AllianceBernstein Holding L.P. Units

Thank you for standing by, and welcome to the Alliance Bernstein Fourth Quarter 2020 Earnings Review. At this time, all participants are in a listen-only mode. After these speakers' 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 it will be available for replay for one week. I would now like to turn the conference over to the host for this call, head of investor relations for AB, Mr. Mark Griffin. Please go ahead.

Thank you, Natalia. Good morning, everyone, and welcome to our fourth quarter 2020 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.alliancebernstein.com. Seth Bernstein, our president and CEO, and Ali Dabaj, head of finance and strategy, will present our results. Kate Burke, our COO, will join us for questions after our prepared remarks. Some of the information we'll 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 2020 10-K, which we filed earlier this morning. Under Regulation FD, management may only address questions of 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 and thank you for joining us today. 2020 forced all of us to face unexpected challenges unparalleled in both scope and scale. While the impact of COVID-19 civil unrest and depressed economic activity continue to reverberate today, the initial onset and subsequent reaction shaped the year unlike any other. I'm proud to say that Alliance Bernstein, we learned from these challenges, grew as an organization and emerged even stronger than when we started the year. We acted first to ensure the health and safety of our employees, enabling us to be fully invested with our clients and their needs through volatile dynamic market conditions. We also meaningfully stepped up our focus and commitment to practicing true corporate responsibility. improving diversity and inclusion on our board and operating committee, and adopted key commitments to ESG and racial equity, all while continuing to invest in the health and well-being of the communities in which we are a part. In 2020, we made progress on several strategic growth initiatives, including initiating our European commercial real estate debt and CLO private alternatives platforms, both in partnership with Equitable, building our onshore presence in China, and further broadening our Asian footprint, which we recently received six prestigious awards in Asia Asset Management's 2021 Best of the Best, launching six new multi-asset products, expanding our ESG leadership and capabilities rooted in our distinct strength and fundamental research, and executing our national headquarters relocation, which remains on track with our new office building opening next quarter and was modestly accretive to earnings in 2020. Our long-term investment performance remained solid, with our talented teams continuing to generate idiosyncratic returns that can't be replicated. For the year, we posted active organic growth of 3% net of expected exit redemptions while expanding our margins to meet our 2020 adjusted operating margin target of 30%. We delivered 15% growth in both earnings and distributions to unit holders. Let's get into the specifics, starting with a firm-wide overview on slide four. Fourth quarter gross sales of $31.3 billion were up $4 billion, or 16% from a year ago, a strong finish to the year. Full year gross sales of $124 billion were up 20% from the prior year, the strongest year in over a decade, reflecting broad-based growth across all three channels. Fourth quarter firm-wide active net inflows were $5.2 billion, excluding acts of redemption, a 4% annualized active organic growth rate. Full-year active net inflows of $14.9 billion, excluding expected acts of redemption, represented a 3% active organic growth rate. Year-end assets under management of $686 billion increased 10% year-over-year, while full-year average AUM of $620 billion increased 8% versus the prior year. Slide 5 shows our quarterly flow trend by channel. Fourth quarter firm-wide net inflows reflected strong growth in institutional, offset by net outflows in retail and private wealth. Retail experienced active net inflows driven by active equities and munis offset by passive outflows. Institutional gross sales strengthened to $9.9 billion, excluding the acts of redemption. We generated net inflows of $5.7 billion, with both active equities and active fixed income growing by 10% annualized. In private wealth, gross sales increased 37% year-over-year and were up 6% sequentially, with significant productivity gains. Net outflows were $1.1 billion in the quarter. Slide 6 shows annual net flows trends. But we buy our strongest sales years since 2007. Firm-wide net inflows of $9.2 billion, XX redemptions, reflected strong growth in institutional offset by net outflows in retail and private wealth. Retail posted its strongest sales year ever with active inflows of 3.1 billion driven by equities offset by passive outflows of 4.6 billion. Institutional posted its strongest sales in over a decade and grew net inflows by 1 billion or 12.8 billion excluding access redemptions. Private wealth also had its strongest sales year in over a decade. Outflows of 2 billion reflected in part a flight to safety as investors shunned volatility weaker shorter term investment performance. Now let's turn to investment performance beginning on slide seven. Clearly 2020 was a stunning year for global financial markets. The market turmoil of March and April seems today to be a distant memory, following the provision of massive and coordinated monetary stimulus from central banks and astonishing fiscal policy support, which continues today. Our teams responded well in a volatile market and were positioned to take advantage of the ensuing recovery in risk assets. In the fourth quarter, our fixed income performance continued to improve as multi-sector credit positioning once again benefited from a risk-on environment. Credit sectors outperformed governments in the quarter, with U.S. high yield up 5.5%, European high yield up 5.6%, Emerging markets up 4.5%, and U.S. corporates up 3%, all posting healthy excess returns versus governments, which returned minus 0.8%. In fixed income, 62% of assets outperformed over the three-year period and 79% outperformed over the five-year period. On a one-year basis, the percentage of assets outperforming improved to 43%, reflecting strength in our municipal and global plus products. Our flagship global high-yield portfolio continued its strong recovery following a difficult first quarter, placing it in the eighth percentile of its Morningstar peer group in the fourth quarter and the tenth percentile for the nine months ending in December. American income was in the second quartile for these periods and remains top quartile over the three, five, and ten-year periods, as shown on slide 21 of the appendix. Long-term equity performance remains solid. as 61% of assets outperformed over the three-year period and 53% outperformed over the five-year period. As the most recent one-year period, 41% of assets outperformed, reflecting the outsized weightings of the top five mega cap stocks in certain benchmarks. As we noted last quarter, momentum and beta are prominent factor risks for these stocks to which we remain sensitive. The market broadened considerably in the fourth quarter, with U.S. small caps up 31% and value-leading growth. In this environment, our value portfolio is delivered by outperforming peers in the quarter, as cyclical value came back into vogue in November and December. Our diverse equity offering is positioned to participate should markets continue to broaden across styles and capitalization ranges. Moving on to our client channels, beginning with retail on slide eight. 2020 saw banner retail sales up 79 billion, up 5% year-over-year. U.S. sales were up 21%, and Japan doubled, while Asia ex-Japan sales declined by 15% versus a robust 2019. Despite experiencing record first-quarter redemptions due to the industry-wide sell-off in March, we generated active net inflows for the full year of 3.1 billion. As shown on the upper left chart, 2020 was our fourth consecutive year of active equity growth. We delivered 7% organic growth in 2020 and 8% on average over the last four years in the face of unrelenting industry headwinds. Our retail offering is the most balanced it has been in years, with equity contributing 46% of sales and fixed income 45%. By geography, Asia X Japan and the U.S. represent 38% and 37% of sales, respectively. Japan is now 11%, with EMEA and Latin America rounding out our offering. We now have 59 products of more than a billion dollars each, balanced across asset classes, including 15 all-to-multi-asset. Several of our largest funds posted very strong flow rankings in 2020, as shown on the bottom right. Now I'll discuss institutional on slide nine. Full-year gross sales of $30.9 billion were up 81% year-over-year, the highest level in over a decade. Excluding the planned acts of redemptions, we generated $12.8 billion of net inflows. Active equity sales accelerated in 2020 to the highest level in over a decade. We've now posted sales greater than $2 billion for seven of the past eight quarters. First, fixed income sales were also robust, up 260%, driven by core mortgage and securitized debt. Full year net flows were led by active equity, which grew organically by $7.2 billion, or 16% year over year. Equity flows led by global core, international small cap, U.S. concentrated growth, and international strategic value. We also had diversifying flows from China value and low vol total returns. In alternatives, we launched our European commercial real estate debt platform in the quarter, supported by a sizable commitment from Equitable. This platform extends geographic capabilities while leveraging our strong relationship with Equitable as they seek yield-enhancing investment alternatives. We were also excited to have closed and funded our first CLO, a $400 million offering, the first of hopefully many to come. Our ESG-focused portfolios with purpose have now grown to... billion, up 60% year over year. We continue to see strong interest from global investors and consultants in ESG-focused products and have several more in development. Our Green Managed Volatility Equities Fund was recently awarded Most Innovative Launch by Investment Week, and we had three finalists named by UK-based ESG Investing in their 2021 Investor Awards. Our institutional pipeline was 12.2 billion at quarter end, reflecting several sizable fundings during the quarter, including a $4 billion agency MBS mandate. We added 4.2 billion in pipeline additions in the quarter. Notable pipeline additions include 1.3 billion of global credit, 750 million in European value, and 450 million in our fourth U.S. commercial real estate debt fund, and 400 million in global healthcare. Moving to private wealth management on slide 10. Full-year gross sales of $14 billion increased by 27% year-over-year and were the highest in over a decade. The top left graph shows strong improvement in our advisor productivity, up 21% in the fourth quarter and up for the full year. Productivity levels approached all-time highs last seen before the financial crisis. Redemptions of $16 billion partially reflected a customer flight to safety, while single strategy-related outflows early in 2020 have since abated with meaningfully improved performance. Full-year net outflows were $2 billion. As we closed the year, we saw evidence that an uptick in broader M&A activity is leading to thawing in business transactions, which bodes well for client fundings. We raised $850 million in alternatives through this channel in 2020 across a number of different strategies, including Asturias, the long-short TMT strategy acquired in early 2020. MUNI impact is now over $1 billion in AUM and up 55% from the prior year. Our ESG-focused strategies in private wealth grew 65% last year to $4.5 billion in AUM, with additional product launches planned for the near term. And our proprietary separately managed equity tax loss harvesting product recently surpassed $500 million with AUM up 52% sequentially. I'll finish our business overview with the sell side on slide 11. Elevated market volatility in 2020 drove an increase in Bernstein Research's global client trading volumes both for the fourth quarter and for the full year. Revenues increased by 7% in the fourth quarter and 13% for the full year as compared with prior periods. We were particularly pleased to see strong growth in Asia, including in India, where we've made focused investments. Our U.S. business also posted strong growth. While Bernstein Research provided a valuable hedge to our core asset management business during the extreme volatility in early 2020, secular challenges in the research business remained. We would not expect last year's market volatility, extending primarily from COVID-19, to persist over the long term. In 2020, we embedded a proprietary, bottom-up, fundamental approach to ESG into our global research. We hosted a global webinar series, authored nearly 200 reports exploring ESG-related themes, and published a global outline collaboration evaluating the impacts of climate change for each sector. Highlights of our full year accomplishments are shown on slide 12. 61% of our equity assets and 60% of our fixed income assets are outperforming over three years. We continue to show remarkable traction delivering differentiated return streams and active equities as retail and institutional grew organically by 7% and 16% respectively. Our ESG offering is growing quickly with AUM up and a half billion at year end, up 60% in 2020. We drove full-year active inflows in both retail and institutional, overcoming the acts of redemption. Our institutional pipeline of 12.2 billion at year end has a fee base with a mix of over 80% active equity and alternatives. And we continue to grow our suite of alternative and multi-asset offerings, including the fourth quarter launch of our CLO and European Commercial Real Estate Debt Businesses, as well as six multi-asset strategies and more expected to come in 2021. We are committed to managing our business to deliver strong incremental operating margins. Our full-year adjusted operating margin of 30.1% was up 260 basis points year over year, with full-year earnings and unit holder distributions up 15% versus the prior year. Now I'll turn it over to Ali Dabaj to walk through the financials.