AllianceBernstein Holding L.P. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Assets Under Management: Firmwide AUM reached $860 billion, with Bernstein Private Wealth at $153B, institutional at $351B, and retail at $356B.
• Flow Dynamics: Improved net flows of $1.7B (excluding reinsurance), driven by tax-exempt fixed income and private alternatives inflows. Active equities had outflows, but structured/defensive strategies saw inflows.
• Insurance Asset Management: New partnership with Fortitude in FCA Re, enhancing third-party insurance asset management.
• Investment Performance: Fixed income had a positive outlook, equities saw strong returns but some underperformance in certain baskets.
• Retail Highlights: Tax-exempt retail inflows reaccelerated, with a 26% annualized organic growth rate; taxable flows rebounded.
• Institutional Channel: Private alternative services had significant inflows, with pipeline AUM ~$12B.
• Private Wealth: Gaining market share in the ultra-high-net-worth channel, with strong sales and inflows.
• Retirement and Private Alternatives: Custom target date funds at ~$105B, lifetime income strategy manages $13.5B, private markets AUM near $80B, targeting $90B-$100B by 2027.

Segment Performance

• Firmwide Assets Under Management: Reached $860 billion as of quarter-end. Bernstein Private Wealth stands at a record high of $153 billion, institutional asset management has $351 billion AUM, and the retail platform has $356 billion AUM.
• Net Flows: Firmwide net flows were $1.7 billion positive, excluding $4 billion outflows from the Equitable RGA reinsurance deal. Tax-exempt fixed income had over $4 billion inflows, extending 11 consecutive quarters of positive organic growth. Private alternatives generated nearly $3 billion of net inflows. Active equities had outflows, but structured and defensive strategies saw inflows.
• Bernstein Private Wealth: Represents 18% of firmwide assets, generates approximately 36% of firmwide revenues, and delivered strong sales with the highest inflows in ten quarters.
• Institutional Asset Management: Caters to long-duration capital pools including private markets, insurance, and customized retirement plans, with $351 billion AUM.
• Retail Platform: Serves Asia Pacific and US markets, offering SMAs, active ETFs, and model portfolios, with $356 billion AUM.

Guidance

• Financial Results: Adjusted earnings $0.86 per unit, net revenues $885M, operating income up 15%.
• Expenses: Non-compensation expenses revised to $600M-$610M for full year 2025.
• Performance Fees: Third quarter performance fees ~$20M, expected $35M-$40M in private market fees in Q4, full-year performance fees raised to $130M-$155M.
• Fee Rate: Firmwide base fee rate increased, with private markets AUM growth supporting an all-in fee rate increase.

Risks

• Market Volatility: Impact on performance fees and asset valuations.
• Regulatory Uncertainty: Affecting retirement and private markets solutions.
• Credit Quality: Potential deterioration in individual credits, though overall credit fundamentals remain robust.

Question and Answer

• Q: On insurance opportunity and Ruby Re delay A: FCA Re is additive to Ruby Re, no delay in RGA funding, on track with insurance strategy.
• Q: Private credit quality and rate sensitivity A: Credit quality generally stable, private credit teams see competitive environments, rate declines may impact performance fees.
• Q: Asia business and investor reactions A: Asia business improved, investors diversifying into global equities, strong engagement in taxable fixed income.
• Q: Margin and expense growth A: On track for 30%-35% operating margin, non-comp expenses controlled, buyback timing related to deferred comp plan.
• Q: Bond reallocation and private markets fees A: Bond reallocation underway, private markets fees predictable with PCI, sensitivity to rates low in private wealth.