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Jason Gottlieb

Thank you, Eric. A little over 10 years ago, we had no history in fixed income investing, no in fixed income, investment talent and no fixed income investment operations. Today we have two exceptional credit oriented investment franchises. In 2024 the Denver based credit team led by Brian Krug passed its 10th anniversary, raised $1.7 billion of net inflows and now manages nearly $12 billion.
The Boston based MSCIs capital group led by Mike Sami and Mike o'brien raised $1.9 billion of net inflow and now manages nearly $3 billion collectively. The two teams raised $3.6 billion in 2024 and now manage nearly $15 billion in six different strategies including two alternative strategies. The successful business development is driven by exceptional investment performance for clients that's inception and after fees, the high income, emerging markets, debt opportunities and emerging markets. Local opportunity strategies have generated 174 basis points, 722 basis points, 141 basis points respectively. Our performance annually versus their benchmarks.
The absolute return oriented credit opportunities and global unconstrained strategies have generated average annual returns of 10.41% and 9.76% respectively. Since inception, after fees, the quality and uniqueness of these strategies is reflected in their weighted average effective fee rate, which was 67 basis points in 2024. That includes nearly $12 million in performance fees earned in the fourth quarter, which CJ will further discuss. We are still early on our credit journey, as we have said in the earnings release at Artisan a decade is not that long and three years is just the blink of an eye.
When we partner with new talent, we focus on getting them up and running quickly and with high quality support, we provide time and a distraction free environment so that the investment team can put their time energy and focus into building a foundation of people and process and a track record of investing success only when the foundation is firmly in place. Do we begin to develop a business with greater commercial breadth?
That is what we have been doing with the credit team over the last several years. And what we are beginning to do with the MSICs Capital Group, we aim for durable success and long term growth. The precise form of which is unpredictable at the time talent joins artisan slide. Four shows our execution of this deliberate process. With the MSICs Capital group, we have long been on the hunt for talent in emerging markets that it's an asset class with a large opportunity set in which investment talent can differentiate and long term asset allocation demand exists. We had spoken with numerous em debt managers prior to meeting Mike Sami and Mike o'brien in early 2021.
Once we met them, we embarked on a rigorous process of getting to know them, understanding their process and track records, educating them about artists and partners and determining the appropriate terms and timing for them to join our platform. They ultimately joined Artisan in September of 2021 and established the MSICs Capital Group. Once on board, it was imperative to minimize the time before they began managing capital and reestablish a track record.
Seven months after they joined the firm, we launched Artisan global unconstrained, which has the ability to invest directly in over 89 markets. And since inception has invested in sovereign debt, corporate debt loans, equities options, currency forwards and futures, commodity derivatives, CDS and CDX interest rates and repurchase agreements. A month later, we launched artisan emerging market debt opportunities.
And three months after that, we launched artisan emerging markets, local opportunities within a year from the leadership team. Joining Artisan, the MSICs capital group comprised 13 individuals and was managing three strategies, Mike built a team just the way they wanted it working with them. We delivered a customized operating stack to support their process, their execution and their analytics simultaneously. We resourced the team with a dedicated business leader with previous experience building a large emerging market step business.
In the third quarter of 2023 we accepted large strategic mandates in each of the emerging markets, local opportunities and global unconstrained strategies. We accepted similar large strategic mandates in the MDO and MLO strategies in the third and fourth quarter of 2024 respectively. The team has a very firm foundation and is poised for further success. Each strategy will hit its third anniversary this year which we believe will accelerate business development especially in pull the vehicle.
More generally, I think the process we have undertaken over the past four years to build the MSICs Capital group is a perfect example of the power of our investment platform. We found the right talent, we supported them for success. We focused on the investment performance, we structure distribution to work for the team and minimize distraction. We worked quickly and with high quality, we delivered results and we established the foundation for something that can be very powerful for a very long time.

Eric Colson

Thank you, Jason. I want to expand upon your final point and broaden the lens. What we have accomplished with the MSICs Capital group is what we have been accomplishing with investment talent repeatedly over a long period of time slide, five shows a after 12 and three years for the five investment teams we have established since our IPO in 2013.
Within three years of joining our firm, each of these five teams reached a level of foundational capital that allowed them to execute their investment strategy. Build upon initial track records and establish the economic foundation for long term franchise development capital for talent to manage is a critical component of our investment platform. We have proven our ability to deliver early foundational capital for new talent.
In 2025 we will celebrate another important milestone. The 10th anniversary of the developing world strategy. Working closely with founding portfolio manager, Lewis Kaufman. We have designed and communicated the developing world strategy as a highly differentiated means of accessing emerging markets demand opportunities via an enlarged opportunity set including firms domiciled in developed markets.
Since inception and after fees, the developing world strategy has generated a cumulative return of 157% which is more than four times greater than the MSICs emerging markets index. Lewis is an incredibly experienced, thoughtful and differentiated investor. He is truly one of a kind which is reflected in his performance relative to the index.
As we celebrate the 10th anniversary, we are excited about the opportunity in front of Lewis and the developing world strategy, especially in the wealth marketplace where investors are looking for differentiation and absolute return. Approximately $95 billion of our A is managed for intermediated wealth clients. We have broad and deep relationships across the space it is growing and there is demand for differentiated absolute return oriented strategies. We have reoriented our distribution structure to better address the wealth and alternatives marketplace.
And we believe there is tremendous opportunity to bring more of our investment platform to existing and new intermediated wealth clients. In addition to the traditional institutional business in 2025 we remain committed to building our investment platform, developing our existing franchises, adding new talent to the platform and tapping into demand from investors around the world, seeking high value added investments and then I'll turn it over to C.J to discuss our most recent financial results.

Charles Daley

Thank you, Eric. An overview of financial results begins on slide 11th quarter. Results reflect the outcome of our quality business model which drives durable growth and long term returns for clients and shareholders. Compared to the September quarter revenues rose 6% adjusted operating income was up 12% and our adjusted operating margin improved by 180 basis points.
More specifically assets under management ended the December quarter at $161 billion down 4% from last quarter and up 7% from the end of 2023 net client cash outflows during the December quarter were approximately $800 million and included an outflow from a client rebalance on a $1.1 billion subadvised mandate.
Full year net client cash outflows improved slightly to $3.7 billion fourth quarter and full year 2024 represent the 10th consecutive quarter and 11th consecutive year of positive flows for our fixed income. Business average A. For the quarter was up 2% sequentially and up 18% compared to the December 2023 quarter. While full year average, a improved 15% in the fourth quarter. The equity artisan funds completed their annual income and capital gain distributions. The amount of distributions not reinvested in the artisans funds totaled $795 million for the quarter and $1.2 billion for the full year. This amount is presented separately from client cash outflows.
Our complete GAAP and adjusted results are presented in our earnings release revenues for the quarter increased 6% compared to the September 24th quarter and up 19% compared to the prior year. Fourth quarter. The December 2024 quarter reflects approximately $17 million of performance fees from seven different strategies included in that amount is a $2.4 million performance fee earned on a consolidated investment product which is reflected in non operating income as required by accounting rules.
As of the end of 2024 approximately 3% of our EUM is subject to performance fees and the majority of those arrangements are annual fees with measurement dates at the end of December, our weighted average recurring fee rate for the quarter excluding performance fees was 68 basis points. Reflecting the growing growing portion of our A and lower fee fixed income strategies inclusive of performance fees. Our weighted average fee rate for the fourth quarter was 72 basis points.
Adjusted operating expenses for the quarter were up 3% from the third quarter of 2024 and 11% for the same quarter. Last year, primarily from higher incentive compensation expense due to increased revenues adjusted operating income increased 12% sequentially and 37% compared to the same quarter last year. As a result of revenue growth outpacing increases in operating expenses adjusted net income per adjusted share improved 14% compared to last quarter and 35% compared to December 2023 quarter, full year, 2024 revenues were up 14% compared to 2023 on a higher average. A adjusted operating expenses increased 10% from 2023. Primarily from higher incentive compensation elevated revenues also contributing to the increase in compensation and benefits with higher fixed compensation expenses from an increase in the number of full time associates and annual base salary merit increases.
Additionally, amortization of long term incentive compensation expense increased primarily from the $6 million impact of the retirement acceleration clause discussed during the first quarter, 2024 call and the net increase from the impact of the addition of the January 2024 long term incentive award grants higher revenues in 2024 led to a 22% improvement in adjusted operating income and a 23% improvement in adjusted net income per adjusted share over 2023 in calculating our non-GAAP measures, non operating income includes only interest, expense and interest income. Although valuation changes on our seed investments impact shareholder economics. We fully exclude these valuation changes from our adjusted results to provide transparency into our core business operations.
Turning to slide 11, our balance sheet remains strong. We currently have $155 million of seed capital in our investment products with significant capacity as strategies reach scale and our seed investments are redeemed. Any gains realized are included in the cash available for corporate purposes, seed investment or as an addition to our year end special dividend.
In addition, our $100 million revolving credit facility remains unused $60 million of our senior notes will mature in August 2025. We currently expect to refinance the maturing amounts of new series of long term senior notes. We continue to return capital to shareholders on a consistent and predictable basis through quarterly cash dividend payments and a year end special dividend.
Consistent with our dividend policy, our board of directors declared a quarterly dividend of $0.84 per share with respect to the December 2024 quarter and an additional $0.50 for the year end. Special dividend dividends declared with respect to 2024 cash generated total $3.48 per share. An increase of 25% from the dividends declared with respect to 2023 cash generation.
The special dividend declared with respect to 2024 was 47% larger than the previous year. And special dividend as a result of higher earnings and realized gains on seed capital redemptions dividends declared with respect to 2024 represent an 8% dividend yield calculated based on the closing price of a common stock on December 31 2024. Consistent with prior years, a portion of cash available for the special dividend has been retained for future growth initiatives.
Looking ahead to 2025 our board approved the 2025 annual long term incentive award of approximately $66 million consisting of $47 million of cash based franchise capital awards and $19 million of restricted stock awards. Approximately 85% of the awards are awarded to our investment talent. Generally 50% of the award vest pro Rata over five years and the remaining 50% vest on or 18 months after a qualified retirement. We expect long term incentive amortization to be approximately $75 million for 2025 excluding the mark to market impact, excluding long term incentive compensation, fixed expenses are expected to increase mid to low single digits in 2025. The majority of the increase reflects 2025 merit increases and the absorption of a full year of expense for full time employees hired in 2024.
As a reminder, our compensation and benefits expenses are generally higher in the first quarter of each year due to seasonal expenses. We estimate those seasonal expenses will be approximately $6 million higher in the first quarter of 2025 compared to the fourth quarter of 2024.
That concludes my remarks and I will now turn the call back to the operator.

Question and Answer Session

Operator

Ladies and gentlemen, at this time, we will begin the question and answer session to ask a question. (Operator instructions)
And our first question today comes from Bill Katz, TD Cowen.

Bill Katz

I appreciate the commentary and the opportunity to ask question. Just thinking through the interplay between the what seems to be a bit of a pickup in the organic growth rate versus the fee rate. And just sort of wondering if this might be just some of the initial capital you've taken on the fixed income platform more broadly. Can you sort of speak to the extent you can continue to grow out the credit platform and the insight EM sites team, how that might play through on the subadvisory fee rate, which seems to have gone down rather dramatically.
And then sort of relatedly just sort of wondering as you look at the rest of the business with particular emphasis on the International Value Fund, which is doing very well. That's now roughly 25% of the platform. Just wondering where you are in terms of risk management of capacity, in terms of continuing to grow that platform.

Eric Colson

Kind of taking a reverse order. The international value strategy is hit a similar spot where we've seen in the early years of international equity or our growth platform or value platform. Over 30 years, we've seen various teams build up and we've had to manage the capacity given our values at the firm, heavily weigh performance and we believe by weighing more on performance and betting on performance, we create a longer term business. What we've seen in many of our competitors that have become an asset gathering business have focused on maximizing the dollars they can bring in a given year. We clearly are in capacity management with a few of our strategies.
What that means to us is that we're always looking at the velocity of assets, we're looking at the mix of assets and we're looking at the total asset capacity. We will manage international value with a forward lien but really not let the assets get out of control so that we don't hurt the performance track record and that's been fairly consistent and it's worked out very well for us over the 30 years. With regards to the organic growth and fee rate, you clearly saw a build up over the last year specifically and a little bit in the fourth quarter of what we call foundational assets.
I think you used the term subadvisory. These are foundational assets that are have been a little larger than past teams given the emerging market debt. And the global unconstrained strategies both have taken on or all three strategies have taken on foundational assets and some of these have had a performance based fees. And so it's brought down the fee rate a bit more, as opposed to the clear mix of fixed income as you can see in the fixed income fee rate. It would be slightly if we grew fixed income, enormously, it bring down the rate slightly. The tick you saw was the foundational asset over the last couple of quarters.

Bill Katz

That was my suspicion and maybe one for C.J. And thanks for taking the questions. The payout rate this year was much higher on the dividend. I think it sounds like it was a realization of some gains on seed capital. So maybe a two part question, where are you in terms of any kind of, where are you in terms of seed capital needs versus maybe repatriating that and then secondary, how we should be thinking about payout rate for 2025?

Charles Daley

Thanks for the question bill. So the payout ratio slight uptick, I think you hit the hit the point. We did realize some some gains on seed capital investments that we redeem during the year. I think there will be, we expect to see some more of that in 2025 with respect to our private fund credit opportunities which, we've had seen in there for the last 10 years so or seven years.
And then the rest of the seat capital is majority of it's in sites which is as Eric said, still in the foundational phase. So at some point that'll be harvested but no clear time frame on that with respect to the payout ratio. We've been in the mid 90s for the last three years. We've held back some cash to fund the capital needs. We did that again this year, but I would think you would see something similar in the mid 90% range on the power ratio with respect to calculating that on adjusted EPS.

Operator

Our next question comes from Alex Blostein, Goldman Sachs.

Alex Blostein

Thanks for the question as well. A little bit of a bigger picture question for you guys for global and international emerging markets, equity strategies broadly. We've clearly seen lots of volatility in those markets relative to us markets for some time. Political uncertainty continues to be significant. So curious how you're seeing the end customer, the end market, respond to that with respect to either institutional interest in the non US business is picking up staying the same or diminishing as well as anything on the retail side that you're noticing on the grant on the ground that could, pivot the appetite for the strategies and if things do turn and there's more appetite, which products are sort of most best positioned from a capacity perspective to take in new assets.

Eric Colson

I'll give it a start and probably Jason will jump in a bit too. But yeah, just on the big picture, it's that time of the year where where people roll into looking at capital market forecast revisiting asset allocation. The direction there has been really an eye on inflation and a lot of the volatility in the global macro markets. I think the output we've been seeing from clients is a bit of a hesitation though given the macro environment and, and firstly, what's going on with the tariff news and inflation and the fed. I don't think we are going to see as much tactical movement as we thought. I think it'll be more strategic in nature.
People are a little frozen on which direction things are going to go. Given all the news in the marketplace. So we're expecting some moderate strategic moves and asset allocation but not wholesale changes that some people talk about of big moves this year. If there's start getting a, a clearer picture of the direction of some policies and regulation and where the markets are digesting the news, you might see some shifts, but we're expecting just some OZK changes in the marketplace. When we looked at our product mix.

Jason Gottlieb

The only thing I would add, Alex, it's Jason Gottlieb. Is we've seen continued progress and stability in the alpha profile of a number of those strategies. It tends to make sense to us the uncertainty drives volatility in those markets and volatility is basically the gas and an active manager tank.
And our team's ability to capture that that volatility has proven out pretty nicely across the platform. We're seeing it in the global equity team, the international value team, global value, sustainable emerging markets developing world. So we feel like we're really well positioned in that regard for what is an active management opportunity set. It's really just more a question of, when that tide turns, we'll certainly be very well positioned for it.

Alex Blostein

That all makes sense. I see you want for you. I heard the comments around compensation and the guidance for '25. Sorry if I missed any color on non comp as well, if we can run through your expectations for expense growth and those buckets, in total as well by pro by line if you have that.

Jason Gottlieb

So, if you were to assume flat markets, I would expect expenses to be up low single digits, a couple percent. If you were really focus in on fixed controllable. Given the variable nature of our P&L obviously, revenues are going to dictate variable expenses. But on the fixed side, you're really looking at probably mid single digits, I'd say two thirds about it of it is the long term incentive comp, which we highlighted, in the prepared remarks and then we have some increases in salary and benefits primarily some muted new roles over last year and then merit increases and the full impact of new hires then new hires of about 10 or 11 folks last year in 2025 the rest of the buckets are relatively flat for our projections.

Alex Blostein

Great. Thank you.

Operator

Our next question comes from John Dunn, Evercore ISI.

John Dunn

You guys talked about two EM sites m sites strategies hitting three year track record. Can you remind us maybe any other strategies getting to significant milestones in '25?

Eric Colson

International Explorer is, It's March of of this year. They're going to be hitting their three year milestone. That's the smaller cap strategy that's sitting in the international value franchise. And that's clearly going to springboard them into a greater opportunities. Their alpha profile is exceptional. Their absolute return profile is quite compelling. As we had mentioned in our earnings commentary, the Developing World Fund is going to be hitting its 10 year anniversary and by all accounts, most relevant time periods look extremely compelling. And certainly the short term numbers that Lewis and the developing World team have been able to produce have been catching a lot of attention and a lot of forward lean in the emerging market space as well.

John Dunn

Got it. And at your investor day, you guys had talked about not needing to be first movers to do anything in like private markets ALTs. That we're a little further away from any kind of perspectives, observations learnings updated about going down that direction at some point.

Jason Gottlieb

Ultimately, we're going to be measured by the opportunities we bring to the platform that being said behind the scenes. Eric and I have been methodically building out the investment strategy group. I think if you were there, you saw the co heads of investment strategy which are led by Keegan o'brien and Chris Nicolau. Talking about the platform, what we're developing together with Eric and we're evaluating more opportunities than we ever have. Our bias has been towards ALTs but we have an open door policy. We're looking at anything and everything we learned a lot by doing that. And as I had mentioned last quarter, we're looking primarily in the real estate credit and equity across private but also credit more broadly. There's still plenty of opportunity for us. Talent is looking for a new home everywhere and anywhere. Lift out an acquisition format still remains quite strong.
Our goal will continue to remain focused on talent and partnering with the right individuals. We do have later stage opportunities we're working through. But as I said, last quarter, until the team or individual has joined, uncertainty remains extremely high.
I think it's important to point out that there's several of our current franchises that have embraced degrees of freedom and we continue to work across the platform to develop new capabilities that intersect with the team's passion, asset allocation and commercial application. Look no further than the international value team in the launch of global special situations which we expect to be in fund format in late QQ one of this year. We believe that artisan in general is a highly attractive home and that we provide it autonomous and distraction free investment environment.
It's aligned economics and it's a platform that is built to build a business. So we're going to be patient. We're going to swing at pitches that we think are akin to you know, success for our platform. But we do have plenty of opportunities where we can we can grow and expand.

Operator

Thank you and ladies and gentlemen. With that we will be ending today's question and answer session as well as today's presentation and conference call. Thank you for attending. You may now disconnect your lines.