Artisan's Stellar Managers Earn Plenty of Medals

Artisan Partners has thrived in recent years. Seven of its 14 funds now have 10-year records. Of those, five surpassed more than 80% of their peers for the decade ending March 18, 2014, and the other two land in their categories' top halves. Investors have responded accordingly: Artisan's funds have taken in a net $11 billion since the start of 2012, when the lineup had a combined $30 billion in assets. At the end of February 2014, combined with market appreciation, those flows have pushed Artisan's fund assets to $61 billion

How has Artisan succeeded? First, by hiring investors who, by and large, already owned proven track records. The firm also has given them freedom to live where they want, build teams as they see fit, and close funds before they grow too large. Indeed, the firm's six investment teams (including the one for just-launched Artisan High Income) are spread around the U.S.--Milwaukee, San Francisco, Atlanta, New York, and Kansas City--and several analysts are based in London. The teams range in size from just a few members to more than 20. And seven of the firm's funds are closed to new investors.

Morningstar analysts think highly of the prospects of the four teams we cover, too. Four Artisan funds earn Morningstar Analyst Ratings of Gold and six earn a Silver. Let's take a closer look at those teams.

 Artisan International (ARTIX) (Silver) and  Artisan International Small Cap (ARTJX) (Gold)
Team leader Mark Yockey joined Artisan in late 1995 after a successful six-year stint managing a fund now named Waddell & Reed International Growth . He has since amassed an impressive investing record and won Morningstar's International-Stock Manager of the Year award for 1998. He's also put together a sizable, experienced team of 20 comanagers, analysts, and junior analysts. They seek a mix of fast growers, steady-Eddie fare, and turnaround plays. That's proved to be a winning formula: Yockey's oldest charge, Artisan International, has beaten more than 80% of its foreign large-blend peers over the past 10 and 15 years. While the fund has grown large at times, Yockey hasn't closed it yet. But size hasn't slowed it down--the fund beat 90% of its peers in 2011, 2012, and 2013.

On the other hand, Yockey and his team shut Artisan International Small Cap to new investors in 2003, just two years after its launch, to preserve its flexibility. That's worked out exceedingly well, as the fund has outpaced more than 90% of its foreign small/mid-growth peers since inception.

Yockey and company also manage Artisan Global Equity (ARTHX) (off to a strong start since its 2010 inception) and Artisan Global Small Cap (launched in June 2013). Compared with other Artisan teams, Yockey was slow to name comanagers on his funds--the first was Barry Dargan at Global Equity (Dargan left the firm in 2013)-- but now all of his charges have at least one comanager.

Artisan Mid Cap Value (ARTQX) (Gold),  Artisan Small Cap Value (Gold), and  Artisan Value (ARTLX) (Silver)
Scott Satterwhite founded this compact team, but other members have taken on major roles. Satterwhite and James Kieffer have worked together for 25 years. When the former managed small-value portfolios for Wachovia (including a fund now called Wells Fargo Advantage Special Small Cap Value (ESPAX)), Kieffer was a key analyst for him. They joined Artisan together in 1997, and Artisan Small Cap Value was launched. Kieffer, promoted to comanager in 2000, has served as the lead on Artisan Mid Cap Value since the team took it over in 2001. George Sertl, who joined the team in 2000, was promoted to comanager when a third fund, Artisan Value, launched in 2006. The trio won Morningstar's Domestic-Stock Manager of the Year for 2011.

The picture here isn't particularly rosy at the moment. The funds have struggled lately as the market hasn't favored the team's risk-conscious style, which balances valuations and business quality. Satterwhite also plans to retire in October 2016. (Artisan requires portfolio managers to give three years' notice.) But the team has gone through dry spells before, and Kieffer and Sertl are veteran managers now. The lengthy transition period also allows Dan Kane (an analyst since 2008 who was promoted to comanager in 2012) to gradually take over Satterwhite's responsibilities. (The team has two analysts.) The team's prudent approach to managing its workload--Small Cap Value closed to new investors in 2000 and Mid Cap Value has been closed for most of the past eight years--also inspires confidence.

 Artisan International Value (ARTKX) (Gold) and  Artisan Global Value (ARTGX) (Silver)
This team's principals, David Samra and Dan O'Keefe, had no track record when they were hired in 2002. Nevertheless, Samra and O'Keefe, who previously served as analysts for David Herro of  Oakmark International (OAKIX), have racked up superb records at their two charges. Like their former boss, Samra and O'Keefe (along with their five analysts) ply a valuation-sensitive approach and are willing to avoid entire sectors and countries when the individual stocks within them don't fit their criteria. But they emphasize business quality to a greater degree, which has helped the funds (both closed to new investors) hold up quite well in down markets. Artisan International Value has crushed its typical peer on a risk-adjusted basis since its 2002 inception, and Artisan Global Value has done the same since launching in 2007. The duo won Morningstar's International-Stock Manager of the Year award twice--once for holding up well in 2008 and then for beating nearly all rivals in 2013's rally.

This team may be due for a period of less-impressive returns. It has found fewer compelling ideas lately as stocks have surged, so both funds' cash stakes hover around 12% (a rare event), and Samra and O'Keefe report that their holdings' average discount to fair value is now smaller than usual. But the team's risk-sensitive strategy should keep the funds from imploding if the market turns south.

 Artisan Global Opportunities (ARTRX) (Silver),  Artisan Mid Cap (ARTMX) (Silver), and  Artisan Small Cap (ARTSX) (Silver)
Andy Stephens founded this team in 1997 after 11 years as an analyst and portfolio manager at Strong Funds, but he's built a crew of savvy investors to help carry the load. Matthew Kamm, who joined the team in 2003, serves as the lead skipper on the team's original and largest charge, Artisan Mid Cap. Jim Hamel, hired when Mid Cap launched in 1997, has led the effort at Artisan Global Opportunities since its 2008 inception. Jason White joined the team in 2000 and is a comanager on all three funds. The one outlier is Craigh Cepukenas, who comanaged Artisan Small Cap as part of a separate team until 2009. That's when he joined this team as it took over management of the then-struggling fund (Cepukenas has served as the lead since then).

Like the other Artisan managers, this growth-oriented team doesn't get too aggressive: It avoids speculative highfliers, which has kept the funds from underperforming in bear markets. Artisan Small Cap's performance has dramatically improved since the team took over, and both of its other charges boast fine records. And like other teams, this one has generally kept a close eye on capacity: Artisan Mid Cap closed to new investors in 2002 (although continuing inflows arguably moderated performance in the mid-2000s), as did Artisan Small Cap in mid-2013.

For a list of the open-end funds we cover, click here.
For a list of the closed-end funds we cover, click here.
For a list of the exchange-traded funds we cover, click here.
For information on the Morningstar Analyst Ratings, click here.