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
income taxes, including controls over the deferred tax assets and tax receivable agreements. These procedures also included,
among others, testing management’s process for estimating the deferred tax assets and amounts payable under tax receivable
agreements, including (1) testing the factors to the Company’s estimates, related to the timing of sales or exchanges by the
holders of limited partnership units and the price of the Class A common stock at the time of such sales or exchanges, (2)
assessing the reasonableness of the factors used in the Company’s estimates, related to the likelihood of the Company having
sufficient future taxable income to utilize the deferred tax asset and the tax rate then applicable as well as the portion of the
Company’s payments under the TRA constituting imputed interest or depreciable basis or amortizable basis, and (3) testing the
impact of sales or exchanges of limited partnership units on the deferred tax asset and amounts payable under tax receivable
agreements. Professionals with specialized skill and knowledge were used to assist in testing the estimates and assessing the
appropriateness of the application of the tax laws related to evaluating whether the sales or exchanges of partnership units are
taxable.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 23, 2021
We have served as the Company’s auditor since 1995.
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ARTISAN PARTNERS ASSET MANAGEMENT INC.
Consolidated Statements of Financial Condition
(U.S. dollars in thousands, except per share amounts)
At December 31,
2020
2019
Cash and cash equivalents
Accounts receivable
Investment securities
Prepaid expenses
Property and equipment, net
Operating lease assets
Restricted cash
Deferred tax assets
Other
Assets of consolidated investment products
Cash and cash equivalents
Accounts receivable and other
Investment assets, at fair value
Total assets
ASSETS
$
154,987 $
99,888
3,656
10,820
35,874
79,304
629
482,061
6,942
43,834
3,587
230,380
$
1,151,962 $
134,621
81,868
23,878
9,589
39,495
87,155
629
435,897
3,099
9,005
1,647
106,736
933,619
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND STOCKHOLDERS’ EQUITY
Accounts payable, accrued expenses, and other
Accrued incentive compensation
Operating lease liabilities
Borrowings
Amounts payable under tax receivable agreements
Liabilities of consolidated investment products
Accounts payable, accrued expenses, and other
Investment liabilities, at fair value
Total liabilities
Commitments and contingencies
Redeemable noncontrolling interests
Common stock
$
$
24,727 $
12,924
92,671
199,284
412,468
109,362
15,731
867,167 $
19,926
16,159
101,154
199,103
375,324
34,156
6,186
752,008
93,753
43,110
Class A common stock ($0.01 par value per share, 500,000,000 shares authorized,
63,131,007 and 56,429,825 shares outstanding at December 31, 2020 and
December 31, 2019, respectively)
Class B common stock ($0.01 par value per share, 200,000,000 shares authorized,
4,457,958 and 7,803,364 shares outstanding at December 31, 2020 and
December 31, 2019, respectively)
Class C common stock ($0.01 par value per share, 400,000,000 shares authorized,
10,983,145 and 13,568,665 shares outstanding at December 31, 2020 and
December 31, 2019, respectively)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Total Artisan Partners Asset Management Inc. stockholders’ equity
Noncontrolling interests - Artisan Partners Holdings
Total stockholders’ equity
Total liabilities, redeemable noncontrolling interests, and stockholders’ equity
$
$
631
45
110
107,738
72,944
(991)
180,477
10,565
191,042 $
1,151,962 $
564
78
136
89,149
44,455
(1,425)
132,957
5,544
138,501
933,619
The accompanying notes are an integral part of the consolidated financial statements.
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ARTISAN PARTNERS ASSET MANAGEMENT INC.
Consolidated Statements of Operations
(U.S. dollars in thousands, except per share amounts)
Revenues
Management fees
Performance fees
Total revenues
Operating Expenses
Compensation and benefits
Distribution, servicing and marketing
Occupancy
Communication and technology
General and administrative
Total operating expenses
Total operating income
Non-operating income (expense)
Interest expense
Net investment gain (loss) of consolidated investment products
Other investment gain (loss)
Net gain (loss) on the tax receivable agreements
Total non-operating income (expense)
Income before income taxes
Provision for income taxes
Net income before noncontrolling interests
Less: Net income attributable to noncontrolling interests - Artisan
Partners Holdings
Less: Net income attributable to noncontrolling interests - consolidated
investment products
Net income attributable to Artisan Partners Asset Management Inc.
Basic earnings per share
Diluted earnings per share
For the Years Ended December 31,
2018
2019
2020
$
$
884,902 $ 794,338 $ 825,679
2,956
4,614
14,665
899,567 $ 798,952 $ 828,635
435,818
24,312
21,922
38,138
21,053
541,243
358,324
(10,804)
26,147
305
(4,674)
10,974
369,298
60,795
308,503
400,456
23,170
23,319
39,499
29,053
515,497
283,455
(11,054)
10,084
6,338
(19,557)
(14,189)
269,266
27,809
241,457
413,166
26,561
18,700
37,164
28,103
523,694
304,941
(11,223)
5,721
2,098
251
(3,153)
301,788
47,598
254,190
81,079
80,055
91,054
14,807
4,866
4,827
212,617 $ 156,536 $ 158,309
3.40 $
3.40 $
2.65 $
2.65 $
2.84
2.84
$
$
$
Basic weighted average number of common shares outstanding
55,633,529
51,127,929
48,862,435
Diluted weighted average number of common shares outstanding
55,637,922
51,127,929
48,862,435
Dividends declared per Class A common share
$
3.39 $
3.39 $
3.19
The accompanying notes are an integral part of the consolidated financial statements.
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ARTISAN PARTNERS ASSET MANAGEMENT INC.
Consolidated Statements of Comprehensive Income
(U.S. dollars in thousands)
For the Years Ended December 31,
Net income before noncontrolling interests
Other comprehensive income (loss)
Foreign currency translation gain (loss)
Total other comprehensive income (loss)
Comprehensive income
$
Comprehensive income attributable to noncontrolling interests - Artisan
Partners Holdings
Comprehensive income attributable to noncontrolling interests -
consolidated investment products
2020
308,503 $ 241,457 $ 254,190
2018
2019
732
732
309,235
732
732
242,189
(1,002)
(1,002)
253,188
81,376
80,317
90,816
14,807
4,866
4,827
Comprehensive income attributable to Artisan Partners Asset Management Inc.
$
213,052 $ 157,006 $ 157,545
The accompanying notes are an integral part of the consolidated financial statements.
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ARTISAN PARTNERS ASSET MANAGEMENT INC.
Consolidated Statements of Changes in Stockholders’ Equity
(U.S. dollars in thousands)
Class A
Common
Stock
Class B
Common
Stock
Class C
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
interests -
Artisan
Partners
Holdings
Total
stockholders’
equity
Redeemable
non-
controlling
interests
Balance at January 1, 2018
Net income
$
505 $
—
119 $
—
132 $ 147,910 $ (37,870) $
—
—
158,309
(873) $
—
(1,858) $ 108,065 $ 62,581
4,827
249,363
91,054
—
—
—
—
—
(717)
(285)
(1,002)
—
—
—
—
358
(260)
—
98
—
(45)
4,923
—
15,965
53,554
Other comprehensive income -
foreign currency translation
Other comprehensive income -
available for sale investments,
net of tax
Cumulative impact of changes
in ownership of Artisan Partners
Holdings LP, net of tax
Amortization of equity-based
compensation
Deferred tax assets, net of
amounts payable under tax
receivable agreements
Issuance of Class A common
stock, net of issuance costs
Forfeitures and employee/
partner terminations
Issuance of restricted stock
awards
Employee net share settlement
Exchange of subsidiary equity
Purchase of equity and
subsidiary equity
Capital contributions, net
Impact of deconsolidation of
consolidated investment
products
Distributions
Dividends
Balance at December 31, 2018
Net income
Other comprehensive income -
foreign currency translation
Cumulative impact of changes
in ownership of Artisan Partners
Holdings LP, net of tax
Amortization of equity-based
compensation
Deferred tax assets, net of
amounts payable under tax
receivable agreements
Issuance of Class A common
stock, net of issuance costs
Forfeitures and employee/
partner terminations
Issuance of restricted stock
awards
Employee net share settlement
Exchange of subsidiary equity
Capital contributions, net
Distributions
Dividends
Balance at December 31, 2019
—
—
—
—
—
(4,878)
—
37,589
—
4,376
—
21,283
(20)
15
—
—
—
(5)
(15)
(1,742)
—
—
—
(21,472)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6
5
15
(2)
12
—
—
—
—
—
541 $
—
$
—
—
(7)
(6)
—
—
—
—
86 $
—
—
—
—
—
—
—
—
(85,498) (82,180)
142 $ 97,553 $ 38,617 $
—
—
156,536
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3,533)
—
31,268
—
2,716
—
—
(22)
—
—
—
—
—
—
—
10
(1)
14
—
—
—
564 $
—
—
(8)
—
—
—
78 $
$
(10)
(1,470)
—
—
—
—
—
(6)
—
—
(37,353) (150,698)
—
136 $ 89,149 $ 44,455 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,895) $
—
—
—
—
—
—
—
—
—
—
(1,425) $
—
—
—
4,376
21,289
—
—
(820)
—
—
(2,564)
—
—
—
(21,478)
—
—
46,572
—
—
(79,631)
—
(103,434)
(103,434)
(102)
—
(167,780)
5,443 $ 140,487 $ 34,349
4,866
236,591
80,055
521
211
732
(51)
3,584
—
—
11,827
43,095
—
—
—
2,716
(22)
—
—
(607)
—
—
—
(2,078)
—
—
—
—
—
3,895
—
(94,842)
(94,842)
—
(188,178)
(127)
5,544 $ 138,501 $ 43,110
The accompanying notes are an integral part of the consolidated financial statements.
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ARTISAN PARTNERS ASSET MANAGEMENT INC.
Consolidated Statements of Changes in Stockholders’ Equity, continued
(U.S. dollars in thousands)
Class A
Common
Stock
Class B
Common
Stock
Class C
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
(Deficit)
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
interests -
Artisan
Partners
Holdings
Total
stockholders’
equity
Redeemable
non-
controlling
interests
Balance at January 1, 2020
$
564 $
78 $
136 $ 89,149 $ 44,455 $
(1,425) $
5,544 $ 138,501 $ 43,110
Net income
Other comprehensive income -
foreign currency translation
Cumulative impact of changes
in ownership of Artisan Partners
Holdings LP, net of tax
Amortization of equity-based
compensation
Deferred tax assets, net of
amounts payable under tax
receivable agreements
Issuance of Class A common
stock, net of issuance costs
Forfeitures and employee/
partner terminations
Issuance of restricted stock
awards
Employee net share settlement
Exchange of subsidiary equity
Purchase of equity and
subsidiary equity
Capital contributions, net
Impact of deconsolidation of
consolidated investment
products
Distributions
—
—
—
—
—
18
—
9
(1)
41
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2,544)
—
28,801
—
14,740
—
62,696
—
—
—
(9)
—
(15)
—
(26)
(3,314)
—
(18)
—
(63,009)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
212,617
—
81,079
293,696
14,807
—
—
623
109
732
(189)
2,733
—
—
—
—
—
—
—
—
—
—
—
8,226
37,027
—
—
—
—
14,740
62,714
—
—
(1,215)
—
(4,530)
—
—
—
—
(63,027)
—
38,277
—
(2,441)
(85,805)
(85,805)
—
—
—
—
—
—
—
—
—
—
—
—
Dividends
Balance at December 31, 2020
—
631 $
$
—
45 $
—
(18,772) (184,128)
110 $ 107,738 $ 72,944 $
—
(991) $
(106)
—
(203,006)
10,565 $ 191,042 $ 93,753
The accompanying notes are an integral part of the consolidated financial statements.
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ARTISAN PARTNERS ASSET MANAGEMENT INC.
Consolidated Statements of Cash Flows
(U.S. dollars in thousands)
Cash flows from operating activities
Net income before noncontrolling interests
$
308,503 $
241,457 $
254,190
For the Years Ended December 31,
2020
2019
2018
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Deferred income taxes
Asset impairment
Noncash lease expense
Net investment (gain) loss on nonconsolidated seed investment
securities
Net (gain) loss on the tax receivable agreements
(Gain) loss on disposal of property and equipment
Amortization of debt issuance costs
Share-based compensation
Net investment (gain) loss of consolidated investment products
6,625
27,990
871
(1,499)
(160)
4,674
5
422
37,027
(26,147)
6,233
7,356
2,107
1,533
(5,101)
19,557
275
463
43,095
(10,084)
5,668
24,863
—
4,086
(688)
(251)
18
457
53,554
(5,721)
Purchase of investments by consolidated investment products
(191,274)
(123,366)
(643,548)
Proceeds from sale of investments by consolidated investment
products
Change in assets and liabilities resulting in an increase
(decrease) in cash:
Accounts receivable
Prepaid expenses and other assets
Accounts payable and accrued expenses
Net change in operating assets and liabilities of consolidated
investment products
Net cash provided by operating activities
Cash flows from investing activities
Acquisition of property and equipment
Leasehold improvements
Proceeds from sale of investment securities
Purchase of investment securities
Net cash provided by (used in) investing activities
137,561
75,468
611,117
(18,020)
(14,178)
(6,110)
1,622
36,587
318,677
(2,049)
(1,050)
24,001
(2,150)
18,752
1,031
6,881
40,066
292,793
(3,498)
(14,286)
288
(10)
9,002
(2,275)
10,027
12,823
333,322
(2,834)
(11,007)
—
(500)
(17,506)
(14,341)
The accompanying notes are an integral part of the consolidated financial statements.
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ARTISAN PARTNERS ASSET MANAGEMENT INC.
Consolidated Statements of Cash Flows (continued)
(U.S. dollars in thousands)
Cash flows from financing activities
Partnership distributions
Dividends paid
Payment of debt issuance costs
Proceeds from issuance of notes payable
Principal payments on notes payable
Payment under the tax receivable agreements
Net proceeds from issuance of common stock
Payment of costs directly associated with the issuance of Class A
common stock
Purchase of equity and subsidiary equity
Taxes paid related to employee net share settlement
Capital contributions to consolidated investment products, net
For the Years Ended December 31,
2020
2019
2018
(85,805)
(94,842)
(203,006)
(188,178)
(103,434)
(167,780)
—
—
—
(26,943)
63,027
(227)
(63,027)
(4,530)
38,277
(366)
50,000
(50,000)
(24,998)
—
—
—
(2,078)
3,895
—
—
—
(36,111)
21,478
(166)
(21,478)
(2,564)
46,572
Net cash used in financing activities
(282,234)
(306,567)
(263,483)
Net increase (decrease) in cash, cash equivalents and restricted cash
Net cash impact of deconsolidation of consolidated investment products
55,195
(31,280)
—
—
55,498
(39,759)
Cash, cash equivalents and restricted cash
Beginning of period
End of period
144,255
175,535
159,796
$
199,450 $
144,255 $
175,535
Cash, cash equivalents and restricted cash as of the end of the period
Cash and cash equivalents
Restricted cash
Cash and cash equivalents of consolidated investment products
$
154,987 $
134,621 $
160,463
629
43,834
629
9,005
629
14,443
Cash, cash equivalents and restricted cash
$
199,450 $
144,255 $
175,535
Supplementary information
Noncash activity:
Establishment of deferred tax assets
$
77,756 $
35,999 $
Establishment of amounts payable under tax receivable agreements
64,087
30,967
Increase in investment securities due to deconsolidation of consolidated
investment products
Operating lease assets obtained in exchange for operating leases
1,469
3,425
946
4,162
Cash paid for:
Interest on borrowings
Income tax
$
10,255 $
10,649 $
35,484
18,593
24,679
20,303
11,381
—
10,694
20,731
The accompanying notes are an integral part of the consolidated financial statements.
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ARTISAN PARTNERS ASSET MANAGEMENT INC.
Notes to Consolidated Financial Statements
(U.S. currencies in thousands, except share and per share amounts and as otherwise indicated)
Note 1. Nature of Business and Organization
Nature of Business
Artisan Partners Asset Management Inc. (“APAM”), through its subsidiaries, is an investment management firm focused on
providing high-value added, active investment strategies to sophisticated clients globally. APAM and its subsidiaries are hereafter
referred to collectively as “Artisan” or the “Company”.
Artisan’s autonomous investment teams manage a broad range of U.S., non-U.S. and global investment strategies that are
diversified by asset class, market cap and investment style. Strategies are offered through multiple investment vehicles to
accommodate a broad range of client mandates. Artisan offers its investment management services primarily to institutions and
through intermediaries that operate with institutional-like decision-making processes and have long-term investment horizons.
Organization
On March 12, 2013, APAM completed its initial public offering (the “IPO”). APAM was formed for the purpose of becoming the
general partner of Artisan Partners Holdings LP (“Artisan Partners Holdings” or “Holdings”) in connection with the IPO.
Holdings is a holding company for the investment management business conducted under the name “Artisan Partners”. The
reorganization (“IPO Reorganization”) established the necessary corporate structure to complete the IPO while at the same time
preserving the ability of the firm to conduct operations through Holdings and its subsidiaries.
As the sole general partner, APAM controls the business and affairs of Holdings. As a result, APAM consolidates Holdings’
financial statements and records a noncontrolling interest for the equity interests in Holdings held by the limited partners of
Holdings. At December 31, 2020, APAM held approximately 80% of the equity ownership interest in Holdings.
Holdings, together with its wholly owned subsidiary, Artisan Investments GP LLC, controls a 100% interest in Artisan Partners
Limited Partnership (“APLP”), a multi-product investment management firm that is the principal operating subsidiary of Artisan
Partners Holdings. APLP is registered as an investment adviser with the U.S. Securities and Exchange Commission under the
Investment Advisers Act of 1940. APLP provides investment advisory services to traditional separate accounts and pooled
investment vehicles, including Artisan Partners Funds, Inc. (“Artisan Funds”), Artisan Partners Global Funds plc (“Artisan
Global Funds”), and Artisan sponsored private funds (“Artisan Private Funds”). Artisan Funds are a series of open-end,
diversified mutual funds registered under the Investment Company Act of 1940, as amended. Artisan Global Funds is a family of
Ireland-domiciled UCITS funds.
Note 2. Summary of Significant Accounting Policies
Basis of presentation
The accompanying consolidated financial statements were prepared in accordance with U.S. generally accepted accounting
principles (“U.S. GAAP”) and related rules and regulations of the SEC. The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates or assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from these estimates or assumptions.
Principles of consolidation
Artisan’s policy is to consolidate all subsidiaries or other entities in which it has a controlling financial interest. The consolidation
guidance requires an analysis to determine if an entity should be evaluated for consolidation using the voting interest entity
(“VOE”) model or the variable interest entity (“VIE”) model. Under the VOE model, controlling financial interest is generally
defined as a majority ownership of voting interests. Under the VIE model, controlling financial interest is defined as (i) the power
to direct activities that most significantly impact the economic performance of the entity and (ii) the right to receive potentially
significant benefits or the obligation to absorb potentially significant losses. Artisan generally consolidates VIEs in which it
meets the power criteria and holds an equity ownership interest of greater than 10%. The consolidated financial statements
include the accounts of APAM and all subsidiaries or other entities in which APAM has a direct or indirect controlling financial
interest. All material intercompany balances have been eliminated in consolidation.
Artisan serves as the investment adviser to Artisan Funds, Artisan Global Funds and Artisan Private Funds. Artisan Funds and
Artisan Global Funds are corporate entities the business and affairs of which are managed by their respective boards of directors.
The shareholders of the funds retain voting rights, including rights to elect and reelect members of their respective boards of
directors. Each series of Artisan Funds is a VOE and is separately evaluated for consolidation under the VOE model. The
shareholders of Artisan Global Funds lack simple majority liquidation rights, and as a result, each sub-fund of Artisan Global
Funds is evaluated for consolidation under the VIE model. Artisan Private Funds are also evaluated for consolidation under the
VIE model because third-party equity holders of the funds generally lack the ability to divest Artisan of its control of the funds.
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From time to time, the Company makes investments in Artisan Funds, Artisan Global Funds and Artisan Private Funds. If the
investment results in a controlling financial interest, APAM consolidates the fund, and the underlying activity of the entire fund is
included in Artisan’s Consolidated Financial Statements. As of December 31, 2020, Artisan had a controlling financial interest in
three sub-funds of Artisan Global Funds and three Artisan Private Funds and, as a result, these funds are included in Artisan’s
Consolidated Financial Statements. Because these consolidated investment products meet the definition of investment companies
under U.S. GAAP, Artisan has retained the specialized industry accounting principles for investment companies in the
consolidated financial statements. See Note 6, “Variable Interest Entities and Consolidated Investment Products” for additional
details.
Operating segments
Artisan operates in one segment, the investment management industry. Artisan provides investment management services to
separate accounts, mutual funds and other pooled investment vehicles. Management assesses the financial performance of these
vehicles on a combined basis.
Cash and cash equivalents
Artisan defines cash and cash equivalents as money market funds and other highly liquid investments with original maturities of
90 days or less. Cash and cash equivalents are stated at cost, which approximates fair value due to the short-term nature and
liquidity of these financial instruments. For disclosure purposes, cash equivalents are categorized as Level 1 in the fair value
hierarchy. Cash and cash equivalents are subject to credit risk and were primarily maintained in demand deposit accounts with
financial institutions or treasury money market funds. Interest and dividends related to cash and cash equivalents is recorded in
other investment gain (loss) in the Consolidated Statements of Operations.
Foreign currency translation
Assets and liabilities of foreign operations whose functional currency is not the U.S. dollar are translated at prevailing year-end
exchange rates. Revenue and expenses of such foreign operations are translated at average exchange rates during the year. The
net effect of the translation adjustment for foreign operations is included in other comprehensive income (loss) in the
Consolidated Statements of Comprehensive Income. The cumulative effect of translation adjustments is included in accumulated
other comprehensive income (loss) and noncontrolling interests - Artisan Partners Holdings in the Consolidated Statements of
Financial Condition, based on period-end ownership levels.
Accounts receivable
Accounts receivable are carried at invoiced amounts and consist primarily of investment advisory fees that have been earned, but
not yet received from clients. Due to the short-term nature of the receivables, the carrying values of these assets approximate fair
value. The accounts receivable balance does not include any allowance for doubtful accounts as Artisan believes all accounts
receivable balances are fully collectible. There has not been any bad debt expense recorded for the years ended December 31,
2020, 2019 and 2018.
Investment securities
Investment securities consist of nonconsolidated investments in shares of Artisan Funds, Artisan Global Funds, and Artisan
Private Funds. Investments provide exposure to various risks, including price risk (the risk of a potential future decline in value
of the investment) and foreign currency risk. Investments are carried at fair value based on net asset values as of the valuation
date.
Realized and unrealized gains (losses) on nonconsolidated investment securities are recorded in other investment gain (loss) in
the Consolidated Statements of Operations. Dividend income from these investments is recognized when earned and is also
included in other investment gain (loss).
Property and equipment
Property and equipment are carried at cost, less accumulated depreciation. Depreciation is generally recognized on a straight-line
basis over the estimated useful lives of the respective assets or the remaining lease term, whichever is shorter. The estimated
useful lives of property and equipment as of December 31, 2020 are as follows:
Property and Equipment Type
Computers and equipment
Computer software
Furniture and fixtures
Leasehold improvements
Useful Life
Five years
Three to Five years
Seven years
Two to 14 years
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Implementation costs incurred to develop or obtain internal-use software, including hosting arrangements, are capitalized and
expensed on a straight-line basis over either the estimated useful life of the respective software or the term of the hosting
arrangement.
Property and equipment is tested for impairment when there is an indication that the carrying amount of an asset may not be
recoverable. When an asset is determined to not be recoverable, the impairment loss is measured based on the excess, if any, of
the carrying value of the asset over its fair value.
Leases
Artisan has lease commitments for office space, parking structures, and equipment, which are all accounted for as operating
leases. Artisan records expense for operating leases on a straight-line basis over the lease term. Any lease incentives received by
Artisan are also amortized on a straight-line basis over the lease term.
Artisan assesses its contractual arrangements for the existence of a lease at inception. Operating leases with an initial term greater
than 12 months are recorded as operating lease assets and operating lease liabilities in the Consolidated Statements of Financial
Condition. Lease components (e.g. fixed rental payments) and non-lease components (e.g. fixed common-area maintenance costs)
are generally accounted for as a single component.
Operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the
lease term. Operating lease assets are recognized at the lease commencement date based on the present value of lease payments
over the lease term, adjusted for prepaid rent and the remaining balance of lease incentives received. Artisan's lease agreements
generally do not provide an implicit interest rate, and therefore the present value calculation uses Artisan's estimated incremental
borrowing rate. A market-based approach is used to estimate the incremental borrowing rate for each individual lease using
observable market interest rates and Artisan specific inputs. The lease terms include periods covered by options to extend or
exclude periods covered by options to terminate the lease when it is reasonably certain that Artisan will exercise that option.
Restricted cash
Restricted cash represents cash that is restricted as collateral on a standby letter of credit related to a lease obligation.
Cash and cash equivalents of consolidated investment products
Cash and cash equivalents of consolidated investment products consist of highly liquid investments, including money market
funds. See Note 6, “Variable Interest Entities and Consolidated Investment Products” for additional details.
Investment assets and liabilities of consolidated investment products
Investment assets and liabilities of consolidated investment products primarily consist of equity securities, fixed income
securities and options. The carrying value of the investment assets and liabilities is also their fair value. Changes in the fair value
of the investments are recognized as gains and losses in earnings. Equity securities are generally valued based upon closing
market prices of the security on the principal exchange on which the security is traded. Fixed income securities include corporate
bonds, convertible bonds and bank loans. Fixed income securities are generally valued based on the judgment of pricing vendors.
Derivative assets and liabilities are generally comprised of put and call options on securities or indices. Put and call options are
valued at the mid price (average of the bid price and ask price) as provided by the pricing vendor at the close of trading on the
contract’s principal exchange. See Note 6, “Variable Interest Entities and Consolidated Investment Products” for additional
details.
Redeemable noncontrolling interests
Redeemable noncontrolling interests represent third-party investors’ ownership interest in consolidated investment products.
Third-party investors in consolidated investment products generally have the right to withdraw their capital, subject to certain
conditions. Noncontrolling interests of consolidated investment products that are currently redeemable or convertible for cash or
other assets at the option of the holder are classified as temporary equity.
Revenue recognition
Artisan’s investment advisory revenue is derived from contracts with customers in the form of investment management fees and
performance fees.
Investment Management Fees
Investment management fees are generally computed as a percentage of assets under management and are recognized as revenue
at the end of each distinct service period. Fees for providing investment advisory services are computed and billed in accordance
with the underlying investment management agreements, which is generally on a monthly or quarterly basis. Investment
management fees are presented net of cash rebates and expense reimbursements pursuant to contractual expense limitations of
certain funds.
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Performance Fees
A number of investment management agreements provide for performance-based fees or incentive allocations, collectively
“performance fees”. Performance fees, if earned, are recognized upon completion of the contractually determined measurement
period, which is generally quarterly or annually. Performance fees are not subject to claw back as a result of performance
declines subsequent to the most recent measurement date.
Revenue Recognition
Artisan accounts for asset management services as a single performance obligation that is satisfied over time, using a time-based
measure of progress to recognize revenue. Customer consideration is variable due to the uncertainty of the value of assets under
management during each distinct service period. At the end of each period, Artisan records revenue for the actual amount of
investment management fees earned for that period because the uncertainty has been resolved.
Performance fees are subject to the uncertainty of market volatility, and as a result, the entire amount of the variable
consideration related to performance fees is constrained until the end of each measurement period. At the end of the measurement
period, revenue is recorded for the actual amount of performance fees earned during that period because the uncertainty has been
resolved. For performance fees with annual measurement periods, revenue recognized in the current period relates to performance
obligations that were partially satisfied in prior periods.
Customer Rebates and Expense Reimbursements
Artisan has contractually agreed to reimburse for expenses incurred to the extent necessary to limit annualized ordinary operating
expenses incurred by certain funds to not more than a fixed percentage of the funds’ average daily net assets. Artisan may also
contractually agree to pay fee rebates to certain investors in Artisan Global Funds. Artisan accounts for all reimbursements and
rebates as a reduction of the transaction price (and, hence, of revenue) because the billing adjustments and payments represent
consideration payable to customers and Artisan does not receive any distinct goods or services from the customers in exchange.
Share-based compensation
Share-based compensation expense is recognized based on the estimated grant date fair value on a straight-line basis over the
requisite service period of the award. The initial requisite service period is generally five years for restricted share-based awards.
The Company’s accounting policy is to record the impact of forfeitures when they occur.
Distribution, servicing and marketing
Artisan Funds has authorized certain financial services companies, broker-dealers, banks or other intermediaries, and in some
cases other organizations designated by an authorized intermediary, to accept purchase, exchange, and redemption orders for
shares of Artisan Funds on the funds’ behalf. Many intermediaries charge a fee for accounting and shareholder services provided
to fund shareholders on the funds’ behalf. Those services typically include recordkeeping, transaction processing for
shareholders’ accounts, and other services.
The fee is either based on the number of accounts to which the intermediary provides such services or a percentage of the average
daily value of fund shares held in such accounts. The funds pay a portion of such fees directly to the intermediaries, which are
intended to compensate the intermediary for its provision of services of the type that would be provided by the funds’ transfer
agent or other service providers if the shares were registered directly on the books of the funds’ transfer agent. Artisan pays the
balance of those fees which includes compensation to the intermediary for its distribution, servicing and marketing of Artisan
Funds shares.
Artisan Global Funds also have arrangements pursuant to which Artisan is required to pay a portion of its investment
management fee for distribution, servicing and marketing of Artisan Global Funds shares.
Distribution, servicing and marketing fees paid by Artisan are presented as an operating expense as Artisan is the principal in its
role as the primary obligor related to these services. Fees paid were as follows:
Fees paid with respect to Artisan Funds
Fees paid with respect to Global Funds
Other marketing expenses
Total distribution, servicing and marketing
For the Years Ended December 31,
2018
2019
2020
$
$
21,320 $
595
2,397
24,312 $
20,096 $
424
2,650
23,170 $
22,822
1,002
2,737
26,561
Accrued fees to intermediaries were $4.2 million and $3.3 million as of December 31, 2020 and 2019, respectively, and are
included in accounts payable, accrued expenses and other in the Consolidated Statements of Financial Condition.
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Loss contingencies
Artisan considers the assessment of loss contingencies as a significant accounting policy because of the significant uncertainty
relating to the outcome of any potential legal actions and other claims and the difficulty of predicting the likelihood and range of
the potential liability involved, coupled with the material impact on Artisan’s results of operations that could result from legal
actions or other claims and assessments. Artisan recognizes estimated costs to defend as incurred. Potential loss contingencies are
reviewed at least quarterly and are adjusted to reflect the impact and status of settlements, rulings, advice of counsel and other
information pertinent to a particular matter. Significant differences could exist between the actual cost required to investigate,
litigate and/or settle a claim or the ultimate outcome of a suit and management’s estimate. These differences could have a
material impact on Artisan’s results of operations, financial position, or cash flows. Recoveries of losses are recognized in the
Consolidated Statements of Operations when receipt is deemed probable. No loss contingencies were recorded at December 31,
2020, 2019 and 2018. Currently, there are no legal or administrative proceedings that management believes may have a material
effect on Artisan’s consolidated financial position, cash flows or results of operations.
Income taxes
Artisan accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and
liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts
and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to be realized or settled. Artisan recognizes a
valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Artisan accounts for uncertain income tax positions by recognizing the impact of a tax position in its consolidated financial
statements when Artisan believes it is more likely than not that the tax position would not be sustained upon examination by the
appropriate tax authorities based on the technical merits of the position.
Comprehensive income (loss)
Total comprehensive income (loss) includes net income and other comprehensive income. Other comprehensive income (loss)
consists of foreign currency translation.
Partnership distributions
Artisan makes distributions to its partners for purposes of paying income taxes as required under the terms of Artisan Partners
Holdings’ partnership agreement. Tax distributions are calculated utilizing the highest combined individual federal, state and
local income tax rate among the various locations in which the partners, as a result of owning their interests in the partnership, are
subject to tax, assuming maximum applicability of the phase-out of itemized deductions contained in the Internal Revenue Code
for tax years prior to 2018. Artisan also makes additional distributions under the terms of the partnership agreement. Distributions
are recorded in the financial statements on the declaration date.
Earnings per share
Basic earnings per share is computed under the two-class method by dividing income available to Class A common stockholders
by the weighted average number of Class A common shares outstanding during the period. Unvested restricted share-based
awards are excluded from the number of Class A common shares outstanding for the basic earnings per share calculation because
the shares have not yet been earned by employees. Income available to Class A common stockholders is computed by reducing
net income attributable to APAM by earnings (both distributed and undistributed) allocated to participating securities, according
to their respective rights to participate in those earnings. Except for certain performance share units, unvested share-based awards
are participating securities because the awards include non-forfeitable dividend rights during the vesting period. Class B and
Class C common shares do not share in profits of APAM and therefore are not reflected in the calculations.
Diluted earnings per share is computed under the more dilutive of the treasury stock method or the two-class method. The
weighted average number of Class A common shares outstanding during the period is increased by the assumed conversion of
nonparticipating unvested share-based awards into Class A common stock using the treasury stock method.
Recent accounting pronouncements
Accounting standards adopted as of January 1, 2020
In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud
Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred
in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop
or obtain internal-use software. The capitalized implementation costs will be expensed over the term of the hosting arrangement.
The Company adopted the new guidance on January 1, 2020. The Company capitalized $1.3 million of software implementation
costs and recorded $0.1 million of related amortization expense during the year ended December 31, 2020.
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In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which requires entities to measure credit
losses on financial assets based on expected losses rather than incurred losses. The guidance was effective on January 1, 2020 and
requires a modified retrospective approach to adoption. The adoption of this guidance did not have an impact on the consolidated
financial statements.
Note 3. Investment Securities
The disclosures below include details of Artisan’s investments, excluding money market funds and consolidated investment
products. Investments held by consolidated investment products are described in Note 6, “Variable Interest Entities and
Consolidated Investment Products”.
Investments in equity securities
Investments in equity securities accounted for under the equity method
Total investment securities
As of December
31, 2020
As of December
31, 2019
$
$
2,807 $
849
3,656 $
7,543
16,335
23,878
Artisan’s investments in equity securities consist of investments in shares of Artisan Funds, Artisan Global Funds and Artisan
Private Funds. Unrealized gains on investment securities held as of December 31, 2020, 2019 and 2018 were $0.7 million,
$5.0 million, and $0.7 million, respectively.
Note 4. Fair Value Measurements
The table below presents information about Artisan’s assets and liabilities that are measured at fair value and the valuation
techniques Artisan utilized to determine such fair value. The financial instruments held by consolidated investment products are
excluded from the table below and are presented in Note 6, “Variable Interest Entities and Consolidated Investment Products”.
In accordance with ASC 820, fair value is defined as the price that Artisan would receive upon selling an investment in an orderly
transaction to an independent buyer in the principal or most advantageous market for the investment. The following three-tier fair
value hierarchy prioritizes the inputs used in measuring fair value:
•
•
•
Level 1 – Observable inputs such as quoted (unadjusted) market prices in active markets for identical securities.
Level 2 – Other significant observable inputs (including but not limited to quoted prices for similar instruments, interest
rates, prepayment speeds, credit risk, etc.).
Level 3 – Significant unobservable inputs (including Artisan’s own assumptions in determining fair value).
The following provides the hierarchy of inputs used to derive fair value of Artisan’s assets and liabilities that are financial
instruments as of December 31, 2020 and 2019:
Assets and Liabilities at Fair Value
Total
NAV Practical Expedient
(No Fair Value Level)
Level 1
Level 2
Level 3
December 31, 2020
Assets
Money market funds
$
25,855 $
Equity securities
3,656
— $
25,855 $
57
3,599
— $
—
December 31, 2019
Assets
Money market funds
$
30,673 $
— $
30,673 $
Equity securities
23,878
15,068
8,810
— $
—
—
—
—
—
Fair values determined based on Level 1 inputs utilize quoted market prices for identical assets. Level 1 assets generally consist
of money market funds, open-end mutual funds and UCITS funds. Equity securities without a fair value level consist of the
Company’s investments in Artisan Private Funds, which are measured at the underlying fund’s net asset value (“NAV”), using
the ASC 820 practical expedient. The NAV is provided by the fund and is derived from the fair values of the underlying
investments as of the reporting date. Cash maintained in demand deposit accounts is excluded from the table above.
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Note 5. Borrowings
Artisan’s borrowings consist of the following as of December 31, 2020 and 2019:
Revolving credit agreement
Senior notes
Series C
Series D
Series E
Total borrowings
Maturity
Outstanding Balance
August 2022
—
August 2022
August 2025
August 2027
$
90,000
60,000
50,000
200,000
Interest Rate Per
Annum
NA
5.82 %
4.29 %
4.53 %
The fair value of borrowings was approximately $207.7 million as of December 31, 2020. Fair value was determined based on
future cash flows, discounted to present value using current market interest rates. The inputs are categorized as Level 2 in the fair
value hierarchy, as defined in Note 4, “Fair Value Measurements”.
Senior notes - On August 16, 2019, Holdings issued $50 million of 4.53% Series E senior notes and used the proceeds to repay
the $50 million of 5.32% Series B senior notes that matured on August 16, 2019.
The fixed interest rate on each series of unsecured notes is subject to a one percentage point increase in the event Holdings
receives a below-investment grade rating and any such increase will continue to apply until an investment grade rating is
received.
Revolving credit agreement - Any loans outstanding under the revolving credit agreement bear interest at a rate per annum equal
to, at the Company’s election, (i) LIBOR adjusted by a statutory reserve percentage plus an applicable margin ranging from
1.50% to 2.50%, depending on Holdings’ leverage ratio (as defined in the revolving credit agreement) or (ii) an alternate base
rate equal to the highest of (a) Citibank, N.A.’s prime rate, (b) the federal funds effective rate plus 0.50%, and (c) the daily one-
month LIBOR adjusted by a statutory reserve percentage plus 1.00%, plus, in each case, an applicable margin ranging from
0.50% to 1.50%, depending on Holdings’ leverage ratio. Unused commitments will bear interest at a rate that ranges from
0.175% to 0.500%, depending on Holdings’ leverage ratio.
As of and for the year-ended December 31, 2020, there were no borrowings outstanding under the revolving credit agreement and
the interest rate on the unused commitment was 0.175%.
The unsecured notes and the revolving credit agreement contain certain restrictive financial covenants including a limitation on
the leverage ratio of Holdings and a minimum interest coverage ratio. The Company was in compliance with all debt covenants
as of December 31, 2020.
Interest expense incurred on the unsecured notes and revolving credit agreement was $10.3 million, $10.5 million, and $10.6
million for the years ended December 31, 2020, 2019 and 2018, respectively.
As of December 31, 2020, the aggregate maturities of debt obligations, based on their contractual terms, are as follows:
2021
2022
2023
2024
2025
Thereafter
Total
$
—
90,000
—
—
60,000
50,000
$
200,000
Note 6. Variable Interest Entities and Consolidated Investment Products
Artisan serves as the investment adviser for various types of investment products, consisting of both VIEs and VOEs. Artisan
consolidates an investment product if it has a controlling financial interest in the entity. See Note 2, “Summary of Significant
Accounting Policies”. Any such entities are collectively referred to herein as consolidated investment products or CIPs.
As of December 31, 2020, Artisan is considered to have a controlling financial interest in three sub-funds of Artisan Global
Funds and three Artisan Private Funds, with an aggregate direct equity investment in the consolidated investment products of
$59.0 million.
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Artisan’s maximum exposure to loss in connection with the assets and liabilities of CIPs is limited to its direct equity investment,
while the potential benefit is limited to the management and performance fees received and the return on its equity investment.
With the exception of Artisan’s direct equity investment, the assets of CIPs are not available to Artisan’s creditors, nor are they
available to Artisan for general corporate purposes. In addition, third-party investors in the CIPs have no recourse to the general
credit of the Company.
Management and performance fees earned from CIPs are eliminated from revenue upon consolidation. See Note 17, “Related
Party Transactions” for additional information on management and performance fees earned from CIPs.
Third-party investors’ ownership interest in CIPs is presented as redeemable noncontrolling interests in the Consolidated
Statements of Financial Condition as third-party investors have the right to withdraw their capital, subject to certain conditions.
Net income attributable to third-party investors is reported as net income attributable to noncontrolling interests - consolidated
investment products in the Consolidated Statements of Operations.
During the year ended December 31, 2020, the Company determined that it no longer had a controlling financial interest in one
sub-fund of Artisan Global Funds as a result of third party capital contributions. Upon loss of control, the VIE was
deconsolidated and the related assets, liabilities and equity of the fund were derecognized from the Company’s Consolidated
Statements of Financial Condition. There was no net impact to the Consolidated Statements of Operations for the year ended
December 31, 2020. Artisan generally does not recognize a gain or loss upon deconsolidation of investment products because the
assets and liabilities of CIPs are carried at fair value. Upon deconsolidation, Artisan's $1.5 million direct equity investment was
reclassified from investment assets of consolidated investment products to investment securities in the Company's Consolidated
Statements of Financial Condition.
As of December 31, 2020, Artisan held direct equity investments of $0.8 million in VIEs for which the Company does not hold a
controlling financial interest. These direct equity investments consisted of seed investments in sub-funds of Artisan Global Funds
and Artisan Private Funds, both of which are accounted for under the equity method of accounting because Artisan has
significant influence over the funds.
Fair Value Measurements - Consolidated Investment Products
The carrying value of CIPs’ investments is also their fair value. Short and long positions on equity securities are valued based
upon closing prices of the security on the exchange or market designated by the accounting agent or pricing vendor as the
principal exchange. The closing price may represent last sale price, official closing price, a closing auction or other information
depending on market convention. Short and long positions on fixed income instruments are valued at market value. Market
values are generally evaluations based on the judgment of pricing vendors, which may consider, among other factors, the prices
at which securities actually trade, broker-dealer quotations, pricing formulas, estimates of market values obtained from yield data
relating to investments or securities with similar characteristics and/or discounted cash flow models that might be applicable.
Derivative assets and liabilities are generally comprised of put and call options on securities and indices. Put and call options are
valued at the mid price (average of bid price and ask price) as provided by the pricing vendor at the close of trading on the
contract’s principal exchange.
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The following tables present the fair value hierarchy levels of assets and liabilities held by CIPs measured at fair value as of
December 31, 2020 and 2019:
December 31, 2020
Assets
Money market funds
Equity securities - long position
Fixed income instruments - long position
Derivative assets
Liabilities
Fixed income instruments - short position
Derivative liabilities
December 31, 2019
Assets
Money market funds
Equity securities - long position
Fixed income instruments - long position
Derivative assets
Liabilities
Fixed income instruments - short position
Derivative liabilities
Assets and Liabilities at Fair Value
Total
Level 1
Level 2
Level 3
$
$
$
$
7,822 $
83,960
133,518
12,902
7,822 $
83,027
—
12,902
— $
933
133,518
—
14,978 $
753
— $
566
14,978 $
187
5,005 $
9,933
96,681
122
5,005 $
9,933
—
22
— $
—
96,681
100
6,005 $
181
— $
—
6,005 $
181
—
—
—
—
—
—
—
—
—
—
—
—
CIP balances included in the Company's consolidated statements of financial condition were as follows:
Net CIP assets included in the table above
Net CIP assets not included in the table above
Total Net CIP assets
Less: redeemable noncontrolling interests
Artisan’s direct equity investment in CIPs
Note 7. Noncontrolling Interests - Holdings
As of December 31,
2020
As of December 31,
2019
$
222,471 $
(69,763)
152,708
93,753
$
58,955 $
105,555
(28,509)
77,046
43,110
33,936
Net income attributable to noncontrolling interests - Artisan Partners Holdings in the Consolidated Statements of Operations
represents the portion of earnings or loss attributable to the equity ownership interests in Holdings held by the limited partners of
Holdings. As of December 31, 2020, APAM held approximately 80% of the equity ownership interests in Holdings.
Limited partners of Artisan Partners Holdings are entitled to exchange partnership units (along with a corresponding number of
shares of Class B or C common stock of APAM) for shares of Class A common stock from time to time (the "Holdings Common
Unit Exchanges"). The Holdings Common Unit Exchanges increase APAM's equity ownership interest in Holdings and result in
an increase to deferred tax assets and amounts payable under the tax receivable agreements. See Note 11, “Income Taxes and
Related Payments”.
In order to maintain the one-to-one correspondence of the number of Holdings partnership units and APAM common shares,
Holdings will issue one general partner (“GP”) unit to APAM for each share of Class A common stock issued by APAM.
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For the years ended December 31, 2020, 2019 and 2018, APAM’s equity ownership interest in Holdings has increased as a result
of the following transactions:
Balance at January 1, 2018
Issuance of APAM Restricted Shares, Net (1)
2018 Follow-On Offering
Holdings Common Unit Exchanges
Forfeitures from Employee Terminations (1)
Balance at December 31, 2018
Issuance of APAM Restricted Shares, Net (1)
Holdings Common Unit Exchanges
Forfeitures from Employee Terminations (1)
Balance at December 31, 2019
Issuance of APAM Restricted Shares, Net(1)
Delivery of Shares Underlying RSUs(1)
2020 Follow-On Offering
Holdings Common Unit Exchanges
Forfeitures from Employee Terminations (1)
Balance at December 31, 2020
(1) The impact of the transaction on APAM’s ownership percentage was less than 1%.
Holdings GP
Units
Limited
Partnership
Units
Total
APAM
Ownership
%
50,463,126
25,106,719
75,569,845
1,440,282
—
1,440,282
644,424
(644,424)
1,590,611
(1,590,611)
—
—
(67,255)
—
(67,255)
54,071,188
22,871,684
76,942,872
876,271
—
876,271
1,499,655
(1,499,655)
—
(17,289)
—
(17,289)
56,429,825
21,372,029
77,801,854
789,114
24,233
—
—
789,114
24,233
1,802,326
(1,802,326)
4,128,600
(4,128,600)
—
—
(43,091)
—
(43,091)
63,131,007
15,441,103
78,572,110
67 %
— %
1 %
2 %
— %
70 %
— %
3 %
— %
73 %
— %
— %
2 %
5 %
— %
80 %
Changes in ownership of Holdings are accounted for as equity transactions because APAM continues to have a controlling
interest in Holdings. Additional paid-in capital and noncontrolling interests - Artisan Partners Holdings in the Consolidated
Statements of Financial Condition are adjusted to reallocate Holdings’ historical equity to reflect the change in APAM’s
ownership of Holdings.
The reallocation of equity had the following impact on the Consolidated Statements of Financial Condition:
Statement of Financial Condition
Additional paid-in capital
Noncontrolling interests - Artisan Partners Holdings
Accumulated other comprehensive income (loss)
Net impact to financial condition
For the Years Ended December 31,
2020
2019
$
$
(2,544) $
2,733
(189)
— $
(3,533)
3,584
(51)
—
In addition to the reallocation of historical equity, the change in ownership resulted in an increase to deferred tax assets and
additional paid-in capital of $4.3 million and $0.7 million for the years ended December 31, 2020 and 2019, respectively.
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Note 8. Stockholders’ Equity
APAM - Stockholders’ Equity
APAM had the following authorized and outstanding equity as of December 31, 2020 and 2019, respectively:
Outstanding
Authorized
December 31,
2020
December 31,
2019
Voting
Rights (1)
Economic
Rights
Common shares
Class A, par value $0.01 per share
500,000,000
63,131,007
56,429,825
Class B, par value $0.01 per share
200,000,000
4,457,958
7,803,364
Class C, par value $0.01 per share
400,000,000
10,983,145
13,568,665
1 vote per
share
1 vote per
share
1 vote per
share
Proportionate
None
None
(1) The Company’s employees to whom Artisan has granted equity have entered into a stockholders agreement with respect to all shares of
APAM common stock they have acquired from the Company and any shares they may acquire from the Company in the future, pursuant to
which they granted an irrevocable voting proxy to a Stockholders Committee. As of December 31, 2020, Artisan’s employees held 5,183,747
restricted shares of Class A common stock and all 4,457,958 outstanding shares of Class B common stock, all of which were subject to the
agreement.
APAM is dependent on cash generated by Holdings to fund any dividends. Generally, Holdings will make distributions to all of
its partners, including APAM, based on the proportionate ownership each holds in Holdings. APAM will fund dividends to its
stockholders from its proportionate share of those distributions after provision for its taxes and other obligations. APAM declared
and paid the following dividends per share during the years ended December 31, 2020, 2019 and 2018:
Type of Dividend
Quarterly
Special Annual
Class of Stock
For the Years Ended
December 31,
2020
2019
2018
Common Class A
$ 2.79 $ 2.36 $ 2.40
Common Class A
$ 0.60 $ 1.03 $ 0.79
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The following table summarizes APAM’s stock transactions for the years ended December 31, 2020, 2019 and 2018:
Balance at January 1, 2018
2018 Follow-On Offering
Holdings Common Unit Exchanges
Restricted Share Award Grants
Restricted Share Award Net Share Settlement
Employee/Partner Terminations
Balance at December 31, 2018
Holdings Common Unit Exchanges
Restricted Share Award Grants
Restricted Share Award Net Share Settlement
Employee/Partner Terminations
Balance at December 31, 2019
2020 Follow-On Offering
Holdings Common Unit Exchanges
Delivery of Shares Underlying RSUs
Restricted Share Award Grants
Restricted Share Award Net Share Settlement
Employee/Partner Terminations
Total Stock
Outstanding
Class A
Common
Stock(1)
Class B
Common
Stock
Class C
Common
Stock
75,569,845 50,463,126 11,922,192 13,184,527
—
—
644,424
(644,424)
—
1,590,611
(606,066)
(984,545)
1,517,724
1,517,724
(77,442)
(77,442)
—
—
—
—
(67,255)
(67,255)
(2,026,453)
2,026,453
76,942,872 54,071,188
8,645,249 14,226,435
—
1,499,655
(841,885)
(657,770)
959,000
959,000
(82,729)
(82,729)
(17,289)
(17,289)
—
—
—
—
—
—
77,801,854 56,429,825
7,803,364 13,568,665
—
—
1,802,326
(1,777,326)
(25,000)
4,128,600
(1,535,275)
(2,593,325)
24,233
24,233
916,085
916,085
(126,971)
(126,971)
—
—
—
—
—
—
(43,091)
(43,091)
(32,805)
32,805
Balance at December 31, 2020
(1) There were 304,570, 297,891, and 246,581 restricted stock units outstanding at December 31, 2020, 2019, and 2018, respectively. In
addition, there were 60,000 performance share units outstanding at December 31, 2020. Based on the current status of the market and
performance conditions, the 60,000 unvested performance share units would ultimately result in the issuance of 90,000 shares of Class A
common stock if all other vesting conditions were met. Restricted stock units and performance share units are not reflected in the table because
they are not considered outstanding or issued stock.
78,572,110 63,131,007
4,457,958 10,983,145
Each Class A, Class B, Class D and Class E common unit of Holdings (together with the corresponding share of Class B or Class
C common stock) is exchangeable for one share of Class A common stock. The corresponding shares of Class B and Class C
common stock are immediately canceled upon any such exchange.
Upon termination of employment with Artisan, an employee-partner’s Class B common units are exchanged for Class E common
units and the corresponding shares of Class B common stock are canceled. APAM issues the former employee-partner a number
of shares of Class C common stock equal to the former employee-partner’s number of Class E common units. Class E common
units are exchangeable for Class A common stock subject to the same restrictions and limitations on exchange applicable to the
other common units of Holdings.
Artisan Partners Holdings - Partners’ Equity
Holdings makes distributions of its net income to the holders of its partnership units for income taxes as required under the terms
of the partnership agreement and also makes additional distributions under the terms of the partnership agreement. The
distributions are recorded in the financial statements on the declaration date, or on the payment date in lieu of a declaration date.
Holdings’ partnership distributions for the years ended December 31, 2020, 2019 and 2018 were as follows:
Holdings Partnership Distributions to Limited Partners
$
85,805 $
94,842 $
103,434
Holdings Partnership Distributions to APAM
Total Holdings Partnership Distributions
270,044
226,245
217,396
$
355,849 $
321,087 $
320,830
The distributions are recorded as a reduction to consolidated stockholders’ equity, with the exception of distributions made to
APAM, which are eliminated upon consolidation.
For the Years Ended December 31,
2020
2019
2018
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Note 9. Revenue From Contracts with Customers
The following table presents a disaggregation of investment advisory revenue by type and vehicle for the years ended
December 31, 2020, 2019 and 2018:
Management fees
Artisan Funds
Artisan Global Funds
Separate accounts(1)
Performance fees
Separate accounts(1)
Artisan Global Funds
For the Years Ended December 31,
2020
2019
2018
$
503,642 $
452,504 $
487,041
33,531
347,729
32,332
309,502
35,007
303,631
14,650
15
4,614
—
2,956
—
Total revenues(2)
828,635
(1) Separate account revenue consists of management fees and performance fees earned from vehicles other than Artisan Funds or Artisan Global
Funds, which includes traditional separate accounts, Artisan-branded collective investment trusts and Artisan Private Funds.
(2) All management fees and performance fees from consolidated investment products were eliminated upon consolidation and therefore are
omitted from this table.
798,952 $
899,567 $
$
The following table presents the balances of receivables related to contracts with customers:
Customer
Artisan Funds
Artisan Global Funds
Separate accounts
Total receivables from contracts with customers
Non-customer receivables
Accounts receivable
December 31,
2020
December 31,
2019
$
$
$
5,227 $
4,473
87,971
97,671 $
2,217
99,888 $
6,703
3,588
69,413
79,704
2,164
81,868
Artisan Funds and Artisan Global Funds are billed on the last day of each month. Artisan Funds and Artisan Global Funds make
payments on the same day the invoice is received for the majority of the invoiced amount. The remainder of the invoice is
generally paid in the month following receipt of the invoice. Separate account clients are generally billed on a monthly or
quarterly basis, with payments due within 30 days of billing.
Artisan had no other contract assets or liabilities from contracts with customers as of December 31, 2020 and 2019.
Note 10. Compensation and Benefits
Total compensation and benefits consists of the following:
For the Years Ended December 31,
2020
2019
2018
Salaries, incentive compensation and benefits (1)
$
399,325 $
358,339 $
360,287
Restricted share-based award compensation expense
36,493
42,117
52,879
Total compensation and benefits
$
435,818 $
400,456 $
413,166
(1) Excluding restricted share-based award compensation expense
Incentive compensation
Cash incentive compensation paid to members of Artisan’s investment teams and members of its distribution teams is generally
based on formulas that are tied directly to revenues. These payments are made in the quarter following the quarter in which the
incentive was earned with the exception of fourth quarter payments which are paid in the fourth quarter of the year. Cash
incentive compensation paid to most other employees is discretionary and subjectively determined based on individual
performance and Artisan’s overall results during the applicable year and is generally paid on an annual basis.
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Restricted share-based awards
Artisan has registered 14,000,000 shares of Class A common stock for issuance under the 2013 Omnibus Incentive Compensation
Plan (the “Plan”). Pursuant to the Plan, APAM has granted a combination of restricted stock awards, restricted stock units, and
performance share units (collectively referred to as “restricted share-based awards” or "awards") of Class A common stock to
employees.
Standard Restricted Shares. Standard restricted shares are generally subject to a pro rata five-year service vesting condition.
Career Shares. Career shares are generally subject to both (i) a pro rata five-year service vesting condition and (ii) a qualifying
retirement (as defined in the award agreement).
Franchise Shares. Like career shares, franchise shares are generally subject to both (i) a pro rata five-year service vesting
condition and (ii) a qualifying retirement condition. In addition, franchise shares, which are only granted to investment team
members, are subject to a Franchise Protection Clause, which provides that the number of shares that ultimately vest depends on
whether certain conditions relating to client cash flows are met. If such conditions are not met, compensation cost will be
reversed for any shares that do not vest.
Performance Share Units (PSUs). PSUs are generally subject to (i) a three-year service vesting condition, (ii) certain
performance conditions related to the Company's operating margin and total shareholder return compared to a peer group during
a three-year performance period, and (iii) for one-half of the PSUs eligible to vest at the end of the performance period, a
qualifying retirement condition. The number of shares of Class A common stock that are ultimately issued in connection with
each PSU award will depend upon the outcome of the performance, market and qualified retirement conditions. For the portion of
a PSU award with a "performance condition" under ASC 718, expense is recognized over the service period if it is probable that
the performance condition will be achieved.
Compensation expense is recognized based on the estimated grant date fair value on a straight-line basis over the requisite service
period of the award. The initial requisite service period is generally five years for restricted stock awards and restricted stock
units, and three years for performance share units. The fair value of each award is equal to the market price of the Company's
common stock on the grant date, except for performance share units with a "market condition" performance metric under ASC
718, which have a grant-date fair value based on a Monte Carlo valuation model.
Unvested restricted share-based awards are subject to forfeiture. Grantees are generally entitled to dividends or dividend
equivalents on unvested and vested awards. 4,634,924 shares of Class A common stock were reserved and available for issuance
under the Plan as of December 31, 2020.During the year ended December 31, 2020, Artisan granted 916,085 restricted stock
awards, 3,370 restricted stock units, and 60,000 performance share units of Class A common stock to employees of the Company.
Total compensation expense associated with the 2020 grant is expected to be approximately $34.0 million.
The following tables summarize the restricted share-based award activity for the years ended December 31, 2020, 2019 and 2018:
Weighted-
Average Grant
Date Fair Value
Restricted
Stock Awards
and Restricted
Stock Units
$
$
$
$
38.79
39.32
36.09
44.50
38.04
22.92
34.61
39.21
35.00
33.80
30.92
32.59
35.09
4,013,986
1,518,974
(67,255)
(787,248)
4,678,457
963,000
(17,289)
(618,746)
5,005,422
919,455
(43,091)
(588,144)
5,293,642
Unvested at January 1, 2018
Granted
Forfeited
Vested
Unvested at January 1, 2019
Granted
Forfeited
Vested
Unvested at January 1, 2020
Granted
Forfeited
Vested
Unvested at December 31, 2020
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Weighted-
Average Grant
Date Fair Value
Performance
Share Units
Unvested at January 1, 2020
$
Granted
Forfeited
Vested
—
52.45
—
—
—
60,000
—
—
Unvested at December 31, 2020
$
52.45
60,000
Based on the current status of the market and performance conditions, the 60,000 unvested performance share units would
ultimately result in the issuance of 90,000 shares of Class A common stock if all other vesting conditions were met.
The aggregate vesting date fair value of awards that vested during the years ended December 31, 2020, 2019 and 2018 was
approximately $21.0 million, $15.9 million, and $25.8 million, respectively. The unrecognized compensation expense for the
unvested restricted stock awards and restricted stock units as of December 31, 2020 was $76.4 million with a weighted average
recognition period of 3.1 years remaining. The unrecognized compensation expense for the unvested performance share units as
of December 31, 2020 was $2.3 million with a weighted average recognition period of 3.2 years remaining.
During the years ended December 31, 2020 and 2019, the Company withheld a total of 126,971 and 82,729 restricted shares,
respectively, and paid $4.5 million and $2.1 million, respectively, as a result of net share settlements to satisfy employee tax
withholding obligations. These net share settlements had the effect of shares repurchased and retired by the Company, as they
reduced the number of shares outstanding.
Note 11. Income Taxes and Related Payments
APAM is subject to U.S. federal, state and local income taxation on APAM’s allocable portion of Holdings’ income, as well as
foreign income taxes payable by Holdings’ subsidiaries. Components of the provision for income taxes consist of the following:
Current:
Federal
State and local
Foreign
Total
Deferred:
Federal
State and local
Total
Income tax expense
For the Years Ended December 31,
2020
2019
2018
$
24,116 $
13,609 $
18,247
8,174
515
32,805
27,110
880
27,990
6,315
529
20,453
22,310
(14,954)
7,356
$
60,795 $
27,809 $
3,993
495
22,735
22,218
2,645
24,863
47,598
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The provision for income taxes differs from the amount of income tax computed by applying the applicable U.S. statutory federal
income tax rate to income before provision for income taxes as follows:
U.S. federal statutory rate
State and local taxes, net of federal tax effect
Excess tax benefits on share-based compensation
Rate benefit from the flow through entity
Change in state tax rate
Unrecognized tax benefits
Other
Effective tax rate
Years Ended December 31,
2020
2019
2018
21.0 %
21.0 %
21.0 %
3.1
(1.1)
(5.5)
(1.1)
0.2
(0.1)
2.8
(0.7)
(6.7)
(6.8)
0.6
0.1
16.5 %
10.3 %
2.1
(0.4)
(6.7)
—
—
(0.2)
15.8 %
The effective tax rate includes a rate benefit attributable to the fact that, for the years ended December 31, 2020, 2019 and 2018,
approximately 24%, 31% and 33%, respectively, of Artisan Partners Holdings’ taxable earnings were attributable to other
partners and not subject to corporate-level taxes. The effective tax rate was also reduced in the years ended December 31, 2019,
and 2020 due to the remeasurement of existing deferred tax assets resulting from an increase in Artisan's state deferred income
tax rates. The effective tax rate was also lower than the statutory rate due to dividends paid on unvested share-based awards.
In connection with the IPO, APAM entered into two tax receivable agreements (“TRAs”). The first TRA, generally provides for
the payment by APAM to a private equity fund (the “Pre-H&F Corp Merger Shareholder”) or its assignees of 85% of the
applicable cash savings, if any, of U.S. federal, state and local income taxes that APAM actually realizes (or is deemed to realize
in certain circumstances) as a result of (i) the tax attributes of the preferred units APAM acquired in the merger of a wholly-
owned subsidiary of the Pre-H&F Corp Merger Shareholder into APAM in March 2013, (ii) net operating losses available as a
result of the merger and (iii) tax benefits related to imputed interest.
The second TRA generally provides for the payment by APAM to current or former limited partners of Holdings or their
assignees of 85% of the applicable cash savings, if any, of U.S. federal, state and local income taxes that APAM actually realizes
(or is deemed to realize in certain circumstances) as a result of (i) certain tax attributes of their partnership units sold to APAM or
exchanged (for shares of Class A common stock, convertible preferred stock or other consideration) and that are created as a
result of such sales or exchanges and payments under the TRAs and (ii) tax benefits related to imputed interest. Under both
agreements, APAM generally will retain the benefit of the remaining 15% of the applicable tax savings.
For purposes of the TRAs, cash savings of income taxes are calculated by comparing APAM’s actual income tax liability to the
amount it would have been required to pay had it not been able to utilize any of the tax benefits subject to the TRAs, unless
certain assumptions apply. The TRAs will continue in effect until all such tax benefits have been utilized or expired, unless
APAM exercises its right to terminate the agreements or payments under the agreements are accelerated in the event that APAM
materially breaches any of its material obligations under the agreements.
The actual increase in tax basis, as well as the amount and timing of any payments under these agreements, will vary depending
upon a number of factors, including the timing of sales or exchanges by the holders of limited partnership units, the price of the
Class A common stock at the time of such sales or exchanges, whether such sales or exchanges are taxable, the amount and
timing of the taxable income APAM generates in the future and the tax rate then applicable and the portion of APAM’s payments
under the TRAs constituting imputed interest or depreciable basis or amortizable basis.
Payments under the TRAs, if any, will be made pro rata among all TRA counterparties entitled to payments on an annual basis to
the extent APAM has sufficient taxable income to utilize the increased depreciation and amortization charges and imputed
interest deductions. Artisan expects to make one or more payments under the TRAs, to the extent they are required, prior to or
within 125 days after APAM’s U.S. federal income tax return is filed for each fiscal year. Interest on the TRA payments will
accrue at a rate equal to one-year LIBOR plus 100 basis points from the due date (without extension) of such tax return until such
payments are made.
Amounts payable under tax receivable agreements are estimates which may be impacted by factors, including but not limited to,
expected tax rates, projected taxable income, and projected ownership levels and are subject to change. Changes in the estimates
of amounts payable under tax receivable agreements are recorded as non-operating income (loss) in the Consolidated Statements
of Operations.
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The change in the Company’s deferred tax assets related to the tax benefits described above and the change in corresponding
amounts payable under the TRAs for the years ended December 31, 2020 and 2019 is summarized as follows:
December 31, 2018
2019 Holdings Common Unit Exchanges
Amortization
Payments under TRAs (1)
Change in estimate (2)
December 31, 2019
2020 Follow-On Offering
2020 Holdings Common Unit Exchanges
Amortization
Payments under TRAs (1)
Change in estimate (2)
Deferred Tax Asset
- Amortizable
Basis
Amounts Payable
Under Tax
Receivable
Agreements
$
404,715 $
13,424
(31,872)
—
21,873
$
408,140 $
21,424
48,474
(34,686)
—
3,602
369,355
11,410
—
(24,998)
19,557
375,324
18,211
41,203
—
(26,943)
4,673
December 31, 2020
(1) Interest payments of $60 thousand and $78 thousand were paid in addition to these TRA payments for the years ended December 31, 2020
and 2019, respectively.
(2) Included in these totals are adjustments to the deferred tax assets for changes in the state deferred enacted tax rates of $3.7 million and $17.2
million for the years ended December 31, 2020 and 2019, respectively.
446,954 $
412,468
$
Net deferred tax assets comprise the following:
Deferred tax assets:
Amortizable basis (1)
Other (2)
Total deferred tax assets
Less: valuation allowance (3)
Net deferred tax assets
As of December 31,
2020
As of December 31,
2019
$
446,954 $
35,107
482,061
—
408,140
27,757
435,897
—
$
482,061 $
435,897
(1) Represents the unamortized step-up of tax basis and other tax attributes from the merger and partnership unit sales and exchanges
described above. These future tax benefits are subject to the TRA agreements.
(2) Represents the net deferred tax assets associated with the merger described above and other miscellaneous deferred tax assets. These future
tax benefits are not subject to the TRA agreements.
(3) Artisan assessed whether the deferred tax assets would be realizable and determined based on its history of taxable income that the benefits
would more likely than not be realized. Accordingly, no valuation allowance is required.
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Accounting standards establish a minimum threshold for recognizing, and a process for measuring, the benefits of income tax
return positions in financial statements. The change in the Company’s gross unrecognized tax benefits for the years ended
December 31, 2020, 2019 and 2018 is summarized as follows:
Balance at beginning of year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Tax positions related to the current year
Settlements with taxing authorities
Expirations of statute of limitations
Balance at end of year
For the Years Ended December 31,
2020
2019
2018
$
1,667 $
— $
1,187
(613)
216
(1,372)
—
1,667
—
—
—
—
$
1,085 $
1,667 $
—
—
—
—
—
—
—
If recognized, $0.7 million and $1.6 million of the benefits recorded as of December 31, 2020 and 2019, respectively, would
favorably impact the effective tax rate in future periods. The total amount of unrecognized tax benefits is currently not expected
to significantly increase or decrease within the next twelve months.
The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision.
Accrued interest on uncertain tax positions was $0.2 million and $0.3 million as of December 31, 2020 and 2019, respectively,
and is excluded from the unrecognized tax benefits total above. The gross unrecognized tax benefit is recorded within accounts
payable, accrued expenses, and other in the Company's Consolidated Statements of Financial Condition.
In the normal course of business, Artisan is subject to examination by federal and certain state, local and foreign tax regulators.
As of December 31, 2020, U.S. federal income tax returns filed for the years 2017 through 2019 are open and therefore subject to
examination. State, local and foreign income tax returns filed are generally subject to examination from 2016 to 2019.
Note 12. Earnings Per Share
The computation of basic and diluted earnings per share for the years ended December 31, 2020, 2019 and 2018 were as follows:
Basic and Diluted Earnings Per Share
Numerator:
Net income attributable to APAM
Less: Allocation to participating securities
Net income available to common stockholders
Denominator:
Basic weighted average shares outstanding
Dilutive effect of nonparticipating equity awards
Diluted weighted average shares outstanding
Earnings per share - Basic
Earnings per share - Diluted
For the Years Ended December 31,
2020
2019
2018
$
212,617 $
156,536 $
158,309
23,268
21,154
19,447
$
189,349 $
135,382 $
138,862
55,633,529
51,127,929
48,862,435
4,393
—
—
55,637,922
51,127,929
48,862,435
$
$
3.40 $
3.40 $
2.65 $
2.65 $
2.84
2.84
Allocation to participating securities in the table above primarily represents dividends paid to holders of unvested restricted
share-based awards, which reduces net income available to common stockholders.
The Holdings limited partnership units are anti-dilutive primarily due to the impact of public company expenses. Unvested
restricted share-based awards with non-forfeitable dividend rights during the vesting period are considered participating securities
and are therefore anti-dilutive.
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The following table summarizes the weighted-average shares outstanding that are excluded from the calculation of diluted
earnings per share because their effect would have been anti-dilutive:
Anti-Dilutive Weighted Average Shares Outstanding
Holdings limited partnership units
Unvested restricted share-based awards
Total
Note 13. Benefit Plans
For the Years Ended December 31,
2020
2019
2018
17,885,335
21,827,809
23,351,440
5,313,466
5,026,357
4,813,895
23,198,801
26,854,166
28,165,335
Artisan has a 401(k) plan and similar foreign arrangements for its non-U.S. employees, under which it provides a matching
contribution on employees’ pre-tax contributions. Expenses related to Artisan’s benefits plans for the years ended December 31,
2020, 2019 and 2018 were $7.8 million, $7.2 million and $6.9 million, respectively, and are included in compensation and
benefits in the Consolidated Statements of Operations.
Artisan provides an opportunity for eligible employees to participate in Artisan’s financial growth and success through phantom
equity awards, pursuant to the Artisan Partners Holdings LP Phantom Equity Plan. The phantom equity awards provide
participants the right to receive cash payments upon vesting based on the trading price of APAM’s Class A common stock.
Awards made under the Phantom Equity Plan are liability awards and are subject to vesting on a pro-rata basis over five years.
Award recipients must be employed by Artisan on the vesting date in order to receive payment.
Expense related to the plan for the years ended December 31, 2020, 2019 and 2018 was $1.6 million, $0.9 million and $0.5
million, respectively, and is included in compensation and benefits in the Consolidated Statements of Operations. The liability at
December 31, 2020 and 2019 for the plan was $1.5 million and $0.9 million, respectively.
Note 14. Indemnifications
In the normal course of business, APAM enters into agreements that include indemnities in favor of third parties. Holdings has
also agreed to indemnify APAM as its general partner, Artisan Investment Corporation (“AIC”) as its former general partner, the
directors and officers of APAM, the directors and officers of AIC as its former general partner, the members of its former
Advisory Committee, and its partners, directors, officers, employees and agents. Holdings’ subsidiaries may also have similar
agreements to indemnify their respective general partner(s), directors, officers, directors and officers of their general partner(s),
partners, members, employees, and agents. The Company’s maximum exposure under these arrangements is unknown, as this
would involve future claims that may be made against the Company that have not yet occurred. APAM maintains insurance
policies that may provide coverage against certain claims under these indemnities.
Note 15. Property and Equipment
The composition of property and equipment at December 31, 2020 and 2019 are as follows:
Computers and equipment
Computer software
Furniture and fixtures
Leasehold improvements
Total Cost
Less: Accumulated depreciation
Property and equipment, net of accumulated depreciation
As of December 31,
2020
2019
$
6,768 $
5,377
12,267
49,038
7,105
4,112
11,780
48,119
$
$
73,450 $
71,116
(37,576)
(31,621)
35,874 $
39,495
Depreciation expense totaled $6.5 million, $6.8 million and $5.6 million for the years ended December 31, 2020, 2019 and 2018,
respectively.
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Note 16. Leases
Operating lease expense was as follows:
Lease Type
Parking leases
Office leases (1)
Variable lease cost (2)
Short-term lease cost (2)
Sublease income
Office equipment leases
Classification
For the Years Ended
December 31,
2020
2019
Compensation and benefits
$
520 $
Occupancy
Occupancy
Occupancy
Occupancy
Communication and technology
14,991
135
343
(429)
281
519
15,931
118
369
(286)
305
16,956
Total operating lease expense
(1) Office lease expense includes impairment charges of $0.9 million and $1.5 million for the years ended December 31, 2020 and 2019,
respectively, related to the abandonment of a leased office space, as discussed below.
(2) Variable and short-term lease costs are excluded from the measurement of operating lease liabilities.
15,841 $
$
During the years ended December 31, 2020 and 2019, the Company recognized asset impairment losses of $0.9 million and $2.1
million, respectively, related to the abandonment of a leased office location. The losses are recorded in occupancy expense based
on the present value of expected future cash flows. The $0.9 million impairment loss incurred for the year ended December 31,
2020 consists entirely of a lease asset impairment and the $2.1 million impairment loss incurred for the year ended December 31,
2019 consists of a $1.5 million lease asset impairment and a $0.6 million property impairment.
Operating lease expense was $13.9 million for the year ended December 31, 2018 under ASC Topic 840.
The table below presents the maturity of operating lease liabilities:
2021
2022
2023
2024
2025
Thereafter
Total undiscounted lease payments
Adjustment to discount to present value
Operating lease liabilities
As of December 31,
2020
$
$
16,749
15,375
13,800
13,495
13,450
37,026
109,895
(17,224)
92,671
As of December 31, 2020, there were not any leases that were signed but not yet commenced, and none of the options to extend
lease terms were reasonably certain of being exercised. Other information related to leases was as follows:
Weighted average discount rate
Weighted average remaining lease term
Operating cash flows for operating leases
Note 17. Related Party Transactions
For the Years Ended
December 31,
2020
2019
4.6 %
4.7 %
7.4 years
16,546
8.1 years
14,183
Several of the current executive officers and directors of APAM, or entities associated with those individuals, are limited partners
of Holdings. As a result, certain transactions (such as TRA payments) between Artisan and the limited partners of Holdings are
considered to be related party transactions with respect to these persons.
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Holdings also makes estimated state tax payments on behalf of certain limited partners, including related parties. These payments
are then netted from subsequent distributions to the limited partners. At December 31, 2020 and 2019, accounts receivables
included $2.0 million and $0.9 million, respectively, of partnership tax reimbursements due from Holdings’ limited partners,
including related parties.
Affiliate transactions—Artisan Funds
Artisan has an agreement to serve as the investment adviser to Artisan Funds, with which certain Artisan employees are affiliated.
Under the terms of the agreement, which generally is reviewed and continued by the board of directors of Artisan Funds
annually, a fee is paid to Artisan based on an annual percentage of the average daily net assets of each Artisan Fund ranging from
0.625% to 1.05%. Artisan has contractually agreed to reimburse for expenses incurred to the extent necessary to limit annualized
ordinary operating expenses incurred by certain of the Artisan Funds to not more than a fixed percentage (ranging from 0.88% to
1.50%) of a fund’s average daily net assets. In addition, Artisan may voluntarily waive fees or reimburse any of the Artisan
Funds for other expenses. The officers and directors of Artisan Funds who are affiliated with Artisan receive no compensation
from the funds.
Investment advisory fees for managing Artisan Funds and amounts reimbursed by Artisan for fees and expenses (including
management fees) are as follows:
Artisan Funds
Investment advisory fees (Gross of expense reimbursements)
Expense reimbursements
Affiliate transactions—Artisan Global Funds
For the Years Ended December 31,
2020
2019
2018
$
$
504,204 $
452,895 $
487,460
562 $
391 $
419
Artisan has an agreement to serve as the investment manager to Artisan Global Funds, with which certain Artisan employees are
affiliated. Under the terms of these agreements, a fee is paid based on an annual percentage of the average daily net assets of each
fund ranging from 0.75% to 1.85%. Artisan reimburses each sub-fund of Artisan Global Funds to the extent that sub-fund’s
annual expenses, not including Artisan’s fee, exceed certain levels, which range from 0.10% to 0.20%. In addition, Artisan may
voluntarily waive fees or reimburse any of the Artisan Global Funds for other expenses. The directors of Artisan Global Funds
who are also employees of Artisan receive no compensation from the funds.
Investment advisory fees for managing Artisan Global Funds and amounts reimbursed to Artisan Global Funds by Artisan are as
follows:
Artisan Global Funds
For the Years Ended December 31,
2020
2019
2018
Investment advisory fees (Gross of expense reimbursements)
Elimination of fees from consolidated investment products (1)
$
33,786 $
32,577 $
35,070
(58)
(67)
(62)
Consolidated investment advisory fees (Gross of expense
reimbursements)
Expense reimbursements
Elimination of expense reimbursements from consolidated investment
products (1)
Consolidated expense reimbursements
$
$
$
33,728 $
32,510 $
35,008
515 $
514 $
386
(333)
(336)
182 $
178 $
(385)
1
(1) Investment advisory fees and expense reimbursements related to consolidated investment products are eliminated from revenue upon
consolidation.
Affiliate transactions - Artisan Private Funds
Pursuant to written agreements, Artisan serves as the investment manager and acts as the general partner for certain Artisan
Private Funds. Under the terms of these agreements, Artisan earns a management fee and for certain funds is entitled to receive
either an allocation of profits or a performance-based fee. In addition, for a period of time following the formation of each private
fund, Artisan has agreed to reimburse the fund to the extent that expenses, excluding Artisan’s management fee, performance fee
and transaction related costs, exceed certain levels, which range from 0.10% to 1.00% per annum of the net assets of the fund.
Artisan may also voluntarily waive fees or reimburse the funds for other expenses.
Artisan and certain related parties, including employees, officers and members of the Company’s Board have invested in one or
more of the funds and currently do not pay a management fee, performance fee or incentive allocation.
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Investment advisory fees for managing the Artisan Private Funds and amounts reimbursed to Artisan Private Funds by Artisan
are as follows:
Artisan Private Funds
Investment advisory fees (Gross of expense reimbursements)
Elimination of fees from consolidated investment products (1)
Consolidated investment advisory fees (Gross of expense
reimbursements)
Expense reimbursements
Elimination of expense reimbursements from consolidated investment
products (1)
Consolidated expense reimbursements
For the Years Ended December 31,
2020
2019
2018
7,570 $
3,253 $
(1,084)
(369)
1,298
(286)
6,486 $
2,884 $
1,012
405 $
219 $
206
(258)
(114)
147 $
105 $
(206)
—
$
$
$
$
(1) Investment advisory fees and expense reimbursements related to consolidated investment products are eliminated from revenue upon
consolidation.
Note 18. Geographic Information
Artisan generates a portion of its revenues from clients domiciled in various countries outside the United States. Revenues by
geographic location based on client domicile for the years ended December 31, 2020, 2019 and 2018 were as follows:
U.S.
Non-U.S.
Total revenues
For the Years Ended December 31,
2020
2019
2018
$
748,327 $
666,650 $
698,994
151,240
132,302
129,641
$
899,567 $
798,952 $
828,635
The following table sets forth Artisan’s long-lived assets by geographic area, which consist of net property and equipment and
operating lease assets:
U.S.
Non-U.S.
Total long-lived assets
Note 19. Litigation Matters
As of December 31,
2020
2019
$
$
111,171 $
4,007
115,178 $
121,146
5,504
126,650
In the normal course of business, Artisan may be subject to various legal and administrative proceedings. Currently, there are no
legal or administrative proceedings that management believes may have a material effect on Artisan’s consolidated financial
position, cash flows or results of operations.
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Note 20. Subsequent Events
Long-term incentive awards
During the first quarter of 2021, the board of directors of APAM approved the 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 to certain
employees pursuant to the Company’s 2013 Omnibus Incentive Compensation Plan. The grant will be effective March 1, 2021.
Compensation expense associated with these awards will be recognized on a straight-line basis over the requisite service period,
which is generally five years. Expense for the cash awards will be variable based on the investment returns of the underlying
equity investments that are linked to the cash awards.
Distributions and dividends
APAM, acting as the general partner of Artisan Partners Holdings, declared, effective February 2, 2021, a distribution by Artisan
Partners Holdings of $60.4 million to holders of Artisan Partners Holdings partnership units, including APAM. The board of
directors of APAM declared, effective February 2, 2021, a quarterly dividend of $0.97 per share of Class A common stock and a
special annual dividend of $0.31 per share of Class A common stock. Both APAM common stock dividends, a total of $1.28 per
share, are payable on February 26, 2021 to stockholders of record as of February 12, 2021.
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are
designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that
such information is accumulated and communicated to our management, including our principal executive and principal financial
officers, as appropriate, to allow for timely decisions regarding required disclosure.
Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our
disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) at
December 31, 2020. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures are effective.
Report of Management on Internal Control over Financial Reporting
Company management is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Company management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our
internal control over financial reporting as of December 31, 2020, based on the 2013 version of the Internal Control - Integrated
Framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control -
Integrated Framework. Based on that assessment, Company management concluded that the Company’s internal control over
financial reporting was effective as of December 31, 2020.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020, has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing in Item 8,
which expresses an unqualified opinion on the effectiveness of internal control over financial reporting as of December 31, 2020.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the quarter ended December 31, 2020, that have materially affected or are reasonably likely to
materially affect our internal control over financial reporting.
Item 9B. Other Information
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following table sets forth the name, age and position of each of our directors at February 14, 2021:
Name
Jennifer A. Barbetta
Matthew R. Barger
Eric R. Colson
Tench Coxe
Stephanie G. DiMarco
Jeffrey A. Joerres
Andrew A. Ziegler
Age
Position
48
63
51
63
63
61
63
Independent Director
Independent Director
Chief Executive Officer and Chairman of the Board
Independent Director
Independent Director
Independent Director
Lead Independent Director
Ms. Barbetta has served on our board of directors and on the Nominating and Corporate Governance Committee since October of
2020. She is currently a senior managing director and chief operating officer at Starwood Capital Group. Prior to joining
Starwood in 2019, she was a partner and managing director at Goldman Sachs. Ms. Barbetta spent more than 24 years at
Goldman Sachs where she served in a variety of leadership roles within Goldman Sachs Asset Management. She currently serves
on the board of directors of Queen’s Gambit Growth Capital, on the Dean’s Advisory Council for the Villanova School of
Business and the Emeritus Board of the Point Foundation. With over 24 years of experience serving in a number of roles at
Goldman Sachs, Ms. Barbetta has amassed substantial experience in the investment management industry. Ms. Barbetta brings
strong leadership skills as well as deep knowledge of operational and strategic matters to the Board.
Mr. Barger has served on our board of directors since February of 2013. Mr. Barger is chair of the Nominating and Corporate
Governance Committee and also serves on the Audit Committee. He is currently the managing member of MRB Capital, LLC,
and he has been a senior advisor at Hellman & Friedman LLC (“H&F”) since 2007. Prior to 2007, he served in a number of roles
at H&F, including managing general partner and chairman of the investment committee. Mr. Barger was a member of the
advisory committee of Artisan Partners Holdings from January 1995 to the completion of our initial public offering in March
2013. Prior to joining H&F, Mr. Barger was an associate in the corporate finance department of Lehman Brothers Kuhn Loeb. He
has been a director of Hall Capital Partners LLC since 2007 and has served on the advisory board of Stonyrock Partners LP since
2019. Mr. Barger’s expertise in the investment management industry and his broad experience in public and private directorships,
finance, corporate strategy and business development provide valuable insight to our Board.
Mr. Colson has been chief executive officer and a director of Artisan Partners Asset Management since March 2011 and has
served as chairman of the board of directors since August 1, 2015. Mr. Colson also served as president of Artisan Partners Asset
Management from March 2011 to January 2021. He has been a director of Artisan Partners Funds, Inc. since November 2013.
Mr. Colson has served as chief executive officer of Artisan Partners since January 2010. Before serving as Artisan Partners’ chief
executive officer, Mr. Colson served as chief operating officer for investment operations from March 2007 through January 2010.
Mr. Colson has been a managing director of Artisan Partners since he joined the firm in January 2005. Mr. Colson's experience as
our chief executive officer makes him well qualified to serve both as a director and as chairman of the board. Our board of
directors values his substantial experience in the investment management industry and his extensive knowledge of our business.
Mr. Coxe has served on our board of directors since February of 2013 and currently serves on the Compensation Committee and
Nominating and Corporate Governance Committee. He was a managing director of Sutter Hill Ventures from 1989 through
December 2020 and joined that firm in 1987 following his tenure with Digital Communications Associates in Atlanta. Prior to
that, Mr. Coxe worked with Lehman Brothers in New York City, where he was a corporate finance analyst specializing in
mergers and acquisitions as well as debt and equity financing. Mr. Coxe was a member of Artisan Partners Holdings’ advisory
committee from January 1995 to the completion of our initial public offering in March 2013. He currently serves on the board of
directors of Nvidia Corporation and is a former director of Mattersight Corporation and PINC Solutions. Mr. Coxe’s wide-
ranging leadership experience and his experiences with both public and private directorships enable him to provide additional
insight to our board of directors and its committees.
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Ms. DiMarco has served on our board of directors since February 2013. Ms. DiMarco is chair of the Audit Committee and also
serves on the Compensation Committee. Ms. DiMarco founded Advent Software, Inc. in June 1983 and served Advent in various
capacities over time, including as chair of its board of directors (September 2013 to July 2015), chief executive officer (May
2003 to June 2012) and chief financial officer (July 2008 to September 2009). She currently serves on the advisory board of the
College of Engineering at the University of California Berkeley and the board of directors of Summer Search, a non-profit
organization. She is a member of several private company boards and is an advisor to NYCA, a venture capital firm. She is a
former member of the board of trustees of the University of California Berkeley Foundation, a former advisory board member of
the Haas School of Business at the University of California Berkeley and a former trustee of the San Francisco Foundation where
she chaired the investment committee. Ms. DiMarco’s extensive experience in technological developments for the investment
management industry provides useful insight to our board of directors and her management experience as a founder, officer and
director of Advent provide perspective on the management and operations of a public company. In addition, her extensive
financial and accounting experience strengthens our Board through her understanding of accounting principles, financial
reporting rules and regulations, and internal controls.
Mr. Joerres has served on our board of directors since February of 2013. He is currently chair of the Compensation Committee
and serves as a member of the Audit Committee. Mr. Joerres was executive chairman and chairman of the board of directors of
ManpowerGroup until his retirement in December 2015. From April 1999 until May 2014, he served as chief executive officer of
ManpowerGroup. Mr. Joerres currently serves on the boards of directors of ConocoPhillips and Western Union, and is a member
of the Committee for Economic Development. He is also past chairman and director of the Federal Reserve Bank of Chicago, a
former director of Johnson Controls International plc, and a former trustee of the U.S. Council for International Business. Our
board of directors values Mr. Joerres’s global operating and leadership experience and his innovative approach to optimizing
human capital. In addition, his substantial experience on public company boards enables him to provide guidance to our Board
with respect to the management and operations of a public company.
Mr. Ziegler has served on our board of directors since March 2011 and is currently its lead independent director. Mr. Ziegler
served as chairman of the board of directors from March 2011 to August 2015 and was our executive chairman from March 2011
to March 2014. Mr. Ziegler was a managing director and the chief executive officer of Artisan Partners Holdings from its
founding in 1994 through January 2010. Our board of directors values Mr. Ziegler's operating and leadership experience as our
founder and past executive chairman. His extensive knowledge of our business and the investment management industry provide
our Board with insight into the Company and valuable continuity of leadership.
Under the terms of our stockholders agreement, our stockholders committee, which had as of February 19, 2021, the authority to
vote approximately 14% of the combined voting power of our capital stock, is required to vote the shares subject to the
agreement for the election of each of Mr. Barger and Mr. Colson. Under the agreement, Artisan is required to use its best efforts
to elect Mr. Barger and Mr. Colson, which efforts must include soliciting proxies for, and recommending that the Company’s
stockholders vote in favor of, the election of each. For more information on the stockholders agreement and stockholders
committee see Item 13 of this report.
Certain information regarding our executive officers is included at the end of Part I of this Form 10-K under the heading
"Information about our Executive Officers".
Code of Ethics
Our board of directors has adopted a Code of Business Conduct applicable to all directors, officers and employees of the
Company to provide a framework for the highest standards of professional conduct and foster a culture of honesty and
accountability. The Code of Business Conduct satisfies applicable SEC requirements and NYSE listing standards. The Code of
Business Conduct is available under the Corporate Governance link on our website at www.apam.com.
We intend to post on our website at www.apam.com, all disclosures that are required by law or NYSE listing standards
concerning any amendments to, or waivers from, any provision of our Code of Business Conduct.
The Board of Directors and its Committees
The board of directors conducts its business through meetings of the Board and through meetings of its committees. The Board
has three standing committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance
Committee. The current members and chairpersons of the committees are:
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Director
Jennifer A. Barbetta
Matthew R. Barger
Eric R. Colson
Tench Coxe
Stephanie G. DiMarco
Jeffrey A. Joerres
Andrew A. Ziegler
Audit Committee
Compensation
Committee
X
Chair
X
X
X
Chair
Nominating and
Corporate
Governance
Committee
X
Chair
X
The Audit Committee is a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of
the Exchange Act. The Audit Committee is comprised solely of directors who meet the independence requirements under NYSE
listing standards and the Securities Exchange Act, and who are “financially literate” under NYSE rules. The board of directors
has determined that each member of the Audit Committee has “accounting or related financial management expertise” and
qualifies as an “audit committee financial expert”.
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Item 11. Executive Compensation
Compensation Discussion and Analysis
Summary
The core elements of our named executive officers’ compensation are base salary, a performance based cash bonus and
performance based equity awards with long-term vesting provisions. For 2020, 93% of our Chief Executive Officer's
compensation was performance based. For our other named executive officers, performance based compensation ranged from
85% to 94% of 2020’s total compensation.
The following table shows the elements of compensation paid to our Chief Executive Officer, Chief Financial Officer and the
three other most highly compensated officers (collectively, the named executive officers) with respect to 2020, 2019 and 2018.
The amounts in this table vary from the data and reporting conventions required by SEC rules in the Summary Compensation
Table below.
Performance Based Compensation
Equity Awards
Name & Principal Position Year
Salary
Cash
Bonus
Standard
Grant
Career
Grant
Total Direct
Compensation
Eric R. Colson
2020
$ 500,000 $ 5,225,000 $ 967,319 $ 967,280 $
7,659,599
Chief Executive Officer
2019
500,000
4,750,000
786,750 786,750
2018
437,500
5,000,000
222,828 222,806
Charles J. Daley, Jr.
2020
300,000
1,950,000
248,877 248,877
Chief Financial Officer
2019
300,000
1,850,000
76,050
76,050
2018
287,500
1,950,000
57,300
57,300
Jason A. Gottlieb
2020
300,000
2,700,000
967,319 967,280
President
2019
300,000
2,450,000
786,750 786,750
2018
287,500
2,600,000
458,400 458,400
Sarah A. Johnson
2020
300,000
1,150,000
248,877 248,877
Chief Legal Officer
2019
300,000
1,100,000
76,050
76,050
2018
287,500
1,150,000
57,300
57,300
Christopher J. Krein
2020
300,000
1,500,000
758,704 531,069
6,823,500
5,883,134
2,747,754
2,302,100
2,352,100
4,934,599
4,323,500
3,804,300
1,947,754
1,552,100
1,552,100
3,089,773
Performance
Based as %
of Total
93%
93%
93%
89%
87%
88%
94%
93%
92%
85%
81%
81%
90%
Executive Vice President
2020 business highlights include:
• We onboarded new investment talent and continued to add degrees of investment freedom within existing and new
investment strategies.
•
Our investment teams continued to generate strong absolute and relative investment returns for clients and investors.
• We recorded our highest ever year-end assets under management due to both strong investment returns and net client
cash inflows.
Our financial results reflect the Company’s strong overall performance in 2020.
•
2020 Executive Compensation
•
•
Base salaries for 2020 remained unchanged for our named executive officers. The base salary for our Chief Executive
Officer was $500,000 and the base salary for all other named executive officers was $300,000.
2020 performance based cash bonuses paid to the named executive officers were higher than 2019 bonuses, reflecting
the increase in average assets under management and the resulting record level of revenues. The 2020 cash bonuses
reflect the strong performance of the firm’s management team as they continued to execute on the firm’s strategic
initiatives and maintain the firm’s high value added, investments-first culture.
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•
Equity awards for our named executive officers, which were larger with respect to 2020 than 2019, consisted of the
following:
◦ Mr. Colson and Mr. Gottlieb were each awarded 28,211 performance share units (PSUs) with respect to
2020. Mr. Krein was awarded 18,808 PSUs with respect to 2020. The PSUs have a three-year performance
period beginning January 1, 2021. 50% of the PSUs are eligible for vesting if the recipient remains employed
through the performance period. 100% of the PSUs are eligible for vesting if the recipient satisfies the service
condition and either (i) the firm’s adjusted operating margin during the performance period exceeds the
median for a defined peer group or (ii) the firm’s total shareholder return during the performance period
exceeds the median of the peer group. 150% of the PSUs are eligible for vesting if the recipient satisfies the
service condition and both the operating margin and total shareholder return performance conditions. At the
conclusion of the performance period, the standard PSUs eligible for vesting will vest, and the career PSUs
eligible for vesting will be further subject to career vesting terms that, with certain exceptions, means the
PSUs will vest only if and when the recipient retires from the firm in accordance with qualifying retirement
conditions. The value of the PSUs granted reflected in the table above for each of Mr. Colson, Mr. Gottlieb
and Mr. Krein is the grant date fair value calculated in accordance with FASB ASC Topic 718, which is
based on satisfying the service condition, achieving the adjusted operating margin condition, and the probable
outcome of the total shareholder return performance condition using a Monte Carlo valuation method.
◦ Mr. Daley and Ms. Johnson each received an equity award consisting of a 50/50 mix of standard shares and
career shares. The standard shares will vest pro-rata over the five years following the date of grant, subject to
continued employment. With certain exceptions, the career shares will only vest if and when the recipient
retires from the Company in accordance with qualifying retirement conditions.
Compensation Program Features
Our executive compensation program includes the following features that we believe reflect sound corporate pay governance:
The vast majority of our named executive officers’ total compensation is performance based.
•
• We do not have employment or other agreements that provide termination benefits outside the context of a change in
•
•
control.
After receiving a minimum amount of standard equity, generally one-half of all equity awarded to our named executive
officers contains career vesting conditions that, with certain exceptions, means equity will only vest if and when the
recipient retires from the Company in accordance with qualifying retirement conditions.
All of our outstanding unvested equity awards to named executive officers include double-trigger change in control
provisions.
• We maintain equity ownership guidelines, pursuant to which our named executive officers are required to hold
•
Company equity equal in value to eight times base salary for the Chief Executive Officer and three times base salary
for all other named executive officers.
Our named executive officers are subject to a clawback policy that permits the board of directors to recover incentive
compensation from a named executive officer if his or her fraud or willful misconduct led to a material restatement of
financial results.
None of our named executive officers have bonus guarantees.
• We do not provide “golden parachute” tax gross ups.
•
• We do not offer retirement income or pension plans other than the same 401(k) plan that is available to all employees.
• We do not maintain any benefit plans or perquisites that cover only one or more of our named executive officers.
Our insider trading policy prohibits hedging and restricts pledging of Company stock by all of our employees.
•
Our Compensation Committee receives input from an independent compensation consultant.
•
Objectives of the Compensation Program
We believe that to create long-term value for our stockholders our management team needs to focus on the following business
objectives:
•
•
•
•
•
Attracting, retaining and cultivating top investment talent whose interests are aligned with our clients and stockholders.
Delivering superior investment performance and client service.
Achieving profitable and sustainable financial results.
Expanding our investment capabilities through thoughtful growth.
Continuing to diversify our sources of assets under management.
Our executive compensation program is designed to:
•
•
•
•
Support our business strategy.
Attract, motivate and retain highly talented, results-oriented individuals.
Reward the achievement of superior and sustained long-term performance.
Be flexible and responsive to evolving market conditions.
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•
•
Align the interests of our named executive officers with our stockholders.
Provide competitive pay opportunities.
Elements of our Named Executive Officers’ Compensation and Benefits
The elements of our named executive officer compensation program include:
•
•
•
•
•
Base salary
Performance based cash bonus
Performance based equity awards
Retirement benefits
Other benefits
Base Salary
Base salaries are intended to provide our named executive officers with a degree of financial certainty and stability that does not
depend on performance. Our named executive officers’ base salaries represent a relatively small portion of their overall total
direct compensation. We believe that the majority of their pay should be performance based.
Prior to 2018, the base salary for all of the firm’s managing directors, including the named executive officers, was $250,000.
After reviewing industry and peer practices, the Compensation Committee determined to increase the base salary to $300,000 for
all managing directors and to $500,000 for our Chief Executive Officer. The increases for the named executive officers were
intended to increase the competitiveness of the base salaries by bringing them closer to the median level of the peer group salary
information presented by the Committee’s compensation consultant, McLagan. The base salary increase represented the first ever
base salary increase at Artisan for Mr. Colson, Mr. Daley, Mr. Gottlieb and Mr. Krein. No changes were made to the named
executive officers' base salaries during 2019 or 2020.
Performance Based Cash Bonus and Equity Awards
Annual cash bonuses and equity awards are determined at or after the end of each year and are based on the Compensation
Committee’s assessment of individual and company-wide performance measured over both annual and long-term periods.
In order to incentivize a holistic and long-term approach, focused on maintaining the firm’s identity and integrity as a high value
added, talent-centered investment firm with a variable expense operating model and strong balance sheet, we do not use
predetermined incentive formulas. In determining executives’ annual cash bonuses and equity awards, we consider both the
shorter-term and the longer-term contributions of each executive and how those contributions will relate to the firm’s long-term
health and sustainability.
The board of directors and management believe that the vast majority of long-term incentive awards, whether granted in equity or
cash, should be made to the firm’s most critical employees—its investment professionals—to attract, motivate and retain those
individuals and enhance long-term alignment of interests. A consequence of this approach is that there is a limited amount of
long-term incentive awards, whether granted in equity or cash, to allocate to non-investment team members, including named
executive officers. That is why a relatively small portion of each executive’s annual performance based pay is in the form of
equity-based long-term incentive awards. Increasing the amount of equity-based long-term incentive awards made to named
executive officers would necessarily decrease the amount of long-term incentives awarded to investment team members.
The equity we grant to our named executive officers is subject to long-term time vesting and/or performance vesting conditions.
In addition, generally one-half of all equity awarded to our named executive officers contains career vesting conditions that, with
certain exceptions, means equity will only vest if and when the executive retires from the Company in accordance with qualifying
retirement conditions. Equity awarded to our named executive officers consists of either restricted stock or performance share
units, as described below.
Restricted Stock. Prior to the equity awarded in 2020, all of our named executive officers were granted restricted stock in the
form of standard restricted shares and career shares. Our standard restricted shares vest pro-rata over the five years following the
date of grant, subject to continued employment. For career shares to vest, both of the following conditions must be met:
•
•
Pro rata time-vesting, under which 20% of the shares become eligible to vest in each of the five years following the
year of grant.
Qualifying retirement, which generally requires that the recipient (i) has been employed by us for at least 10 years at
retirement; (ii) has provided, for named executive officers, 18 months' prior written notice of retirement; and (iii) has
remained at the Company through the retirement notice period.
Career shares and standard restricted shares will also vest upon a termination of employment due to death or disability. In
addition, after the fifth anniversary of the grant date, if the Company terminates a recipient without cause (as defined in the award
agreement), career shares will fully vest, provided that the recipient has at least 10 years of service with the Company at the time
of termination. After a change of control, if the Company terminates a named executive officer without cause or he or she resigns
for good reason, in either case, within two years of the change in control, the shares will fully vest.
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Performance Share Units (PSUs). Beginning with the equity awarded in 2020, Mr. Colson and Mr. Gottlieb received PSUs in
lieu of restricted stock awards. In 2021, Mr. Krein received PSUs in addition to Mr. Colson and Mr. Gottlieb. The PSUs have a
three-year performance period, after which achievement of the performance conditions will be assessed by the Compensation
Committee.
PSUs will be eligible to vest if the performance conditions are met, as determined by the Compensation Committee after
completion of the performance period, as follows:
•
•
•
50% of the PSUs will be eligible to vest if the recipient remains employed at Artisan through the performance period.
100% of the PSUs will be eligible to vest if the recipient satisfies the service condition and either (i) the firm’s adjusted
operating margin during the performance period exceeds the median for a defined peer group or (ii) the firm’s total
shareholder return during the performance period exceeds the median of the peer group.
150% of the PSUs will be eligible to vest if the recipient satisfies the service condition and both the operating margin
and total shareholder return performance conditions.
For purposes of the PSU awards, “adjusted operating margin” represents adjusted (non-GAAP) operating margin, if reported by
the company. If adjusted operating margin is not reported, GAAP margin is used. If no operating margin is reported, consolidated
revenues and consolidated expenses are used to calculate an operating margin. Additional adjustments may be made to the
calculation of operating margin by the Compensation Committee at its discretion to improve the comparability amongst Artisan
and the peer group. The peer group for purposes of the 2020 PSU awards includes the following publicly traded asset
management firms: AllianceBernstein; Affiliated Managers Group; BlackRock; Eaton Vance; Federated Hermes; Franklin
Resources; GAMCO Investors; Invesco; Janus Henderson Investors; Lazard; Legg Mason; BrightSphere; T. Rowe Price Group;
Virtus Investment Partners; and Waddell & Reed Financial. The peer group for purposes of the 2021 PSU award was modified
and includes the following publicly traded asset management firms: AllianceBernstein; Affiliated Managers Group; BlackRock;
Federated Hermes; Franklin Resources; Invesco; Janus Henderson Investors; Lazard; BrightSphere; T. Rowe Price Group; and
Virtus Investment Partners.
Once the Compensation Committee has determined the number of PSUs that are eligible to vest with respect to the performance
period, one-half of the total PSUs eligible to vest will vest and the underlying shares will be delivered. The other half of PSUs
eligible to vest will be further subject to career vesting conditions that, with certain exceptions, means the PSUs will vest and the
underlying shares will be delivered only if and when the recipient retires from the Company in accordance with qualifying
retirement conditions.
All outstanding PSUs will also vest upon a termination of employment due to death or disability. In addition, after the fifth
anniversary of the grant date, if the Company terminates a recipient without cause (as defined in the award agreement), all PSUs
previously determined to be eligible to vest but not having vested will vest, provided that the recipient has at least 10 years of
service with the Company at the time of termination. After a change of control, if the Company terminates a named executive
officer without cause or he or she resigns for good reason, in either case, within two years of the change in control, all
outstanding PSUs will fully vest.
We intend to continue to grant annual equity-based awards to our named executive officers under the Omnibus Plan, which
provides for a wide variety of equity awards. The size and structure of the equity awards granted may not be indicative of future
awards. Future equity awards may be granted in a mix of restricted shares (both standard and career) and performance share
units, and subject to both time- and performance-based vesting conditions. We generally expect at least half of the equity awards
to our named executive officers to include career vesting terms, after a minimum amount of standard equity has been granted.
Retirement Benefits
We believe that providing a cost-effective retirement benefit for the Company’s employees is an important recruitment and
retention tool. Accordingly, the Company maintains, and each of the named executive officers participates in, a contributory
defined contribution retirement plan for all U.S.-based employees, and matches 100% of each employee’s contributions (other
than catch-up contributions by employees age 50 and older) up to the 2020 limit of $19,500. We also maintain retirement plans or
make retirement plan contributions (or equivalent cash payments) for our employees based outside the U.S. The opportunity to
participate in a retiree health plan, at the sole expense of the retiree, is available to employee-partners and career share recipients
who have at least 10 years of service with us at the time of retirement.
Other Benefits
Our named executive officers participate in the employee health and welfare benefit programs we maintain, including medical,
group life and long-term disability insurance, and health care savings accounts, on the same basis as all U.S. employees, subject
to satisfying any eligibility requirements and applicable law. We also generally provide employer-paid parking or transit
assistance and, for our benefit and convenience, on-site food and beverages; our named executive officers enjoy those benefits on
the same terms as all of our employees.
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Determination of Compensation
Role of Compensation Committee, Board of Directors and Chief Executive Officer. Our Compensation Committee, which is
comprised solely of directors who qualify as independent under applicable SEC and NYSE rules, has ultimate responsibility for
all compensation decisions relating to our named executive officers. Other members of the board of directors regularly attend and
participate in meetings of the Compensation Committee, and the members of the Compensation Committee and board of
directors regularly meet in executive session without management present. The decisions of the Compensation Committee are
reported to the entire board of directors.
Our Chief Executive Officer evaluates the performance of, and makes recommendations to our Compensation Committee
regarding compensation matters involving, the other named executive officers. The Compensation Committee retains the ultimate
authority to approve, reject or modify those recommendations. The Compensation Committee evaluates our Chief Executive
Officer’s performance and determines our Chief Executive Officer’s compensation.
Use of Compensation Consultant. Our Compensation Committee has retained the services of McLagan, a compensation
consultant, to provide advice regarding our named executive officer and non-employee director compensation programs. As its
consultant, McLagan provides the Compensation Committee with information on competitive pay levels for our executive
management vis-à-vis an executive reference peer group and about compensation trends in the asset management industry.
McLagan must receive pre-approval from the chairperson of our Compensation Committee prior to accepting any non-survey-
related work from management. Our Compensation Committee has assessed the independence of McLagan pursuant to SEC rules
and concluded that no conflict of interest exists that prevents McLagan from independently advising the Compensation
Committee.
Peer Group Compensation Review. Our Compensation Committee considers the individual and aggregate pay levels,
compensation structure, and financial and operational performance of other asset management companies in connection with its
compensation decision-making process. We do not seek to benchmark our executive compensation to that of our peers. Instead,
the Compensation Committee reviews the information to stay informed of competitive pay levels, compensation structure, and
compensation trends in the asset management industry.
Tax and Accounting Considerations. When it reviews compensation matters, our Compensation Committee considers the
anticipated tax and accounting treatment of various payments and benefits to the Company and, when relevant, to its named
executive officers, although these considerations are not dispositive.
Results of Advisory Vote on Executive Compensation. The Compensation Committee considers the results of the Company’s
advisory vote on compensation when determining the amount and type of compensation paid to the named executive officers and
the structure of the executive compensation program generally. The Company did not have an advisory vote on compensation at
its 2020 annual meeting of stockholders. At the 2019 annual meeting of stockholders, the advisory vote on executive
compensation received stockholder support with approximately 64% of the votes cast in favor of our executives' compensation.
The Compensation Committee values the input of our stockholders and is mindful of the level of support received. Over the
course of the Company's history, the Company’s executive compensation program has worked well to attract and retain highly
talented individuals, reward the achievement of superior long-term performance, and align the interests of those individuals with
our stockholders and partners. With respect to 2019, the Compensation Committee introduced performance share units for Mr.
Colson and Mr. Gottlieb. With respect to 2020, the Compensation Committee expanded the use of performance share units to Mr.
Krein. The Compensation Committee will continue to consider other changes to the executive compensation program.
2020 Executive Compensation Process and Decisions
At its January 2020 meeting, our Compensation Committee and board of directors discussed and agreed upon a set of strategic
priorities and business and financial metrics against which to evaluate performance and determine bonuses for 2020. At each
subsequent meeting, the Compensation Committee and board of directors reviewed the status of the strategic priorities and
assessed the Company’s year-to-date business and financial metrics.
In December 2020 the Compensation Committee determined annual cash bonuses and, in January 2021, the board of directors
approved equity awards, in each case based on its assessment of the named executive officers’ execution of strategic priorities
and our 2020 business and financial results. In shaping its decisions with respect to all of the named executive officers, the
Compensation Committee considered the Company’s strong performance in 2020, including the following highlights:
•
The Company onboarded new investment talent and continued to add degrees of investment freedom within existing
and new investment strategies.
◦
◦
◦
Beini Zhou and Anand Vasagiri joined the Artisan International Value team and launched the International
Small Cap Value strategy.
Tiffany Hsiao and Yuanyuan Ji joined the Artisan Global Equity team to design and launch a new strategy
focused on post-venture firms in greater China.
The Global Value team launched its second strategy, the Select Equity strategy.
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•
•
The Company’s investment teams continued to generate strong absolute and relative investment returns for clients and
investors.
◦
◦
Net of fees, seventeen of nineteen strategies have outperformed relative to their benchmarks since inception.
Five Artisan Funds finished 2020 in the top decile of their Morningstar peer groups, and 8 of 15 Artisan
Funds finished in the top quartile of their peer groups.
The Company recorded its highest ever year-end assets under management due to strong investment returns and net
client cash inflows.
◦
◦
◦
During the year ended December 31, 2020, assets under management increased to $157.8 billion, an increase
of $36.8 billion, or 30%, compared to $121.0 billion at December 31, 2019, as a result of $30.3 billion of
market appreciation and $7.2 billion of net client cash inflows, partially offset by $0.7 billion of Artisan
Funds’ distributions that were not reinvested.
16 of 19 investment strategies had positive net inflows in 2020, with six strategies having net inflows in
excess of $500 million. Investment strategies with inception dates beginning in 2014 or later had $9.5 billion
in net inflows, an organic growth rate of 78%.
Average assets under management for the year ended December 31, 2020 was $124.9 billion, an increase of
12.5% from the average of $111.0 billion for the year ended December 31, 2019.
•
The Company’s financial results reflect its strong overall performance in 2020.
◦
◦
◦
◦
The Company earned $900 million in revenue for the year ended December 31, 2020, a 13% increase from
revenues of $799 million for the year ended December 31, 2019.
Operating margin was 39.8% in 2020, compared to 35.5% in 2019.
The Company generated $3.40 of earnings per basic and diluted share and $3.33 of adjusted EPS.
The declaration of $3.39 of dividends per share with respect to 2020.
Based on these achievements and our financial and business performance, the Compensation Committee determined to pay 2020
cash incentive awards as follows: $5,225,000 for Mr. Colson; $1,950,000 for Mr. Daley; $2,700,000 for Mr. Gottlieb; $1,150,000
for Ms. Johnson; and $1,500,000 for Mr. Krein. The Compensation Committee also recommended, and our board of directors
subsequently approved, equity grants in respect of 2020 to our named executive officers. The aggregate award constituted a total
of approximately 740,249 restricted stock awards, 1,306 restricted stock units and 75,230 PSUs, of which a total of 18,808
restricted shares and all 75,230 PSUs (or 12% of the total grant) were awarded to our named executive officers as follows: 14,106
standard PSUs and 14,105 career PSUs for Mr. Colson; 4,702 standard restricted shares and 4,702 career shares for Mr. Daley;
14,106 standard PSUs and 14,105 career PSUs for Mr. Gottlieb; 4,702 standard restricted shares and 4,702 career shares for Ms.
Johnson; 11,769 standard PSUs and 7,039 career PSUs for Mr. Krein.
Other Compensation Policies and Practices
Equity Ownership Guidelines. Executive officers are expected to own shares of the Company’s common stock and/or Class B
common units of Artisan Partners Holdings equal in value to eight times base salary for the Chief Executive Officer and three
times base salary for all other executive officers. Current executive officers have a period of five years from the time the
guidelines were adopted in February 2018 to comply with the ownership requirements. In addition, in the future, any individual
becoming an executive officer will have a period of five years from the time of his or her designation as an executive officer to
comply with the guidelines. As of December 31, 2020, each of our named executive officers held equity in excess of their base
salary as follows: 66 times base salary for Mr. Colson; 18 times base salary for Mr. Daley; 21 times base salary for Mr. Gottlieb;
23 times base salary for Ms. Johnson; and 5 times base salary for Mr. Krein.
Compensation Clawback Policy. Our executive compensation clawback policy provides that in the event of a material
restatement of the Company’s financial results within three years of the original reporting, the board of directors will review the
facts and circumstances that led to the restatement and, if the Board determines that an executive officer engaged in fraud or
willful misconduct leading to material noncompliance with any financial reporting requirements and the restatement, the Board
may choose to recover incentive compensation paid to an executive officer in an amount that the Board determines is the
difference between the amount of incentive compensation paid or granted to the executive officer and the amount of incentive
compensation that would have been paid or granted to the executive officer based upon the restated financial results. Incentive
compensation subject to this policy includes both cash bonuses and equity awards.
Hedging and Pledging Policies. Our code of ethics and insider trading policies prohibit our directors and employees, including
our executive officers, from engaging in hedging transactions involving any derivative security relating to Company securities,
whether or not the instrument is issued by the Company, except in connection with awards made under an Artisan compensation
or benefit plan. Our directors and employees are also restricted from pledging Company securities when they are in possession of
material, nonpublic information or otherwise are not permitted to trade in Company securities, such as during any black-out
period.
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Risk Management and our Compensation Program
We have identified two primary risks relating to compensation: the risk that compensation will not be sufficient in amount or
appropriately structured to attract and to retain talent, and the risk that compensation may provide unintended short-term
incentives. To combat the risk that our compensation might not be sufficient or be inappropriately structured, we strive to use a
compensation structure, and set compensation levels, for all employees in a way that we believe promotes retention. To avoid
unintended short-term incentives, we make equity awards subject to multi-year vesting schedules and, for certain employees
(including our named executive officers), provide for career vesting conditions on a portion of the long-term incentives received.
In addition, our named executive officers are subject to equity ownership guidelines and a compensation clawback policy that
applies to both cash and equity awards. We believe that both the structure and levels of compensation have aided us in attracting
and retaining key personnel. In addition, we believe that the long-term nature of our awards incentivizes a holistic approach to
maintaining the firm’s long-term health and sustainability. We have not seen any employee behaviors motivated by our
compensation policies and practices that create increased risks for our stockholders.
Based on the foregoing, we do not believe that our compensation policies and practices motivate imprudent risk taking.
Consequently, we are satisfied that any potential risks arising from our employee compensation policies and practices are not
reasonably likely to have a material adverse effect on the Company. Our Compensation Committee will continue to monitor the
effects of its compensation decisions to determine whether risks are being appropriately managed.
Compensation Committee Interlocks and Insider Participation
Through January 27, 2020, the Compensation Committee consisted of Seth W. Brennan, Tench Coxe and Jeffrey A. Joerres. On
January 27, 2020, Mr. Brennan resigned from the board of directors and Stephanie G. DiMarco was subsequently appointed to
the Compensation Committee in his place. Each member of our Compensation Committee is an independent director under the
rules of the NYSE and our Corporate Governance Guidelines. None of the members of the Compensation Committee have been
an officer or employee of the Company. None of our executive officers serves on the board of directors of a company that has an
executive officer that serves on our Board.
In connection with our initial public offering, we entered into agreements with all limited partners of Artisan Partners Holdings,
including with entities associated with Tench Coxe. Information about the agreements and transactions thereunder, are more fully
discussed in Item 13 of this report.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b)
of Regulation S-K with management and, based upon such review and discussion, has recommended to the board of directors that
the Compensation Discussion and Analysis be included in Artisan Partners Asset Management’s annual report on Form 10-K and
proxy statement.
Compensation Committee:
Jeffrey A. Joerres, Chairperson
Tench Coxe
Stephanie G. DiMarco
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Summary Compensation Table
The following table provides information regarding the compensation earned during the years ended December 31, 2018, 2019
and 2020 by each of our named executive officers.
The applicable SEC rules require that for purposes of the Summary Compensation Table, the value of an equity award be
reported in the year of grant rather than the year with respect to which the award was made. Accordingly, the stock awards
reported for 2018, 2019, and 2020 reflect the awards made in February 2018, January 2019, and January 2020, respectively.
Because we consider the value of the equity awards we make in January or February of each year to be a part of each named
executive officer’s compensation for the prior year, we have included those values in the row for the prior year in the table at the
beginning of this Item 11, as well as in the table immediately following the Summary Compensation Table.
Name & Principal Position
Eric R. Colson
Chief Executive Officer
Charles J. Daley, Jr.
Chief Financial Officer
Jason A. Gottlieb
President
Sarah A. Johnson
Chief Legal Officer
Christopher J. Krein
Executive Vice President
Year
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
Salary
Bonus (1)
Stock
Awards(2)
All Other
Compensation(3)
Total
$
500,000 $ 5,225,000 $ 1,573,500 $
230,134 $ 7,528,634
500,000
437,500
300,000
300,000
287,500
300,000
300,000
287,500
300,000
300,000
287,500
4,750,000
5,000,000
1,950,000
1,850,000
1,950,000
2,700,000
2,450,000
2,600,000
1,150,000
1,100,000
1,150,000
300,000
1,500,000
445,634
1,042,775
152,100
114,600
259,710
1,573,500
916,800
521,388
152,100
114,600
177,075
388,700
149,772
69,475
124,889
94,854
63,798
46,382
46,476
44,506
105,610
87,207
68,013
45,110
5,845,406
6,549,750
2,526,989
2,359,454
2,561,008
4,619,882
3,713,276
3,453,394
1,707,710
1,601,807
1,682,588
2,233,810
(1) Amounts in this column represent the annual performance based cash bonus compensation earned by our named executive officers in
2020, 2019 and 2018, as applicable. The 2020 cash bonus amounts were paid in December 2020. The 2018 and 2019 cash bonus amounts
were paid in February 2019 and 2020, respectively.
(2) Amounts reported represent the grant date fair value of the equity granted to each named executive officer in the year indicated. We
consider the value of the equity awards we made in 2019, 2020 and 2021 to be a part of each named executive officer’s compensation for
2018, 2019 and 2020, respectively. Therefore, in the supplemental table immediately following the Summary Compensation Table, we report
the grant date fair value of the equity awards for the year with respect to which it was granted. The values reported for awards of restricted
shares represent the grant date fair value as computed in accordance with FASB ASC Topic 718 based upon the price of our common stock
at the grant date. The values reported for PSUs represent the grant date fair value based upon the probable outcome of the performance
conditions. In accordance with FASB ASC Topic 718, grant date fair value of the PSUs is based on satisfying the service condition,
achieving the adjusted operating margin condition, and the outcome of the total shareholder return performance condition using a Monte
Carlo valuation method.
(3) Amounts in this column represent the aggregate dollar amount of all other compensation received by our named executive officers. All
other compensation includes, but is not limited to (a) Company matching contributions to contributory defined contribution plan accounts
equal to 100% of their pre-tax contributions (excluding catch-up contributions for named executive officers age 50 and older) up to the
limitations imposed under applicable tax rules, which contributions totaled $19,500 for each named executive officer in 2020; (b) health and
vision insurance premiums and HSA contributions paid by the Company for plans that are generally offered to all employees on a
nondiscriminatory basis in the aggregate amount of approximately $25,000 for each named executive officer in 2020; and (c) reimbursement
for 2020 self-employment payroll tax expense as follows: $183,813 for Mr. Colson; $78,568 for Mr. Daley, and $57,459 for Ms. Johnson.
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The Summary Compensation Table above reflects the value of the equity awarded to each named executive officer in the year in
which it was granted, as required by SEC disclosure rules. The supplemental table below reflects the value of the equity awarded
to each named executive officer for the year with respect to which it was granted.
Name
Eric R. Colson
Charles J. Daley, Jr.
Jason A. Gottlieb
Sarah A. Johnson
Year
Salary
Bonus
Stock
Awards (1)
All Other
Compensation
Total
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
$
500,000 $ 5,225,000 $ 1,934,599 $
230,134 $ 7,889,733
500,000
4,750,000
1,573,500
149,772
6,973,272
437,500
5,000,000
445,634
69,475
5,952,609
300,000
1,950,000
497,754
124,889
2,872,643
300,000
1,850,000
152,100
94,854
2,396,954
287,500
1,950,000
114,600
63,798
2,415,898
300,000
2,700,000
1,934,599
46,382
4,980,981
300,000
2,450,000
1,573,500
46,476
4,369,976
287,500
2,600,000
916,800
44,506
3,848,806
300,000
1,150,000
497,754
105,610
2,053,364
300,000
1,100,000
152,100
87,207
1,639,307
287,500
1,150,000
114,600
68,013
1,620,113
Christopher J. Krein
(1) Represents equity awarded with respect to each of fiscal years 2020, 2019 and 2018. Equity awards for all of our named executive
officers for fiscal year 2018 consisted of restricted shares. Equity awards for fiscal years 2020 and 2019 for Mr. Daley and Ms. Johnson
consisted of restricted shares. Equity awards for fiscal year 2020 and 2019 for Mr. Colson and Mr. Gottlieb, and for 2020 for Mr. Krein,
consisted of PSUs as follows:
1,500,000
1,289,773
300,000
45,110
2020
3,134,883
Name
Eric R. Colson
Jason A. Gottlieb
Estimated Future Payouts
Under Equity Incentive Plan
Awards
Grant Date
Threshold (#)
Target (#)
Grant Date
Fair Value of
Awards ($)
(A)
1/26/2021
2/11/2020
1/26/2021
2/11/2020
14,106
15,000
14,106
15,000
42,317 $ 1,934,599
45,000 $ 1,573,500
42,317 $ 1,934,599
45,000 $ 1,573,500
Christopher J. Krein
(A) Represents the value of performance share units based on the expected outcome as of the date of grant. In accordance with FASB ASC
Topic 718, grant date fair value is based on satisfying the service condition, achieving the adjusted operating margin condition, and the
outcome of the total shareholder return performance condition using a Monte Carlo valuation method.
28,212 $ 1,289,773
1/26/2021
9,405
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Table of Contents
Grants of Plan-Based Awards During 2020
The following table provides information regarding plan-based awards granted to each of our named executive officers in the
year ended December 31, 2020. In accordance with SEC rules, the table does not include awards that were granted in 2021 with
respect to 2020 performance. See above for information regarding those awards.
Name
Eric R. Colson
Charles J. Daley, Jr.
Jason A. Gottlieb
Sarah A. Johnson
Estimated Future Payouts
Under Equity Incentive Plan
Awards(1)
Grant Date
Threshold (#)
Target (#)
2/11/2020
1/29/2020
2/11/2020
1/29/2020
15,000
45,000
—
—
15,000
45,000
—
—
All Other Stock
Awards: Number
of Shares of Stock
or Units (#)(2)
Grant Date Fair
Value of Stock
Awards ($)(3)
— $
1,573,500
4,500
—
4,500
152,100
1,573,500
152,100
—
—
11,500
1/29/2020
Christopher J. Krein
(1) Represents the minimum and maximum number of PSUs granted in 2020 with respect to 2019 performance. There is no difference between
target and maximum grant levels. A description of the performance conditions for the PSUs is provided above in the “Compensation Discussion
and Analysis—Performance Based Cash Bonus and Equity Awards”. One-half of the total PSUs eligible to vest upon achievement of the
performance condition(s) will vest and the underlying shares will be delivered. The other half of the PSUs eligible to vest will be further subject
to career vesting conditions. PSUs entitle the holder to dividend equivalent rights. Dividend equivalents are paid on PSUs at the same time, and
in the same amounts, as dividends are paid on outstanding shares of our Class A common stock.
(2) Represents the number of restricted shares of our Class A common stock granted in 2020 with respect to 2019 performance. One-half of each
award consisted of standard restricted awards and the other half consisted of career awards. Vesting conditions for standard restricted awards
and career awards are described above in the “Compensation Discussion and Analysis—Performance Based Cash Bonus and Equity Awards”.
Standard restricted awards and career awards entitle the holder to dividends. Dividends are paid on these awards at the same time, and in the
same amounts, as dividends are paid on other outstanding shares of our Class A common stock.
(3) In accordance with FASB ASC Topic 718, grant date fair value of restricted stock awards is computed based upon the price of our common
stock at the grant date. Grant date fair value of the PSUs is based on satisfying the service condition, achieving the adjusted operating margin
condition, and the outcome of the total shareholder return performance condition using a Monte Carlo valuation method.
388,700
Outstanding Equity Awards at December 31, 2020
The following table provides information about the outstanding unvested equity awards held by each of our named executive
officers as of December 31, 2020.
103
Table of Contents
Number of Shares or
Units of Stock That
Have Not Vested(#)(1)
Market Value of Shares
or Units of Stock That
Have Not Vested($)(3)
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights that Have
not Vested (#)(2)
Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights that
Have Not Vested
($)(3)
71,949 $
3,621,913 $
45,000 $
2,265,300
27,780
71,470
26,100
1,398,445
3,597,800
1,313,874
—
45,000
—
—
2,265,300
—
Name
Eric R. Colson
Charles J. Daley, Jr.
Jason A. Gottlieb
Sarah A. Johnson
Christopher J. Krein
(1) Represents the number of unvested restricted shares of Class A common stock as of December 31, 2020, that are scheduled to vest as set forth
below.
(2) Represents the number of unvested PSU share equivalents as of December 31, 2020, that are scheduled to vest as set forth below. The number
and value of PSUs reported herein assumes the 30,000 PSUs granted to Mr. Colson and Mr. Gottlieb in 2020 will ultimately result in the issuance
of 45,000 shares of Class A common stock if all other vesting conditions were met as of December 31, 2020.
1,072,645
21,308
—
—
Restricted Stock
Performance Share
Units
Name
Eric R. Colson
Charles J. Daley, Jr.
Jason A. Gottlieb
Sarah A. Johnson
Christopher J. Krein
Vest Date
February 2021
February 2022
February 2023
February 2024
8,594
5,595
4,594
1,945
Qualified Retirement
51,221
February 2021
February 2022
February 2023
February 2024
February 2025
Qualified Retirement
February 2021
October 2021
February 2022
February 2023
February 2024
Qualified Retirement
February 2021
February 2022
February 2023
February 2024
February 2025
3,110
2,110
1,610
950
450
19,550
19,571
3,624
12,325
5,325
4,000
26,625
2,900
1,900
1,400
950
450
Qualified Retirement
18,500
February 2021
February 2022
February 2023
February 2024
February 2025
Qualified Retirement
4,651
3,036
2,677
1,677
1,150
8,117
—
—
22,500
—
22,500
—
—
—
—
—
—
—
—
—
22,500
—
22,500
—
—
—
—
—
—
—
—
—
—
—
—
(3) Awards were valued based on the closing price of our Class A common stock on the NYSE on December 31, 2020, which was $50.34.
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Table of Contents
Equity Awards Vested During the Year Ended December 31, 2020
The following table provides information about the value realized by each of our named executive officers during the year ended
December 31, 2020, upon the vesting of equity awards.
Name
Eric R. Colson
Charles J. Daley, Jr.
Jason A. Gottlieb
Sarah A. Johnson
Number of Shares
Acquired on Vesting(#)
Value Realized on
Vesting($)(1)
8,594
$
2,660
19,571
2,450
306,634
94,909
698,293
87,416
Christopher J. Krein
124,880
(1) The value of the restricted shares of Class A common stock that vested during 2020 is based on the stock price of our Class A common stock
on each respective vesting date.
3,500
CEO Pay Ratio - 33:1
Our CEO pay ratio compares our CEO’s annual total compensation in 2020 to that of the median of the annual total
compensation of all other Company employees (the “Median Employee”) for the same period. The calculation of annual total
compensation of all other employees was determined in the same manner as the “Total Compensation” shown for our CEO in the
Summary Compensation Table above and therefore includes each employee’s base, bonus, equity-based awards, and the value of
all Company-paid benefits. We included all employees as of December 31, 2020 in our analysis.
The annual total compensation for 2020 for our CEO was $7,528,634 and for the Median Employee was $226,274. The resulting
ratio of our CEO’s pay to the pay of our Median Employee for 2020 is 33 to 1.
Pension Benefits
We do not sponsor or maintain any defined benefit pension or retirement benefits for the benefit of our named executive officers.
Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
We do not sponsor or maintain any nonqualified defined contribution or other nonqualified deferred compensation plans for the
benefit of our named executive officers.
Employment Agreements
We do not have employment agreements with any of our named executive officers. Upon commencement of employment, each
named executive officer received an offer letter outlining the initial terms of employment, including base salary and cash
incentive compensation. None of these terms affected compensation paid to our named executive officers in 2020 and will not
affect compensation paid in future years.
Each of the named executive officers has agreed, pursuant to his or her equity award agreements, to certain restrictive covenants,
including agreements not to compete with Artisan or solicit Artisan clients and employees, in each case for one year after he or
she ceases to be employed by Artisan. The enforceability of the restrictive covenants may be limited depending on the particular
facts and circumstances.
Potential Payments Upon Termination or Change in Control
Our named executive officers are all employed on an “at will” basis, which enables us to terminate their employment at any time.
Our named executive officers do not have agreements that provide severance benefits. We do not offer or have in place any
formal retirement, severance or similar compensation programs providing for additional benefits or payments in connection with
a termination of employment, change in job responsibility or change in control (other than our contributory defined contribution
plan). Under certain circumstances, a named executive officer may be offered severance benefits to be negotiated at the time of
termination.
Equity awards granted to our named executive officers are evidenced by an award agreement that sets forth the terms and
conditions of the award and the effect of any termination event or change in control on unvested awards. The effect of a
termination event or change in control on outstanding equity awards varies by the type of award.
Each of our named executive officers has been granted standard restricted shares and career shares. Mr. Colson and Mr. Gottlieb
have also been granted performance share units, half of which are also subject to career vesting conditions. All outstanding equity
awards will vest upon a termination of employment due to death or disability and, in the context of a change of control, if the
Company terminates a named executive officer without cause or he or she resigns for good reason, in either case, within two
years of the change in control. Equity awards with career vesting conditions will also fully vest if, after the fifth anniversary of
the grant date, the Company terminates a recipient without cause (as defined in the award agreement), provided that the recipient
has at least 10 years of service with the Company at the time of termination.
105
Table of Contents
The following table provides the value of the accelerated vesting and retirement vesting of equity that would have been realized
for each of the named executive officers if his or her employment had ended on December 31, 2020 under the circumstances
indicated (including following a change in control).
Qualifying
Termination in
Connection with
Change in
Control
Death or
Disability
Qualified
Retirement (1)
Involuntary
Termination
without Cause
Eric R. Colson
Standard Restricted Shares (2)
Career Shares (3)
Standard Performance Share Units (2)
Career Performance Share Units (3)
Charles J. Daley, Jr.
Standard Restricted Shares (2)
Career Shares (3)
Jason A. Gottlieb
Standard Restricted Shares (2)
Career Shares (3)
Standard Performance Share Units (2)
Career Performance Share Units (3)
Sarah A. Johnson
Standard Restricted Shares (2)
Career Shares (3)
Christopher J. Krein
Standard Restricted Shares (2)
Career Shares(3)
$
1,043,448 $
1,043,448 $
— $
2,578,465
2,578,465
1,535,078
755,100
755,100
414,298
984,147
2,257,497
1,340,303
755,100
755,100
382,584
931,290
664,035
408,610
755,100
755,100
414,298
984,147
2,257,497
1,340,303
755,100
755,100
382,584
931,290
664,035
408,610
—
415,305
—
—
—
—
—
—
569,849
201,360
—
—
—
—
—
—
—
—
—
—
548,706
201,360
—
—
—
—
(1) Amounts shown in the “Qualified Retirement” column reflect the value of career shares that have satisfied the pro-rata vesting and 10 years
of service requirements as of December 31, 2020 and would therefore be eligible to vest had the named executive officer provided 18 months'
advance notice and retired as of that date. None of our named executive officers have provided us with notice of retirement. For named
executive officers that hold Class B common units of Artisan Partners Holdings, the number of shares received upon exchange of Class B
common units that may be sold in any one-year period may increase upon retirement, provided that the named executive officer provided
sufficient notice of retirement.
(2) Represents the value of the accelerated vesting of standard restricted shares and standard PSUs based on the closing price of our Class A
common stock on the NYSE on December 31, 2020, which was $50.34 per share. Any outstanding standard restricted shares and standard PSUs
will become fully vested upon the holder’s death or disability or upon a qualifying termination of employment in connection with a change in
control (subject to continued employment through such occurrence).
(3) Represents the value of the accelerated vesting and retirement vesting of career shares and career PSUs based on the closing price of our
Class A common stock on the NYSE as of December 31, 2020 which was $50.34 per share. Any outstanding career shares and career PSUs will
become fully vested upon the holder’s death or disability or upon a qualifying termination of employment in connection with a change in
control (subject to continued employment through such occurrence). Career PSUs that have met the performance vesting conditions and
outstanding career shares will also fully vest if, after the fifth anniversary of the grant date, the Company terminates the holder without cause,
provided that he or she has at least 10 years of service with the Company at the time of termination.
106
Table of Contents
DIRECTOR COMPENSATION
The Compensation Committee is responsible for periodically reviewing non-employee director compensation and recommending
changes, if appropriate, to the full board of directors. In connection with this review, the Compensation Committee considers
information provided by our compensation consultant, including data regarding the total compensation paid to directors at peer
companies, as well as information on the individual components of that compensation.
The objective of our director compensation program is to compensate our highly qualified non-employee directors for their time,
efforts and contributions, and to attract highly qualified non-employee director candidates for potential future service on the
board of directors. For fiscal year 2020, the director compensation program entitled non-employee directors to a cash component,
designed to compensate directors for their service, and an equity component, designed to align the interests of the directors with
those of the Company’s stockholders.
For 2020, the standard equity component of the Company’s director compensation program consisted of $100,000 of restricted
stock units for each of the non-employee directors awarded under the Artisan Partners Asset Management Inc. 2013 Non-
Employee Director Compensation Plan. Each outstanding restricted stock unit entitles the holder to dividend equivalent rights on
one outstanding share of Class A common stock. The shares of Class A common stock underlying the restricted stock units will
be delivered on the earlier to occur of (i) a change in control of Company and (ii) the termination of the director’s service as a
director.
During 2020, each of Mr. Barger, Mr. Coxe, Ms. DiMarco, Mr. Joerres and Mr. Ziegler was entitled to receive a cash payment of
$50,000, paid in four quarterly installments. The lead director and chairperson of our Audit Committee were each entitled to
receive an additional cash retainer of $50,000, and the chairpersons of each of the Compensation Committee and Nominating and
Corporate Governance Committee were entitled to receive an additional cash retainer of $40,000. Mr. Barger, Mr. Coxe, Ms.
DiMarco, Mr. Joerres and Mr. Ziegler elected to receive the value of this cash compensation in the form of additional restricted
stock units. As a result, an additional number of restricted stock units were granted to each of them in January of 2020, the value
of which equaled the amount of cash compensation to which each director was entitled. One-quarter of the units awarded to each
director in lieu of cash compensation vested in each quarter of 2020.
Seth W. Brennan resigned from the Company’s board of directors on January 27, 2020 and, as a result, did not receive any
director compensation with respect to 2020. However, upon his resignation, his 23,633 outstanding restricted stock units were
canceled and the Class A common shares underlying the restricted stock units were delivered to Mr. Brennan.
Ms. Barbetta was appointed to the Company’s board of directors effective October 1, 2020. For her service during 2020, Ms.
Barbetta received a cash payment of $12,500, which represented payment of the 2020 cash component of the director
compensation program, prorated for her period of service on the board of directors.
All directors are reimbursed for reasonable out-of-pocket expenses incurred by them in connection with attending board,
committee and stockholder meetings, including those for travel, meals and lodging. These reimbursements are not reflected in the
table below.
Mr. Colson does not receive any additional compensation for serving on the board of directors.
The following table provides information concerning the 2020 compensation of each non-employee director who served in fiscal
year 2020.
Name
Jennifer A. Barbetta
Matthew R. Barger(1)
Tench Coxe(2)
Stephanie G. DiMarco(3)
Jeffrey A. Joerres(4)
Andrew A. Ziegler(5)
(1) On December 31, 2020, Mr. Barger had 40,289 restricted stock units outstanding.
(2) On December 31, 2020, Mr. Coxe had 32,803 restricted stock units outstanding.
(3) On December 31, 2020, Ms. DiMarco had 42,161 restricted stock units outstanding.
(4) On December 31, 2020, Mr. Joerres had 40,289 restricted stock units outstanding.
(5) On December 31, 2020, Mr. Ziegler had 39,133 restricted stock units outstanding.
Stock Awards
Fees Paid in Cash
$
— $
12,500
190,000 $
150,000
200,000
190,000
200,000
—
—
—
—
—
107
Table of Contents
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information regarding the beneficial ownership of our common stock as of February 19, 2021, for:
•
•
•
•
each person known by us to beneficially own more than 5% of any class of our outstanding shares, as of February 19, 2021;
each of our named executive officers;
each of our directors; and
all of our executive officers and directors as a group.
Because we have disclosed the ownership of shares of our Class B common stock and Class C common stock (which correspond to
partnership units that are exchangeable for Class A common stock), the shares of Class A common stock underlying partnership units
are not separately reflected in the table below.
Applicable percentage ownership is based on 63,199,483 shares of Class A common stock (including 218,183 restricted stock units that
are currently outstanding), 4,457,958 shares of Class B common stock and 10,983,145 shares of Class C common stock outstanding at
February 19, 2021. The aggregate percentage of combined voting power represents voting power with respect to all shares of our
common stock voting together as a single class and is based on 78,422,403 total votes attributed to 78,422,403 total shares of
outstanding common stock, as each share of our common stock entitles its holder to one vote per share.
Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of
securities to persons who possess sole or shared voting power or investment power with respect to such securities. Except as otherwise
indicated, all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them,
subject to applicable community property laws.
Except as otherwise indicated, the address for each stockholder listed below is c/o Artisan Partners Asset Management Inc., 875 E.
Wisconsin Avenue, Suite 800, Milwaukee, Wisconsin 53202.
Class A(1)
Class B
Class C
No. of
Shares
% of
Class
No. of
Shares
% of
Class
No. of
Shares
% of
Class
Aggregate
% of
Combined
Voting
Power
Directors and Executive Officers:
Stockholders Committee(2)
Eric R. Colson(3)(4)
Charles J. Daley, Jr.(3)(5)
Jason A. Gottlieb(3)(4)
Gregory K. Ramirez(3)
Sarah A. Johnson(3)
Christopher J. Krein(3)
Jennifer A. Barbetta(6)
Matthew R. Barger(6)(7)
Tench Coxe(6)(8)
Stephanie G. DiMarco(6)(9)
Jeffrey A. Joerres(6)(10)
Andrew A. Ziegler(6)(11)
6,236,075
9.9 % 4,457,958
100.0 %
124,943
45,000
71,804
40,900
46,000
25,526
3,345
44,398
208,559
117,539
47,898
43,433
*
*
*
*
*
*
*
*
*
*
*
*
482,463
10.8 %
60,050
1.3 %
—
— %
1.7 %
2.1 %
— %
— %
77,364
94,464
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— %
— %
— %
— %
— %
— %
— %
— %
— % 1,242,002
11.3 %
— %
— %
— %
—
—
—
— %
— %
— %
— % 3,455,973
31.5 %
Directors and executive officers as a group
6,707,047
10.6 % 4,457,958
100.0 % 4,697,975
42.8 %
5+% Stockholders:
MLY Holdings Corp.(3)(12)
James C. Kieffer (3)
Michael C. Roos(3)
N. David Samra(3)
Artisan Investment Corporation(11)
Arthur Rock 2000 Trust
LaunchEquity Acquisition Partners, LLC (13)
Scott C. Satterwhite
Big Fish Partners LLC
Kayne Anderson Rudnick Investment Management LLC (14)
3,850,589
6.1 %
The Vanguard Group(15)
Blackrock Inc.(16)
*Less than 1%.
5,614,225
8.9 %
4,402,230
7.0 %
108
—
— % 1,094,215
24.5 %
185,000
11,680
*
*
427,030
9.6 %
301,505
6.8 %
932,025
1.5 %
231,346
5.2 %
—
—
—
—
— %
— %
— %
— %
—
—
—
—
—
— %
— %
— %
— %
— %
—
—
—
—
—
—
—
—
— % 3,455,973
31.5 %
— % 1,153,280
10.5 %
— % 1,121,196
10.2 %
— % 1,023,768
9.3 %
— % 726,575
6.6 %
— %
— %
— %
—
—
—
— %
— %
— %
13.6 %
— %
*
— %
*
*
— %
— %
1.6 %
*
*
*
4.4 %
19.9 %
— %
— %
*
— %
4.4 %
1.5 %
1.4 %
1.3 %
*
4.9 %
*
5.4 %
Table of Contents
(1) Subject to certain exceptions, the persons who hold shares of our Class B common stock and Class C common stock (which
correspond to partnership units that generally are exchangeable for Class A common stock) are currently deemed to have
beneficial ownership over a number of shares of our Class A common stock equal to the number of shares of our Class B common
stock and Class C common stock reflected in the table above, respectively. Because we have disclosed the ownership of shares of
our Class B common stock and Class C common stock, the shares of Class A common stock underlying partnership units are not
separately reflected in the table above.
(2) Each of our employees to whom we have granted equity has entered into a stockholders agreement pursuant to which they granted
an irrevocable voting proxy with respect to all of the shares of our common stock they have acquired from us and any shares they
may acquire from us in the future to a stockholders committee currently consisting of Mr. Colson, Mr. Daley and Mr. Ramirez. All
shares subject to the stockholders agreement are voted in accordance with the majority decision of those three members. Shares
originally subject to the agreement cease to be subject to it when sold by the employee or upon the termination of the employee’s
employment with us. The number of shares of Class A and Class B common stock in this row includes all shares of Class A
common stock and Class B common stock that we have granted to current employees and that have not yet been sold by those
employees. As members of the stockholders committee, Mr. Colson, Mr. Daley and Mr. Ramirez share voting power over all of
these shares. Other than as shown in the row applicable to each of them individually, none of Mr. Colson, Mr. Daley or Mr.
Ramirez has investment power with respect to any of the shares subject to the stockholders agreement, and each disclaims
beneficial ownership of such shares.
(3) Pursuant to the stockholders agreement, Mr. Colson, Mr. Daley, Mr. Gottlieb, Mr. Ramirez, Ms. Johnson, Mr. Krein, MLY
Holdings Corp., Mr. Kieffer, Mr. Roos, and Mr. Samra each granted an irrevocable voting proxy with respect to all of the shares of
our common stock he or she has acquired from us and any shares he or she may acquire from us in the future to the stockholders
committee as described in footnote 2 above. Each retains investment power with respect to the shares of our common stock he or
she holds, which are the shares reflected in the row applicable to each person. 400 of Mr. Daley’s shares, 1,400 of Mr. Ramirez’s
shares and 4,000 of Ms. Johnson’s shares are not subject to the stockholders agreement.
(4) Does not include 30,000 outstanding performance share units held by each of Mr. Colson and Mr. Gottlieb that are subject to
future vesting to the extent that certain service conditions and performance objectives are achieved.
(5)
(6)
(7)
(8)
(9)
(10)
(11)
Includes 200 shares of Class A common stock held by Mr. Daley’s daughter.
Includes the shares of Class A common stock underlying restricted stock units granted to our non-employee directors. The
underlying shares will be delivered on the earlier to occur of (i) a change in control of Artisan and (ii) assuming the restricted stock
units have vested, the termination of such person’s service as a director. Restricted stock units do not have voting rights.
Includes (i) 44,398 restricted stock units, (ii) 621,002 shares of Class C common stock held by a revocable trust and (iii) 621,000
shares of Class C common stock held by annuity trusts. Mr. Barger is a trustee of each trust and has voting and investment
authority over the shares held by the trusts.
Includes (i) 36,148 restricted stock units, 32,803 of which are held for the benefit of the managing directors of the general partner
of Sutter Hill Ventures, (ii) 22,411 shares of Class A common stock held by a trust of which Mr. Coxe is a co-trustee and
beneficiary, (iii) 50,000 shares of Class A common stock held by a limited partnership of which Mr. Coxe is a trustee of a trust that
is the general partner, (iv) 50,000 shares of Class A common stock held in a Roth IRA and (v) 50,000 shares of Class A common
stock held by a profit sharing plan for the benefit of Mr. Coxe.
Includes (i) 46,461 restricted stock units, (ii) 20,308 shares of Class A common stock held by a charitable trust and (iii) 50,770
shares of Class A common stock held by a living trust. Ms. DiMarco is a trustee of each trust and has voting and investment
authority over the shares held by the trusts.
Includes 44,398 restricted stock units.
Includes 43,433 restricted stock units. The Class C shares reflected in the row applicable to Mr. Ziegler individually are owned by
Artisan Investment Corporation. Mr. Ziegler and Carlene M. Ziegler, who are married to each other, control Artisan Investment
Corporation.
(12) MLY Holdings Corp. is a Delaware corporation through which Mark L. Yockey holds his shares of Class B common stock.
Mr. Yockey is the sole director of MLY Holdings Corp.
(13) LaunchEquity Acquisition Partners, LLC, is a manager-managed designated series limited liability company organized under the
laws of the State of Delaware. Andrew C. Stephens is the sole manager of the designated series of LaunchEquity Acquisition
Partners through which Mr. Stephens holds his shares of Class C common stock.
(14) This information has been derived from the Schedule 13G filed with the SEC on February 11, 2021 by Kayne Anderson Rudnick
Investment Management LLC which states that Kayne Anderson Rudnick Investment Management had sole voting and dispositive
power over 2,957,664 shares and shared voting and dispositive power over 892,925 shares of Class A common stock as of
December 31, 2020. The address of Kayne Anderson Rudnick Investment Management is 1800 Avenue of the Stars, Los Angeles,
California, 90067.
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(15) This information has been derived from the Schedule 13G filed with the SEC on February 10, 2021 by The Vanguard Group, Inc.
which states that Vanguard Group had sole voting power over zero shares, shared voting power over 85,596 shares, sole
dispositive power over 5,481,920 shares, and shared dispositive power over 132,305 shares of Class A common stock as of
December 31, 2020. The address of the Vanguard Group is 100 Vanguard Blvd, Malvern, Pennsylvania, 19355.
(16) This information has been derived from the Schedule 13G filed with the SEC on January 29, 2021 by BlackRock Inc. which states
that BlackRock had sole voting power over 4,249,927 shares and dispositive power over 4,402,230 shares of Class A common
stock as of December 31, 2020. The address of Blackrock Inc. is 55 East 52nd Street, New York, NY 10055.
Securities Authorized for Issuance Under Equity Compensation Plans
All of our equity compensation plans were approved by our sole stockholder prior to our IPO in March 2013. The following table sets
forth the total shares of our Class A common stock authorized and issued (or to be issued) under our equity compensation plans as of
December 31, 2020.
Issued (or to be issued
upon settlement of
RSUs or PSUs)(1)
As of December 31, 2020
Number of Securities
remaining available for
future issuance under
equity compensation plans
2013 Omnibus Incentive
Compensation Plan
9,561,616
4,634,924
Type of Equity
Outstanding
Restricted Stock Awards
Restricted Stock Units
Performance Share Units
2013 Non-Employee
Director Plan
(1) Excludes shares forfeited by grantees and available for future issuance.
223,036
776,964
Restricted Stock Units
The shares of Class A common stock underlying restricted stock units and performance share units awarded to employees under the
2013 Omnibus Incentive Compensation Plan will generally be issued and delivered promptly following the vesting of the awards. As of
December 31, 2020, there were 109,895 restricted stock units and 60,000 performance share units outstanding under the 2013 Omnibus
Incentive Compensation Plan. The 60,000 performance share units would result in the issuance of 90,000 shares of Class A common
stock if all vesting conditions are met.
The shares of Class A common stock underlying the restricted stock units awarded to our non-employee directors under the 2013 Non-
Employee Director Plan will be issued and delivered upon the earlier to occur of (i) a change in control and (ii) the termination of the
director’s service on the Board.
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Item 13. Certain Relationships and Related Transactions, and Director Independence
Transactions in Connection with our IPO
In March 2013, in connection with our IPO, we entered into the agreements described below with the limited partners of Artisan
Partners Holdings, including the following persons and entities:
•
•
•
Those of our currently-serving executive officers who own Class B common units of Artisan Partners Holdings.
Artisan Investment Corporation (“AIC”), an entity controlled by Andrew A. Ziegler, our Lead Independent Director,
and Carlene M. Ziegler. AIC owns all of the Class D common units of Artisan Partners Holdings.
Private equity funds (the “H&F holders”) controlled by Hellman & Friedman LLC (“H&F”). Matthew R. Barger, one
of our directors, is a senior advisor of H&F. The H&F holders no longer own any units of Artisan Partners Holdings or,
to our knowledge, any shares of our common stock.
• Mr. Barger, who owns Class A common units of Artisan Partners Holdings.
Two trusts of which Tench Coxe, one of our directors, is a co-trustee.
•
Several other persons or entities who own Class A common units of Artisan Partners Holdings and greater than 5% of
•
outstanding shares of our Class C common stock.
Several of our employees, or entities controlled by an employee, who own (or owned) Class B common units of Artisan
Partners Holdings and greater than 5% of the outstanding shares of our Class B common stock.
•
The rights of each of the persons and entities listed above under the agreements discussed below are, in general, the same as the
rights of each other holder of the same class of partnership units. So, for instance, the rights of our currently-serving executive
officers that are holders of Class B common units, under the exchange, registration rights, partnership and tax receivable
agreements described below are, in general, the same as the rights of each other holder of Class B common units. The
descriptions of the transactions and agreements below, including the rights and ownership interests of the persons and entities
listed above, are as of February 19, 2021, unless otherwise indicated.
Exchange Agreement
Under the exchange agreement, subject to certain restrictions (including those intended to ensure that Artisan Partners Holdings
is not treated as a “publicly traded partnership” for U.S. federal income tax purposes), holders of partnership units have the right
to exchange common units (together with an equal number of shares of our Class B common stock or Class C common stock, as
applicable) for shares of our Class A common stock on a one-for-one basis. A partnership unit cannot be exchanged for a share of
our Class A common stock without a share of our Class B common stock or Class C common stock, as applicable, being
delivered together at the time of exchange for cancellation.
Holders of partnership units have the right to exchange units in a number of circumstances that are generally based on, but in
several respects are not identical to, the “safe harbors” contained in the U.S. Treasury Regulations dealing with publicly traded
partnerships. In accordance with the terms of the exchange agreement, partnership units are exchangeable: (i) in connection with
the first underwritten offering in any calendar year pursuant to the resale and registration rights agreement; (ii) on a specified date
each fiscal quarter; (iii) in connection with the holder’s death, disability or mental incompetence; (iv) as part of one or more
exchanges by the holder and any related persons during any 30-calendar day period representing in the aggregate more than 2%
of all outstanding partnership units (generally disregarding interests held by us); (v) if the exchange is of all of the partnership
units held by AIC in a single transaction; (vi) in connection with a tender offer, share exchange offer, issuer bid, take-over bid,
recapitalization or similar transaction with respect to our Class A common stock that is effected with the consent of our board of
directors or in connection with certain mergers, consolidations or other business combinations; or (vii) if we permit the exchanges
after determining that Artisan Partners Holdings would not be treated as a “publicly traded partnership” under Section 7704 of the
Internal Revenue Code as a result. In general, we may provide for exchanges in addition to the exchanges that holders of
partnership units are entitled to under the exchange agreement.
As the holders of limited partnership units exchange their units for Class A common stock, we receive a number of general
partnership units, or GP units, of Artisan Partners Holdings equal to the number of shares of our Class A common stock that they
receive, and an equal number of limited partnership units are canceled.
During the fiscal year ended December 31, 2020, holders of Class A, Class B and Class E common units exchanged an aggregate
of 4,128,600 units for Class A common stock, and an equal number of shares of our Class B or Class C common stock, as
applicable, were canceled. We expect that approximately 137 thousand common units will be exchanged on February 25, 2021.
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Resale and Registration Rights Agreement
Under the resale and registration rights agreement, we have provided the holders of partnership units with certain registration
rights. We have also established certain restrictions on the timing and manner of resales of Class A common stock received upon
exchange of partnership units. In general, our board of directors may waive or modify the restrictions on resale described below.
We were required to file, and use our reasonable best efforts to cause the SEC to declare effective, two registration statements:
(i) an exchange shelf registration statement registering all shares of our Class A common stock and convertible preferred stock to
be issued upon exchange of partnership units, and (ii) a shelf registration statement registering secondary sales of Class A
common stock issuable upon exchange of units or conversion of convertible preferred stock by AIC and the H&F holders, as
applicable.
As of December 31, 2020, AIC owned 3,455,973 Class D common units exchangeable for an equal number of shares of our Class
A common stock. There is no limit on the number of shares of our Class A common stock AIC may sell. AIC has the right to use
the resale shelf registration statement to sell shares of Class A common stock, including the right to an unrestricted number of
brokered transactions and, subject to certain limitations and qualifications, marketed and unmarketed underwritten shelf
takedowns.
As of December 31, 2020, our employee-partners owned an aggregate of 4,457,958 Class B common units. Under the resale and
registration rights agreement, in each 12-month period, the first of which began in the first quarter of 2014, each employee-
partner is permitted to sell up to (i) a number of shares of our Class A common stock representing 15% of the aggregate number
of common units and shares of Class A common stock received upon exchange of common units he or she held as of the first day
of that period or, (ii) if greater, shares of our Class A common stock having a market value as of the time of sale of $250,000, as
well as, in either case, the number of shares such holder could have sold in any previous period or periods but did not sell in such
period or periods. In February 2018, our board of directors approved the sale of additional shares by certain employee-partners,
including Mr. Colson and certain senior portfolio managers that own Class B common units of Artisan Partners Holdings and
more than 5% of the outstanding shares of Class B common stock. In 2018, 2019 and 2020, those employee-partners were
permitted to sell 20% of the aggregate number of common units and shares of Class A common stock received upon exchange of
common units each held as of February 1, 2018. We expect to permit them to sell the same number of shares during the first
quarters of 2021 and 2022, subject to their maintaining a minimum dollar amount in long-term incentive awards. Units sold by
employee-partners in connection with underwritten offerings or otherwise redeemed by us are included when calculating the
maximum number of shares each employee-partner is permitted to sell in any one-year period. Our board of directors may waive
or modify the resale limitations described in this paragraph.
In total, approximately 1.0 million shares will become eligible for sale by employee-partners in the first quarter of 2021.
Combined with shares that previously became eligible but have not yet been sold, approximately 3.0 million shares are eligible
for sale by employee-partners in the first quarter of 2021. Because employee-partners and other employees are eligible to sell
amounts of vested equity as described above and elsewhere in this 10-K, employees’ equity ownership, in the aggregate, could
significantly decline over a short period of time and without additional notice.
Upon termination of employment with Artisan, an employee-partner’s Class B common units are exchanged for Class E common
units; the employee-partner’s shares of Class B common stock are canceled; and we issue the former employee-partner a number
of shares of Class C common stock equal to the former employee-partner’s number of Class E common units. Class E common
units are exchangeable for Class A common stock subject to the same restrictions and limitations on exchange applicable to the
other common units of Holdings.
If an employee-partner’s employment was terminated as a result of retirement, death or disability, the employee-partner or his or
her estate may (i) as of and after the time of termination of employment, sell (A) a number of shares of our Class A common
stock up to one-half of the employee-partner’s aggregate number of common units and shares of Class A common stock received
upon exchange of common units held as of the date of termination of employment or, (B) if greater, shares of our Class A
common stock having a market value as of the time of sale of up to $250,000, and (ii) as of and after the first anniversary of the
termination, the person’s remaining shares of our Class A common stock received upon exchange of common units. Retirement,
for these purposes, generally requires that the employee-partner have provided ten years of service or more at the date of
retirement and offered one year’s notice (or eighteen months’ notice in the case of employee-partners who are decision-making
portfolio managers or executive officers) of retirement, subject to our right to accept a shorter period of notice. Prior to February
2019, the eighteen months’ notice requirement was three years, subject to the Company’s discretion to waive the period to no less
than one year.
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If an employee-partner resigns or is terminated involuntarily, the employee-partner may in each 12-month period following the
third, fourth, fifth and sixth anniversary of the termination, sell a number of shares of our Class A common stock up to one-fourth
of the employee-partner’s aggregate number of common units and shares of Class A common stock received upon exchange of
common units held as of the date of termination of his or her employment (as well as the number of shares such employee-partner
could have sold in any previous period or periods but did not sell in such period or periods).
As of December 31, 2020, former employee-partners owned an aggregate of 2,670,110 Class E common units, approximately
2.6 million of which may be sold during the first quarter of 2021.
As of December 31, 2020, our initial outside investors who are holders of Class A common units owned an aggregate of
4,857,062 Class A common units exchangeable for an equal number of shares of our Class A common stock. There is no limit on
the number of shares of our Class A common stock the holders of Class A common units may sell.
We have paid and will continue to pay all expenses incident to our performance of any registration or marketing of securities
pursuant to the resale and registration rights agreement, including reasonable fees and out-of-pocket costs and expenses of selling
stockholders. We have also agreed to indemnify any selling stockholder, solely in their capacity as selling stockholders, against
any losses or damages resulting from any untrue statement, or omission of material fact in any registration statement, prospectus
or free writing prospectus pursuant to which they may sell shares of our Class A common stock, except to the extent the liability
arose from their misstatement or omission of a material fact, in which case they have similarly agreed to indemnify us.
Amended and Restated Limited Partnership Agreement of Artisan Partners Holdings
As a holding company, we conduct all of our business activities through our direct subsidiary, Artisan Partners Holdings, an
intermediate holding company, which wholly owns Artisan Partners Limited Partnership, our principal operating subsidiary. The
rights and obligations of Artisan Partners Holdings’ partners are set forth in its amended and restated limited partnership
agreement.
We are the general partner of Artisan Partners Holdings and control its business and affairs and are responsible for the
management of its business, subject to the voting rights of the limited partners as described below. No limited partners of Artisan
Partners Holdings, in their capacity as such, have any authority or right to control the management of Artisan Partners Holdings
or to bind it in connection with any matter.
Artisan Partners Holdings has outstanding GP units and common units. Net profits and net losses and distributions of profits of
Artisan Partners Holdings are allocated and made to partners pro rata in accordance with the number of partnership units they
hold. Artisan Partners Holdings is obligated to distribute to us and its other partners cash payments for the purposes of funding
tax obligations of ours and theirs as partners of Artisan Partners Holdings. In order to make a share of our Class A common stock
represent the same percentage economic interest, disregarding corporate-level taxes and payments with respect to the tax
receivable agreements, in Artisan Partners Holdings as a common unit of Artisan Partners Holdings, we always hold a number of
GP units equal to the number of shares of Class A common stock issued and outstanding.
As the general partner of Artisan Partners Holdings, we hold all GP units and control the business of Artisan Partners Holdings.
Our approval, acting in our capacity as the general partner, along with the approval of holders of a majority of each class of
limited partnership units (except the Class E common units), voting as a separate class, will be required to engage in a material
corporate transaction; with certain exceptions, redeem or reclassify partnership units or interests in any subsidiary, issue
additional partnership units or interests in any subsidiary, or create additional classes of partnership units or interests in any
subsidiary; or make any in-kind distributions. If any of the foregoing affects only certain classes of partnership units, only the
approval of us and the affected classes would be required. The approval rights of each class of partnership units will terminate
when the holders of the respective class of units directly or indirectly cease to own units constituting at least 5% of the
outstanding units of Artisan Partners Holdings.
The amended and restated limited partnership agreement may be amended with the consent of the general partner and the holders
of a majority of the Class A common units, Class B common units and Class D common units, each voting as a separate class,
provided that the general partner may, without the consent of any limited partner, make amendments that do not materially and
adversely affect any limited partners. To the extent any amendment materially and adversely affects only certain classes of
limited partners, only the holders of a majority of the units of the affected classes have the right to approve such amendment.
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Artisan Partners Holdings will indemnify AIC, as its former general partner, us, as its current general partner, the former
members of its pre-IPO Advisory Committee, the members of our stockholders committee and our directors and officers against
any losses, damages, costs or expenses (including reasonable attorneys’ fees, judgments, fines and amounts paid in settlement)
actually incurred in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal or
administrative (including any action by or on behalf of Artisan Partners Holdings) arising as a result of the capacities in which
they serve or served Artisan Partners Holdings to the maximum extent that any of them could be indemnified if Artisan Partners
Holdings were a Delaware corporation and they were directors of such corporation. In addition, Artisan Partners Holdings will
pay the costs or expenses (including reasonable attorneys’ fees) incurred by the indemnified parties in advance of a final
disposition of such matters so long as the indemnified party undertakes to repay the expenses if the party is adjudicated not to be
entitled to indemnification.
Artisan Partners Holdings will also indemnify its officers and employees and officers and employees of its subsidiaries against
any losses, damages, costs or expenses (including reasonable attorneys’ fees, judgments, fines and amounts paid in settlement)
actually incurred in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal or
administrative arising as a result of their being an employee of Artisan Partners Holdings (or their serving as an officer or
fiduciary of any of Artisan Partners Holdings’ subsidiaries or benefit plans or any entity of which Artisan is sponsor or adviser),
provided that no employee will be indemnified or reimbursed for any claim, obligation or liability adjudicated to have arisen out
of or been based upon such employee’s intentional misconduct, gross negligence, fraud or knowing violation of law.
Stockholders Agreement
Our employees (including all of our employee-partners) to whom we have granted equity have entered into a stockholders
agreement pursuant to which they granted an irrevocable voting proxy with respect to all shares of our common stock they have
acquired from us (which shares represented approximately 14% of the combined voting power of our capital stock as of
February 19, 2021) and any shares they may acquire from us in the future to a stockholders committee currently consisting of
Eric R. Colson (Chairman and Chief Executive Officer), Charles J. Daley, Jr. (Chief Financial Officer) and Gregory K. Ramirez
(Executive Vice President). Any shares of our common stock that we issue to our employees in the future will be subject to the
stockholders agreement so long as the agreement has not been terminated. Shares subject to the stockholders agreement will be
voted in accordance with the majority decision of the three members of the stockholders committee.
The members of the stockholders committee must be Artisan employees and holders of shares subject to the agreement. If a
member of the stockholders committee ceases to act as a member of the committee, our Chief Executive Officer (if he or she is a
holder of shares subject to the stockholders agreement and is not already a member of the committee) will become a member of
the committee. Otherwise, the two remaining members of the stockholders committee will jointly select a third member of the
committee. Each member of the stockholders committee is entitled to indemnification from Artisan in his or her capacity as a
member of the committee.
The stockholders agreement provides that in connection with our election of directors, the members of the stockholders
committee will vote the shares subject to the agreement in support of the following:
• Matthew R. Barger, or, unless Mr. Barger is removed from the board of directors for cause, a successor selected by Mr.
Barger who holds Class A common units, so long as the holders of the Class A common units beneficially own at least
5% of our outstanding capital stock. As of December 31, 2020, the holders of the Class A common units beneficially
owned approximately 6% of our outstanding capital stock.
•
A director nominee, initially Mr. Colson, designated by the stockholders committee who is an employee-partner.
Under the terms of the stockholders agreement, we are required to use our best efforts to elect the nominees described above,
which efforts must include soliciting proxies for, and recommending that our stockholders vote in favor of, the election of each.
Other than as provided above, under the terms of the stockholders agreement, the stockholders committee may in its discretion
vote, or abstain from voting, all or any of the shares subject to the agreement on any matter on which holders of shares of our
common stock are entitled to vote. The committee is specifically authorized to vote for its members as directors under the terms
of the stockholders agreement.
If and when the stockholders committee is no longer obligated to vote in favor of a director nominee who is a Class A common
unit holder, parties to the stockholders agreement holding at least two-thirds of the shares subject to the agreement may terminate
the agreement.
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Tax Receivable Agreement (Exchanges)
We are party to a tax receivable agreement with each current or former holder of limited partnership units or their assignees, (the
“TRA”) that generally provides for the payment by us to each of them or their assignees of 85% of the applicable cash savings, if
any, of U.S. federal, state and local income taxes that we actually realize (or are deemed to realize in certain circumstances) as a
result of (i) certain tax attributes of partnership units sold to us or exchanged (for shares of Class A common stock or other
consideration) and that are created as a result of such sales or exchanges, and (ii) tax benefits related to imputed interest.
For purposes of this TRA, cash savings in tax are calculated by comparing our actual income tax liability to the amount we would
have been required to pay had we not been able to utilize any of the tax benefits subject to the TRA, unless certain assumptions
apply. The TRA will continue until all tax benefits have been utilized or expired, unless we exercise our right to terminate the
agreement or we materially breach any of our material obligations under the agreement, in which cases our obligations under the
agreement will accelerate. The actual increase in tax basis, as well as the amount and timing of any payments under this
agreement, will vary depending upon a number of factors, including the timing of purchases or exchanges of partnership units,
the price of our Class A common stock at the time of such purchases or exchanges, the extent to which such transactions are
taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable and the portion of
our payments under the TRA constituting imputed interest or depreciable or amortizable basis. In addition, in the case of a
change of control, our obligations will be based on different assumptions that may affect the amount of the payments required
under the TRA.
As of December 31, 2020, we recorded a $404 million liability, representing amounts payable under the TRA equal to 85% of the
tax benefit we expect to realize from our purchase of Class A common units in connection with the IPO; our purchase of common
units since the IPO; and the quarterly exchanges made by certain limited partners pursuant to the exchange agreement. The
amount assumes no material changes in the related tax law and that we earn sufficient taxable income to realize all tax benefits
subject to the TRA. Additional purchases or exchanges of units of Artisan Partners Holdings will cause the liability to increase.
During 2020, we made payments under the TRA totaling approximately $26 million in the aggregate. Of that amount,
$6.3 million was paid to certain of our directors or entities associated with certain directors that hold or held Class C common
stock; $6.5 million was paid to our employee-partners, of which $4.9 million was paid to certain of our currently-serving
executive officers and several employee-partners, or entities controlled by employee-partners, who own greater than 5% of the
outstanding shares of our Class B common stock; and $1.4 million to other persons or entities who own Class A or Class E
common units of Artisan Partners Holdings and greater than 5% of the outstanding shares of our Class C common stock.
Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are
subject to the TRA, we expect that the reduction in tax payments for us associated with (i) the purchase or exchange of
partnership units from March 2013 through December 31, 2020; and (ii) projected future purchases or exchanges of partnership
units would aggregate to approximately $703 million over generally a minimum of 15 years, assuming the future purchases or
exchanges described in clause (ii) occurred at a price of $50.34 per share of our Class A common stock, which was the closing
price of our Class A common stock on December 31, 2020.
Under such scenario we would be required to pay the other parties to the TRA 85% of such amount, or approximately
$628 million, over generally a minimum of 15 years. The actual amount may materially differ from this hypothetical amount, as
potential future reductions in tax payments for us and TRA payments by us will be calculated using the market value of our
Class A common stock at the time of purchase or exchange and the prevailing tax rates applicable to us over the life of the TRA
and will be dependent on us generating sufficient future taxable income to realize the benefit.
February 2020 Coordinated Offering
In February 2020, we entered into partnership unit purchase agreements with limited partners who elected to sell partnership units
to us. Under those agreements, we used the net proceeds of our issuance of 1,802,326 shares of our Class A common stock in
February 2020 to purchase 1,802,326 common units from certain employee-partners of Artisan Partners Holdings LP, including
an executive officer and several employee-partners, or entities controlled by employee-partners, who owned greater than 5% of
the outstanding shares of our Class B common stock. We purchased the units at a price equal to $34.96 per unit.
Indemnification Agreements
We have entered into an indemnification agreement with each of our executive officers, directors and the members of our
stockholders committee that provides, in general, that we will indemnify them to the fullest extent permitted by Delaware law in
connection with their service in such capacities. Due to the nature of the indemnification agreements, they are not the type of
agreements that are typically entered into with or available to unaffiliated third parties.
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Investments in Artisan Private Funds
Several of our directors, executive officers and employees, including employees who own greater than 5% of the outstanding
shares of our Class B common stock, have made investments in certain Artisan Private Funds. These investments provided the
initial seed capital that supported the launch of new investment strategies and products. As is common in the investment
management industry, management and incentive fees are not charged and incentive allocations are not made on these
investments. The amount of management fees that would have been earned by us during 2020 had management fees been
charged on investments made by related parties totaled approximately $326,441. The amount of incentive fees or allocations that
would have been allocated to us in 2020 had incentive fees or allocations been made on these investments totaled approximately
$297,338.
Review, Approval or Ratification of Transactions with Related Persons
We have adopted a written policy regarding the approval of any transaction or series of transactions in which we are a participant,
the amount involved exceeds $120,000, and a “related party” (a director, director nominee, executive officer, or a person known
to us to be the beneficial owner of more than 5% of any class of our voting securities, or any immediate family member of any of
the foregoing) has a direct or indirect material interest (a “related party transaction”). Under the policy, all potential related party
transactions must be brought to the attention of the Chief Legal Officer who will evaluate the facts and circumstances of the
transaction and determine whether it constitutes a related party transaction. If the Chief Legal Officer determines that a
transaction is a related party transaction, the material terms of the transaction will be presented for consideration and approval or
ratification at the Audit Committee's next regularly scheduled meeting. If the Chief Legal Officer determines that it is impractical
or undesirable to wait until the next Audit Committee meeting, the matter will be presented to the Chair of the Audit Committee
for review and approval or ratification on behalf of the Audit Committee. Any related party transaction approved or ratified by
the Chair will be reported to the Audit Committee at its next regularly scheduled meeting. The Chief Legal Officer may also
determine to submit the related party transaction to the entire board of directors for review and approval or ratification.
A related party transaction will be approved or ratified if, after considering all relevant factors, it is determined in good faith that
the transaction is not inconsistent with the best interests of the Company or its stockholders. When reviewing a related party
transaction that commenced without approval, all available options, including ratification, amendment and termination of the
transaction, will be considered. Under the policy, any director who has an interest in a related party transaction will recuse
himself or herself from any formal action with respect to the transaction as deemed appropriate by the Audit Committee or board
of directors.
Director Independence
Our board of directors is composed of a majority of directors who satisfy the criteria for independence under the NYSE listing
standards and do not have any material relationship with the Company. Our Board has determined that each of Jennifer A.
Barbetta, Matthew R. Barger, Tench Coxe, Stephanie G. DiMarco, Jeffrey A. Joerres and Andrew A. Ziegler is independent in
accordance with NYSE listing standards and our corporate governance guidelines, and does not have any relationship that would
interfere with exercising independent judgment in carrying out his or her responsibilities as a director. See Item 10 for a list of the
committees on which each director serves.
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Item 14. Principal Accountant Fees and Services
Audit and Non-Audit Fees
Aggregate fees for professional services rendered for us by PricewaterhouseCoopers LLP as of and for the fiscal years ended
December 31, 2020 and 2019 are set forth below. The aggregate fees included in the “Audit Fees” and the “Audit-Related Fees”
categories are fees for services performed for those fiscal years. The aggregate fees included in the “Tax Fees” and “All Other
Fees” categories are fees for services performed in those fiscal years.
Audit Fees
Audit-Related Fees (1)
Tax Fees (2)
All Other Fees
Fiscal Year
2020
Fiscal Year
2019
$ 1,068,500
$
1,015,400
350,400
816,900
4,500
301,000
843,400
4,600
Total
(1) For the years ended December 31, 2020 and 2019, audit-related fees includes $187,000 and $227,500, respectively, for audit services
provided to our sponsored investment products, including consolidated investment products.
(2) Tax fees for the years ended December 31, 2020 and 2019, includes $214,000 and $147,000, respectively, of fees related to tax return
compliance and preparation. For the years ended December 31, 2020 and 2019, tax fees also includes $154,000 and $89,000, respectively, of
fees for tax services provided to our sponsored investment products, including consolidated investment products.
$ 2,240,300
$
2,164,400
Audit Fees for the fiscal years ended December 31, 2020 and 2019 were for professional services rendered for the audits of our
annual financial statements, reviews of quarterly financial statements and services that are customarily provided in connection
with statutory or regulatory filings.
Audit-Related Fees for the fiscal years ended December 31, 2020 and 2019 were for consultations related to the accounting or
disclosure treatment of transactions, audit services provided to our sponsored investment products, and attest services related to
our compliance with the Global Investment Performance Standards (GIPS). Audit-Related Fees for the fiscal year ended
December 31, 2020 includes fees for the review of a registration statement filed with the SEC.
Tax Fees for the fiscal years ended December 31, 2020 and 2019 were for domestic and foreign tax return compliance, including
review of partner capital accounts, and consultations related to technical interpretations, applicable laws and regulations and tax
accounting.
Other Fees for the fiscal years ended December 31, 2020 and 2019 were license fees for professional publications.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public
Accounting Firm
The Audit Committee is required to pre-approve, or adopt appropriate procedures to pre-approve, all audit and non-audit services
to be provided by the independent auditors. The Audit Committee will typically pre-approve specific types of audit, audit-related,
tax and other services on an annual basis, and pre-approves all other services on an individual basis throughout the year as the
need arises. The Audit Committee has delegated to its chairperson the authority to pre-approve independent auditor engagements
between meetings of the Audit Committee. Any such pre-approvals will be reported to the entire Audit Committee at its next
regular meeting.
All services for fiscal 2020 were pre-approved by the Audit Committee. In all cases, the Audit Committee concluded that the
provision of such services by PricewaterhouseCoopers LLP was compatible with the maintenance of PricewaterhouseCoopers
LLP’s independence.
117
Table of Contents
PART IV
Item 15. Exhibits, Financial Statement Schedules
(1) Financial Statements: The information required by this Item is contained in Item 8 of Part II of this report.
(2) Financial Statement Schedules: None
(3) Exhibits:
Exhibit
No.
Description
Form
File No.
Exhibit
Filing Date
Filed or
Furnished
Herewith
Agreement and Plan of Merger between Artisan
Partners Asset Management Inc. and H&F Brewer
Blocker Corp.
Restated Certificate of Incorporation of Artisan
Partners Asset Management Inc.
Amended and Restated Bylaws of Artisan Partners
Asset Management Inc.
Description of the Registrant's Securities
Fifth Amended and Restated Limited Partnership
Agreement of Artisan Partners Holdings LP
Amended and Restated Resale and Registration Rights
Agreement
Exchange Agreement
Tax Receivable Agreement (Merger)
Tax Receivable Agreement (Exchanges)
Stockholders Agreement
Artisan Partners Asset Management Inc. 2013
Omnibus Incentive Compensation Plan (1)
Artisan Partners Asset Management Inc. 2013 Non-
Employee Director Plan (1)
Form of Artisan Partners Holdings LP Restated Class
B Common Units Grant Agreement
Form of Indemnification Agreement
Form of Indemnification Priority Agreement
Form of Artisan Partners Asset Management Inc. 2013
Non-Employee Director Plan - Restricted Share Unit
Award Agreement (1)
Form of Artisan Partners Asset Management Inc. 2013
Omnibus Incentive Compensation Plan - Restricted
Share Award Agreement (1)
Form of Artisan Partners Asset Management Inc. 2013
Omnibus Incentive Compensation Plan - Career Share
Award Agreement (1)
Form of Artisan Partners Asset Management Inc. 2013
Omnibus Incentive Compensation Plan - Amended
and Restated Restricted Share Award Agreement (1)
Form of Artisan Partners Asset Management Inc. 2013
Omnibus Incentive Compensation Plan - Amended
and Restated Career Share Award Agreement (1)
Form of Artisan Partners Asset Management Inc. 2013
Omnibus Incentive Compensation Plan - Franchise
Share Award Agreement (1)
Form of Artisan Partners Asset Management Inc. 2013
Omnibus Incentive Compensation Plan - Performance
Share Unit Award Agreement (1)
2.1
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10-K
001-35826
10-K
001-35826
10-K
10-K
001-35826
001-35826
2.1
3.1
3.2
4.1
February 25, 2016
February 25, 2016
February 25, 2016
February 18, 2020
10-K
001-35826
10.1
February 25, 2016
10-K
10-K
10-K
10-K
10-K
001-35826
001-35826
001-35826
001-35826
001-35826
10.2
10.3
10.4
10.5
10.6
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
10-K
001-35826
10.9
February 25, 2016
10-K
001-35826
10.10
February 25, 2016
10-K
10-K
10-K
001-35826
001-35826
001-35826
10.12
10.14
10.15
February 25, 2016
February 25, 2016
February 25, 2016
10-K
001-35826
10.18
February 25, 2016
10-K
001-35826
10.13
February 20, 2019
10-K
001-35826
10.14
February 20, 2019
10-K
001-35826
10.15
February 20, 2019
10-K
001-35826
10.16
February 20, 2019
10-K
001-35826
10.17
February 20, 2019
10-K
001-35826
10.18
February 18, 2020
118
Table of Contents
Exhibit
No.
Description
Form
File No.
Exhibit
Filing Date
Filed or
Furnished
Herewith
Form of Artisan Partners Asset Management Inc. 2013
Omnibus Incentive Compensation Plan - Performance
Share Unit Award Certificate for awards made on or
after January 26, 2021 (1)
Form of Artisan Partners Asset Management Inc. 2013
Omnibus Incentive Compensation Plan - Franchise
Capital Award Agreement - Annual Vesting (1)
Form of Artisan Partners Asset Management Inc. 2013
Omnibus Incentive Compensation Plan - Franchise
Capital Award Agreement - Career Vesting (PM) (1)
Form of Artisan Partners Asset Management Inc. 2013
Omnibus Incentive Compensation Plan - Franchise
Capital Award Agreement - Career Vesting (Non-PM)
(1)
Form of Unit Purchase Agreement
10-K
001-35826
10.22
February 25, 2016
10-K
001-35826
10.20
February 18, 2020
8-K
001-35826
10.1
August 18, 2017
8-K
001-35826
10.2
August 18, 2017
10-Q
001-35826
10.3
November 1, 2017
8-K
001-35826
10.1
June 6, 2019
Second Amended and Restated Investment Advisory
Agreement between Artisan Partners Limited
Partnership and Artisan Partners Funds, Inc.
Note Purchase Agreement, dated as of August 16,
2017, among Artisan Partners Holdings LP and the
purchasers listed therein
Amended and Restated Five-Year Revolving Credit
Agreement, dated as of August 16, 2017, among
Artisan Partners Holdings LP, the lenders named
therein, and Citibank, N.A., as Administrative Agent
Note Purchase Agreement, dated August 16, 2012, as
amended September 15, 2017, among Artisan Partners
Holdings LP and the purchasers listed therein
Note Purchase Agreement, dated as of June 6, 2019,
among Artisan Partners Holdings LP and the
purchasers listed therein
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting
Firm
Certification of the Company’s Chief Executive
Officer pursuant to Exchange Act Rules
13a-14(a)/15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
Certification of the Company’s Chief Financial Officer
pursuant to Exchange Act Rules 13a-14(a)/15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of the Company’s Chief Executive
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (2)
Certification of the Company’s Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (2)
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
21.1
23.1
31.1
31.2
32.1
32.2
X
X
X
X
X
X
X
X
X
X
119
Table of Contents
Exhibit
No.
Description
Form
File No.
Exhibit
Filing Date
Filed or
Furnished
Herewith
The following Extensible Business Reporting
Language (XBRL) documents are collectively
included herewith as Exhibit 101: (i) the Consolidated
Statements of Financial Condition as of December 31,
2020 and 2019; (ii) the Consolidated Statements of
Operations for the years ended December 31, 2020,
2019 and 2018; (iii) the Consolidated Statements of
Comprehensive Income for the years ended December
31, 2020, 2019 and 2018; (iv) the Consolidated
Statements of Changes in Stockholders’ Equity for the
years ended December 31, 2020, 2019 and 2018; (v)
the Consolidated Statements of Cash Flows for the
years ended December 31, 2020, 2019 and 2018 and
(vi) the Notes to Consolidated Financial Statements as
of and for the years ended December 31, 2020, 2019
and 2018
101
Cover Page Interactive Data File (embedded within the
Inline XBRL document contained in Exhibit 101)
104
(1) Indicates a management contract or compensatory plan.
X
X
(2) These certifications are deemed to be furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18
of the Securities Exchange Act of 1934.
Item 16. Form 10-K Summary
None.
120
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: February 23, 2021
Artisan Partners Asset Management Inc.
By:
/s/ Eric R. Colson
Eric R. Colson
Chief Executive Officer and Chairman of the Board
(principal executive officer)
/s/ Charles J. Daley Jr.
Charles J. Daley, Jr.
Executive Vice President, Chief Financial Officer
and Treasurer
(principal financial and accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on the 23rd day of February, 2021.
Title
Director
Director
Director
Director
Director
Director
Signature
/s/ Jennifer Barbetta
Jennifer A. Barbetta
/s/ Matthew R. Barger
Matthew R. Barger
/s/ Tench Coxe
Tench Coxe
/s/ Stephanie G. DiMarco
Stephanie G. DiMarco
/s/ Jeffrey A. Joerres
Jeffrey A. Joerres
/s/ Andrew A. Ziegler
Andrew A. Ziegler
121
Exhibit 10.19
ARTISAN PARTNERS ASSET MANAGEMENT INC.
2013 OMNIBUS INCENTIVE COMPENSATION PLAN
Performance Share Unit Award Certificate
For awards made on or after January 26, 2021
Artisan Partners Asset Management Inc. (“Artisan”), pursuant to the Artisan Partners Asset Management Inc.
2013 Omnibus Incentive Compensation Plan (as amended, from time to time, the “Plan”), has awarded
performance share units (“PSUs”) to Grantee as set forth below in consideration of Grantee’s service as an
employee of Artisan or any of its subsidiaries. Each PSU constitutes an unfunded and unsecured promise
of Artisan to deliver (or cause to be delivered) to Grantee a share of Artisan’s Class A common stock (a
“Share”) on the applicable Delivery Date (as defined below).
Grantee:
Grant Date:
Number of PSUs:
[ ]
[ ]
[ ] PSUs are the “Standard PSUs”
[ ] PSUs are the “Career PSUs”
Performance Period:
Performance Conditions:
Earned PSUs:
The number of PSUs may increase or decrease based on the
performance conditions described below.
January 1, 20[ ] through December 31, 20[ ]
The PSUs are subject to the following performance conditions:
•
•
Artisan’s TSR (as defined below) over the Performance Period
must exceed the median TSR of the Peer Group (defined
below) over the Performance Period
Artisan’s Adjusted Operating Margin over the Performance
Period (defined below) must exceed the median Adjusted
Operating Margin of the Peer Group over the Performance
Period
Subject to Grantee’s continued Employment with the Company, the
Standard PSUs and Career PSUs will be earned to the extent that the
performance conditions are met, as determined by the Compensation
Committee, as follows:
•
•
•
If neither condition is met, then 50% of the Standard PSUs and
50% of the Career PSUs will be Earned and the remainder will
be forfeited as of the date on which the Committee
determines performance was not met.
If one condition is met, then 100% of the Standard PSUs and
100% of the Career PSUs will be Earned.
If both conditions are met, then 150% of the Standard PSUs
and 150% of the Career PSUs will be Earned.
Vesting Eligibility Schedule:
There is no proportionate or partial vesting in the period prior to a
vesting date.
Delivery Date:
Standard PSUs: Subject to Grantee’s continued Employment with the
Company, the Earned Standard PSUs will vest on the date on which
the Compensation Committee determines the level at which the
performance conditions were met.
Career PSUs: The Earned Career PSUs will vest on Grantee’s Qualifying
Retirement (as defined in the Award Agreement) after the Performance
Period. For the avoidance of doubt, no Career PSUs will vest if
Grantee’s Employment terminates for any reason (including due to
retirement) during the Performance Period.
Subject to applicable withholding, Shares underlying the Earned
Standard PSUs and Earned Career PSUs will be delivered (and such
PSUs will be cancelled) promptly following the date on which such
PSUs vest and, in any case, within five business days following that
date (each such date is a “Delivery Date”).
“Business day” means any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of New York) on which banks are
open for business in New York City and in the State of Wisconsin.
Definitions:
“Adjusted Operating Margin” for Artisan and for each member of the
Peer Group is determined by dividing adjusted operating income by
total revenues, with additional adjustments made at the discretion of
the Compensation Committee to improve comparability.
“Peer Group” means the group of Artisan’s publicly traded peers listed
below, provided that the Compensation Committee may modify the
group as it deems appropriate in the event a merger, acquisition or
other material corporate transaction impacts the status of a named
peer.
•
AllianceBernstein; Affiliated Managers Group; BlackRock;
Federated Hermes; Franklin Resources; Invesco; Janus
Henderson Investors; Lazard; BrightSphere; T. Rowe Price
Group; and Virtus Investment Partners.
“TSR” for Artisan and for each member of the Peer Group is determined
by dividing (a) the sum of (i) the difference obtained by subtracting the
applicable Beginning Price from the applicable Ending Price plus (ii) all
dividends and other distributions during the Performance Period by (b)
the applicable Beginning Price. Any non-cash distributions will be
valued at fair market value as determined by the Compensation
Committee. For the purpose of determining TSR, the value of
dividends and other distributions shall be determined by treating
them as reinvested in additional shares of stock at the closing market
price on the date of distribution.
•
•
“Beginning Price” means, with respect to Artisan and any other
Peer Group member, the average of the closing market prices
of such company’s common stock on the principal exchange
on which such stock is traded for the twenty consecutive
trading days ending on the last trading day prior to the
beginning of the Performance Period.
“Ending Price” means, with respect to Artisan and any other
Peer Group member, the average of the closing market prices
of such company’s common stock on the principal exchange
on which such stock is traded for the twenty consecutive
trading days ending on the last trading day of the
Performance Period.
This award is subject to all of the terms, conditions and restrictions set forth in Grantee’s Performance
Share Unit Award Agreement, dated [ ] (including any schedules and appendices thereto) (the “Award
Agreement”) and the Plan, each of which has been provided to Grantee and are incorporated herein by
reference.
Grantee acknowledges receipt of copies of the Award Agreement and the Plan, has read and understands
the terms and provisions thereof, has had the opportunity to consult with his or her legal, tax and financial
advisors, and accepts this award subject to all of the terms and conditions of the Award Agreement and
the Plan.
Artisan may, in its sole discretion, deliver this Performance Share Unit Award Certificate, the Award
Agreement, the Plan or any other documents related to this award, by electronic means and request
Grantee’s acceptance of this award and the terms of the Award Agreement by electronic means. Grantee
hereby consents to receive such documents by electronic delivery, including by accessing such
documents on a website, and agrees to accept this award and the terms of the Award Agreement through
any on-line or electronic system utilized by Artisan for this purpose.
Artisan Partners Asset Management Inc.
By:
Grantee
Title:
Exhibit 10.20
ARTISAN PARTNERS ASSET MANAGEMENT INC.
2013 OMNIBUS INCENTIVE COMPENSATION PLAN
Franchise Capital Award Certificate - Annual Vesting
Artisan Partners Limited Partnership (“Artisan”), pursuant to the Artisan Partners Asset Management Inc.
2013 Omnibus Incentive Compensation Plan (as amended, from time to time, the “Plan”), has awarded a
long-term incentive award (“Franchise Capital Award”) to Grantee as set forth below in consideration of
Grantee’s service as an employee of Artisan or any of its affiliates.
Grantee:
Grant Date:
FCA Grant Amount:
Vesting Eligibility Schedule:
[ ]
[ ]
$[ ]
1/5, 1/4, 1/3, 1/2, and the balance of the Franchise Capital Award will
vest on the last business day of February of each of [ ], [ ], [ ], [ ], and
[ ], respectively, subject to Grantee’s continued service through each
such date.
This award is subject to all of the terms, conditions and restrictions set forth in Grantee’s Franchise Capital
Award Agreement – Annual Vesting dated [ ] (including any schedules and appendices thereto) (the
“Award Agreement”) and the Plan, each of which has been provided to Grantee and are incorporated
herein by reference.
Grantee acknowledges receipt of copies of the Award Agreement and the Plan, has read and understands
the terms and provisions thereof, has had the opportunity to consult with his or her legal, tax and financial
advisors, and accepts this award subject to all of the terms and conditions of the Award Agreement and
the Plan.
Artisan may, in its sole discretion, deliver this Franchise Capital Award Certificate, the Award Agreement,
the Plan or any other documents related to this award, by electronic means and request Grantee’s
acceptance of this award and the terms of the Award Agreement by electronic means. Grantee hereby
consents to receive such documents by electronic delivery, including by accessing such documents on a
website, and agrees to accept this award and the terms of the Award Agreement through any on-line or
electronic system utilized by Artisan for this purpose.
Artisan Partners Limited Partnership
By:
Grantee
Title:
ARTISAN PARTNERS ASSET MANAGEMENT INC.
2013 OMNIBUS INCENTIVE COMPENSATION PLAN
FRANCHISE CAPITAL AWARD AGREEMENT - ANNUAL VESTING
This Franchise Capital Award Agreement (this “Award Agreement”) between [ ] (the “Grantee”) and Artisan
Partners Limited Partnership (“Artisan”) is effective [ ].
1.
2.
3.
The Plan. Franchise Capital Awards are made pursuant to the Artisan Partners Asset Management
Inc. 2013 Omnibus Incentive Compensation Plan (as amended, from time to time, the “Plan”).
Nature of Franchise Capital Award. Prior to payout, Grantee will be a general unsecured creditor of
Artisan, ranking pari passu with all other general unsecured creditors. Franchise Capital Awards are
cash awards and will be paid in cash subject to and following vesting of such award or portion
thereof.
Forfeiture. Subject to Sections 4 and 5 and the terms of any employment, severance or similar
agreement between Grantee and Artisan, if Grantee’s Employment (meaning, his or her performance
of services for Artisan or its affiliates as determined by the Compensation Committee) terminates for
any reason prior to vesting, any then unvested portion of a Franchise Capital Award shall be
automatically forfeited and Artisan shall have no further obligations to Grantee or Grantee’s legal
representative under this Award Agreement with respect to the forfeited amount.
4.
Annual Vesting.
(a) Vesting. Subject to Grantee’s continued Employment with Artisan, 1/5, 1/4, 1/3, 1/2, and the
balance of a Franchise Capital Award (the FCA Grant Amount plus or minus any investment
gains or losses) will vest on the last business day of February in each of the first five years
following the Grant Date, as set forth on the applicable Franchise Capital Award Certificate.
(b) Payout. Artisan expects to pay out vested Franchise Capital Award amounts to Grantee with
payroll as soon as reasonably practicable after the vesting date, subject to limitations on the
redemption of the underlying investments. Artisan generally expects these payments will be
made at the end of March.
5.
Acceleration.
(a) Change in Control: Upon a Change in Control (as defined in the Plan), any unvested Franchise
Capital Award amounts will vest on the last business day of the calendar month in which occurs
the Change in Control, and the vested amounts will be paid in full with payroll as soon as
reasonably practicable thereafter, subject to limitations on the redemption of the underlying
investments.
(b) Death or Disability while Employed: Notwithstanding any other provision in this Agreement,
upon termination of Grantee’s Employment with Artisan by reason of death or Disability, any
unvested Franchise Capital Award amounts will vest on the last business day of the calendar
month in which occurs the termination of Employment, and the vested amounts will be paid in
full with payroll as soon as reasonably practicable thereafter, subject to limitations on the
redemption of the underlying investments. For purposes of this Award Agreement, “Disability”
means Grantee’s inability to perform the essential functions of his or her position, with or
without reasonable accommodation, for a period aggregating 180 days within any continuous
period of 365 days by reason of physical or mental incapacity.
Investment Prior to Vesting. Upon the Grant Date, the FCA Grant Amount (as set forth on each
franchise capital award certificate) will generally be invested by Artisan in one or more of Artisan’s
investment strategies. Investments will be made in the mutual fund or private fund corresponding
to the strategy chosen, within the lowest fee share class eligible for investment. Dividends and/or
distributions received in respect of the invested amounts will be automatically reinvested. Any
payment to Grantee in respect of any vested portion of a Franchise Capital Award will take into
account any gains and losses in such underlying investment, but Artisan will be the legal owner of
such underlying investment prior to payment.
Restrictive Covenants. GRANTEE AGREES TO BE SUBJECT TO THE RESTRICTIVE COVENANTS SET
FORTH IN APPENDIX A TO THIS AWARD AGREEMENT.
Non-Transferability. Grantee may not transfer, assign, pledge or otherwise encumber a Franchise
Capital Award other than by will or by the laws of descent and distribution, and any attempt to sell,
transfer, assign, pledge, hedge or otherwise dispose of a Franchise Capital Award in violation of this
Award Agreement shall be void and of no effect.
Tax Withholding. Any cash amounts paid to the Grantee in respect of a Franchise Capital Award will
be taxable as ordinary income and subject to employment taxes imposed by applicable laws at the
time of payment. A portion of each cash amount will be withheld by Artisan at the time of payment
to satisfy applicable federal, state or local tax and social security withholding obligations with respect
to a Franchise Capital Award, provided that amounts will not be withheld from employees who are
partners of Artisan Partners Holdings LP at the time of payment.
Section 409A. All payments under this Award Agreement are intended to be exempt from Section
409A of the Internal Revenue Code (“Section 409A”) pursuant to the “short-term deferral rule” under
Treasury regulation 1.409A-1(b)(4), and this Award Agreement will be administered in a manner
consistent with this intent.
Entire Agreement. This Award Agreement, together with any franchise capital award certificates, and
the Plan constitute the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersede all prior understandings and agreements (whether written or
oral) between Artisan and Grantee with respect to such subject matter.
Notices. Any notice required to be given to Artisan under the terms of this Award Agreement will be
in writing or email and be delivered to Artisan’s Chief Legal Officer. Any notice required to be given
to Grantee will be in writing or email and delivered to the address or addresses last maintained in
Artisan’s records.
Binding Effect. Any action taken or decision made in good faith by the Compensation Committee of
the Board of Directors of Artisan Partners Asset Management Inc. in connection with the
construction, administration or interpretation of this Award Agreement will lie within its sole and
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
absolute discretion and will be final, conclusive and binding on Grantee and all persons claiming
under or through Grantee.
Choice of Forum. As a condition to Grantee’s receipt of a Franchise Capital Award, Grantee hereby
irrevocably submits to the exclusive jurisdiction of any state or federal court located in Delaware over
any suit, action or proceeding arising out of or relating to the Plan or this Award Agreement.
Governing Law. This Award Agreement will be governed by and construed in accordance with the
laws of the State of Delaware without regard to its principles of conflict of laws.
Electronic Delivery and Signature. Artisan may, in its sole discretion, deliver this Award Agreement,
the Plan or any other documents related to a Franchise Capital Award by electronic means and
request Grantee’s agreement to the terms thereof by electronic means. Grantee hereby consents to
receive such documents by electronic delivery, including by accessing such documents on a
website, and agrees to accept the terms of the Award Agreement through any on-line or electronic
system utilized by Artisan for this purpose.
Artisan Partners Limited Partnership
By:
Grantee
Title:
Appendix A: Restrictive Covenants
1. Definitions. For purposes of this Appendix A:
“Artisan Client” means each of the following:
•
•
•
Any client of the Artisan Group (i) for which Grantee provided services (such as investment
management or relationship management services) on behalf of the Artisan Group during the 12
months preceding Grantee’s last date of Employment and (ii) with whom the Grantee had
substantive personal contact (including, without limitation, phone or email contact) during the
12 months preceding the Grantee’s last date of Employment.
Any investor in a mutual fund, UCITS fund, private fund or other pooled investment vehicle
advised, promoted, or sponsored by the Artisan Group (each, an “Artisan Pooled Vehicle”) (i) for
which investor the Grantee provided services (such as investment management services to the
relevant Artisan Pooled Vehicle or relationship management services) on behalf of the Artisan
Group during the 12 months preceding Grantee’s last date of Employment and (ii) with whom
the Grantee had substantive personal contact (including, without limitation, phone or email
contact) during the 12 months preceding the Grantee’s last date of Employment.
Any employee, partner or director of a financial intermediary, financial adviser or planner,
consultant or broker-dealer (each, a “Client Intermediary”) (i) to whom the Grantee provided
services (such as investment management or relationship management services) on behalf of
the Artisan Group during the 12 months preceding the Grantee’s last date of Employment and
(ii) with whom the Grantee had substantive personal contact (including, without limitation,
phone or email contact) during the 12 months preceding the Grantee’s last date of Employment.
“Artisan Group” means Artisan Partners Asset Management Inc. and each of its subsidiaries and affiliates
(including, for the avoidance of doubt, Artisan Partners Limited Partnership).
“Artisan Prospective Client” means any person or entity for which the Artisan Group made a proposal to
perform services in which the Grantee participated by means of substantive personal contact with the
person or entity or the agents of the person or entity during the 12 months preceding the Grantee’s last
date of Employment. For the avoidance of doubt, “Artisan Prospective Client” shall include a person or
entity with respect to which this definition otherwise applies, including but not limited to financial
intermediaries, financial advisers or planners, consultants, and broker dealers, notwithstanding that the
services that were proposed to be provided would have been provided indirectly through such person’s
or entity’s investment in an Artisan Pooled Vehicle.
“Competitive Enterprise” means any business enterprise that either (i) engages in any activity that competes
with any then-current activity of the Artisan Group,
investment
management services, or (ii) holds a 5% or greater equity, voting or profit participation interest in any
enterprise that engages in such a competitive activity.
including, without
limitation,
“Restricted Period” means the period during which Grantee is Employed and for a period of one year
immediately following termination of Grantee’s Employment for any reason.
“Restricted Person” means an individual who, at the time of the solicitation, was an employee of the Artisan
Group and: (i) was an executive officer, portfolio manager (including associate or co-portfolio manager),
or managing director of the Artisan Group (a “top-level employee”), had special skills or knowledge
important to the Artisan Group, or had skills that are difficult for the Artisan Group to replace, and (ii) with
whom Grantee had a working relationship or about whom Grantee acquired or possessed specialized
knowledge, in each case, in connection with Grantee’s employment and during the 18 months prior to
the termination of Grantee’s employment.
“Restricted Services” means any activity that Grantee was engaged in on behalf of the Artisan Group at any
time during the 12 months preceding Grantee’s last date of Employment.
“Territory” means anywhere in the world.
2. Non-Competition. If, during any portion of Grantee’s Employment with the Artisan Group, Grantee is or was an
Executive Officer of Artisan or a decision-making portfolio manager (meaning he or she has or had investment
discretion and is or was therefore identified as a portfolio manager in the firm’s Form ADV), then the terms and
conditions of this Section 2 shall apply. As a necessary measure to protect the confidential trade secrets and
proprietary information of the Artisan Group, Grantee agrees that during the Restricted Period he or she will not,
directly or indirectly, (i) hold an equity, voting or profit participation interest in a Competitive Enterprise (other
than a 5% or less interest in a publicly traded entity which is only held for passive investment purposes); (ii)
provide Restricted Services anywhere in the Territory to a Competitive Enterprise; or (iii) manage or supervise
personnel engaged in providing Restricted Services anywhere in the Territory on behalf of a Competitive
Enterprise. As it relates to the practice of law, the terms of this Section 2 and the terms of any other similar
provision agreed to by the parties hereto shall be binding and effective upon Grantee only to the extent
permissible under the Rules of Professional Conduct or any other professional or ethical rules governing the
practice of law that Grantee may be subject to. Further, the prohibitions in this Section 2 shall not apply
to Grantee’s management, without compensation, of the investments of the Grantee or members of the
Grantee’s family or a trust or similar vehicle for the benefit of any of the foregoing.
3. Non-Solicitation of Clients and Prospective Clients. Grantee agrees that during the Restricted Period he or she
will not induce or attempt to induce any Artisan Client or Artisan Prospective Client to use the investment
management services (including by way of investing in a mutual fund, UCITS fund or other pooled investment
vehicle) of any person or entity other than the Artisan Group or to cease using the investment management
services (including any Artisan Pooled Vehicle) of the Artisan Group. The prohibitions in this Section 3 shall not
apply to (i) Grantee’s management, without compensation, of the investments of the Grantee or members of the
Grantee’s family or a trust or similar vehicle for the benefit of any of the foregoing, or (ii) the provision of services
by Grantee to a business enterprise solely because such business enterprise engages in general advertising and
solicitation efforts that may or do reach an Artisan Client.
4. Non-Solicitation of Restricted Persons.
(a)
Non-Solicitation of Restricted Persons. Grantee agrees that during the Restricted Period he or she will
not directly or indirectly solicit or attempt to solicit any Restricted Person to terminate employment for
the purpose of engaging in, or starting a business which engages in, a Competitive Enterprise.
(b)
No Hire of Restricted Persons. To the extent not prohibited by local or state laws, Grantee agrees that
during the Restricted Period he or she will not hire, employ or otherwise use the services of a Restricted
Person.
(c)
With respect to Sections 4(a) and 4(b) above, the parties hereto agree that it shall be conclusively
presumed to have resulted from an impermissible solicitation, and therefore it shall be a deemed
violation of such section, if during the Restricted Period, the Grantee and one or more persons who was
an Artisan portfolio manager (including associate or co-portfolio manager) at any time within the period
of 18 months prior to termination of the Grantee’s Employment, become employed by either the same
employer or an affiliate thereof, or otherwise become affiliated as partners, contractors or other personal
service providers with an entity together with its affiliates, to provide Restricted Services for the benefit of
a Competitive Enterprise or any affiliate of a Competitive Enterprise.
5.
Included Actions. Grantee shall be deemed to have taken any action which is prohibited by this Appendix A and
to be in violation of this Appendix A if Grantee takes such action directly or indirectly, or if it is taken by any
person or entity with whom Grantee is associated as an employee, independent contractor, consultant, agent,
partner, member, proprietor, owner, stockholder, officer, director, or trustee, or by any person or entity directly or
indirectly controlled by, controlling or under common control with Grantee.
6.
7.
Injunctive Relief; Enforceability of Restrictive Covenants. Grantee acknowledges that irreparable injury may result
to the Artisan Group if Grantee breaches the provisions of this Appendix A and agrees that the Artisan Group will
be entitled, in addition to all other legal remedies available to the Artisan Group, to an injunction or other
equitable relief by any court of competent jurisdiction to prevent or restrain any breach of this Appendix A. The
parties hereto acknowledge that the restrictions on Grantee imposed by this Appendix A are reasonable in both
duration and geographic scope and in all other respects for the protection of the Artisan Group, and its business,
goodwill, and property rights. Grantee acknowledges that the restrictions imposed in this Appendix A will not
prevent Grantee from earning a living in the event of, and after, the end of Grantee’s Employment. Grantee
further acknowledges that Grantee had the opportunity to consult with his or her legal, tax and financial advisors
regarding the restrictions imposed in this Appendix A prior to accepting this Award Agreement.
Severability. Should any provision of this Appendix A be held by a court of competent jurisdiction to be
enforceable only if modified, or if any portion of this Appendix A shall be held as unenforceable and thus
stricken, such holding shall not affect the validity of the remainder of this Appendix A. The parties agree that any
such court is expressly authorized to modify any such unenforceable provision, whether by revising or deleting
the offending provision, or by making such other modifications to this Appendix A as it deems warranted to carry
out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The
parties expressly agree that this Appendix A as so modified by the court shall be binding upon and enforceable
against each of them. In any event, should one or more of the provisions of this Appendix A be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other
provisions hereof, and if such provision or provisions are not modified as provided above, this Appendix A shall
be construed as if such invalid, illegal or unenforceable provisions had not been set forth herein.
8.
Survival of Provisions. The obligations contained in this Appendix A will survive, and will remain fully enforceable
after, the vesting of any and all awards granted pursuant to this Award Agreement, any termination of this Award
Agreement, and the termination of the Grantee’s Employment for any reason.
Exhibit 10.21
ARTISAN PARTNERS ASSET MANAGEMENT INC.
2013 OMNIBUS INCENTIVE COMPENSATION PLAN
Franchise Capital Award Certificate - Career Vesting (PM)
Artisan Partners Limited Partnership (“Artisan”), pursuant to the Artisan Partners Asset Management Inc.
2013 Omnibus Incentive Compensation Plan (as amended, from time to time, the “Plan”), has awarded a
long-term incentive award (“Franchise Capital Award”) to Grantee as set forth below in consideration of
Grantee’s service as an employee of Artisan or any of its affiliates.
Grantee:
Grant Date:
FCA Grant Amount:
Vesting Eligibility Schedule:
[ ]
[ ]
$[ ]
20%, 40%, 60%, 80% and 100% of the Franchise Capital Award will
become eligible to vest on the last business day of February of each
of [ ], [ ], [ ], [ ], and [ ], respectively.
As provided in the Award Agreement, with certain exceptions
(including application of the Franchise Protection Rules), the
Franchise Capital Award will vest only to the extent that it has
become eligible to vest and Grantee has a Qualifying Retirement.
There is no proportionate or partial vesting in the period prior to a
vesting date.
This award is subject to all of the terms, conditions and restrictions set forth in Grantee’s Franchise Capital
Award Agreement – Career Vesting (PM) dated [ ] (including any schedules and appendices thereto) (the
“Award Agreement”) and the Plan, each of which has been provided to Grantee and are incorporated
herein by reference.
Grantee acknowledges receipt of copies of the Award Agreement and the Plan, has read and understands
the terms and provisions thereof, has had the opportunity to consult with his or her legal, tax and financial
advisors, and accepts this award subject to all of the terms and conditions of the Award Agreement and
the Plan.
Artisan may, in its sole discretion, deliver this Franchise Capital Award Certificate, the Award Agreement,
the Plan or any other documents related to this award, by electronic means and request Grantee’s
acceptance of this award and the terms of the Award Agreement by electronic means. Grantee hereby
consents to receive such documents by electronic delivery, including by accessing such documents on a
website, and agrees to accept this award and the terms of the Award Agreement through any on-line or
electronic system utilized by Artisan for this purpose.
Artisan Partners Limited Partnership
By:
Grantee
Title:
ARTISAN PARTNERS ASSET MANAGEMENT INC.
2013 OMNIBUS INCENTIVE COMPENSATION PLAN
FRANCHISE CAPITAL AWARD AGREEMENT - CAREER VESTING (PM)
This Franchise Capital Award Agreement (this “Award Agreement”) between [ ] (the “Grantee”) and Artisan
Partners Limited Partnership (“Artisan”) is effective [ ].
1.
2.
3.
The Plan. Franchise Capital Awards are made pursuant to the Artisan Partners Asset Management
Inc. 2013 Omnibus Incentive Compensation Plan (as amended, from time to time, the “Plan”).
Nature of Franchise Capital Award. Prior to payout, Grantee will be a general unsecured creditor of
Artisan, ranking pari passu with all other general unsecured creditors. Franchise Capital Awards are
cash awards and will be paid in cash subject to and following vesting of such award or portion
thereof.
Forfeiture. Subject to Sections 4 and 5 and the terms of any employment, severance or similar
agreement between Grantee and Artisan, if Grantee’s Employment (meaning, his or her performance
of services for Artisan or its affiliates as determined by the Compensation Committee) terminates for
any reason prior to vesting, any then unvested portion of a Franchise Capital Award shall be
automatically forfeited and Artisan shall have no further obligations to Grantee or Grantee’s legal
representative under this Award Agreement with respect to the forfeited amount.
4.
Vesting.
(a) Vesting Conditions. Subject to Section 5, if the conditions of Section 4(b) have been satisfied, the
Franchise Capital Award amount calculated under Section 4(c) will vest on the last business day
of the calendar month in which occurs the 18-month anniversary of Grantee’s retirement date.
Any Franchise Capital Award amount that does not vest at the time provided for in this Section
4(a) shall be automatically forfeited and Artisan shall have no further obligations to Grantee or
Grantee’s legal representative under this Award Agreement with respect to the forfeited
amount.
(b) Vesting Eligibility. In order for any Franchise Capital Award amount to vest under this Section 4,
(i) the Franchise Capital Award amount must be eligible to vest under the applicable Vesting
Eligibility Schedule (as set forth on the applicable Franchise Capital Award Certificate) as of
Grantee’s retirement date; (ii) Grantee must have given Artisan at least 18 months advance
written notice of intention to retire; (iii) Grantee must have attained at least ten years of service
with Artisan as of Grantee’s retirement date; and (iv) Grantee must have served in his or her
standard capacity (or as otherwise directed by Artisan but no less than 50% of the prior hourly
service level) during the period between the date of the written notice of intention to retire and
Grantee’s retirement date. The portion of any Franchise Capital Award not eligible to vest as of
the retirement date shall be automatically forfeited on the retirement date.
If Grantee would have attained at least ten years of service with Artisan as of the retirement date
but for Artisan reducing the notice period and causing the retirement date to occur prior to the
date on which Grantee will have attained ten years of service with Artisan, then the ten-year
service requirement will be deemed to be satisfied as of the retirement date.
(c) Franchise Protection Clause Clawback. The amount of an eligible Franchise Capital Award that
will vest on the vesting date will be calculated as set forth in the following table, where
“Cumulative Organic Contraction %” will equal (x) the cumulative net client cash flows of the
accounts managed by Grantee’s investment team beginning on the first day of the month of
Grantee’s retirement notice and ending on the last day of the month prior to vesting (a 3-year
period), divided by (y) the AUM in accounts managed by Grantee’s investment team as of the
first day of the month of Grantee’s retirement notice.
Cumulative Organic Contraction %
% of Eligible Franchise Capital Award Vesting
Less than or equal to 33%:
Between 33% and 67%:
Greater than 67%:
100%
(1 – Cumulative Organic Contraction %)
0%
For example, (i) if the Cumulative Organic Contraction % is 20%, then 100% of the eligible
Franchise Capital Award amount will vest; (ii) if the Cumulative Organic Contraction % is 55%,
then 45% of the eligible Franchise Capital Award amount will vest; or (iii) if the Cumulative
Organic Contraction % is 70%, then 0% of the eligible Franchise Capital Award amount will vest.
For the avoidance of doubt, if the cumulative net client cash flows during the measurement
period are positive, 100% of the eligible Franchise Capital Award amount will vest.
(d) Death after Retirement. If Grantee dies after having satisfied the retirement conditions in (ii) and
(iii) of Section 4(b) but prior to the 18-month anniversary of the retirement date, the portion of
any Franchise Capital Award eligible to vest as of the retirement date will vest on the last
business day of the calendar month in which the death occurs.
(e) Payout. Artisan expects to pay out any vested Franchise Capital Award amounts to Grantee with
payroll as soon as reasonably practicable after the vesting date, subject to limitations on the
redemption of the underlying investments.
5.
Acceleration.
(a) Change in Control: Upon a Change in Control (as defined in the Plan), any unvested Franchise
Capital Award amounts will vest on the last business day of the calendar month in which occurs
the Change in Control, and the vested amounts (without any Franchise Protection Clause
Clawback adjustment) will be paid in full with payroll as soon as reasonably practicable
thereafter, subject to limitations on the redemption of the underlying investments.
(b) Death or Disability while Employed: Notwithstanding any other provision in this Agreement,
upon termination of Grantee’s Employment with Artisan by reason of death or Disability, any
unvested Franchise Capital Award amounts will vest on the last business day of the calendar
month in which occurs the termination of Employment, and the vested amounts (without any
Franchise Protection Clause Clawback adjustment) will be paid in full with payroll as soon as
reasonably practicable thereafter, subject to limitations on the redemption of the underlying
investments. For purposes of this Award Agreement, “Disability” means Grantee’s inability to
perform the essential
functions of his or her position, with or without reasonable
accommodation, for a period aggregating 180 days within any continuous period of 365 days by
reason of physical or mental incapacity.
(c) Termination without Cause: If, on or after the fifth anniversary of a Grant Date (as set forth in a
franchise capital award certificate), (i) Artisan terminates the Employment of Grantee without
Cause and (ii) Grantee has attained at least ten years of service with Artisan as of the date of
termination of Employment, those Franchise Capital Awards granted five years or more ago will
vest on the last business day of the calendar month in which occurs the termination of
Employment, and the vested amounts (without any Franchise Protection Clause Clawback
adjustment) will be paid in full with payroll as soon as reasonably practicable thereafter, subject
to limitations on the redemption of the underlying investments.
For purposes of this Section 5(c), “Cause” means the occurrence of any of the following: (i) such
Grantee’s material violation of any material contract, policy or agreement written between
Grantee and Artisan; (ii) such Grantee’s commission or attempted commission of any felony or
any crime involving fraud or dishonesty under the laws of the United States or any state thereof
or under the laws of any other jurisdiction; (iii) such Grantee’s attempted commission of, or
participation in, a fraud or act of dishonesty against Artisan or any client of Artisan; or (iv) such
Grantee’s willful, material violation of the applicable rules or regulations of any governmental or
self-regulatory authority that causes material harm to Artisan, such Grantee’s disqualification or
bar by any governmental or self-regulatory authority from serving in the capacity required by his
or her job description or such Grantee’s loss of any governmental or self-regulatory license that
is reasonably necessary for such Grantee to perform his or her duties or responsibilities as an
employee of Artisan.
6.
7.
8.
Investment Prior to Vesting. Upon the Grant Date, the FCA Grant Amount (as set forth on each
franchise capital award certificate) will generally be invested by Artisan in one or more of Artisan’s
investment strategies. Investments will be made in the mutual fund or private fund corresponding
to the strategy chosen, within the lowest fee share class eligible for investment. Dividends and/or
distributions received in respect of the invested amounts will be automatically reinvested. Any
payment to Grantee in respect of any vested portion of a Franchise Capital Award will take into
account any gains and losses in such underlying investment, but Artisan will be the legal owner of
such underlying investment prior to payment.
Restrictive Covenants. GRANTEE AGREES TO BE SUBJECT TO THE RESTRICTIVE COVENANTS SET
FORTH IN APPENDIX A TO THIS AWARD AGREEMENT.
Non-Transferability. Grantee may not transfer, assign, pledge or otherwise encumber a Franchise
Capital Award other than by will or by the laws of descent and distribution, and any attempt to sell,
transfer, assign, pledge, hedge or otherwise dispose of a Franchise Capital Award in violation of this
Award Agreement shall be void and of no effect.
9.
10.
11.
12.
13.
14.
15.
16.
Tax Withholding. Any cash amounts paid to the Grantee in respect of a Franchise Capital Award will
be taxable as ordinary income and subject to employment taxes imposed by applicable laws at the
time of payment. A portion of each cash amount will be withheld by Artisan at the time of payment
to satisfy applicable federal, state or local tax and social security withholding obligations with respect
to a Franchise Capital Award, provided that amounts will not be withheld from employees who are
partners of Artisan Partners Holdings LP at the time of payment.
Section 409A. All payments under this Award Agreement are intended to be exempt from Section
409A of the Internal Revenue Code (“Section 409A”) pursuant to the “short-term deferral rule” under
Treasury regulation 1.409A-1(b)(4), and this Award Agreement will be administered in a manner
consistent with this intent.
Entire Agreement. This Award Agreement, together with any franchise capital award certificates, and
the Plan constitute the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersede all prior understandings and agreements (whether written or
oral) between Artisan and Grantee with respect to such subject matter.
Notices. Any notice required to be given to Artisan under the terms of this Award Agreement will be
in writing or email and be delivered to Artisan’s Chief Legal Officer. Any notice required to be given
to Grantee will be in writing or email and delivered to the address or addresses last maintained in
Artisan’s records.
Binding Effect. Any action taken or decision made in good faith by the Compensation Committee of
the Board of Directors of Artisan Partners Asset Management Inc. in connection with the
construction, administration or interpretation of this Award Agreement will lie within its sole and
absolute discretion and will be final, conclusive and binding on Grantee and all persons claiming
under or through Grantee.
Choice of Forum. As a condition to Grantee’s receipt of a Franchise Capital Award, Grantee hereby
irrevocably submits to the exclusive jurisdiction of any state or federal court located in Delaware over
any suit, action or proceeding arising out of or relating to the Plan or this Award Agreement.
Governing Law. This Award Agreement will be governed by and construed in accordance with the
laws of the State of Delaware without regard to its principles of conflict of laws.
Electronic Delivery and Signature. Artisan may, in its sole discretion, deliver this Award Agreement,
the Plan or any other documents related to a Franchise Capital Award by electronic means and
request Grantee’s agreement to the terms thereof by electronic means. Grantee hereby consents to
receive such documents by electronic delivery, including by accessing such documents on a
website, and agrees to accept the terms of the Award Agreement through any on-line or electronic
system utilized by Artisan for this purpose.
Artisan Partners Limited Partnership
By:
Grantee
Title:
Appendix A: Restrictive Covenants
1. Definitions. For purposes of this Appendix A:
“Artisan Client” means each of the following:
•
•
•
Any client of the Artisan Group (i) for which Grantee provided services (such as investment
management or relationship management services) on behalf of the Artisan Group during the 12
months preceding Grantee’s last date of Employment and (ii) with whom the Grantee had
substantive personal contact (including, without limitation, phone or email contact) during the
12 months preceding the Grantee’s last date of Employment.
Any investor in a mutual fund, UCITS fund, private fund or other pooled investment vehicle
advised, promoted, or sponsored by the Artisan Group (each, an “Artisan Pooled Vehicle”) (i) for
which investor the Grantee provided services (such as investment management services to the
relevant Artisan Pooled Vehicle or relationship management services) on behalf of the Artisan
Group during the 12 months preceding Grantee’s last date of Employment and (ii) with whom
the Grantee had substantive personal contact (including, without limitation, phone or email
contact) during the 12 months preceding the Grantee’s last date of Employment.
Any employee, partner or director of a financial intermediary, financial adviser or planner,
consultant or broker-dealer (each, a “Client Intermediary”) (i) to whom the Grantee provided
services (such as investment management or relationship management services) on behalf of
the Artisan Group during the 12 months preceding the Grantee’s last date of Employment and
(ii) with whom the Grantee had substantive personal contact (including, without limitation,
phone or email contact) during the 12 months preceding the Grantee’s last date of Employment.
“Artisan Group” means Artisan Partners Asset Management Inc. and each of its subsidiaries and affiliates
(including, for the avoidance of doubt, Artisan Partners Limited Partnership).
“Artisan Prospective Client” means any person or entity for which the Artisan Group made a proposal to
perform services in which the Grantee participated by means of substantive personal contact with the
person or entity or the agents of the person or entity during the 12 months preceding the Grantee’s last
date of Employment. For the avoidance of doubt, “Artisan Prospective Client” shall include a person or
entity with respect to which this definition otherwise applies, including but not limited to financial
intermediaries, financial advisers or planners, consultants, and broker dealers, notwithstanding that the
services that were proposed to be provided would have been provided indirectly through such person’s
or entity’s investment in an Artisan Pooled Vehicle.
“Competitive Enterprise” means any business enterprise that either (i) engages in any activity that competes
with any then-current activity of the Artisan Group,
investment
management services, or (ii) holds a 5% or greater equity, voting or profit participation interest in any
enterprise that engages in such a competitive activity.
including, without
limitation,
“Restricted Period” means the period during which Grantee is Employed and for a period of one year
immediately following termination of Grantee’s Employment for any reason.
“Restricted Person” means an individual who, at the time of the solicitation, was an employee of the Artisan
Group and: (i) was an executive officer, portfolio manager (including associate or co-portfolio manager),
or managing director of the Artisan Group (a “top-level employee”), had special skills or knowledge
important to the Artisan Group, or had skills that are difficult for the Artisan Group to replace, and (ii) with
whom Grantee had a working relationship or about whom Grantee acquired or possessed specialized
knowledge, in each case, in connection with Grantee’s employment and during the 18 months prior to
the termination of Grantee’s employment.
“Restricted Services” means any activity that Grantee was engaged in on behalf of the Artisan Group at any
time during the 12 months preceding Grantee’s last date of Employment.
“Territory” means anywhere in the world.
2. Non-Competition. If during any portion of Grantee’s Employment with the Artisan Group Grantee is or was an
Executive Officer of Artisan or a decision-making portfolio manager (meaning he or she has or had investment
discretion and is or was therefore identified as a portfolio manager in the firm’s Form ADV), then the terms and
conditions of this Section 2 shall apply. As a necessary measure to protect the confidential trade secrets and
proprietary information of the Artisan Group, Grantee agrees that during the Restricted Period he or she will not,
directly or indirectly, (i) hold an equity, voting or profit participation interest in a Competitive Enterprise (other
than a 5% or less interest in a publicly traded entity which is only held for passive investment purposes); (ii)
provide Restricted Services anywhere in the Territory to a Competitive Enterprise; or (iii) manage or supervise
personnel engaged in providing Restricted Services anywhere in the Territory on behalf of a Competitive
Enterprise. As it relates to the practice of law, the terms of this Section 2 and the terms of any other similar
provision agreed to by the parties hereto shall be binding and effective upon Grantee only to the extent
permissible under the Rules of Professional Conduct or any other professional or ethical rules governing the
practice of law that Grantee may be subject to. Further, the prohibitions in this Section 2 shall not apply
to Grantee’s management, without compensation, of the investments of the Grantee or members of the
Grantee’s family or a trust or similar vehicle for the benefit of any of the foregoing.
3. Non-Solicitation of Clients and Prospective Clients. Grantee agrees that during the Restricted Period he or she
will not induce or attempt to induce any Artisan Client or Artisan Prospective Client to use the investment
management services (including by way of investing in a mutual fund, UCITS fund or other pooled investment
vehicle) of any person or entity other than the Artisan Group or to cease using the investment management
services (including any Artisan Pooled Vehicle) of the Artisan Group. The prohibitions in this Section 3 shall not
apply to (i) Grantee’s management, without compensation, of the investments of the Grantee or members of the
Grantee’s family or a trust or similar vehicle for the benefit of any of the foregoing, or (ii) the provision of services
by Grantee to a business enterprise solely because such business enterprise engages in general advertising and
solicitation efforts that may or do reach an Artisan Client.
4. Non-Solicitation of Restricted Persons.
(a)
Non-Solicitation of Restricted Persons. Grantee agrees that during the Restricted Period he or she will
not directly or indirectly solicit or attempt to solicit any Restricted Person to terminate employment for
the purpose of engaging in, or starting a business which engages in, a Competitive Enterprise.
(b)
No Hire of Restricted Persons. To the extent not prohibited by local or state laws, Grantee agrees that
during the Restricted Period he or she will not hire, employ or otherwise use the services of a Restricted
Person.
(c)
With respect to Sections 4(a) and 4(b) above, the parties hereto agree that it shall be conclusively
presumed to have resulted from an impermissible solicitation, and therefore it shall be a deemed
violation of such section, if during the Restricted Period, the Grantee and one or more persons who was
an Artisan portfolio manager (including associate or co-portfolio manager) at any time within the period
of 18 months prior to termination of the Grantee’s Employment, become employed by either the same
employer or an affiliate thereof, or otherwise become affiliated as partners, contractors or other personal
service providers with an entity together with its affiliates, to provide Restricted Services for the benefit of
a Competitive Enterprise or any affiliate of a Competitive Enterprise.
5.
Included Actions. Grantee shall be deemed to have taken any action which is prohibited by this Appendix A and
to be in violation of this Appendix A if Grantee takes such action directly or indirectly, or if it is taken by any
person or entity with whom Grantee is associated as an employee, independent contractor, consultant, agent,
partner, member, proprietor, owner, stockholder, officer, director, or trustee, or by any person or entity directly or
indirectly controlled by, controlling or under common control with Grantee.
6.
7.
Injunctive Relief; Enforceability of Restrictive Covenants. Grantee acknowledges that irreparable injury may result
to the Artisan Group if Grantee breaches the provisions of this Appendix A and agrees that the Artisan Group will
be entitled, in addition to all other legal remedies available to the Artisan Group, to an injunction or other
equitable relief by any court of competent jurisdiction to prevent or restrain any breach of this Appendix A. The
parties hereto acknowledge that the restrictions on Grantee imposed by this Appendix A are reasonable in both
duration and geographic scope and in all other respects for the protection of the Artisan Group, and its business,
goodwill, and property rights. Grantee acknowledges that the restrictions imposed in this Appendix A will not
prevent Grantee from earning a living in the event of, and after, the end of Grantee’s Employment. Grantee
further acknowledges that Grantee had the opportunity to consult with his or her legal, tax and financial advisors
regarding the restrictions imposed in this Appendix A prior to accepting this Award Agreement.
Severability. Should any provision of this Appendix A be held by a court of competent jurisdiction to be
enforceable only if modified, or if any portion of this Appendix A shall be held as unenforceable and thus
stricken, such holding shall not affect the validity of the remainder of this Appendix A. The parties agree that any
such court is expressly authorized to modify any such unenforceable provision, whether by revising or deleting
the offending provision, or by making such other modifications to this Appendix A as it deems warranted to carry
out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The
parties expressly agree that this Appendix A as so modified by the court shall be binding upon and enforceable
against each of them. In any event, should one or more of the provisions of this Appendix A be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other
provisions hereof, and if such provision or provisions are not modified as provided above, this Appendix A shall
be construed as if such invalid, illegal or unenforceable provisions had not been set forth herein.
8.
Survival of Provisions. The obligations contained in this Appendix A will survive, and will remain fully enforceable
after, the vesting of any and all awards granted pursuant to this Award Agreement, any termination of this Award
Agreement, and the termination of the Grantee’s Employment for any reason.
Exhibit 10.22
ARTISAN PARTNERS ASSET MANAGEMENT INC.
2013 OMNIBUS INCENTIVE COMPENSATION PLAN
Franchise Capital Award Certificate - Career Vesting (Non-PM)
Artisan Partners Limited Partnership (“Artisan”), pursuant to the Artisan Partners Asset Management Inc.
2013 Omnibus Incentive Compensation Plan (as amended, from time to time, the “Plan”), has awarded a
long-term incentive award (“Franchise Capital Award”) to Grantee as set forth below in consideration of
Grantee’s service as an employee of Artisan or any of its affiliates.
Grantee:
Grant Date:
FCA Grant Amount:
Vesting Eligibility Schedule:
[ ]
[ ]
$[ ]
20%, 40%, 60%, 80% and 100% of the Franchise Capital Award will
become eligible to vest on the last business day of February of each
of [ ], [ ], [ ], [ ], and [ ], respectively.
As provided in the Award Agreement, with certain exceptions, the
Franchise Capital Award will vest only to the extent that it has
become eligible to vest and Grantee has a Qualifying Retirement.
There is no proportionate or partial vesting in the period prior to a
vesting date.
This award is subject to all of the terms, conditions and restrictions set forth in Grantee’s Franchise Capital
Award Agreement – Career Vesting (Non-PM) dated [ ] (including any schedules and appendices thereto)
(the “Award Agreement”) and the Plan, each of which has been provided to Grantee and are incorporated
herein by reference.
Grantee acknowledges receipt of copies of the Award Agreement and the Plan, has read and understands
the terms and provisions thereof, has had the opportunity to consult with his or her legal, tax and financial
advisors, and accepts this award subject to all of the terms and conditions of the Award Agreement and
the Plan.
Artisan may, in its sole discretion, deliver this Franchise Capital Award Certificate, the Award Agreement,
the Plan or any other documents related to this award, by electronic means and request Grantee’s
acceptance of this award and the terms of the Award Agreement by electronic means. Grantee hereby
consents to receive such documents by electronic delivery, including by accessing such documents on a
website, and agrees to accept this award and the terms of the Award Agreement through any on-line or
electronic system utilized by Artisan for this purpose.
Artisan Partners Limited Partnership
By:
Grantee
Title:
ARTISAN PARTNERS ASSET MANAGEMENT INC.
2013 OMNIBUS INCENTIVE COMPENSATION PLAN
FRANCHISE CAPITAL AWARD AGREEMENT - CAREER VESTING (NON-PM)
This Franchise Capital Award Agreement (this “Award Agreement”) between [ ] (the “Grantee”) and Artisan
Partners Limited Partnership (“Artisan”) is effective [ ].
1.
2.
3.
4.
The Plan. Franchise Capital Awards are made pursuant to the Artisan Partners Asset Management
Inc. 2013 Omnibus Incentive Compensation Plan (as amended, from time to time, the “Plan”).
Nature of Franchise Capital Award. Prior to payout, Grantee will be a general unsecured creditor of
Artisan, ranking pari passu with all other general unsecured creditors. Franchise Capital Awards are
cash awards and will be paid in cash subject to and following vesting of such award or portion
thereof.
Forfeiture. Subject to Sections 4 and 5 and the terms of any employment, severance or similar
agreement between Grantee and Artisan, if Grantee’s Employment (meaning, his or her performance
of services for Artisan or its affiliates as determined by the Compensation Committee) terminates for
any reason prior to vesting, any then unvested portion of a Franchise Capital Award shall be
automatically forfeited and Artisan shall have no further obligations to Grantee or Grantee’s legal
representative under this Award Agreement with respect to the forfeited amount.
Vesting upon Qualifying Retirement. If (i) Grantee has given Artisan at least one-year advance written
notice of intention to retire, (ii) Grantee has attained at least ten years of service with Artisan as of
Grantee’s retirement date, and (iii) Grantee has served in his or her standard capacity (or as otherwise
directed by Artisan but no less than 50% of the prior hourly service level) during the period between
the date of Grantee’s written notice of intention to retire and Grantee’s retirement date, then the
portion of any Franchise Capital Award eligible to vest under any applicable Vesting Eligibility
Schedule (as set forth on the applicable Franchise Capital Award Certificate) will vest on the last
business day of the calendar month in which occurs the Grantee’s retirement date. The portion of
any Franchise Capital Award that is not eligible to vest under the applicable Vesting Eligibility
Schedule as of the retirement date shall be automatically forfeited.
If Grantee would have attained at least ten years of service with Artisan as of the retirement date but
for Artisan reducing the notice period and causing the retirement date to occur prior to the date on
which Grantee will have attained ten years of service with Artisan, then the ten-year service
requirement will be deemed to be satisfied as of the retirement date.
Payout. Artisan expects to pay out any vested Franchise Capital Award amounts to Grantee with
payroll as soon as reasonably practicable after the vesting date, subject to limitations on the
redemption of the underlying investments.
5.
Acceleration.
(a) Change in Control: Upon a Change in Control (as defined in the Plan), any unvested Franchise
Capital Award amounts will vest on the last business day of the calendar month in which occurs
the Change in Control, and the vested amounts will be paid in full with payroll as soon as
reasonably practicable thereafter, subject to limitations on the redemption of the underlying
investments.
(b) Death or Disability while Employed: Notwithstanding any other provision in this Agreement,
upon termination of Grantee’s Employment with Artisan by reason of death or Disability, any
unvested Franchise Capital Award amounts will vest on the last business day of the calendar
month in which occurs the termination of Employment, and the vested amounts will be paid in
full with payroll as soon as reasonably practicable thereafter, subject to limitations on the
redemption of the underlying investments. For purposes of this Award Agreement, “Disability”
means Grantee’s inability to perform the essential functions of his or her position, with or
without reasonable accommodation, for a period aggregating 180 days within any continuous
period of 365 days by reason of physical or mental incapacity.
(c) Termination without Cause: If, on or after the fifth anniversary of a Grant Date (as set forth in a
franchise capital award certificate), (i) Artisan terminates the Employment of Grantee without
Cause and (ii) Grantee has attained at least ten years of service with Artisan as of the date of
termination of Employment, those Franchise Capital Awards granted five years or more ago will
vest on the last business day of the calendar month in which occurs the termination of
Employment, and the vested amounts will be paid in full with payroll as soon as reasonably
practicable thereafter, subject to limitations on the redemption of the underlying investments.
For purposes of this Section 5(c), “Cause” means the occurrence of any of the following: (i) such
Grantee’s material violation of any material contract, policy or agreement written between
Grantee and Artisan; (ii) such Grantee’s commission or attempted commission of any felony or
any crime involving fraud or dishonesty under the laws of the United States or any state thereof
or under the laws of any other jurisdiction; (iii) such Grantee’s attempted commission of, or
participation in, a fraud or act of dishonesty against Artisan or any client of Artisan; or (iv) such
Grantee’s willful, material violation of the applicable rules or regulations of any governmental or
self-regulatory authority that causes material harm to Artisan, such Grantee’s disqualification or
bar by any governmental or self-regulatory authority from serving in the capacity required by his
or her job description or such Grantee’s loss of any governmental or self-regulatory license that
is reasonably necessary for such Grantee to perform his or her duties or responsibilities as an
employee of Artisan.
6.
Investment Prior to Vesting. Upon the Grant Date, the FCA Grant Amount (as set forth on each
franchise capital award certificate) will generally be invested by Artisan in one or more of Artisan’s
investment strategies. Investments will be made in the mutual fund or private fund corresponding
to the strategy chosen, within the lowest fee share class eligible for investment. Dividends and/or
distributions received in respect of the invested amounts will be automatically reinvested. Any
payment to Grantee in respect of any vested portion of a Franchise Capital Award will take into
account any gains and losses in such underlying investment, but Artisan will be the legal owner of
such underlying investment prior to payment.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Restrictive Covenants. GRANTEE AGREES TO BE SUBJECT TO THE RESTRICTIVE COVENANTS SET
FORTH IN APPENDIX A TO THIS AWARD AGREEMENT.
Non-Transferability. Grantee may not transfer, assign, pledge or otherwise encumber a Franchise
Capital Award other than by will or by the laws of descent and distribution, and any attempt to sell,
transfer, assign, pledge, hedge or otherwise dispose of a Franchise Capital Award in violation of this
Award Agreement shall be void and of no effect.
Tax Withholding. Any cash amounts paid to the Grantee in respect of a Franchise Capital Award will
be taxable as ordinary income and subject to employment taxes imposed by applicable laws at the
time of payment. A portion of each cash amount will be withheld by Artisan at the time of payment
to satisfy applicable federal, state or local tax and social security withholding obligations with respect
to a Franchise Capital Award, provided that amounts will not be withheld from employees who are
partners of Artisan Partners Holdings LP at the time of payment.
Section 409A. All payments under this Award Agreement are intended to be exempt from Section
409A of the Internal Revenue Code (“Section 409A”) pursuant to the “short-term deferral rule” under
Treasury regulation 1.409A-1(b)(4), and this Award Agreement will be administered in a manner
consistent with this intent.
Entire Agreement. This Award Agreement, together with any franchise capital award certificates, and
the Plan constitute the entire agreement and understanding of the parties with respect to the
subject matter hereof and supersede all prior understandings and agreements (whether written or
oral) between Artisan and Grantee with respect to such subject matter.
Notices. Any notice required to be given to Artisan under the terms of this Award Agreement will be
in writing or email and be delivered to Artisan’s Chief Legal Officer. Any notice required to be given
to Grantee will be in writing or email and delivered to the address or addresses last maintained in
Artisan’s records.
Binding Effect. Any action taken or decision made in good faith by the Compensation Committee of
the Board of Directors of Artisan Partners Asset Management Inc. in connection with the
construction, administration or interpretation of this Award Agreement will lie within its sole and
absolute discretion and will be final, conclusive and binding on Grantee and all persons claiming
under or through Grantee.
Choice of Forum. As a condition to Grantee’s receipt of a Franchise Capital Award, Grantee hereby
irrevocably submits to the exclusive jurisdiction of any state or federal court located in Delaware over
any suit, action or proceeding arising out of or relating to the Plan or this Award Agreement.
Governing Law. This Award Agreement will be governed by and construed in accordance with the
laws of the State of Delaware without regard to its principles of conflict of laws.
Electronic Delivery and Signature. Artisan may, in its sole discretion, deliver this Award Agreement,
the Plan or any other documents related to a Franchise Capital Award by electronic means and
request Grantee’s agreement to the terms thereof by electronic means. Grantee hereby consents to
receive such documents by electronic delivery, including by accessing such documents on a
website, and agrees to accept the terms of the Award Agreement through any on-line or electronic
system utilized by Artisan for this purpose.
Artisan Partners Limited Partnership
By:
Grantee
Title:
Appendix A: Restrictive Covenants
1. Definitions. For purposes of this Appendix A:
“Artisan Client” means each of the following:
•
•
•
Any client of the Artisan Group (i) for which Grantee provided services (such as investment
management or relationship management services) on behalf of the Artisan Group during the 12
months preceding Grantee’s last date of Employment and (ii) with whom the Grantee had
substantive personal contact (including, without limitation, phone or email contact) during the
12 months preceding the Grantee’s last date of Employment.
Any investor in a mutual fund, UCITS fund, private fund or other pooled investment vehicle
advised, promoted, or sponsored by the Artisan Group (each, an “Artisan Pooled Vehicle”) (i) for
which investor the Grantee provided services (such as investment management services to the
relevant Artisan Pooled Vehicle or relationship management services) on behalf of the Artisan
Group during the 12 months preceding Grantee’s last date of Employment and (ii) with whom
the Grantee had substantive personal contact (including, without limitation, phone or email
contact) during the 12 months preceding the Grantee’s last date of Employment.
Any employee, partner or director of a financial intermediary, financial adviser or planner,
consultant or broker-dealer (each, a “Client Intermediary”) (i) to whom the Grantee provided
services (such as investment management or relationship management services) on behalf of
the Artisan Group during the 12 months preceding the Grantee’s last date of Employment and
(ii) with whom the Grantee had substantive personal contact (including, without limitation,
phone or email contact) during the 12 months preceding the Grantee’s last date of Employment.
“Artisan Group” means Artisan Partners Asset Management Inc. and each of its subsidiaries and affiliates
(including, for the avoidance of doubt, Artisan Partners Limited Partnership).
“Artisan Prospective Client” means any person or entity for which the Artisan Group made a proposal to
perform services in which the Grantee participated by means of substantive personal contact with the
person or entity or the agents of the person or entity during the 12 months preceding the Grantee’s last
date of Employment. For the avoidance of doubt, “Artisan Prospective Client” shall include a person or
entity with respect to which this definition otherwise applies, including but not limited to financial
intermediaries, financial advisers or planners, consultants, and broker dealers, notwithstanding that the
services that were proposed to be provided would have been provided indirectly through such person’s
or entity’s investment in an Artisan Pooled Vehicle.
“Competitive Enterprise” means any business enterprise that either (i) engages in any activity that competes
with any then-current activity of the Artisan Group,
investment
management services, or (ii) holds a 5% or greater equity, voting or profit participation interest in any
enterprise that engages in such a competitive activity.
including, without
limitation,
“Restricted Period” means the period during which Grantee is Employed and for a period of one year
immediately following termination of Grantee’s Employment for any reason.
“Restricted Person” means an individual who, at the time of the solicitation, was an employee of the Artisan
Group and: (i) was an executive officer, portfolio manager (including associate or co-portfolio manager),
or managing director of the Artisan Group (a “top-level employee”), had special skills or knowledge
important to the Artisan Group, or had skills that are difficult for the Artisan Group to replace, and (ii) with
whom Grantee had a working relationship or about whom Grantee acquired or possessed specialized
knowledge, in each case, in connection with Grantee’s employment and during the 18 months prior to
the termination of Grantee’s employment.
“Restricted Services” means any activity that Grantee was engaged in on behalf of the Artisan Group at any
time during the 12 months preceding Grantee’s last date of Employment.
“Territory” means anywhere in the world.
2. Non-Competition. If during any portion of Grantee’s Employment with the Artisan Group Grantee is or was an
Executive Officer of Artisan or a decision-making portfolio manager (meaning he or she has or had investment
discretion and is or was therefore identified as a portfolio manager in the firm’s Form ADV), then the terms and
conditions of this Section 2 shall apply. As a necessary measure to protect the confidential trade secrets and
proprietary information of the Artisan Group, Grantee agrees that during the Restricted Period he or she will not,
directly or indirectly, (i) hold an equity, voting or profit participation interest in a Competitive Enterprise (other
than a 5% or less interest in a publicly traded entity which is only held for passive investment purposes); (ii)
provide Restricted Services anywhere in the Territory to a Competitive Enterprise; or (iii) manage or supervise
personnel engaged in providing Restricted Services anywhere in the Territory on behalf of a Competitive
Enterprise. As it relates to the practice of law, the terms of this Section 2 and the terms of any other similar
provision agreed to by the parties hereto shall be binding and effective upon Grantee only to the extent
permissible under the Rules of Professional Conduct or any other professional or ethical rules governing the
practice of law that Grantee may be subject to. Further, the prohibitions in this Section 2 shall not apply
to Grantee’s management, without compensation, of the investments of the Grantee or members of the
Grantee’s family or a trust or similar vehicle for the benefit of any of the foregoing.
3. Non-Solicitation of Clients and Prospective Clients. Grantee agrees that during the Restricted Period he or she
will not induce or attempt to induce any Artisan Client or Artisan Prospective Client to use the investment
management services (including by way of investing in a mutual fund, UCITS fund or other pooled investment
vehicle) of any person or entity other than the Artisan Group or to cease using the investment management
services (including any Artisan Pooled Vehicle) of the Artisan Group. The prohibitions in this Section 3 shall not
apply to (i) Grantee’s management, without compensation, of the investments of the Grantee or members of the
Grantee’s family or a trust or similar vehicle for the benefit of any of the foregoing, or (ii) the provision of services
by Grantee to a business enterprise solely because such business enterprise engages in general advertising and
solicitation efforts that may or do reach an Artisan Client.
4. Non-Solicitation of Restricted Persons.
(a)
Non-Solicitation of Restricted Persons. Grantee agrees that during the Restricted Period he or she will
not directly or indirectly solicit or attempt to solicit any Restricted Person to terminate employment for
the purpose of engaging in, or starting a business which engages in, a Competitive Enterprise.
(b)
No Hire of Restricted Persons. To the extent not prohibited by local or state laws, Grantee agrees that
during the Restricted Period he or she will not hire, employ or otherwise use the services of a Restricted
Person.
(c)
With respect to Sections 4(a) and 4(b) above, the parties hereto agree that it shall be conclusively
presumed to have resulted from an impermissible solicitation, and therefore it shall be a deemed
violation of such section, if during the Restricted Period, the Grantee and one or more persons who was
an Artisan portfolio manager (including associate or co-portfolio manager) at any time within the period
of 18 months prior to termination of the Grantee’s Employment, become employed by either the same
employer or an affiliate thereof, or otherwise become affiliated as partners, contractors or other personal
service providers with an entity together with its affiliates, to provide Restricted Services for the benefit of
a Competitive Enterprise or any affiliate of a Competitive Enterprise.
5.
Included Actions. Grantee shall be deemed to have taken any action which is prohibited by this Appendix A and
to be in violation of this Appendix A if Grantee takes such action directly or indirectly, or if it is taken by any
person or entity with whom Grantee is associated as an employee, independent contractor, consultant, agent,
partner, member, proprietor, owner, stockholder, officer, director, or trustee, or by any person or entity directly or
indirectly controlled by, controlling or under common control with Grantee.
6.
7.
Injunctive Relief; Enforceability of Restrictive Covenants. Grantee acknowledges that irreparable injury may result
to the Artisan Group if Grantee breaches the provisions of this Appendix A and agrees that the Artisan Group will
be entitled, in addition to all other legal remedies available to the Artisan Group, to an injunction or other
equitable relief by any court of competent jurisdiction to prevent or restrain any breach of this Appendix A. The
parties hereto acknowledge that the restrictions on Grantee imposed by this Appendix A are reasonable in both
duration and geographic scope and in all other respects for the protection of the Artisan Group, and its business,
goodwill, and property rights. Grantee acknowledges that the restrictions imposed in this Appendix A will not
prevent Grantee from earning a living in the event of, and after, the end of Grantee’s Employment. Grantee
further acknowledges that Grantee had the opportunity to consult with his or her legal, tax and financial advisors
regarding the restrictions imposed in this Appendix A prior to accepting this Award Agreement.
Severability. Should any provision of this Appendix A be held by a court of competent jurisdiction to be
enforceable only if modified, or if any portion of this Appendix A shall be held as unenforceable and thus
stricken, such holding shall not affect the validity of the remainder of this Appendix A. The parties agree that any
such court is expressly authorized to modify any such unenforceable provision, whether by revising or deleting
the offending provision, or by making such other modifications to this Appendix A as it deems warranted to carry
out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The
parties expressly agree that this Appendix A as so modified by the court shall be binding upon and enforceable
against each of them. In any event, should one or more of the provisions of this Appendix A be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other
provisions hereof, and if such provision or provisions are not modified as provided above, this Appendix A shall
be construed as if such invalid, illegal or unenforceable provisions had not been set forth herein.
8.
Survival of Provisions. The obligations contained in this Appendix A will survive, and will remain fully enforceable
after, the vesting of any and all awards granted pursuant to this Award Agreement, any termination of this Award
Agreement, and the termination of the Grantee’s Employment for any reason.
Subsidiaries of Artisan Partners Asset Management Inc.1
Exhibit 21.1
Name
Artisan Partners Holdings LP
Artisan Partners Distributors LLC
Artisan Investments GP LLC
Artisan Partners Limited Partnership
Artisan Partners Asia-Pacific PTE Ltd.
Artisan Partners Limited
Artisan Partners II Limited
Artisan Partners UK LLP
Artisan Partners Services LLC
Artisan Partners Australia Pty Ltd.
Artisan Credit Opportunities GP LLC
Credit Team Holdco LLC
Antero Peak Group GP LLC
Antero Peak Group Holdco LLC
Artisan Partners Europe Holdings LLC
APEL Financial Distribution Services Ltd.
Artisan Partners International Holdings LLC
Artisan Partners GP LLC
Artisan International Small Cap Value GP LLC
International Small Cap Value Holdco LLC
Artisan Partners Hong Kong Holdings LLC
Artisan Partners Hong Kong Limited
Artisan Partners Asia Funds Holdco LLC
Jurisdiction of Incorporation/Organization
Delaware
Wisconsin
Delaware
Delaware
Singapore
United Kingdom
United Kingdom
United Kingdom
Delaware
Australia
Delaware
Delaware
Delaware
Delaware
Delaware
Ireland
Delaware
Delaware
Delaware
Delaware
Delaware
Hong Kong
Delaware
Artisan Partners Asia Funds GP LLC
1 Other subsidiaries have been omitted because, when considered in the aggregate, they do not constitute a significant
subsidiary.
Delaware
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No.333-187180) and Form S-3 (No.
333-236494 and 333-194684) of Artisan Partners Asset Management Inc. of our report dated February 23, 2021 relating to the financial
statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 23, 2021
CERTIFICATION
Exhibit 31.1
I, Eric R. Colson, certify that:
1.
2.
3.
4.
I have reviewed this report on Form 10-K of Artisan Partners Asset Management Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
/s/ Eric R. Colson
Eric R. Colson
Chief Executive Officer and Chairman of the Board
(principal executive officer)
Date: February 23, 2021
CERTIFICATION
Exhibit 31.2
I, Charles J. Daley, Jr., certify that:
1.
2.
3.
4.
I have reviewed this report on Form 10-K of Artisan Partners Asset Management Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
/s/ Charles J. Daley, Jr.
Charles J. Daley, Jr.
Executive Vice President, Chief Financial Officer
and Treasurer
(principal financial and accounting officer)
Date: February 23, 2021
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
I, Eric R. Colson, the President, Chief Executive Officer and Chairman of the Board of Artisan Partners Asset Management Inc.
(the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that:
•
•
The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2020 as filed
with the Securities and Exchange Commission on the date hereof (the “Form 10-K”), fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and
results of operations of the Company.
/s/ Eric R. Colson
Eric R. Colson
Chief Executive Officer and Chairman of the Board
(principal executive officer)
Date: February 23, 2021
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
I, Charles J. Daley, Jr., the Executive Vice President, Chief Financial Officer and Treasurer of Artisan Partners Asset
Management Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
•
•
The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2020 as filed
with the Securities and Exchange Commission on the date hereof (the “Form 10-K”), fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and
results of operations of the Company.
/s/ Charles J. Daley, Jr.
Charles J. Daley, Jr.
Executive Vice President, Chief Financial Officer
and Treasurer
(principal financial and accounting officer)
Date: February 23, 2021