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Stock Strategist

We Still Have Concerns About Artio Global Investors

Despite its strong investment track record, Artio's shareholder structure leaves much to be desired.


We initially commented on the Artio Global Investors (ART) offering back in September, rating it low-interest. Artio successfully raised $650 million from its initial public offering, selling 25 million shares for $26 each. In our original post, Morningstar equity analyst Gregg Warren stated he had several concerns about the firm despite its strong investment track record and institutional support. Gregg believes Artio's shareholder structure leaves much to be desired:

"The organization is set up in such a way that only 74% of the economic rights of Artio Global Holdings LLC, an intermediate holding company for Artio Global Management LLC, flow through to Artio Global Investors, the company whose stock was brought to market last month. The remaining 26% is split evenly between the two principals, Messrs. Pell and Younes. Julius Baer continues to hold 47% economic rights and 35% of the voting rights (vested in its Class C shares). The two principals, who each received $28 million from the proceeds of the offering, will retain 26% of the voting rights (vested in their Class B Shares), will have no economic rights beyond those at the holding company level, and will hold no Class A common shares. This leaves the remaining Class A shareholders with just 39% of the total voting rights, despite holding 53% economic rights, which effectively leaves control of the publicly-traded firm in the hands of Julius Baer and the two principals."

We also think the name change from Julius Baer Americas to Artio Global Investors raises some potential issues, which Gregg clarifies:

"While there are plenty of things to like about Artio, from its historical track record of market beating performance to its concentration of managed assets with institutional investors (which tend to be far stickier than individual retail investors), there are several issues that prevent u s from being more interested in the firm. For starters, the company only recently changed (in June of 2008) its name from Julius Baer Americas to Artio Global Investors. The impact of this change on its business cannot be fully predicted, and the lack of an established brand image for the new name in the marketplace may disrupt sales and adversely affect the business. While the firm's investment track record has been impressive, with its International Equity I (BJBIX), Global Equity (BJGQX), and Total Return Bond (BJBGX) funds all beating their respective benchmarks handily since they were launched in 1995, performance through the first eight months of 2009 has been less stellar. Should this persist, Artio faces the prospect of losing some of the support it has traditionally had from institutional investors, which once lost are very difficult to bring back into the fold."

Since the firm's IPO, its shares have traded as low as $22.70, and as high as $28.10. Currently, shares are trading around the offer price of $26.

This report is made available compliments of Morningstar IPO Research Services. For more information on Morningstar IPO Research, please contact Marc DeMoss at or +1 312 384-4052.

Bill Buhr does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.