Variable Interest Entities and Consolidated Investment Products (Notes)

12 Months Ended

Dec. 31, 2021

Fair Value Disclosures [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 December 31, 2021, Artisan is considered to have a controlling financial interest in one series of Artisan Funds, three sub-funds of Artisan Global Funds and two Artisan Private Funds, with an aggregate direct equity investment in the consolidated investment products of $61.9 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 17, “Related Party Transactions” for additional information on management and performance fees earned from CIPs.

Third-party investors’ ownership interest in CIPs is presented as redeemable noncontrolling interests in the Consolidated Statements of Financial Condition as third-party investors have the right to withdraw their capital, subject to certain conditions. Net income attributable to third-party investors is reported as net income attributable to noncontrolling interests - consolidated investment products in the Consolidated Statements of Operations.

During the year ended December 31, 2021, the Company determined that it no longer had a controlling financial interest in one Artisan Private Fund upon the redemption of the Company's seed investment. Upon loss of control, the VIE was deconsolidated and the following assets, liabilities, and equity of the fund were derecognized from the Company’s Consolidated Statements of Financial Condition:

	As of January 1, 2021
Assets of consolidated investment products
Cash and cash equivalents	$	34,823
Accounts receivable and other	1,769
Investment assets, at fair value	72,868
Less: Amounts reclassified to investment securities	(11,200)
Total assets	$	98,260
Liabilities of consolidated investment products
Accounts payable, accrued expenses and other	$	76,960
Investment liabilities, at fair value	566
Total liabilities	77,526
Redeemable noncontrolling interests	20,734
Total liabilities and equity	$	98,260

There was no net impact to the Consolidated Statements of Operations for the year ended December 31, 2021. Artisan generally does not recognize a gain or loss upon deconsolidation of investment products because the assets and liabilities of CIPs are carried at fair value.

As of December 31, 2021, Artisan held direct equity investments of $10.7 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 the judgment of pricing vendors, which may consider, among other factors, the prices at which securities actually trade, broker-dealer quotations, pricing formulas, estimates of market values obtained from yield data relating to investments or securities with similar characteristics and/or discounted cash flow models that might be applicable. Derivative assets and liabilities are generally comprised of put and call options on securities and indices. Put and call options are valued at the mid price (average of bid price and ask price) as provided by the pricing vendor at the close of trading on the contract’s principal exchange.

The following tables present the fair value hierarchy levels of assets and liabilities held by CIPs measured at fair value as of December 31, 2021 and 2020:

	Assets and Liabilities at Fair Value
	Total		Level 1		Level 2		Level 3
December 31, 2021
Assets
Money market funds	$	7,908	$	7,908	$	—	$	—
Equity securities - long position	33,583		31,838		1,745		—
Fixed income instruments - long position	161,177		—		156,240		4,937
Derivative assets	241		—		241		—
Liabilities
Equity securities - short position	$	3,427	$	3,427	$	—	$	—
Fixed income instruments - short position	15,570		—		15,570		—
Derivative liabilities	182		4		178		—
December 31, 2020
Assets
Money market funds	$	7,822	$	7,822	$	—	$	—
Equity securities - long position	83,960		83,027		933		—
Fixed income instruments - long position	133,518		—		133,518		—
Derivative assets	12,902		12,902		—		—
Liabilities
Fixed income instruments - short position	$	14,978	$	—	$	14,978	$	—
Derivative liabilities	753		566		187		—

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

	As of December 31, 2021		As of December 31, 2020
Net CIP assets included in the table above	$	183,730	$	222,471
Net CIP assets not included in the table above	(10,769)		(69,763)
Total Net CIP assets	172,961		152,708
Less: redeemable noncontrolling interests	111,035		93,753
Artisan’s direct equity investment in CIPs	$	61,926	$	58,955