Variable Interest Entities and Consolidated Investment Products

6 Months Ended

Jun. 30, 2024

Fair Value Measurements, Recurring and Non-recurring [Abstract]

Variable Interest Entities and Consolidated Investment Products

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 June 30, 2024, Artisan is considered to have a controlling financial interest in five sub-funds of Artisan Global Funds and two Artisan Private Funds, with an aggregate direct equity investment in the consolidated investment products of $98.7 million.

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 14, “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 unaudited condensed 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 (loss) attributable to noncontrolling interests - consolidated investment products in the unaudited consolidated statements of operations.

During the six months ended June 30, 2024, the Company determined that it no longer had a controlling financial interest in one series of Artisan Funds as a result of third party capital contributions. Upon loss of control, the fund was deconsolidated and the related assets, liabilities and equity of the fund were derecognized from the Company’s unaudited condensed consolidated statements of financial condition. There was no net impact to the unaudited consolidated statement of operations for the six months ended June 30, 2024. Artisan generally does not recognize a gain or loss upon deconsolidation of investment products as the assets and liabilities of CIPs are carried at fair value. Artisan’s $23.8 million direct equity investment was reclassified from investment assets of consolidated investment products to investment securities.

As of June 30, 2024, Artisan held direct equity investments of $13.8 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

Investments held by CIPs are reflected at 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 prices provided by independent 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. Short-term investments are comprised of repurchase agreements and U.S. Treasury obligations. Repurchase agreements are valued at cost plus accrued interest and U.S. treasury obligations are valued using the same principles as fixed income securities. Derivative assets and liabilities are generally comprised of put and call options on securities and indices and forward foreign currency contracts. 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. Open forward foreign currency contracts are valued using the market spot rate.

The following tables present the fair value hierarchy levels of assets and liabilities held by CIPs measured at fair value as of June 30, 2024 and December 31, 2023:


	Assets and Liabilities at Fair Value
	Total		Level 1		Level 2		Level 3
June 30, 2024
Assets
Money market funds	$	26,467	$	26,467	$	—	$	—
Equity securities - long position	66,095		64,825		1,270		—
Fixed income instruments - long position	295,930		—		288,280		7,650
Derivative assets	676		—		676		—


Liabilities

Fixed income instruments - short position	$	11,318	$	—	$	11,318	$	—
Derivative liabilities	1,474		164		1,310		—
Repurchase agreements	2,651		—		2,651		—


	Assets and Liabilities at Fair Value
	Total		Level 1		Level 2		Level 3
December 31, 2023
Assets
Money market funds	$	18,156	$	18,156	$	—	$	—
Equity securities - long position	42,693		40,838		1,855		—
Fixed income instruments - long position	315,183		—		309,110		6,073
Derivative assets	1,004		—		1,004		—
Short-term investments	5,215		—		5,215		—

Liabilities
Fixed income instruments - short position	$	7,392	$	—	$	7,392	$	—
Derivative liabilities	2,188		843		1,345		—

CIP balances included in the Company’s unaudited condensed consolidated statements of financial condition were as follows:


	As of June 30, 2024		As of December 31, 2023
Net CIP assets included in the table above	$	373,725	$	372,671
Net CIP assets/(liabilities) not included in the table above	1,373		(5,434)
Total Net CIP assets	375,098		367,237
Less: redeemable noncontrolling interests	276,420		252,406
Artisan’s direct equity investment in CIPs	$	98,678	$	114,831