Artisan Partners Asset Management (APAM) risk factors, FY2024 10-K

Human Capital Risks

1. 01The loss of key investment professionals or senior members of our distribution and management teams could have a material adverse effect on our business
2. 02Changes 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

Market and Investment Performance Risks

1. 03Poor investment performance leads to a loss of AUM which reduces our revenues and negatively impacts our financial condition
2. 04Difficult market conditions typically adversely affect our business in many ways, including by reducing our AUM and causing clients to withdraw funds, each of which reduces our revenues and impacts our financial condition
3. 05for any number of reasons beyond our control, including, among others, a declining market, general economic downturn or recession, political uncertainty, inflation rates, natural disasters, war, acts of terrorism, or other unpredictable events
4. 06Several 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
5. 07We may not be able to maintain our current fee rates as a result of poor investment performance, competitive pressures, changes in global markets and asset classes, changes in our business mix or for other reasons, which could have a material adverse effect on our profit margins and results of operations
6. 08We depend on third parties to market our investment strategies
7. 09The investment management industry is intensely competitive and experiencing transformative pressures. Failure to address these transformative pressures and remain competitive could negatively impact our business

Risks Related to our Business

1. 10Our efforts to establish and develop new teams, strategies and vehicles, or pursue other strategic transactions, may face challenges or ultimately be unsuccessful, which could impact our results of operations, reputation and culture
2. 11We derive substantially all of our revenues from contracts and relationships that may be terminated upon short or no notice
3. 12Investors in many of the funds we advise can redeem their investments at any time without prior notice or with fairly limited notice, which would reduce our AUM and could adversely affect our earnings
4. 13The majority of our AUM are managed in primarily long-only, equity investment strategies, which exposes us to greater risk than certain of our competitors who may manage more assets in diverse strategies
5. 14Our 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 dealing with those risks presents us with new challenges
6. 15If our techniques for managing risk are ineffective, we may be exposed to material unanticipated losses
7. 16We provide a range of services to Artisan Funds, Artisan Global Funds, Artisan Private Funds and sub-advised funds which may expose us to liability

Risks Related to Legal or Regulatory Factors and Taxation

1. 17Failure 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
2. 18Our failure to comply with clients’ investment guidelines and applicable legal limitations could result in damage awards against us and a loss of AUM, either of which could adversely affect our reputation and financial condition
3. 19Employee misconduct, or perceived misconduct, could expose us to significant legal liability and/or reputational harm
4. 20The 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
5. 21Changes in tax laws or exposure to additional tax liabilities could have a material impact on our financial condition, results of operations and liquidity
6. 22We are subject to extensive, complex and sometimes overlapping laws, rules and regulations
7. 23suspensions of individual employees, or limitations on particular business activities, any of which could have an adverse impact on our reputation and business
8. 24The regulatory environment in which we operate is subject to continual change, and regulatory developments may adversely affect our business
9. 25The 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
10. 26A change of control could result in termination of our investment management agreements with mutual funds and could trigger consent requirements in our other investment management agreements

Operational and Cybersecurity Risks

1. 27We depend on information technology, and any failures of, damage to or unauthorized access to our information technology systems or infrastructure, or those of third parties with which we do business, may disrupt our business, result in losses, damage our reputation or limit our growth
2. 28Any significant limitation, failure or 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
3. 29Our indebtedness may expose us to material risks
4. 30Our note purchase agreements and revolving credit agreement contain, and our future indebtedness may contain, various covenants that may limit our business activities

Risks Related to Our Structure

1. 31Control by our stockholders committee of approximately 10% 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
2. 32Our ability to pay regular dividends to our stockholders is subject to the discretion of our Board and may be limited by our structure and applicable provisions of Delaware law
3. 33Our ability to pay taxes and expenses, including payments under the tax receivable agreements (“TRAs”), may be limited by our holding company structure
4. 34We 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
5. 35In 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
6. 36If 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

Risks Related to Our Class A Common Stock

1. 37Equity markets and the price of our Class A common stock have been, and may continue to be, volatile, which could result in rapid and substantial losses for our stockholders
2. 38Future 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
3. 39Provisions in our organizational documents, equity award agreements and Delaware law could discourage a change of control that stockholders may favor, which could negatively affect the market price of our Class A common stock
4. 40Our restated certificate of incorporation contains a forum selection clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents
5. 41Our restated certificate of incorporation provides that certain of our investors do not have an obligation to offer us business opportunities