Makela Taphorn – Investor Relations Eric Colson – President and Chief Executive Officer C.J. Daley – Executive Vice President, Chief Financial Officer and Treasurer.

Michael Kim – Sandler ONeill Bill Katz – Citi Robert Lee – KBW Michael Carrier – Bank of America Merrill Lynch Eric Berg – RBC Capital Chris Shutler – William Blair.

Hello, ladies and gentlemen. Thank you for standing by. Welcome to Artisan Partners Asset Management’s First Quarter 2015 Earnings Conference Call. My name is Gary and I will be your conference operator today. At this time, all participants are in a listen-only mode.

After the prepared remarks, management will conduct a question-and-answer session and conference participants will be given instructions at that time. As a reminder, this conference call is being recorded. At this time, I will turn the call over to Makela Taphorn with Artisan Partners..

Good afternoon everyone. Before we begin, I would like to remind you that our first quarter earnings release and the related presentation materials are available on the Investor Relations section of our website.

I would also like to remind you that comments made on today’s call and some of our responses to your questions may deal with forward-looking statements and are subject to risks and uncertainties. Factors that may cause our actual results to differ from expectations are presented in the earnings release and are detailed in our filings with the SEC.

And we undertake no obligation to revise these statements following the date of this call. In addition, some of our remarks made today include references to our non-GAAP financial measures. You can find reconciliations of those measures to the most comparable GAAP measures in the earnings release.

And with that, I’ll now turn the call over to our CEO, Eric Colson..

Thanks, Makela. Welcome to the Artisan Partners Asset Management business update and quarterly earnings call. I’m Eric Colson, CEO and I’m joined by C.J. Daley, CFO. Time is a valuable asset, we hope to use this time wisely.

As usual I want to discuss the quarter in relation to our long-term strategy and continue to reinforce the business philosophy that will drive our results over longer and more meaningful periods.

This quarter I want to explain how our strategy of increasing degrees of investment freedom meets the demand of clients who are evolving their investment policies and asset allocations. Our focus on differentiated high value-added strategies design to meet the long-term demand of sophisticated clients it’s fundamental to our business model.

Given that focus and our patience in executing our strategy we do not expect linear outcomes from quarter-to-quarter or year-to-year. Once I’m done with the business update C. J. will take the lead and discuss our financials. On slide 2, I would highlight that our total AUM increased to over $108 billion due to market appreciation.

Our average AUM has steadily grown over the past three years leveling out over the past 12 months. Our asset diversifications by investment teams and distribution channels remain solid. As noted in the bullet we now have seven autonomous investment teams.

Our new Developing World team is led by Lewis Kaufman, we have hired two investment professionals to join Lewis on the team. We plan to launch the team’s first strategy in the next few months. I will further discuss the Developing World team later in the call. Adding new investments talent is an important part of our thoughtful growth strategy.

While growth is necessary patience and stability are equally important. We are extremely patient and searching for new talent. We wait for all the right characteristics to align before bringing on new talent. Patience and stability help us avoid mistakes allowing us to succeed by not losing.

Before turning to our long-term results slide, I want to spend a few minutes on Slide 3 which is new. As I said on prior calls we are in the mid seven exceptional bull market, that is generating some interesting outcomes.

The scatter plots on the left side of the page show one of the anomalies the linear relationship that investors typically expect between volatility risk and investment return has not held across certain broad asset classes.

Over the last five years the large cap Russell 1000 index has generated greater average annual returns with meaningfully less volatility than the small cap Russell 2000 index. Similarly the All-World Index has outperformed the more volatile EC and Emerging Market indices.

The 10-year chart on the bottom left of the page shows the linear relationship that investors typically expect and which underlies much of modern investment theory and practice. The recent risk return results are one of the factors prompting sophisticated investors to rethink asset allocation and manager selection.

Which impact how we think about new strategies, I also want to note the information in the tables on the right side of the page. We have included the growth returns of the median active managers for the 5 and 10 year periods. Within the investment categories corresponding to the indices shown in the scatter plots.

For example, the performance of global equity managers is typically gauged against the All Country World Index. As you can see the median active managers have added value during both periods. For investors, who have invested with managers better then medians, even more value has been added.

Slide 4 provides the current view of our long-term investment results. We analyze performance around several key points. Faithfulness to a stated investment process, solid absolute performance and performance compared to peers and the index.

As of March 31, eight of our 12 investment strategies that have a 5-year track record have added value relative to their broad performance benchmarks, over the trailing five years. Six of our seven strategies with a 10-year track record have added value over the trailing 10-year period.

And on an absolute basis, 10 of our 12 strategies with a 5-year track record have produced greater then 10% average annualized returns over the last five years. All our strategies continue to execute their distinct investment processes with integrity.

Regarding process consistency, we believe that each of our investment teams but this is kind of talent and investment process necessary to deliver strong performance over the long-term.

Our clients invest in our strategies, because they believe in both the talent and the investment process, we can’t risk surprising our clients similar to the way in which the unexpected risk return outcomes discussed on the previous slide, are pushing investors to change asset allocation.

If the outcomes we generate surprise investors, they will seek alternatives. Thus for us real business risk is doing something unexpected to surprises our clients. Moving to Slide 5, the lumpiness that can stand from process discipline as reflected in our trailing one, three, and five year numbers.

As of March 31, over 80% of our assets under management wherein strategies outperforming the respective benchmarks, over the five-year period, while 98% of our assets under management outperformed over the trailing 10-year period, and sends each strategies inception.

Our mutual fund peer ratings which are highlighted at the bottom of the page, show how our results translate into industry wide rankings by Morningstar and Lipper. Our firm wide asset rated Morningstar rating remains outstanding at 4.1 stars. While on the topic of rankings, our global value team recently received two 2015 Lipper U.S fund awards.

The Artisan global value funds received awards for being the number one fund in both the three year and the five year category within Lipper's global multi-cap core funds universe. This is a third year in a row, that the team has been recognized by a Lipper’s U.S. funds awards.

The earlier slide on broad market performance show the remarkable returns of U.S. stock indices over the last five years. Those returns have driven up the valuations of stocks and in the universes within which our U.S. mid-cap and small-cap value strategies operate.

That’s why as we said before, we ar not surprised that those strategies have underperformed their benchmark indices during the bull market. Keep in mind, that the average annual returns of the benchmarks for those strategies over the last five years are around 16% and 15% respectively.

Moving on Slide 6, illustrates the current outcomes of our long-term asset diversification strategy. As I said earlier we don’t expect our outcomes or growth to be linear. Despite strong performance we experienced net outflows during the quarter in four of our six investment teams in all three distribution channels.

Given our firm wide long-term performance we believe that we are well positioned to continue to grow over more meaningful time periods. The growths in diversification of our AUM are results of deliberate long-term decision making.

We expect to expanding investment degrees of freedom within existing investment teams and with new teams for resulting further long-term growth. On the next slide is illustrates two other successful growth stories. On Slide 7, the first chart shows the growth of assets in our intermediary distribution channel over the last five years.

We began a concerted effort in the broker dealer and financial advisor channels in 2002, with the addition of an individual to focus on those areas. While we experienced net outflows in the channel during the last quarter, our three year and five year annualized organic growth rates in the channel have been very strong.

We now have over 34 billion of AUM sourced through our intermediary channel. The second chart shows the growth of our non-U.S AUM. We began to focus on global distribution in 2009 and the efforts are paying off with three and five year annualized organic growth rates of over 20% and 57%.

We now have $13.8 billion of AUM sourced from clients domiciled outside of the United States. These growth stories are similar to a period during the late 90s and early 2000s when we experienced strong growth and defined contribution assets. We identified the DC channel and the potential source of considerable organic growth.

We developed a plan to focus on that channel and we experienced tremendous success. These examples illustrate our track record of delivering organic growth overtime. While we have experience net outflows over the last 12 months, we remained very optimistic about continuing to grow our business over the long-term. As C.J.

will discuss our open strategies have seen solid organic growth over recent periods. We’re also confident that our global distribution efforts will continue to pay dividends. However, given our business discipline, we don’t expect the smooth pattern on a year-to-year basis. On Slide 8, you can see the three core principles that define who we are.

We’re a high value-added investment firm designed for investment talent to thrive in a growth oriented culture. We manage our business with a mind set similar to that of our investment team and managing their strategies. We operate to the long-term and execute with a commitment to our business philosophy.

On recent quarterly calls, I’ve explained our talent driven business model and powerful approach to growth. With the next few slides, I will discuss how our commitment to high value-added investment strategy the lines of the long-term trends in institutional investing. Let’s move to Slide 9.

Institutional investment policies are shifting away from style box categories and towards risk based and outcome oriented approaches. Instead of focusing on allocating assets across categories like U.S., non-U.S.

or large cap, small cap, these approaches focused on our particular strategies regardless of traditional asset classes will contribute to a larger portfolios expected return in risk. Within these allocation frameworks institutions are not hiring managers to add value across the entire portfolio.

If an index can provide a desired exposure or outcome investors will use the low cost asset products. But that remains a very important and large role for active management. Institutional investors are looking to active managers to deliver return and risk profiles and outcome that are differentiated from the index returns.

Active managers can deliver these types of strategies by loosening investment constraints that investment team can use more judgment and flexibility to deliver the differentiated benchmark agnostic outcomes.

Slide 10, which I’d shared with you before is a very simplistic representation of the investment continuum from passive data on the left to high value-added active alpha on the right.

Today, in building our customized risk and outcome based portfolios institutional investors are increasingly using passive, unconstrained alpha and alternative investments. This is much different than the 90s when constraints style box strategies were growing asset.

At Artisan, we have been evolving our investment strategy in light of these larger trends. Turning to Slide 11, our evolution response to the trends discussed on the prior slide, began in earnest with the launch of our global opportunities and global value strategies in 2007. In 2010, we had our global equity strategy.

Prior to the launch of these strategies our teams had focused our efforts in the constrained alpha category. They were constrained by requirements at the market capitalization, geography and security instruments. Within the global products, we removed the traditional U.S. versus non-U.S.

allocation constraints and excluded or reduced many standard portfolio construction limitations. This provides our teams with greater freedom to add value wherever they find it, which the teams want and which aligns with the trends I’ve been discussing.

These global products also appeal to investors using more traditional asset allocation method or hybrid approaches. The value-added performance numbers and five star overall Morningstar ratings speak to the success we have achieved so far with these strategies.

Together with our global distribution strategy, these strategies provide us with a great opportunity to further grow and diversify our business. With the market evolving towards even higher degrees of freedom, our new strategy development continues along this path. Slide 12 outlines our new strategy development.

As you know, we think to add new strategies within our existing team and by bringing on new talent from outside Artisan. In either case, our development of new strategies will reflect the following. First, the interest and experience of our current and future investment professionals will drive the new strategies we offer.

We believe that strategies start and end with investment talent. Second, we will design strategies that fit low within traditional, outcome and risk based allocation strategies.

While we have discuss the evolutionary trend away from traditional asset allocation, we believe that the bulk of asset allocator still utilize the traditional approach producing stability and opportunity for our more mature strategies. Going forward many allocators will utilize a hybrid model.

Third, our new strategies will reflect increasing degrees of investment freedom, which will further allow our investment teams to manage investment risks and outcomes. This approach will help us within many models including the hybrid approach. Lastly, these new strategies will be difficult to replicate with passive products.

Our launch of the Artisan high income strategy in 2014 and our current development of the Artisan Developing World team are consistent with those objectives. The high income strategy is and the Developing World strategy will be high value-added and relatively unconstrained.

We don’t believe that the risk return profile either strategy to be easily replicated through indices. Turning to Slide 13, I want to return to our new Developing World team. As you know, in February, we hired Lewis Kaufman as a founding portfolio manager of the Artisan Developing World team. We have also hired two investment professionals.

Lewis has worked closely in the past. We are in the process of setting the team up in its own office in San Francisco. The team’s first mutual fund is currently in registration with the SEC. We hope to launch the fund in the next few months. We’re excited about the team’s potential and it’s placed in our growth oriented culture.

There are tremendous opportunities in the emerging markets. Sophisticated clients are comfortable with the asset class and want the diversification and opportunity it provides. It is also as a great place for active managers to differentiate themselves and offer investors a unique high value-added strategy. I’ll now turn it over to C.J.

to discuss our financial results..

Thanks, Eric. Hello, everyone. The summary of our March quarter 2015 financial results is on Slide 14. For the quarter ending AUM increased 1% to $108.7 billion. The increase was driven by market depreciation substantially offset by net claim cash outflows of $2.2 billion.

Average AUM also increased 1% quarter-over-quarter, but revenues declined 1% because of two last calendar days in the March quarter. Our adjusted operating margin for the March 2015 quarter was 38.4%, was impacted by several unique items in this first quarter.

The most significant item with the startup cost associated with the onboarding of our seventh investment team the Developing World team. Those cost reduced operating margin by 320 basis points and reduced adjusted net income by $0.06 per share.

In addition in the first quarter each year, we incurred seasonal compensation costs and we also began to recognize expense from our January 2015 equity grant. The seasonal cost decreased operating margin by 160 basis points or $0.03 per share and the grant of equity decreased adjusted operating margin by 40 basis points or $0.01 per adjusted share.

Adjusted net income per adjusted share was $0.65. Our board of directors approved regular quarterly dividend of $0.60. The dividend will be paid May 29 to shareholders of record on May 15.

Slide 15, details our AUM and client cash flows, ending assets under management of $108.7 billion that March quarter was up 1% from the December 2014 quarter, primarily due to strong equity market in the first quarter. Client cash flows were below our expectations as we experienced net outflows of $2.2 billion for the quarter.

These net outflows were primarily the result our performance driven client redemptions in two of our U.S. value strategies. And asset allocation decisions across the number of other strategies. Overall, outflows were generally consistent with what we experienced last quarter and reflective of the headwinds we expected to face in early 2015.

Despite overall net outflows for the quarter, we’re encouraged by healthy growth this quarter and our strategies with realizable capacity, our non-U.S. growth, global equity, global opportunities and high income strategies.

Those strategies brought in a total of $1.2 billion in net client cash inflows in the current March quarter, which represents a 14% organic growth rate. Slide 16 highlights our non-U.S. client AUM which remains just under $14 billion or 13% of total AUM at the end of March consistent with the December quarter.

We experience slight net outflows in our non-U.S. client base this quarter, as a result of our client rebalancing decisions in our global value strategy. Our financial results begin on Slide 17. For the March quarter, revenues were $203.6 million on average AUM of $108.4 billion.

Despite higher average AUM the 1% decline in revenues quarter-over-quarter was driven by two less billing days in the current March quarter when compared to the December quarter. Our weighted average management fee for the March quarter was 76 basis points consistent with the December quarter.

Our adjusted operating margin which excludes pre-operating share based compensation and other GAAP expenses was 38.4% for the current March quarter compared to 43.9% in the December 2014 quarter and 45.1% in the first quarter of 2014.

Our adjusted operating margin for the March quarter was down 550 basis points from December and inline with expectations when factoring in the onboarding of our Developing World team, which negatively impacted margin by 320 basis points.

Seasonal first quarter expenses, which reduced adjusted margin by 160 basis points and in January equity grant, which also reduced margin by 40 basis points. We expect the ongoing cost per quarter of Developing World team is approximately $1.5 per quarter or about $0.01 per share.

Adjusted net income for adjusted share was $0.65, down from $0.76 in the December quarter, primarily due to the items I previously mentioned that impacted our margin.

Our annualized adjusted effective tax rate rose from 36.5% to 37% in the current March quarter due to the apportionment of more income to states with higher tax rates, primarily New York. We include Slide 18, to highlight the components of our compensation expense.

In the first quarter of each year, we incur seasonal benefits and payroll tax expenses caused by the reset of the new calendar year. Those costs attributed an additional $2.6 million of expenses in the March quarter compared to December.

In addition, the Developing World team added $7.1 million of compensation in the salary and incentives volume of which $6 million is unique to March quarter. Remaining $0.5 million of startup costs related to the Developing World team is included in general and administrative expense.

Finally our board approved in equity grant to employees in January of 2015, which increased our run rate equity based compensation expense to $8.5 million. Slide 19, shows our balance sheet highlights. Our balance sheet remains strong.

Our cash balance remains healthy ending the March quarter at $215 million which was up 18% from $182 million at December 31, 2014. The last slide summarizes the dividends we paid since our IPO in March 2013. The second quarter of 2015, our board of directors has declared a regularly – quarterly dividend of $0.60 per share.

This is consistent with our previous quarterly dividend. Our dividend policy target distribution of the majority of adjusted earnings after considering business conditions and the amount of cash we want to retain at the time.

Over the last four quarters, we have returned cash of $3.20 per share to our shareholders which is slightly an excess of adjusted earnings per share for 2014. And based on a share price of $45, represents a yield of approximately 7%.

We continue to remain focused on growing in responsible and thoughtful manner that prioritizes our investment talent and their investment processes. In the first quarter, we continue to make investments in our talent and infrastructure to build realizable capacity for the future.

Our investments over the last several years have provided us the opportunity for continued growth particularly in our international and global strategies and from our new investment teams.

Although, we expect to continue to face headwinds coming from institutional reallocation decisions and relative performance challenges which will occur at times and certain of our strategies.

Over time, which maybe several quarters or years, we believe our measured approach to running a talent business will be rewarded by long-term growth in AUM and revenues. Our model has been designed for long-term success and it enables us to continue to produce predictable earnings, meaningful returns of shareholder capital and healthy balance sheet.

All of which reinforces our commitment to our investment teams, clients and shareholders. Gary, I’ll turn it back to you for questions..

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Michael Kim with Sandler ONeill. Please go ahead..

Hey, guys good afternoon.

First just in terms of expanding for the investment degrees of freedom, can you just go into a little more color in terms of how you are planning on implementing that new, once if you will across your existing strategies and then any follow through as it relates to maybe being able to better recruit investment talent down the road?.

Sure. Mike, its Eric Colson.

Yes the - we’ve been talking about the expanding degrees of investment freedom for a couple of years and in fact I have to go all the way back to the launch of our global strategies of opening up the mandate and we’re starting to see clients give us degrees of freedom and to other assets classes so some of our teams been able to add more cash or include fixed income securities if they so choose.

Likewise, we’ve seen a little bit more hedging occur in our strategies on a currency basis.

And as we look out going forward and looking at asset allocations models allowing active managers to short securities or create a risk reward outcome or an outcome such as an emerging markets outcome with Developing World going to allow our teams to broaden the use of securities or hedging strategies for – future strategies or existing and we’ve been modifying guidelines over the last few years to take advantage of that.

We do this in a evolutionary manner, you do have to get approval from a broad array of clients especially the separate account clients to modify those guidelines and we continue to see those trends reinforces with our client base and you can see the outcome with our two new strategies with new world, our Developing World and about with the high income strategy..

Got it, that’s helpful. And then maybe just following up on sort of the demand for more concentrated by active share strategies that you just mentioned.

Just wondering how do you think you maybe able to capitalize on that trend in light of sort of the team’s investment approaches, but also in the context of some of the recent performance trend and maybe more limited capacity broadly speaking?.

From an active share standpoint, we already have fairly high active share across majority of our strategies. And we will be rewarded that for that active share overtime.

I think the higher use of passive strategies will continue for a little bit of time and the use of high active share or high value-added managers will get a little bit more concentrated and separate exposure oriented strategies with through active strategies and lately that’s measured by active share ratio or historically, there are many advisors and consultants were looking at tracking there to an index.

I think that will continue or benefit, our current strategy of whether it’s the global small cap, which is the fairly new strategy is a concentrated portfolio, our large cap value is also concentrated with right now, 32, 33 securities. So we are already in that space right now and the concentrated high active share.

We think the next step is really degrees of freedom with use of newer securities that we have used in the past..

Got it.

And then just final question, now with the high income strategy has reached it’s one-year track record, just wondering if you expect to see a step up in demand or the three-year number is still more important and just from a scale perspective, does the fund still need to maybe get to a certain asset level in order for investors to be able to allocate bigger amounts into the strategy..

We still believe that for true realizable capacity, which is a term rates used in past years that a three-year track record with certain level of assets and more predictability of the strategy with underneath the Artisan umbrella is required for true large asset growth I think we’ll have a positive lean going forward.

We could be surprised in the short-run just given the one year performance that the team that we’ve assembled so far Bryan’s past record and we have just hired a dedicated relationship manager to focus on the institutional channel and so start next quarter.

So we are getting ready for anticipated interest but we truly think the asset that the true asset movement will occur more inline with the three year mark..

Got it, okay. Thanks for taking my questions..

Sure..

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

Okay. Thanks so much.

So just starting on that – on the last question as you think about the new world team you brought on and in fact they can launch fund over the next couple of months, is it a similar type of growth occur Eric, you think in terms of just help you guys to get the track record up and going or do you think similarly given the strong performance track record of that team it might accelerate the opportunity?.

Bill, our base line assumptions are is that new strategies always take some time and given the great track record that we saw on the high income side with Bryan Krug. Bryan produced a similar alpha in his asset class certainly is created a great track record and has a strong reputation in the market place.

I think the real question is around demand for emerging markets are enlarging over the last seven years.

The emerging market index has produced I think 0.6% return people think there is going to be a version to mean towards a higher return and there is greater interest that could help us out in the short-run just as much as the last couple of years and high income or high yield but the overall flows have been muted versus pervious years..

Okay. So I appreciate you calling out some of the newer initiatives that are working high yields I think international and global.

When you look at your way of the $109 billion if so of the AUM that you have I know a bunch has disclosed and how much of that do you think is style box centric that could be at risk for the structural change you talked about? I get the questions how quickly can you make this migration toward the solutions and outcome oriented portfolio was I think you’re on the way to doing versus just the general attrition or commoditization of that core business?.

Those evolution in asset allocation, it move slowly, if you are current adhering to a traditional asset allocation model, someone doesn’t wake up that day until let’s terminate all those managers and move to this new outcome of risk based. You have some really strong managers in there.

You may be just want to leave in place for a while and you are willing to tolerate a hybrid approach, because you have a good stronger manager in place. So I don’t think that our traditional or more matured strategies are going to go anywhere. And as time moves on those strategies will get more degrees of freedom, but we have that balancing act.

We can’t go too far where we take the strategy outside of what was intended for within a client portfolio. So I think these trends move really slow and you have time to modify and just you have to do it at the right pace and not surprise anybody. And I think we’ve successfully done that over the years..

And just one more maybe for C.J. I’m so curious if even adding back all the adjustments that you highlighted in terms of the separate pressure on the margin in Q1, and looking over the last several quarter against the market where the equities are generally higher over the last year. So, the margins been trending lower so.

How you thinking about the trade off between growth versus margins on a go-forward basis?.

Yes, Bill. I think what we saw was we had some periods in the last several years of some significant growth in our margin trended up higher and faster than we would have originally anticipated.

So I think some of the pull back you are seeing as reflective of just having gotten to where we thought we would get so quickly and we continue to believe that overtime our margins and will settle in the low-to-mid 40s and our comp ratio will settle in the mid-40s and our view hasn’t changed although, you guys can do the math on the modeling to understand what 10% growth in revenues would due to that.

And I think that’s what we saw over the past couple of years which is why we’re trending down….

Okay. All right. Thanks for taking my questions..

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

Thanks. Good morning or afternoon guys. My question is just shifting little bit to capital manager and the dividend and first couple of years pay a 100% of earnings pretty predictable in that sense but, with the stock having comeback some and maybe some new teams coming on and thinking about evolving portfolios.

What juncture, particularly since liquidity on the stock is gone better and what time of juncture number one do you – the share repurchase start coming into the mix from a capital management perspective and secondly, you envision as the business evolves having to devote incrementally more capital to a seed at this point?.

Yes, I’ll start with sort of the last point. You know, our use of cash has been - our thoughts around that really haven’t changed. We don’t see any sort of major capital commitments in regards to the business or see capital that would prevent us from returning back our capital in our earnings to our shareholders.

Now the form of that at least for the short-term the next year I don’t see any change in our lean towards paying out a cash dividend versus stock repurchase. I would never say never but I clearly think that you should expect cash dividend versus stock repurchase over the next 12 months.

And at some point I do think that stock repurchase will be part of the discussion. But it currently is much more in favor of cash dividend. And a 7% yield which is currently about where we are running..

Okay. Great, and then just curious I mean, understanding that non-U.S. is a long-term opportunity for the firm and what’s about I guess it’s $14 billion is or maybe just under in terms of asset at this point.

But if you look at the exhibit and I lost the page that’s on, I mean, the organic growth at least last four, five quarters from that channel has been pretty muted.

So considering that global at least my perception is that global strategies in general have been in demand and notwithstanding having one of those key strategies closed, can you may be talked a little bit about why you think may that organic growth has been more muted from that kind of key distribution channel since beginning of 2014, is there something about what do you think those clients are looking for or is it just not been really much of a distribution focus in the short-term, is maybe you want to focus on funds, trying to get a feel for that?.

Sure, Rob. It’s Eric. The global equity space is fairly competitive and given the number of strategies that tend to be on by rated less for many of the consultants or various platform. It requires a little bit more time and enough dollars for to be realizable.

So certainly, as you have an emerging market strategy with couple of $100 million in a three-year track record given the scarcity of that, availability of that strategy it lowers the hurdles there for realizable.

With regards the global strategies in our global equity team just hit the five-year track record, it has I think the size now to be put on to many of the consultant list as well as platforms and as that five-year track record just hit this last quarter as of March 31.

The global opportunity strategy is in a similar state for first couple of years we operated that strategy as what we call an opportunistic growth strategy and had a U.S.

emphasis and then we evolved it to global and reality of just hit its true five-year record and both those strategies I think are right in the sweet spot for realizable assets global opportunities being the little bit ahead of it just on the maturity and in the size right now.

And if you couple that with our distribution efforts in Europe as well as in Australia that we think the flows are a timing issue you are going to have some outflows and inflows and as you go after intuitional accounts we’ve always said its going to be lumpy and given specifically those two global strategies which we look at all three there on Slide 11 and couple that with our distribution outside the U.S.

We’re fairly optimistic about the outcome over the next few years here as people realize our strategy. And you did bring up the distribution a bit. We do think our strategies are bought not sold. And we work on those sophisticated buyers as well as intermediaries to put us on those lists. So that makes even lumpier..

Okay, great. Just maybe one follow-up and this goes back to kind of the – your comments Eric, around kind of the evolving asset management industry and focusing on adding degrees of freedom to strategies is that.

I just want to make sure I understand it correctly, if I – the focus is taking with existing strategies kind of migrating how those portfolios are run where you can to whether it’s using other you mentioned securities or somehow pretty more flexibility or freedom into those portfolios that you also touched on why that’s a touchy thing you could, it depends on the timing over time and you want to make sure you deliver what clients effect so.

So what degree is that make sense so just start brand new strategies to just have the those degrees of freedom from day one get them started, get them feed them and build the track record that way so you’re – is that may be you’re doing some of that but with that why not goes through that approach if versus this kind of more it’s a little bit what you already have?.

Rob, we do think about that exact trade off, in fact we looked years ago when we were looking at launching global opportunities that can we do this in our mid-cap growth strategy can we add degrees of freedom or for so convicted about growing degrees of freedom shouldn’t we just evolve the mid-cap into a pure global strategy.

And then you look at your client base and that strategy is over half the assets or institutional it’s not DC oriented assets and we play a very specific role there and so pending that client base and asset base we’ll make a decision on the evolution or a brand new strategy back then we made the decision to launch a brand new strategy with higher degrees of freedom.

Now over the years we also made simple evolutionary steps in mid-cap growth where we had ability to go 5% ADR’s 10 years ago now we’ve been made a step of 5% ADR’s in non-U.S. and then we moved to 10% non-U.S.

so in areas where the strategies fit the very specific mandate in a structured allocation will be more mindful of that not to disrupt the flows and we’ll have to go slowly on the evolution and other cases will launch brand new strategies as something we discussed each of our investment teams as they asked for degrees of freedom or want to evolve..

Okay, great. Thanks for taking my questions guys..

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

Thanks guys. Just on the expenses in terms of the outlook. So I think you know I get the moving pieces particularly on the comp line when I think about you are going into second quarter, third quarter and the rest of the year. Are there any additional costs on the grant side or is that fully in the run rate at this point..

Yes, on the grant side its pretty much fully baked. We had a stub period in the first quarter for the January grant, but it was a partial grant. So that guidance we gave you is going to be within a couple of hundred thousand dollars.

We do – we did last quarter sort of indicate that we’re going to uptick our technology spend and we got off to a slow start this year, so that will uptick a bit.

And but otherwise, we’re going to be pretty consistent, trending down because of the seasonal expenses and obviously, the absence of those unique cost to the Developing World team in the first quarter on boarding them..

Okay, got it. And Eric, just - you hit on some of this, but I just want to understand when I think about the growth outlook over the next couple of years, it seems like on some of the core products based on the flow trends you’ve got little bit of the headwind on the performance side and then some on the allocation side.

And then you’ve got a lot of new opportunities whether it’s on the new teams or the distribution front to offset some of those on the areas where performance or its new allocation based.

Is there anything you guys can do on in distribution side or with those clients particularly obviously on the performance aspect of it? They given just the strategy its part of that cycle so clients can understand that versus you are seeing the lower redemptions or is it just part of the cycle that you deal with and then at some point that will start to shift..

The – when we look at the array of strategies that we have the two areas where we’ve seen some difficulties the U.S. value team in emerging markets and outside of that that the teams have been producing fairly strong results and are positioned quite well and some of the noise and asset flow, we think it’s exactly that noise. When it comes to the U.S.

value team one of the statement we like to reemphasis is that we’re bought not sold and the clients that buy us look for the stability of our talents, the integrity of our process, and the expectations and the one thing that we do as we have a dedicated business leader for each one of our teams and those business leaders sole job is that one franchise.

So and really strong performance period there to help amplify the asset gathering efforts and likewise when the strategy is out of favor like our U.S. value team who tend to be a little bit more absolute value have difficulty buying high PE stocks.

And certainly, somewhat of an anti-momentum strategy, you lean on these client service professionals to educate the client base and given that their sole job is just one investment team. I think that commitment and dedication helps to extend the duration of that asset through the difficult performance periods..

Okay, that’s helpful. And then just last one, when you look at the teams that you have added, and then you look at the shift that you are talking about in terms of expanding the degrees of freedom. Do you still see quite a few like opportunities or gaps that you don’t have on the platform.

And so over the next three to five years continue to be looking for those opportunities or is it more from the products that you have, building those out maybe tweaking some of the strategies..

It will be a combination of both. It will always be out in the marketplace looking for great talent that has a strategy that we think fits well in long-term asset allocation as well as organization, as well as the existing teams we have right now have an ability to launch new strategies. So it will clearly be a combination of both going forward..

Okay. Thanks..

The next question comes from Eric Berg with RBC Capital. Please go ahead..

Thanks very much. Eric, I understand your answer to immediately preceding question that the – the marketing people really need to so to speak lean into the pitch at this point in order to communicate the approach and discipline of the U.S. value team.

You are very experienced person in the area, not only of managing your company, but of being a former consultant. What's your sense of whether the audience will even listen to this given the extent of both at the retail brokerage level and at the institutional consultant level given the extent of the under performance.

Will they even care is what I’m asking?.

It certainly will care, I mean there is always an array of clients on their willingness to tolerate under performance and what's their time horizon and a lot of factors come into play, inception date, so not all of the clients have the returns over a one, three, five, seven, and are not endpoint dependent on these exact numbers that we see in the book, that many of our clients have been with us for a long period of time that have strong absolute returns.

If you look at certainly the three-year and five-year return, you are looking at returns of mid-teens well above their return hurdles they are looking for. So it depends on the client’s inception date, their view of absolute returns in this space and they are understanding of our strategy and conviction to our strategy.

And we think the way we position a strategy and work with the consulting community as well as the broker dealer, who have built very strong internal research departments that think of the stability of the people and the process and the portfolio results.

The best thing we can do is reinforce the people to process and let them understand and help them understand, why we are underperforming. And we think if we have heavily skewed institutional client base, which if you look the value team and we look more specifically at the mid-cap value.

The mid-cap values around 60% institutional, with the remainder being in broker dealer and financial advisors that we think has done strong due diligence on our process. We think that skew will give us greater time than most, but there always is a time horizon that is unique for each client..

The next question comes from Chris Shutler with William Blair. Please, go ahead..

Hi, good afternoon. Just couple of real quick ones. First, just wondering how April is shaping up from a flow perspective. And second C.J., could you just review the comments again on the Developed World Team and the expenses there. I think it got $7.1 million in Q1, $6 million of which was one time, 1.5 per quarter from there.

I just want to make sure that that's right and what the breakout by line item is. Thanks..

Sure. So on the startup cost for Developing World this quarter about $7.6 million, 6.5 with that was unique to the first quarter, and so the guidance of ongoing as kind of ramp up to about $1.5 million a quarter. We have yet to move them in permanent office space, so that’s going to occur over time. So hopefully, that’s helpful.

In the flows, we are going to be lumpy. I mean, April has generally been better than the last several months up to now. But we tend to look out over things over a longer periods of time and try not to get over react or under react to any one quarter or several quarter period. So that’s it to that as much as I can say on that..

Yes, it makes sense. Thanks a lot..

This concludes our question-and-answer session. I like to turn the conference back over to Eric Colson for any closing remarks..

Thank you, everybody, for joining me into the call today. We look forward to our call next quarter..

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..