"APAM's long-term fund performance has steadily declined from industry-leading levels (~80 percent of its retail AuM was rated 4/5 stars by Morningstar in Dec'15) to below the industry average over the last 6 months," Ghosh wrote in a note.
In addition, its 12-month rolling performance is negative (on absolute return basis) for nine out of 14 of its funds.
Furthermore, the analyst highlighted that roughly 40 percent of APAM's funds (six of 14), which represents over 70 percent of its total AUM base, are closed to all new investors. Accordingly, Ghosh expects weaker performance and fund capacity to further pressure net flow trends in 2016/17.
"[W]hile its newer High Income and Developing World strategies continue to grow at a healthy clip (and are not capacity constrained), given that APAM doesn't run similar strategies in parallel, it runs the risk of not being able to accommodate new client demand for specific strategies," Ghosh added.
The analyst expects EPS of $2.23/$2.25 in 2016/2017, which is in line with consensus estimate for 2016 ($2.23), and modestly below 2017 consensus estimate ($2.31).
Shares of Artisan Partners closed Thursday's regular trading at $27.70. Ghosh has a price target of $26.
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