Artisan Partners Asset Management Inc

NYSE:APAM

Earnings Call Analysis

AUM Up 17%, EPS Down, Dividend Yield at 7%

The company's assets under management (AUM) grew to $150 billion by the end of the fourth quarter, reflecting a 17% increase year-over-year largely due to investment returns adding $14.6 billion. However, they faced $4.1 billion in net client cash outflows for the full year, influenced by the trend towards low-fee passive index products and a shift to fixed income. Their revenue in the quarter slightly improved, but expenses rose primarily due to higher incentive compensation. Overall, revenues were down by 2% for the year, and adjusted operating income decreased by 9%. Adjusted EPS was 7% lower. A consistent and predictable capital return policy led to a declared dividend of $2.78 per share for 2023, yielding nearly 7%. Looking ahead, the company is expecting about $69 million in long-term incentive amortization expenses for 2024.

Growth Amidst Challenging Industry Trends

Artisan Partners concluded the fourth quarter with assets under management (AUM) reaching $150 billion, a notable increase of 10% from the prior quarter and 17% year-over-year. This growth was fueled by exceptional investment returns, contributing $14.6 billion to AUM growth, despite facing $400 million in net client cash outflows and a trend towards low-fee passive index products. Even with these tailwinds, revenues for the quarter rose slightly less than 1% sequentially, with a 10% rise compared to the previous year's quarter, driven mainly by performance fees.

Strategic Compensation to Retain Top Talent

Artisan has revamped its incentive structure to include a retirement acceleration feature, aiming to fortify its reputation for best-in-class compensation. This long-term strategic move aligns the interests of employees, shareholders, and clients by encouraging talent retention and proper succession planning, although it will lead to a temporary elevation in related expenses over the next several years.

Fostering Sustainable Growth and Succession Planning

With a focus on long-term value and sustainable growth, Artisan prioritizes investment talent and career longevity. Their business model, tailored for the nurturing and duration extension of their investment staff, introduces refined retirement provisions, enhancing alignment between employees, shareholders, and client interests.

Global Market Dynamics and Distribution Strategy

Artisan Partners acknowledges varied flow dynamics across global markets, recognizing opportunities in equities and alternatives. The firm remains cautious about capacity while they enhance the skill set within their teams. Despite current industry consolidations, Artisan maintains its client-focused approach to produce world-class investment results rather than prioritizing distribution, which may slow growth but ensures alignment with their core values.

Dividend Policy and Shareholder Returns

Consistent with its dividend policy, the Board declared a quarterly dividend of $0.68 per share and a special annual dividend of $0.34 per share, aligning closely with the cash generated. Despite the higher payout ratio of 96.5%, the company continues to balance shareholder returns with reinvestment into the business, indicating a possible increase in the special dividend in the subsequent year without a major shift in policy.

Preparing for a Shift in Investor Sentiment

Artisan foresees a potential move away from safe money markets to more opportunistic investments, given the tremendous growth of money market vehicles to about $6 trillion. The firm's robust performance positions it attractively for when investor sentiment shifts and those sidelined assets seek a new home, particularly within the global strategies and institutional space.

Earnings Call Transcript 2023-Q4

[Operator]

Good afternoon, and welcome to the Artisan Partners Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Eric Colson, Chief Executive Officer. Please go ahead.

[Unknown Executive]

Welcome to the Artisan Partners Asset Management Business Update and Earnings Call. Today's call will include remarks from Eric Colson, CEO; Jason Gottlieb, President; and C.J. Daley, CFO. Following these remarks, we'll open the line for questions. Our latest results and investor presentation are available on the Investor Relations section of our website. Before we begin, I would like to remind you that comments made during today's call, including responses to questions, may include forward-looking statements are subject to known and unknown risks and uncertainties, including, but not limited to, the factors set forth in our earnings release and detailed in our SEC filings. Risks and uncertainties may cause actual results to differ materially from those discussed in the statements, and we have no obligation to update or revise any of these statements following the presentation. In addition, some of our remarks today will include references to non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in the earnings release and the supplemental materials, which can also be found on our Investor Relations website. Also, please note that nothing on this call constitutes an offer or solicitation to purchase or sell an interest in any Artisan investment product or a recommendation for any investment service.I’ll turn it over to Eric Colson.

[Eric Colson, executive]

Thank you for joining the call and reading the transcript. For us, these calls are an opportunity to repeatedly communicate who we are, what we seek to accomplish and the time horizons that matter to us. We intentionally deemphasized quarterly and annual outcomes. Instead, we focus on what we are doing to create and maintain an environment and culture that maximizes the probability of long-term performance for clients, talent and shareholders. Artisan Partners is a high value-added investment firm designed for talent to thrive in a thoughtful growth environment. Our purpose is to compound wealth for clients over long time periods. We do this through our talent-driven business model. We attract, recruit and partner with exceptional and differentiated investment leaders. And we give them autonomy, resources and time to generate investment returns over a long time periods. As Jason will discuss, we have been doing this for nearly 30 years in public equities for a decade in fixed income and are in the early innings and alternatives. Time is a crucial ingredient in what we do. We retect the time of our investment teams so they can maximize time spend on research, investing and adding value for clients. We work to earn time to extend duration. We do this by being true to who we are by maintaining a culture focused on long term, by avoiding the temptation to engineer short-term results, by remaining disciplined through difficult periods, by constantly communicating our time horizon to clients and shareholders, setting the right expectations and doing business with individuals, allocators and institutions that are aligned with our long-term approach. The chart on Slide 2 reinforces why we focus on the long term. Short time periods are noisy. Scale and luck are indistinguishable. Over a longer period, the value of process and discipline become apparent. As we extend time, the value of what we do becomes evident of our 5 strategies with 20-year track records, all 5 have added value over the period after fees. With enough time, outlook can compound into meaningfully more wealth for clients and investors. A simple example of which is on the right side of the slide. We take a similar long-term approach to developing our business. We look for opportunities that are consistent with who we are and where we have an edge. We are methodical. We don't chase fads. We remain focused on high value-added investing. If we do these things with patients, we are confident that quality long-term outcomes will follow. I've asked Jason to elaborate on this approach as it applies to our investment platform.

[Jason Gottlieb, executive]

Thank you, Eric. As Eric mentioned, we have been building equity franchises for nearly 3 decades. We are a decade in with fixed income and are in the early innings with alternatives. I want to start with our equity businesses. Today, we have 8 equity investment teams and 16 strategies, accounting for $137 billion in AUM and approximately $900 million of annual revenue. Several of our equity teams are well-established franchises with recognized leadership, depth of resources, disciplined investment processes, unique cultures and long-term track records. These characteristics result in powerful and durable investment and business engines, but it takes time. The path is not linear and there are periods of decline as well as growth. Slide 3 features our international value franchise. Lead Portfolio Manager, David Samra, joined Artisan 22 years ago and launched the International Value strategy. David has a well-articulated value investing philosophy and process that the International Value team has applied with discipline through market cycles. Result is outstanding investment performance over long time periods. The international value strategy has generated 466 basis points of average annual alpha net of fees since inception. The Artisan International Value Fund is ranked #1 in its Lipper category. You can see the business outcome on the page. The team laid the foundation in the early years, establishing themselves and their track record. They have steadily grown their business by compounding client capital and net new flows. Today, the team manages $41 billion across a diversified book of institutional and wealth channel clients. In 2020, Beini Zhou and Anand Vasagiri joined the International Value franchise and partnered with David to launch the international Explorer strategy. The international Explorer now has a 3-year record. It has generated 549 basis points of average annual alpha net of fees since inception, is managing nearly $250 million in AUM and is poised for future growth. The international value franchise demonstrates the demand for high value-added investing in public equities. Result is a highly valuable business asset that can compound long into the future. We have multiple examples of this throughout our equity business. Turning to Slide 4. We expanded into fixed income 10 years ago with the addition of Bryan Krug and the credit team. The fixed income opportunity set is compelling. The asset class is large and growing. It is complex with tremendous opportunity for skilled talent to add value for clients, and there is asset allocation demand with aging populations creating the need for income and yield. We believe 10 years ago that the success of our talent-driven business model and long-term approach would translate to fixed income, provided we partnered with the right talent, focused on high value-added areas, fully resourced the effort and took the time necessary to build a solid foundation. We are beginning to see the long-term outcomes. The Artisan High Income strategy is nearing its 10-year mark. Since inception, it has generated an average annual return of 6.8% after fees compared to 4.31% for the index. Over that time period, the Artisan High Income Fund is ranked #1 out of 324 funds in its Lipper category. As a result, the high income strategy has generated $1.5 billion in net flows in 2023. In 2022, we launched our second fixed income-oriented team, the EMsights Capital Group, which focuses on emerging markets. We are proving that our platform, philosophy and approach can work in fixed income, evidenced by steady growth in fixed income AUM. We believe we are establishing 2 world-class fixed income franchises with significant investment capacity. It will take time, but we believe these franchises will be every bit as successful and sustainable as our equity franchises. Turning to Slide 5. In the same way that we have methodically built our equity and fixed income businesses, we continue to build our alternatives capabilities. We remain in the early innings. We are focused on setting the right foundation, adding investment degrees of freedom, designing and launching strategies where we have an edge with talent and an opportunity to grow over time. We believe that fixed income provides a natural avenue to continue expanding in this direction. Our credit opportunity strategy now has a 6-year track record and has generated an average annual return of 9.84% since inception, net of fees. The more recently launched global unconstrained strategy has generated an average annual return of 8.92% since inception, net of fees. And during the fourth quarter, we closed $130 million of commitments for our first closed-end fund designed to capture opportunities in dislocated credit markets. While we remain in the early innings, we are confident that our model and philosophy will work in alternatives like it has worked in equities and fixed income.

[Eric Colson, executive]

Thank you, Jason. We remain extremely excited about the long-term investments we are making across equities, fixed income and alternatives. Our excitement stems from a proven approach across asset classes and time periods, successful long-term outcomes for clients, shareholders and key investment talent, and the limited supply of homes for investment talent providing our combination of autonomy, resources and time. We will continue to think in decades versus years or quarters, and we will continue to focus on those things that we can directly influence day in and day out in pursuit of long-term success. Thank you for your time, and I will now turn it over to C.J.

[Charles Daley, executive]

Thanks, Eric. Our 2023 results reflect the impact of a rising market and strong investment performance. Market volatility experienced in 2022 and 2023 highlights the importance of our financial model, maintain a highly variable expense structure to minimize the distractions of short-term market volatility. As we've shown in the past, our financial model is able to deliver stable and predicable results through market cycles. An overview of our financial results begins on Slide 8. Assets under management ended the fourth quarter at $150 billion, up 10% from the September 2023 quarter and up 17% from the prior December year-end. Investment returns contributed $14.6 billion to the increase in AUM in the quarter. Net client cash outflows during the quarter were $400 million, and there was $500 million of Artisan funds distributions that were not reinvested. Average AUM for the quarter was down 1% sequentially and up 10% compared to the December 2022 quarter. The full year investment returns contributed $27 million to the increase in AUM. $3.9 billion of those returns were attributed to investment performance in excess of benchmark returns. Net client cash outflows were $4.1 billion for the year. Net outflows continue to be impacted by industry trends in favor of low-fee passive index products and more recently, the move of funds into fixed income. Gross inflows remain muted and well below our historical levels. Average AUM for 2023 was down 2% year-over-year. Our complete GAAP and adjusted results are presented in our earnings release. Revenues in the quarter increased less than 1% compared to last quarter as performance fees more than offset the impact of lower average AUM. Total performance fees were $6.1 million in the quarter. However, as a result of the required consolidation of our credit opportunity strategy, $2 million of the performance fees are recorded on our P&L below the operating line as a reduction to net income attributable to consolidated investment products. Compared to fourth quarter of 2022, revenues were up 10% on higher average AUM. Adjusted operating expenses for the quarter increased 1% sequentially and 9% compared to the same quarter last year, primarily driven by an increase in incentive compensation expense on higher revenues. For the full year, revenues were down 2% from 2022 on lower average AUM. Our recurring average fee rate remained at 70 basis points. Adjusted operating expenses were up 2% in 2023 compared to '22. The decrease in variable expenses due to lower revenues was more than offset by higher fixed costs. Fixed compensation costs were up $10 million in '23 on a 4% increase in the number of full-time employees and inflationary salary and benefit increases. Travel expenses were also up $3 million during the year. The higher expense was driven by an increased travel by investment research and distribution professionals. Adjusted operating income decreased 9% in 2023 compared to 22% and adjusted EPS was 7% lower. Adjusted EPS includes over $6 million of interest income earned on excess cash in 2023 compared to the negligible amount in 2022. Balance sheet remains strong. We currently have about $150 million of seed capital invested in sponsored investment products with significant amounts of realizable capacity. As those products begin to scale, we will redeem the seed capital to either deploy into new products, otherwise reinvest in the business or return to shareholders. In addition, our $100 million revolving credit facility remains unused. We continue to return capital to shareholders on a consistent and predictable basis through quarterly cash dividend payments and a year-end special dividend. Consistent with our dividend policy, our Board of Directors declared a quarterly dividend of $0.68 per share with respect to the December 2023 quarter, which represents approximately 80% of the cash generated in the quarter. Our Board of Directors also declared a special annual dividend of $0.34 per share. Similar to prior years, we retained a portion of the cash generated in 2023 to fund future growth initiatives, primarily to make seed capital investments in new investment strategies and vehicles. Total of $2.78 per share will be paid out with respect to 2023 cash generation. That resulted in an annual trailing dividend yield of almost 7% and is in line with our historical average annual yield of 8% since our IPO in 2013. Each year, our Board of Directors approved a grant of long-term incentive awards. In the first quarter of 2024, the Board approved an award of approximately $60 million, consisting of $39 million of cash-based franchise capital awards and $21 million of restricted stock awards. Generally, 50% of the award vest pro rata over 5 years and the remaining 50% vests on or 18 months after a qualified retirement. Starting with this 2024 grant, the majority of our incentive awards will include a traditional retirement acceleration feature. New provision eliminates the 5-year vesting requirement when career award recipients have a qualified retirement after having met an age plus years of service threshold of 70%. All other vesting conditions, including notice periods and clawbacks will remain in effect. Full of the traditional retirement acceleration feature is to maintain our best-in-class compensation structure for top talent. From a financial statement perspective, the added feature results in front-loaded expense for awards granted to employees who already meet the age plus years of service requirement. The overall amount of expense to be recorded will remain the same. We're estimating $69 million of long-term incentive amortization expense for 2024, approximately $8 million to $9 million of that expense is a result of the new retirement provision. We expect to have elevated LTI expense for the next several years due to this change and then expect the expense will reduce and level off. Excluding long-term incentive compensation, fixed expenses are expected to increase mid-single digits in 2024. Majority of the increase reflects 2024 merit increases, the absorption of a full year of expense for full-time employees hired in 2023 and an expected low single-digit increase in employees in 2024. The additions will primarily be related to investment in distribution roles to capitalize on our growth strategy. Travel may also increase slightly in 2024 as we execute on our growth initiatives. Occupancy, technology and other fixed operating expenses are expected to be relatively flat compared to 2023. As a reminder, our compensation and benefits expenses are generally higher in the first quarter of each year due to seasonal expenses. We estimate these expenses will be approximately $6 million higher in the first quarter of 2024 compared to the fourth quarter of 2023. That concludes my prepared remarks. I will turn the call back to the operator.

[Operator]

[Operator Instructions]. The first question comes from Alex Blostein with Goldman Sachs.

[Alexander Blostein, analyst]

Eric, I was hoping maybe you could start with the prospects you guys have for the fixed income business. Nice traction over the last couple of quarters and years. Clearly, there's a pretty high expectation that market demand for fixed income will continue to improve. So how are your products positioned to perhaps participate in that? What are your expectations for growth in these strategies for '24?

[Eric Colson, executive]

Alex, we have been emphasizing the credit franchise with Bryan Krug as well as the EMsights franchise with Mike Cirami. I'll start with the EMsights franchise. We've saw quite a bit of outflow in emerging market debt in '22, I think it was the largest emerging market debt outflow in the history of that category. And then 23 last year, we saw probably close to a 10% outflow in the category. We look at our EMsights team in the same way we looked at our global strategies, global value or global opportunities, the bulk of the allocations come from the institutional channel. A high percentage, if not majority comes from outside the United States. There is a competitive landscape, but I think we stack up very well performance-wise. And we expect, as we witnessed with global opportunities and global value, the requirement for a 3-year track record and then starting to see that steep slope and buildup of assets once you get that 3-year track record. Between now and the 3-year track record, we're getting quite a bit of inquiries. We're building the asset base close to about $1 billion, and we expect to continue building the asset base over the next year, but really expect meaningful growth after the 3-year mark, given the traits and characteristics around that client base. Similar to the credit, we also have an alternative strategy with global one constraint that we highlighted in the deck, the returns, the risk, the correlation are all very favorable to participate in the movement in a higher allocation to alternatives, specifically liquid alts. So we're quite pleased with where we're at with sites and the progress they're making to get to that 3-year mark. With credit franchise with Brian Krug, we've established a very strong base that has built in the same way that we saw our early-stage franchises build. We're about $10 billion in the franchise, and we're saving quite a bit of capacity to go into degrees of freedom and create alternative strategies. And with credit opportunities, which was highlighted, the drawdown fund that Jason mentioned and the floating rate fund. We just see a strong runway for building out that franchise and really seeing that take its second phase and build up as we've seen with our other more mature franchises. So again, it's patiently waiting for the right clients, right terms and building those over time.

[Alexander Blostein, analyst]

C.J., one for you just on the change in long-term incentive awards that you highlighted earlier. Can you talk a little bit about what prompted you guys to go down this path? And what caused the change? And as you look out beyond 2024, it sounds like an elevated retirement acceleration clause will weigh on incentive comp for a couple of years. So should we think about that incremental $9 million to $10 million is the new incremental expense beyond 2024 as well?

[Charles Daley, executive]

We've always aligned our business with the long-term value creation and sustainable growth. And we've designed it for investment talent to thrive, to extend their duration and provide a path for them to spend their careers here. We've evolved and have been thoughtful over the 10 years we've been public as well as a partnership before that. In 2014, we introduced these career shares, which are comprised of both time vested as well as qualified retirement provisions. And we've introduced this retirement clause as in the next phase of extending duration and providing a path for investment talent to suspend our career here. So they don't have to worry about whether they're going to wind up forfeiting anything they do the right thing. They have qualified retirement. It will further align they're in our interest, our shareholders' interest, our clients' interest with proper retirement and succession planning. With respect to the expense, I would expect it to be elevated in the $8-ish million for the next 3 years, and then it will step down pretty meaningfully and then over a 5-year period, it will level off. And just to be clear, the provision only applies to grants that started in 2024 and forward. And so we think that benefit will be a long-term benefit for everyone.

[Operator]

The next question comes from John Dunn with Evercore ISI.

[John Dunn, analyst]

Could you maybe give us an update on the drivers of the non-U.S. institutional channel for equities, maybe stuff like Europe, Australia because you got better this quarter?

[Eric Colson, executive]

The non-U.S. drivers, a bit of it was around EMsights that we had some early stage wins there was probably the big change. And I would say Australia has continued to wane on our distribution that we've had early phases in the first quarter. And then in the fourth quarter, we had some outflows. And then with one of our key relationships in the U.K., we had a strong inflow as well in our global ops and Global Value strategies. So if you really broke it down for the quarter, it's probably a good flow in global ops, global value and as well as our insights team, and that was out of the Middle East.

[John Dunn, analyst]

And then at you guys' Investor Day, you talked about not having to be first into newer areas. But lately, there's been a bunch of private market firms and teams joining bigger firms. Have you observed any changes in the backdrop for that or potential sellers thinking about stuff like getting better distribution or whether it's better to be part of someone bigger?

[Jason Gottlieb, executive]

This is Jason. I'll take that. I think we've seen a lot of activity in the private market space, primarily in the private credit world, not to be surprising. We see it both in the world of lift-out opportunities, which is part and parcel with our model as well as the acquisition. And we don't see that as something that's going to stop. I think the changes might come more in the form of lift-outs. And our belief around that is that there's going to be a series of funds that may, in fact, wind up disappointing. And so the carry opportunities for some of the investment teams could be a little bit more shallow than they were in the past, and that might shake some opportunities free. And that has been correlated to the inbound inquiry that we've been experiencing here at Artisan. So it's given us the opportunity to really take a very hard look and be deliberate with the opportunities in that area of the world. That is an asset class. As we had discussed at the Investor Day back in September, and we've talked about in the world of where we go strategically with alternatives, certainly, that is an area of interest, but we're not going to obviously adjust our business model just to find a team. It has to be right for us, one that we think we can deliver differentiated returns in the segment of the market and identify the right clients. And to your point, all of these big, let's call them, acquisitions or mergers tend to come in the form of what can you do for me on distribution. And as you know, that's not necessarily directly our model. We're not here to, first and foremost, distribute, we're here to produce world-class differentiated results and find the right clients on the right terms to deliver that outcome. And so we're going to remain very consistent with our past and our history and take the right shot as and when it arises recognizing that it might take time.

[Operator]

The next question comes from Bill Katz with TD Cowen.

[William Katz, analyst]

Just maybe start off on the flow side. So it seems like there's a lot of different opportunities here. And you made some comments in your press release around the opportunities within equities. Is it some of the smaller incremental vehicles that you are seizing into attractive time lines, attractive performance? Or are there some maybe older, more seasoned vehicles where you're seeing the demand? And relatedly, you've always watched capacity pretty carefully. I appreciate you highlighted the International Value Fund, but at $40 billion, my instinct was, okay, that's a pretty big fund. Where do you tend to cap out incremental new dollars coming into that?

[Jason Gottlieb, executive]

It's Jason again. Our franchises have continuously sought to identify opportunities for expanding degrees of freedom. They've come in many forms, including broader securities via differentiated markets, market caps, liquidity structures. Also, we see our teams build capacity through recruitment and inculturation of that talent. David Samra with high value, and as Eric mentioned, Brian Krug with credit, embody this mindset, importantly with their success, they have the ability to work with like-minded sophisticated clients who understand their philosophies and importantly, their time horizons. This is in large part why we believe the opportunities for modest thoughtful growth are in place while they remain methodical in the pursuit of their top-tier returns for existing shareholders. And so we recognize that David's success on the return side has propelled him to a reasonably large-size fund, but his team has broadened out the types of securities he can use. You've seen us, and I mentioned this on the commentary, having Beini and Anand joined the team, getting down market cap really does give a much more expanded opportunity set for David and the International Value franchise. And then more broadly, I would say, and this isn't specific to any one team or any one market, but you've just seen a huge increase in the world of money market vehicles. I might get the numbers off a little bit, but I think it's grown from somewhere in the high 3s to about $6 trillion at the end of 2023. I don't know what the numbers are today. But until we see a reversal of that, I think there's a lot of pent-up demand and money on the sidelines. But when we do see that reversal, we think that our returns and our performance and our teams speak for themselves, and we think that those assets will ultimately find a home, whether it be with high value or credit or some of the global strategies in the institutional space or in EMEA. So we're going to stay thoughtful. We're going to stay patient. But we think when there is that move back to back out of safety and money markets, we're very well positioned to capture that.

[William Katz, analyst]

And maybe one for C.J. As you look ahead to the year, how are you thinking about balancing reinvestment back in the business versus the payout? Your payout ratio came in maybe a little bit the higher end of what I think folks were thinking about this year, like 96.5%, if I did the math right. You've been running close to 90-ish-percent a couple of years before that. So when you look ahead this year, recognizing some of the seasoning, some of the reinvestment needs, seed capital, et cetera, how do you think through the payout ratio just looking after the year?

[Charles Daley, executive]

Bill, at this time, I think we're staying in the course. We held back some cash this year to see new products. I think we feel pretty good about where we are in the size of our seed book. So there could be potentially some additional cash freed up for other uses next year, including adding to the special dividend. But as we sit here right now, we continue to see the 80% variable dividend paid each quarter, along with that special dividend at the end of the year to be our course of action. So I wouldn't anticipate any major changes to what you're seeing from a payout percentage.

[Operator]

The next question comes from Kenneth Lee with RBC Capital Markets.

[Kenneth Lee, analyst]

Just one on the credit alternative investment strategies. Wondering if you could talk a little bit more about how you see potential demand, especially in the current rate environment.

[Jason Gottlieb, executive]

Jason Gottlieb This is Jason again. I'll talk about a couple of them. And then if there's a follow-up question, just let me know. But when you think about the credit opportunity strategy that Brian has been -- that he's been building and developing over the past 6 years, we now think we've got a phenomenal asset in the form of his performance as we highlighted, it's around almost just shy of 10%, 9.8% net of fee. And we've always been really patient on the distribution side because we firmly believe that time will spend is time spent on the record. And we've now done that. I think the uptake with clients, whether it's existing clients that are evaluating Brian in a different way through an alternative lens or some of the new clients that are starting to evaluate that are building up in the pipeline. We think that that's a really interesting opportunity for us to continue to develop and build and grow the alternatives allocation. And then going back to the global unconstrained strategy on the EMsights team, likewise, what's interesting is this is somewhat countercyclical to the money market conversation that we just had on a prior question, whereas if you have money market rates somewhere in the 4% to 5% range and the strategy that the Global Unconstrained strategy deploys, if you can generate a 3% to 6% excess return on top of that money market rate, you get really, really interesting outcomes somewhere in the, let's call it, mid- to high single digits, potentially in the low double digits, if we're able to execute, tends to be uncorrelated to the broader markets. And I think people are starting to take note of that. Again, it's very, very early innings. As Eric mentioned, we're 2 years into the journey, not even quite 2 years. And we think that once people evaluate the team early stages, they hit their 3-year record. We think that, that could be a really interesting leg to the growth stool. And I'd be remiss if I didn't mention the dislocation, the drawdown fund, raising $130 million for Brian and dislocation opportunities is really a testament to, I think, the strength of his brand and our credit platform broadly. And this is hopefully going to be one of many. Once we deploy that capital, Brian, produces the returns we return the capital. This should be an opportunity to continue to develop and grow and build a really exciting platform around these drawdown vehicles. And so I think we've got really interesting short intermediate long-term duration opportunities for the platform, and there's more that will ultimately reveal themselves, whether it's with the existing teams, which is the highest and best use of our time to develop that. The probability of success is much higher or whether we go out and we identify the next team to bring out of the platform, we still feel like we've got really good opportunities for growth here.

[Kenneth Lee, analyst]

And just one follow-up, if I may. I think in the prepared remarks, you talked about an increase in distribution headcount, wondering if you could just talk a little bit more about expansion plans for distribution this year.

[Jason Gottlieb, executive]

Last year, we spent quite a bit of time optimizing our distribution team. We looked at the array of strategies, getting up to 25 strategies, the complexity of the product mix, including credit and alternatives, we felt the need to emphasize the sales orientation of our centralized distribution groups going after the intermediary, non-U.S. That centralized group, we adjusted compensation, we added resources, we built in training with a real focus on sales and expanded relationship management for continued cross-selling. We then also emphasized client service and product knowledge inside the dedicated distribution. Those individuals attached to our autonomous teams. And with those adjustments, we're also adding a few individuals into both areas as well as we launched an alternative distribution team that is focused in the center of the firm to help amplify sales for credit opportunities, global unconstrained and other alternative strategies. We think at the end of the day, that will create a smoother sales cycle, selling across the firm. And also with the complexity, our clients will get direct relationship manage and product knowledge from individuals that are closest to the teams.

[Operator]

This concludes our question-and-answer session and the Artisan Partners Fourth Quarter 2023 Earnings Conference Call. Thank you. You may now disconnect.