AllianceBernstein Holding L.P. Units

Thank you for standing by and welcome to the Alliance Bernstein second quarter 2019 earnings review. At this time, all participants are in a listen-only mode. After the remarks, there will be a question and answer session and I will give you instructions on how to ask questions at that time. As a reminder, this conference is being recorded and will be available for replay for one week. I would now like to turn the conference over to the host for this call, the head of investor relations for AB, Ms. Hallie Alsner. Please go ahead.

Thank you, Carol. Good morning, everyone, and welcome to our second quarter 2019 earnings review. This conference call is being webcast and accompanied by a slide presentation that's posted in the investor relations section of our website, www.allianzbernstein.com. Seth Bernstein, our President and CEO, John Weisenseel, our CFO, and Jim Gingrich, our COO, will present our results and take questions after our prepared remarks. Some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure, so I'd like to point out the safe harbor language on slide two of our presentation. You can also find our safe harbor language in the MD&A of our second quarter 2019 10Q, which we filed this morning. Under Regulation SD, management may only address questions of a material nature from the investment community in a public forum. So please ask all such questions during this call. Now, I'll turn it over to Seth.

Good morning. Thank you for joining us today. Our second quarter results reflect momentum in several areas of our business. Firm-wide, active flows were positive $10.2 billion in the second quarter, bringing year-to-date active net inflows to $12.3 billion, which translates to a 5.4% annualized organic growth rate. Flows were driven by the continuing rebound in fixed income, particularly in Asia ex-Japan region, and ongoing success of our revitalized active equity platform, which attracted another $1 billion in net due flows during the quarter. And in an environment of declining fee rates, AB's second quarter average fee rate was stable year-on-year and increased slightly sequentially. Now let's get into the specifics, starting with a firm-wide overview on slide four. Second quarter gross sales of $27.3 billion increased 44 percent year-on-year and 18 percent sequentially. Total firm-wide net flows were positive $9.5 billion versus net outflows in the prior year period and net inflows of $1.1 billion in the first quarter. Total assets under management of $580.8 billion at quarter end increased 8% year-on-year and 5% sequentially. An average AUM was up 4% versus the prior year period and 5% sequentially. Slide five shows our quarterly flow trend by channel. Firm-wide net inflows were driven by retail and institutional, while private wealth flows turned negative. In retail, gross sales of $18.8 billion increased versus both prior periods, and net inflows of $5.9 billion compared to outflows in the year-ago period and were higher sequentially. In the bottom left chart, you can see the institutional gross sales of $5.5 billion also increased versus both periods. and redemptions improved following an elevated first quarter that was the result of a variety of factors in the aftermath of the late 2018 market dislocation. This resulted in institutional net inflows of $4.2 billion. In private wealth, gross sales of $3 billion were flat versus the prior year period, excluding $500 million of sales related to option advantage launch. Redemptions increased versus both prior periods due to a single large institutional-like outflow and heightened outflows related to tax season, leading to net outflows of $600 million. Now let's turn to investment performance beginning on slide six. Our near-term fixed income performance has been challenged, though we saw some improvement in the one-year number this quarter. Our percentage of assets outperforming for the three-year period declined to 63%, as two large funds, Global High Yield and Global Bond, underperformed their category averages for the period. Our global diversified high income approach worked against us this quarter as many of our peers in the category invest in high yield corporates, especially U.S. high yield, and have been performing well. Despite the pullback in the percentage of assets outperforming, we continue to have high conviction that being well diversified produces the best risk-adjusted results over time. which you can see in our five-year track record with 91% of our assets outperforming. In equities, our investment performance was solid with 67% of our assets outperforming for the one year, 61% for the three year, and 83% for the five year. Slide seven and eight provide more insight on retail fixed income and equity investment performance. The fixed income table on slide seven reflects some of the near-term performance challenges I mentioned, but also shows that long-term track records remain compelling. Performance in our income portfolios has been particularly strong. American income is top quartile for the one- and five-year periods. European income is top decile for the one- and five-year periods and top quartile for the three-year period. Mortgage income remains top quartile for the three- and five-year periods. And AB income remains top decile for the three- and five-year periods. Moving on to equities on slide eight, Our concentrated growth, low vol, global core, and large cap growth strategies are notable outperformers. In fact, concentrated global and global core each is top decile across time periods. Global low vol is top decile for the one- and five-year periods. Concentrated U.S. growth is top decile for the one-year and top quartile for the three-year, and large cap growth is top quartile for the one- and three-year and top decile for five years. These are impressive rankings, even as we continue to see some underperformance in our value and emerging market strategies. Let's move on to our client channels, beginning with retail on slide nine. We're seeing the results of years we've spent investing in our retail platform to better serve clients globally with a diverse set of product offerings. The outlook for steadier, if not declining rate environment has attracted investors in Asia X Japan region back to the fixed income market over the last several months as they search for yield opportunities. The top left chart shows the pickup in industry-wide retail bond fund sales in the region in 2019. This rebound in sales positively affected our overall sales, which hit an all-time record for retail and flows in the quarter. Combined second quarter growth sales of American income portfolio and global high yield amounted to $7.3 billion and brings year-to-date sales to $13 billion, more than triple versus the first half of 2018. And while the sales pickup in American income and global high yield is notable, the sales only accounted for about 40% of our record quarter. We also saw sales strengthen in other regions during the quarter, including sequential and year-on-year sales growth in EMEA, Japan and U.S. sub-advisory, a year-on-year increase in U.S. retail, and a sequential increase in Latin America. What's more, the average fee rate on our gross sales in the quarter is 20% higher than the overall channel average. Net inflows of $5.9 billion were our best in 19 years and brings year-to-date net inflows to $11.2 billion. And our sources of flows are diverse. Twenty-one funds attracted net flows of $100 million or more year-to-date, with 12 of them fixed income, eight active equity, and one multi-asset. We hit a number of milestones during the quarter as well. AP retail assets under management of $215 billion at quarter end is at an all-time high, and more than 50 retail offerings have more than a billion dollars in assets under management at quarter end. Now I'll talk about institutional on slide 10. The years we've spent revitalizing our active equity franchise are clearly paying off. The top left chart shows sustained active equity sales success and flow momentum. Active equity gross sales of $2.4 billion represent our eighth straight billion-dollar-plus equity sales quarter, and our active equity net flows of $1.1 billion were positive for the sixth straight quarter. Our institutional active equity platform of nearly $41 billion at quarter end has increased 23% over the past 18 months, with 86% of that growth occurring organically thanks to cumulative net inflows of $6.4 billion. Considering the industry-wide contraction, this is particularly impressive. Consultant support is also contributing to the success we're having. Five firms, two global and three major U.S. national, upgraded eight active equity strategies during the quarter, and we continue to see a steady stream of RFP activity. And while we're certainly experiencing an abundance of success in equities, it's important to note that we're also seeing success in other areas, including multi-asset, where a win for our custom alternative solutions from the top-tier pension fund and CRS fundings contributed 35% of channel sales in the quarter. Our quarter-end pipeline of $7.1 billion declined sequentially as fundings increased following a quiet first quarter, but is flat compared to this time last year. With more than 50% of our pipeline ads in the quarter coming from active equity strategies, the average fee rate of new ads is more than double the fee rate on the overall channel. As a result, the pipeline's annual fee base exceeds $30 million for the seventh straight quarter. This bodes well for both future revenues and fee rates. Moving to private wealth management on slide 11. Keeping clients invested and comfortable with their diversified allocations through intra-quarter volatility continues to pay off and attract new clients. Second quarter growth sales of $3 billion brings our year-to-date sales to $6.3 billion. for our best first half excluding option advantage in 11 years. However, flows turned negative with outflows of $600 million. I mentioned earlier that this reversal is largely due to a single large institutional-like outflow as well as heightened activity related to tax season. Year-to-date net flows are slightly negative at $100 million. Our advice model investment platform continue to resonate with a broader, more affluent client base. The average size of new client relationship increased 11% in the first half versus last year. And more than a third of our first half gross sales were from new client relationships. We also added another $700 million in commitments to our suite of alternative and focused equity services during the quarter, bringing total deployed and committed assets above the 10 billion mark to 10.6 billion at quarter end. That's the bottom left chart. Our responsible and impact investing portfolio offerings continue to appeal to our clients. Assets in a diverse array of responsible equity and fixed income services totaling $2.2 billion at quarter end, a 68% increase year over year. Growing our advisor base remains a top priority for us as well, and we remain on track for mid-single-digit growth in 2019. I'll finish with our overview with the sell side on slide 12. Bernstein Research continues to face challenges along with many of our peers in the equity trading business as industry volumes remain depressed and the shift towards lower fee electronic trading persists. Revenues of $106 million were flat year-on-year and up 18% sequentially. However, excluding our April 1st acquisition of Autonomous Research, revenues declined 9% year-on-year. Driven by lower trading volumes and lower volatility in the U.S. year-on-year, that's the bottom left chart. While disappointing, we continue to believe that a differentiated offering will ultimately drive client activity. We have another strong showing in a recent annual independent survey for both U.S. research and trading. Bernstein Research ranked number one for the 17th straight year in quality of analyst service and had number one rankings in several other key areas. Our 35th Strategic Decisions Conference was attended by more than 1,100 clients, and client meetings increased 4% versus last year. a testament to the value clients see in our differentiated research. We continued building out our offering in Asia, with launches in Asia-Pacific healthcare, Indian IT services, and emerging China semiconductors, and new coverage for Asia coal, power, and renewables expected soon. While year-to-day trends in this business are below our expectations, we're thoughtfully navigating a tough environment. So I'll close by highlighting some of our second quarter accomplishments on slide 13. We continue delivering differentiated returns for clients with our diverse products. And we further scaled and commercialized our offerings with momentum and active equities, a pickup in fixed income, and wins across a diverse client base. We remain focused on expense management and executing our relocation to Nashville. I'm proud of what we've achieved during the quarter despite the presence of some headwinds. Now I'll turn it over to John to review our financials. Thank you, Seth.