AllianceBernstein Holding L.P. Units

and will be available for replay on our website shortly after the conclusion of this call. I would now like to turn the conference over to the host for this call, Head of Investor Relations for Alliance Bernstein, Mr. Mark Griffin.

Thank you, Operator. Good morning, everyone, and welcome to our fourth quarter 2023 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, Matt Bass, head of private alternatives, and Bill Siemers, interim CFO. Oner Erzan, head of Global Client Group and Private Wealth, 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 will file on Friday, February 9th. 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. Financial markets enjoyed a strong rally to end 2023 as investors anticipated a shift in Fed policy to lower interest rates in 2024. In 2023, AB was among the beneficiaries of the early wave of fixed income reallocations, with two of three channels growing organically. We drove continued market share gains in U.S. retail, led by municipal SMA and taxable fixed income. We also saw strong cross-border fixed income flows. We made good progress in our key strategic initiatives, launching 10 active VTFs, now 12 in total, at $1.5 billion in assets under management, receiving approval for our wholly owned China Fund Management Company license, and growing our relationship with Equitable in support of our private markets platform, which Matt Bass will touch on further. Looking ahead, U.S. money market funds entered the year at a record $6 trillion in AUM, some of which we expect will migrate to higher return opportunities as the rate cycle turns over later this year. Now, let's get into the specifics, starting with a firm-wide overview on slide four. Fourth quarter gross sales were $28.3 billion, down $2.6 billion from the year-ago period. Firm-wide active net outflows were $2.8 billion. Full-year gross sales of $101.5 billion compared to $115.6 billion last year. Adjusting for two large custom target date sales in 2022 totaling $16 billion, firm-wide sales rose slightly year over year. Full-year active net outflows were $5.2 billion, snapping a streak of four straight years of firm-wide active organic growth. Year-end asset under management of $725 billion increased by 12% year-over-year and 8% from the end of the third quarter, while fourth-quarter average assets under management were up 8% from the prior year, and full-year average AUM was down 1%. Slide 5 shows our quarterly flow trend by channel. Firm-wide, fourth-quarter net outflows were $1.8 billion. Strong retail gross sales of $21 billion increased 47% year-over-year and 24% sequentially, driven by both fixed income and equities. Net inflows were $1.3 billion as we continued to gain share in fixed income, up 14% annualized organically. Our institutional channel had gross sales of $3 billion, down versus prior periods, with last year's fourth quarter including $6.4 billion from custom target date sales. Net outflows were 2.5 billion. In private wealth, gross sales were healthy at 4.3 billion, driven by taxable fixed income and munis. Net outflows were 600 million from some seasonal impact from year-end tax-related planning. Turning to annual net flow trends on slide six, in a challenging year for active managers, gross sales of 101 billion led to firm-wide net outflows of 7 billion or 1.1 percent attrition. Still, our average organic growth rate over the last five years was positive 2 percent. Retail sales of 71 billion grew by 8 percent year-over-year. Net inflows of 3.7 billion were driven by strength in taxable fixed-income immunities. Institutional sales of 11.8 billion declined from 32 billion last year, as we compared against last year's 16 billion in custom target date fundings. 2023 net outflows were $11.8 billion. Private wealth had strong gross sales of $18.6 billion, with net inflows of $1.1 billion, the third straight year of organic growth. Investment performance is shown on slide seven, starting with fixed income. Both government bonds and credit risk assets finished 2023 on a high note, as bond yields fell sharply, with most central banks ending their hiking cycles. The fourth quarter rally brought full-year developed market treasury returns to 6.7%, as measured by Bloomberg Global Treasury Index on a hedge basis. Most credit risk sectors posted strong relative returns to government bonds, with developed markets high yield up 13.8% and emerging markets local currency bonds up 12.7%. AB's fixed income performance remained strong, with 75% of assets outperforming over the one-year period, 73% over the three-year, and 77% over the five-year. In 2023, we experienced $5.2 billion of net inflows into our American Income Fund, as clients looking to put cash to work became more comfortable taking duration. Turning to equities. For many of the same reasons that bonds rallied, equity markets also registered strong gains in the fourth quarter, with the S&P 500 up 12 percent. Market breadth improved, with previously lagging segments of the market rebounding as small caps outperformed large caps and value outperformed growth. Large cap index returns in 2023 were concentrated within the magnificent seven stocks seen as leading beneficiaries of the AI revolution. Representing more than a quarter of the index, these stocks disproportionately drove cap-weighted S&P 500's total return of 26% versus 14% for the equal-weighted version. When combined with stock selection, our performance continued to lag the mega cap-tilted benchmarks, with 26% of equity assets outperforming over the one-year period, 45% over the three-year, and 42% outperforming over the five-year period. Our research process remains robust, and our views are fundamentally driven. Over time, we believe the sources of market returns will broaden relative to the recent period of concentrated returns, encompassing a more fundamentally driven environment. Relative to peers, we continue to outperform the Morningstar peer group over the longer term, with 62 percent and 68 percent of our equity assets outperforming over the three- and five-year periods, respectively. Now I'll review our client channels, beginning with retail on slide eight. Growth sales for the fourth quarter and the full year increased versus prior periods. The full year redemption rate normalized to 28% versus a historically low 24% last year. We generated net inflows of $1.3 billion in the quarter and $3.7 billion for the year, with strength in cross-border fixed income and U.S. retail outpacing equity outflows. U.S. retail grew organically for the fifth consecutive year with $9 billion of net inflows, up 11% in 2023 and up 9% on average over the last five years. Our U.S. large-cap growth product posted $1.4 billion of net inflows driven by U.S. demand. And we posted our 11th straight year of municipal's growth with net flows up $5 billion, growing 19% organically. In taxable fixed income, we grew by 9% organically with $5.2 billion in net inflows in American income as well as money markets. As shown on the bottom right, we ranked in the top 2% of U.S. retail flows and munis and cross-border fixed income flows with the number one rankings in muni income, global high yield, and American income. We launched 10 active ETFs in 2023 with a total of 12 now at $1.5 billion in assets under management. Turning institutional on slide nine, fourth quarter gross sales were $3 billion with net outflows of $2.5 billion. Full year gross sales were $11.8 billion. Coincidentally, net outflows were $11.8 billion driven by equities and multi-asset. Our pipeline was $12 billion a quarter and down $500 million sequentially. Fourth quarter fundings were $1.5 billion led by AB Carvel's residential mortgage and renewable energy strategies and low vol high yield. In the quarter, we added over $1 billion in active equity mandates led by $600 million in global core and $325 million in U.S. SMID value. Equitable's initial $10 billion private market program is now 90% deployed, and we were pleased in December to announce the launch of the PCI NAV lending strategy supported by a $500 million commitment from Equitable. Moving to private wealth on slide 10. Fourth quarter growth sales of 4.3 billion rose 6% year-over-year and 7% sequentially. And 2023 growth sales of 18.6 billion were up 6% year-over-year. We posted strong sales in money market funds, municipals, and our proprietary passive equity tax harvesting strategy, which grew to 3.6 billion, posting strong annualized organic growth of 41%. Fourth quarter net outflows of $600 million reflected some seasonal impact from year-end tax-related planning, while full-year net inflows of $1.1 billion represented our third straight year of organic growth. We've experienced strong productivity growth in our financial advisors, averaging 8% annually since 2018, and we continue to invest in FAA headcount of 5% at year-end versus the prior year. Alternative capital raises were $1.9 billion, led by our secondaries partnership with LSV, real estate equity, and our private credit business. I'll finish our business overview with the sell side on slide 11. Fourth quarter, Bernstein Research revenues of $100 million were flat year over year and increased 7% sequentially. We saw modest improvement in the U.S., though key global markets remained subdued. Full-year revenues of $386 million declined by 7% as institutional trading activity remained constrained. We launched diversified new sector coverage and hosted two client-centric conferences, Healthcare Services Disruptors and U.S. Quant. We had 12 top-ranked analysts in the Institutional Investors All-American Research Team Survey and ranked in the top 10 in generalist sales and trading. Our joint venture with Societe Generale is on track to close in the first half of 2024. We anticipate disclosing further financial details closer to that time. I'll conclude by reviewing the status of our strategic initiatives on slide 12. Performance in fixed income was strong for all periods while equities continued to lag based on stock selection versus concentrated large cap benchmarks. Two of our three channels grew organically, retail and private wealth. Fixed income net flows grew by 5% with robust growth in U.S. retail, where our Muni SMA platform reached $23 billion in AUM, up 36% versus the prior year. We were also pleased to be awarded a license for our wholly owned China Fund Management Company. Fourth quarter adjusted operating income was up 6% year-over-year. Operating margin of 29.2% was down 80 basis points. and earnings in unit holder distributions of 77 cents per unit were up 10%. Full year 2023 operating income declined by 1%, margins of 28.2% declined by 70 basis points, and earnings per unit of $2.69 declined 9% year over year. Lastly, we're pleased that Jackie Marks has joined our team and will be appointed Chief Financial Officer on March 1st. We thank our interim CFO, Bill Siemers, for his dedication and service to AB, and I wish him all the best in his retirement. Now I'll turn the call over to Matt Bass, head of private alternatives, to discuss our middle market lending business. Matt?