AllianceBernstein Holding L.P. Units

Thank you for standing by and welcome to the Alliance Bernstein fourth quarter 2021 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 two weeks. 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 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, 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 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. We are pleased to report 2021 results that showed substantial progress. We accelerated our full-year organic revenue growth to 5%, including a 1% fee rate increase, marking our third year in a row of active organic growth and fourth out of the last five. Active equities, including ESG, municipals, and alternatives multi-asset each grew organically at double-digit rates this year. Investment performance strengthened with 89% of fixed income and 73% of active equity AUM outperforming in 2021. Our institutional pipelines annualized fee base exceeded $65 million, and we launched a diverse set of new client-focused offerings. at the same time strengthening our strategic partnership with Equitable Holdings. For the year, our adjusted operating margin expanded 350 basis points to 33.6%. We delivered 34% 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 growth sales accelerated to $39.4 billion, up 8% or 26% from a year ago and up 22% sequentially, resulting in a record full-year gross sales of $150 billion, up 21% from the prior year. Fourth quarter firm-wide active net inflows were $6.4 billion, a 4% annualized organic growth rate, and a full-year active net inflows of $26.3 billion also grew 4% organically, or 5%, including a 1% fee rate improvement. Year-end assets under management of $779 billion rose 14% year-over-year, and full-year AUM of $731 billion increased 18% versus the prior year. Slide 5 shows our quarterly flow trend by channel. Firm-wide, fourth quarter net inflows of $7.4 billion represented 4% annualized organic growth. Net inflows were positive in each channel for the fourth quarter in a row and the fifth of the last six. Retail generated its strongest growth sales ever, leading to net inflows of $6.3 billion. Active equities and continued strength immunities helped offset outflows in taxable fixed income. Institutional sales of $6.6 billion led to net inflows of $400 million driven by active equities. In private wealth, gross sales increased 40% over the prior year period, with net inflows $700 million as we continued to grow engagement in the ultra-high net worth cohort, supported by our focus on pre-liquidity planning, coupled with an innovative product suite. Slide 6 shows annual net flows trends. The firm's strongest gross sales year ever led to firm-wide net inflows of $26.1 billion. Retail reached a record $100 billion in gross sales. Active inflows of $20.8 billion were driven by 20% organic growth in active equities and 23% growth in municipals, which offset continued outflows from global high-income service. Institutional sales declined year over year, net of a one-time benefit from the venerable sale. We posted net inflows for the year of $2.3 billion. And private wealth had its strongest sales year in more than 20 years, with inflows of $3 billion positive in each quarter of 2021. Investment performance is shown on slide 7, starting with fixed income. The fourth quarter concluded a volatile year for fixed income markets, with yield curves in developed markets flattening and longer-term yields mixed as central bank monetary policies diverged. For the year, yields rose in all major developed markets as the recovery in economic growth solidified and inflation surged. Risk assets were mixed, with most credit sectors outperforming governments led by U.S. and pan-European high yield. Our fixed income performance remained strong, with 89 percent of our fixed income assets outperforming over the one-year period, and 72 percent and 70 percent of assets outperforming over the three- and five-year periods, respectively. In tax exempt, six of our 10 retail municipal funds remained in the top decile of their Morningstar peer group across all time periods, with all 10 in the top quartile across all periods. Our muni bond inflation strategy was in the top 1% across all periods, and our tax-aware vehicles, including SMA, grew by 25% organically. Turning to equities, Despite bouts of volatility, 2021 was another strong year for equities globally, as the MSCI World Index advanced by 24.2%. U.S. large caps led the way, with S&P 500 up 28.7% and developed markets outperforming emerging markets. Style returns flipped repeatedly, with value stocks rallying through May and growth stocks regaining leadership until December. In equities, our percentage of assets outperforming remained healthy, with 73% of AUM outperforming for the one-year period, 48% for the three-year period, and 75% for the five-year period. Three-year performance dipped sequentially as our U.S. large cap growth composite trailed the Russell 1000 growth benchmark, which is highly concentrated with five companies comprising 38% weight at the year end. This strategy did, however, outperform relative to its Morningstar peer group for the three-year period. Our focus remains on identifying high-quality companies with strong fundamentals and reasonable valuations, characteristics which can help reduce risk in downed markets while participating in a market recovery. We're paying close attention to pricing power as well as how distortions that may have inflated or compressed earnings over the past two years will play out as business conditions normalize. Now I'd like to review our client channels, beginning with retail on slide eight. Record annual sales of $100 billion were up $21 billion, or 27% from the prior year high. Active equity sales grew by $23 billion, with net flows up 20% organically driven by Japan, U.S., and sub-advisory. And muni sales grew by over 40%. Fourth quarter net inflows were $6.3 billion, up 9% annualized organically, with full year net inflows of $20.8 billion, up 8% organically. As shown on the upper left, 2021 was our fifth straight year of active equity inflows, with organic growth averaging 11% over that period. U.S. large cap growth led the way among 10 different equity products that each exceeded $250 million of net inflows. Once again, municipals grew by over 20% annualized, led by our SMA tax-aware and muni bond inflation strategies, helping to offset continued taxable fixed income outflows. ESG portfolios for purpose grew to $31.5 billion, up 16% sequentially and 91% year-over-year, driven by our U.S. and global sustainable thematic strategies. In the fourth quarter, Sustainable Global Thematic won the Green Fund Award and the Financial Services Awards of Excellence, published by the Hong Kong Economic Journal. Turning to institutional on slide nine. Fourth quarter gross sales of $6.5 billion declined 34% from a year ago, while rebounding from a slower third quarter. Full year sales were $31.7 billion, including the venerable sales. We drove net inflows of $400 million in the fourth quarter and $2.3 billion for the year, our third consecutive year of organic growth. Inflows and customized retirement solutions, or CRS, commercial real estate debt, or CRED, European CRED, and active equities offset outflows in taxable fixed income and passive equities. Our middle market lending business was awarded two institutional mandates through a consultant, successfully competing against larger, better known alternative managers. Our institutional pipeline grew to a record 21.5 billion at quarter end, led by a 1.5 billion global core equity mandate. The annualized fee base reached 65 million, the majority of which was from alternatives. Our pipeline included a 9.7 billion low fee CRS mandate, which funded in January 2022. While pipeline AUM will be significantly reduced for the foreseeable future, The annualized fee base excluding this mandate remains above $60 million, with an active fee rate more than three times the channel average. With respect to AXA, for whom we currently manage $20 billion in AUM, we continue to expect $5 billion of low-fee retail redemptions in the first half of 2022. Moving to private wealth management on slide 10, fourth quarter and full-year gross sales grew by 40% and 27% respectively versus the year-ago period, driven by strong advisor productivity. Net inflows were $700 million in the fourth quarter, positive in each quarter of 2021 and five of the last six quarters. For the year, we grew net inflows by $3 billion, or 3% organically. We continue to see our mix shift towards our ultra-high net worth, $20 million and over, clients, influenced by our pre-liquidity event planning efforts, from which gross sales more than doubled in 2021. In 2021, we launched nine innovative product offerings, including Real Estate Equity Plus, ABLS Fee Partners One, which is our new secondaries offering, Global Disruptors Fund, and Sustainable Intermediate Duration, to name a few. In the fourth quarter, we closed on our commercial U.S. real estate private debt fund with over $200 million in capital commitments. And for the full year, commitments to private alternative products more than doubled versus the prior year. Our proprietary separately managed equity tax-less harvesting product grew by 32% sequentially, while muni impact and ESG portfolios continue to grow strongly. I'll finish our business overview with the sell side on slide 11. Fourth quarter, Bernstein Research revenues decreased by 4% year-over-year, and full-year net revenues decreased by 2% year-over-year. We experienced a fourth-quarter slowdown in Asia trading volumes, reflecting caution on the part of investors measuring the spillover effect of the Chinese property market, among other events. Full-year trading volumes reflected less volatility in 2021 as compared to 2020, when the COVID sell-off and ensuing recovery lifted volumes. For the full year, Asia trading commissions increased in the high teens while research checks posted mid-single-digit growth, reflecting our premium research franchise. In November, we held our second virtual operational decisions conference with an impressive lineup of senior executives from over 51 companies in various sectors. And we launched coverage on three new sectors this past quarter, two in China, one in Europe. I'll now review progress against our growth initiatives on slide 12. Our investment performance strengthened in 2021 with 70 percent or more of our both fixed income and equity outperforming over the one and five-year periods. We drove organic growth across each channel all four quarters last year and five of the last six quarters with retail positive 12 of the last 14 quarters and institutional positive 10 of the last 11. active equities remained the standout performer. Private wealth grew by 3% positive in each quarter of 2021 and five of the last six quarters with active client engagement and nine diverse new product offerings. Our ESG portfolios with purpose now stand at $31.5 billion in AUM, up 91% year over year. In alternatives, we launched our climate-focused 1.5-degree long short equity strategy and closed on our commercial real estate debt private debt fund. Financially, we delivered on our commitments, posting incremental margins of 53% above our long-term target range of 45% to 50%. Full-year adjusted operating margin of 33.6% was up 350 basis points year over year, with adjusted earnings union holder distributions up 34% versus the prior year. I'll return to share thoughts on our growth strategy, but before that, I'll turn it over to Ali to review the financials.