AllianceBernstein Holding L.P. Q4 FY2025 earnings call

• 2025 was a year of disciplined execution and strategic progress for AllianceBernstein, with newly appointed president Onur Erzan playing a pivotal role. - Assets under management reached a record $867 billion at year-end 2025. - Bernstein private wealth has $156 billion AUM, contributing 37% of firm-wide revenues. - Private markets platform AUM up 18% y/y, with $9 billion deployments in 2025. - SMA franchise grew 12% organically. - Tax-exempt franchise had strong inflows. - Alternatives and multi-asset strategies had positive inflows. - Adjusted operating margin expanded to 33.7%. - Accelerated collaboration with Equitable, onboarding over $10 billion new long-duration assets from Equitable by year-end 2026, expecting to add $3 billion of new private asset mandates from strategic insurance partnerships in 2026.

Assets under management reached a record $867 billion at year-end 2025. Bernstein private wealth business has $156 billion in assets under management, contributing roughly 37% of firm-wide revenues in 2025. Private markets platform closed the year with $82 billion in AUM, up 18% year over year. SMA franchise reached $62 billion of AUM and grew 12% organically in 2025. Tax-exempt franchise had $3.9 billion inflows in the fourth quarter and $11.6 billion for the year. Alternatives and multi-asset strategies posted $1.9 billion active net inflows in the fourth quarter and $10.6 billion for the full year. Adjusted operating margin expanded to 33.7% for the year at the upper end of the 30% to 35% target range.

• Expect to onboard more than $10 billion of new long-duration assets from Equitable by year-end 2026. - Target for private markets AUM in 2027 is $90 billion to $100 billion. - 2026 full year noncompensation expense expected to be in the range of $625 to $650 million. - Full year 2026 effective tax rate forecasted to be 6% to 7%. - Private market strategies expected to contribute $70 to $80 million in performance fees in 2026, public market strategies at least $10 to $20 million assuming no major market drawdown.

• Firm-wide active net flows were negative for both the quarter and the full year due to performance headwinds in active equity and fixed income. - Highly concentrated nature of US equity market leadership and stretch valuations create a challenging backdrop for active managers. - Market volatility and geopolitical uncertainty can impact fixed income outflows. - Complexity in technology implementation may pose risks.

Q: Wanted to maybe get a little more on the outlook for high yield funds distributed in Asia. Some of the know, almost beyond interest rates, some of the puts and takes of, you know, that influence demand month to month.

A: Sure. Hi, John. Yeah. It's Onur. Let me take that question. In terms of the broader trends in Asia, there are macro factors such as the FX risk for foreign investors relative to US dollar, the rates outlook, etcetera. I mean, obviously, we've been navigating those macro factors for decades. Some of our products in Asia have been in existence for thirty years. We have not seen a tremendous impact from a structural demand perspective in terms of the FX risk yet. Yes. There are some ebbs and flows, and on a relative basis, investors are a little bit more sensitive or concerned about the FX risk. But it has not dramatically impacted the structural fixed income demand. As you know, the Asia clients, the retail particularly likes income. And still, the US dollar denominated strategies and global strategies deliver attractive income. Hence, the structural demand remains strong. In terms of our business, in terms of a couple of positives, as you know, we started globalizing our ETF franchise, and we started with fixed income given our strong brand in Asia particularly in fixed income. And we added our second active ETF in Taiwan. If you recall, we were the first active fixed income ETF launcher in '25. This year, we added a high yield fund, and it was a successful IPO. Top in its category. So we see broadening of the vehicles that will help us. And another thing that will help us in Taiwan we were facing some regulatory constraints in terms of percentage of assets that can come from Taiwanese investors in some of our vehicles. Taiwan raised those minimums from 70% to 90% for us. Based on some of the commitments. As a result, that will help us unlock more opportunity in Taiwan. So as a result, there are a couple of unique AB specific factors that will help with the demands. In 2026. And then, obviously, in the broader markets, there will be definitely competition across strategies and depending on how our strategies perform on a relative basis we'll gain or lose market share. As you know, we hold very strong market share in cross-border vehicles that are used in markets like Hong Kong. We are typically a market leader. Sometimes we give up some market share or gain some market share depending on particularly, the positioning of the rate curve given we tend to be long duration and long credit structurally in most of our products.

Q: This is Nathan on for Ben. Just a quick question with AI-related volatility impact software evaluation. Can you size AB's private credit exposure to software across the portfolio by, you know, percentage of AUM, maybe top exposures, like, any areas where you tie in underwriting or adjusted risk limits? Thank you.

A: Sure. It's Onur. Let me take that as well. It's not a very significant exposure for us given our broadly diversified global asset management platform. To recap our private alt platform is around $82 billion of assets based on fee-earning and fee-eligible AUM. Within that, roughly 25% is our corporate direct lending business, PCI. And in that business, typically, it is we are the lead underwriter in middle market, loans. Against sponsors. Typically, we work with 250 sponsors in the United States. Typical, companies we work with are in the $10 million to $75 million EBITDA range. So within that PCI portfolio, we have exposure to technology or software kind of companies. Our exposure tends to be in line with the rest of the corporate direct lending markets. So typically around a quarter of the AUM tends to be related to software. We have a long-standing history in terms of operating and technology and software, and we have not seen any material change in terms of our loss experience, and we have been very diligent in monitoring our credit watches and staying close to those borrowers. But so far, again, no major deterioration. And even, it was to deteriorate materially, it's not gonna impact our business given middle market lending is only roughly $25 billion of AUM. And within that, we only have a certain percentage exposure to software, as I mentioned. So overall, we are not that sensitive to it.