AllianceBernstein Holding L.P. Units

Thank you for standing by, and welcome to the Alliance Bernstein Second Quarter 2021 Earnings Review. At this time, all participants are in listen-only mode. After the remarks, there will be a question and answer session, and I will give instructions to you on how to ask a question 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 of this call, Head of Investor Relations for AB, Mr. Mark Griffin. Please go ahead, sir.

Thank you, Angie. Good morning, everyone, and welcome to our second quarter 2021 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. With us today to discuss the company's results for the quarter are Seth Bernstein, our President and CEO, and Ali Dabaj, CFO and Head of Strategy. Kate Burke, 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 second quarter 2021 10Q, 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.

Thank you, Mark. Good morning, and thank you for joining us today. In the second quarter, we continued to grow organically across all three channels for the third time in the last four quarters. Geographic diversification and differentiated client-focused offerings across active equities, including ESG, multi-asset, municipals, and alternatives led the way. Our short and long-term investment performance improved across both equities and fixed income, while our record institutional pipeline maintained an annualized fee base above $50 million. For the quarter, we posted active organic growth of 4% while expanding our adjusted operating margin to 31.7%. We delivered 49% growth in both adjusted earnings per unit and distributions per unit holder. Let's get into the specifics. starting with the firm-wide overview on slide four. Gross sales were $45 billion, or $36.3 billion net of sales associated with the venerable transaction. Once again, the quarter sales were second only to pre-financial crisis levels 14 years ago. Ex-venerable sales were up $4.5 billion, or 14% from a year ago, and up 9% from the prior quarter. Firm-wide active net flows were $6.7 billion, a 4% annualized organic growth rate, and were up 5%, excluding Axis redemptions and the venerable transaction. Quarter-end assets under management of $738 billion rose 23% year-over-year and 6% from the prior quarter. An average AUM of $723 billion increased 25% year-over-year and 5% sequentially. Slide five shows our quarterly flow trend by channel. Firm-wide second quarter net inflows of $6.2 billion represented a 4% annualized organic growth rate. Net flows were positive in each channel for the third quarter of the last four. Retail generated its second strongest growth sales ever with net inflows of $5.2 billion as growth in active equities and munis more than offset moderating sequential outflows in taxable fixed income. once again highlighting the balance in our retail business. Institutional sales of $8.9 billion, excluding the venerable transaction, led to net inflows of $900 million, driven by our multi-asset retirement solutions and active equity. In private wealth, gross sales increased 4% year-over-year, while declining 33% sequentially. Net inflows of $100 million reflected continued client engagement in what has historically been a seasonally slower quarter sequentially. Now let's turn to investment performance beginning on slide six. Starting with fixed income, in the second quarter, yields diverged amongst developed markets, rising in Europe as growth expectations lifted with vaccine rollouts, while in the U.S. the 10-year yield fell by 27 basis points to 1.47%. U.S. bond returns were positive, and in developed markets, credit outperformed governments as investors looked through near-term transitory inflationary surges. Our fixed income performance continued to strengthen as 91% of our fixed income assets outperformed over the one-year period, 69% of assets outperformed over the three-year period, and 68% over the five-year period. Our offerings generally benefited from an underweight to duration and an overweight to credit. Strategies of global and multi-sector credit positioning included global high yield, which ranked eighth percentile in the quarter, and American income, which ranked 28th. Tax exempts continued to post outstanding relative performance with six of our 10 retail municipal funds in the top decile of their Morningstar peer group across all periods, and all 10 in the top quartile across all periods. Our tax-aware vehicles, including SMA, continue to drive double-digit annualized organic growth rates. Turning to equities, equity markets continue to rise in parallel with earnings expectations, with the S&P 500 up 8.6% and the MSCI World up 7.7% in the second quarter. Through June, the S&P 500 was up 15% year-to-date, while the S&P 500 earnings expectations had risen by 13% over that same period. Interestingly, factoring out dividends, the return this year has almost exactly matched the rise in earnings expectations. In equities, our percentage of assets outperforming strengthened in each time period shown. improving to 44% for the one-year period, 66% for the three-year period, and 71% for the five-year period. Growth stocks regained favor in the second quarter after lagging in prior quarters, with much of the outperformance of growth stocks occurring later in the quarter as longer-term interest rates retraced. Our large-cap growth, global core, and concentrated U.S. and global growth strategies outperformed, aided by stock selection in sectors including healthcare and technology. Our equity platform continues to benefit from broad and global distribution relationships in countries like Japan, as well as expanded services to existing clients, which we'll focus on in the next section on client channels, beginning with retail on slide seven. Once again, gross sales were the second strongest on record, up 22% year-over-year and up 4% sequentially. Net inflows were $5.2 billion, driven by an 18% annualized organic growth in active equities, our 17th straight quarter of active equity inflows. We continue to drive positive flows in U.S. retail and Japan. Municipals grew by 23% annualized, helping to offset taxable fixed income outflows, which moderated sequentially, as American income redemptions improved by $1.6 billion versus the prior quarter. As shown on the upper left chart, a balanced and diverse product offering continues to drive consistent organic growth, with the retail general generating positive net inflows 10 of the last 12 quarters. We remain globally diversified with the U.S. 39% of sales, Japan, EMEA, LATAM, 33% of sales, and Asia X Japan, 28% of sales. We now have 62 products of more than a billion dollars each, balanced across asset classes as compared to what 48 just a year ago. On a net flows basis, our U.S. equity funds rank 9,453 managers, International equity funds ranked 21st out of 253 managers and munis ranked 14th of 111 managers. Several notable individual funds are shown on the bottom right. Turning institutional on slide eight. First quarter gross sales of 8.9 billion excluding the venerable related sales were up 1% year over year and up 82% sequentially. Active equity sales of $2.8 billion more than tripled sequentially, driven by European value, U.S. mid-cap growth, and U.S. concentrated growth. This was the 12th of the last 14 quarters in which active equity posted net inflows. $4 billion of CRS, customized retirement solutions, and LIS, lifetime income solutions, funded in the quarter. LIS passed the $5 billion AUM milestone this quarter, ending above $6 billion, a solid achievement for this growing platform. Also in the quarter, EquiRule seeded a $50 million merger arbitrage vehicle, a strategy for which we are seeing active interest given its strong three-year track record. Fixed income sales slowed in the second quarter with uploads driven by the venerable transaction and the last of the AXA-related redemptions. We've now incurred $13.1 billion in lower feed acts of redemption since we announced them in early 2020, and this redemption program is now essentially complete. Our institutional channel has grown organically inclusive of these redemptions, highlighting the strength of our globally diversified, differentiated solutions, broad client relationships, and talented teams. Our ESG portfolios with purpose grew to $25 billion, up 17% sequentially, driven by our U.S. and global sustainable thematic platform, for which RFPs were up three times in the first half of the year versus the prior year period. We launched the AB Sustainable Income Portfolio and also concluded AB's Climate Change and Investment Academy, a first-of-its-kind collaboration with Columbia University, which enrolled over 1,000 clients around the world. The Academy integrated scientific and academic analysis of how climate change can affect investment risks and opportunities from macroeconomic to issuer levels. Our institutional pipeline grew to a record $17.8 billion at quarter end, up 17% sequentially, driven principally by a large $8 billion CRS mandate. The NUI's fee base exceeded $50 million, or 8%. 18% compound annual growth since we began tracking in 2011, with alternatives over half the fee base. Moving to private wealth management on slide 9, gross sales of $3.6 billion increased 4% year-over-year and declined 33% sequentially. Combined with lower redemptions, we generated net inflows of over $100 million, reflecting a sequential seasonal slowdown. We built on our successful cash campaign earlier in the year with a new tax-aware campaign, which is highly relevant in today's environment. We raised $58 million in a qualified opportunity fund focused on tax-efficient investing and $103 million in the second close of our private equity fund of funds. We also launched two new products, Sustainable Intermediate Duration Bond Fund, an ESG offering, and Global Disruptors, a technology and innovation-focused fund. Our proprietary separately managed equity loss tax loss harvesting product now stands at over a billion, up 41% sequentially. Our muni impact and ESG portfolios continue to grow strongly, as shown on the bottom right. I'll finish our business review with the sell side on slide 10. First-team research revenues decreased by 7% year over year, and we're down 11% sequentially. reflecting more normalized institutional trading volumes as compared with more volatile prior periods. Growth in Asia remains healthy, with trading commissions up 20%, and the NBA continues to ramp strongly. We are successfully engaging clients, as evidenced by our 37th Annual Strategic Decisions Conference. Executives attended from 173 of the world's largest and most influential companies, with over 2,600 investors, up 30% year over year. Once again, research checks increased year over year, and we ranked highly in the most recent Greenwich U.S. Portfolio Manager surveys, as exemplified by being ranked number one in best high-quality written research and first in the most intense sales coverage. I'll close our business overview with progress toward our strategy in the second quarter on slide 11. Our investment performance improved in the quarter with two-thirds or more of equity and fixed income assets now outperforming in both the three- and five-year period. Near-term performance and fixed income continued strong at 91% of assets outperforming, while equity improved sequentially to 44%. Our geographic and product balance has now driven organic growth across all channels in three of the last four quarters, with retail positive 10 of the last 12 quarters and and institutional positive eight out of the last nine quarters. Private wealth grew for the third of the last four quarters with active client engagement across our growing inflation and tax-aware suite. Our ESG portfolios for purpose stand at $25 billion in assets under management, up 17% sequentially. And we're growing at double-digit annualized rates in alternatives, multi-assets, and municipal. We are committed to managing our business to deliver strong incremental operating margins. Our second quarter adjusted operating margin of 31.7% was up 380 basis points year-over-year, with adjusted earnings and unit holder distributions up 49% versus the prior year period. Now I'll turn it over to Ali Dabaj to review the financials, followed by an update on our strategic relationship with Equitable. Ali?