AllianceBernstein Holding L.P. Units

Thank you for standing by, and welcome to the Alliance Firms Team Fourth Quarter 2024 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 questions at that time. As a reminder, this conference is being recorded and will be available for replay on our website shortly after the conclusion of this call. now like to turn the conference over to the host for this call, Vice President of Investor Relations for AB, Mr. Yanis Jogali. Please go ahead.

Good morning, everyone, and welcome to our fourth quarter 2024 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, President and CEO, and Jackie Marks, CFO. Onur Ercan, 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 would like to point out the safe harbor language on slide two of our presentation. You can also find our safe harbor language in the MDNA of our 10-K, which we will file on February 14th. We base our distribution to unit holders on our adjusted results, which we provide in addition to and not as a substitute for our gap results. Our standard gap reporting and a reconciliation of gap to adjusted results are in our presentation appendix, press release, and our 10-K. 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. 2024 was a transformative year for Alliance Bernstein. We executed successfully on key initiatives that enhance our financial profile while also expanding our investment and distribution capabilities. AB's unique value proposition is highlighted on slide three. We have a differentiated distribution platform which includes our proprietary plus private wealth business. Our platform gives us an edge in growing markets like Asia, U.S. high net worth, and global insurance. In 2024, we captured market share across all three of these segments. We can also deliver our clients distinctive investment capabilities across traditional and alternative asset classes. Our versatile skill set allows us to capitalize on asset reallocation trends as we've seen in fixed income. This also includes our growing private markets platform, which is supported by our strategic relationship with Equitable. I will briefly cover our progress towards our 2027 targets later in my presentation. In addition, as Jackie will discuss in further detail, we have a clear line of sight for further margin improvement, which will reflect on our results as we move into 2025, assuming markets do not deteriorate. Finally, AB has a tax-efficient partnership structure that prioritizes capital returns to shareholders, ensuring a disciplined approach to growth investments. Moving to slide four, I'll review our business highlights from the quarter and the year. First, we closed the Bernstein Joint Venture with SocGen, and we relocated our New York City office. The JV allowed us to monetize the value in a business and eliminate a margin drag for AB, while putting Bernstein Research in the hands of a leading industry player with a vision to grow it. Our New York City relocation will contribute approximately $50 million in annual occupancy-related savings that we intend to flow through the bottom line. Those initiatives enhance our margin profile, lower the capital intensity of our business, and enable us to focus on our core investment and wealth management capabilities. Second, our active platform delivered over $4 billion of net inflows in 2024, and two of our three channels, retail and private wealth, grew organically. Despite resurgent rates volatility in the fourth quarter, our active fixed income platform grew at a 9% annual organic growth rate exceeding $24 billion in inflows in 2024, our highest year on record. Inflows exceeded $13 billion for tax exempt and approached $11 billion for taxable, growing 22% and 5% respectively. Taxable flows moderated in the fourth quarter, particularly for our barbell American income strategy, as the portfolio's intermediate duration exposure was impacted by higher rates. Active equity outflows persisted, totaling $7 billion in the fourth quarter and $24 billion throughout the year. Redemptions remained concentrated within institutions. Fourth-quarter outflows were driven by European and emerging market strategies, while global core and concentrated led full-year equity redemptions. Partially offsetting the negative trends, our U.S. large-cap growth strategy continues to resonate with clients across the globe, netting over $3 billion in inflows in 2024. Third, our firm white fee rate is holding steady. This relative stability results in symmetrical growth between our management fees and our assets under management. Fourth, we continue to expand our investment capabilities and distribution coverage via team liftouts and vehicle versatility. Our European growth strategy now manages over $700 million since launching approximately one year ago. We also launched five new active ETFs and converted two, wrapping up the year with 17 strategies and $5.5 billion in assets under management, 70% of which was net new assets. Finally, we continue to expand our private markets platform through deepening existing partnerships and forging new ones. Our private markets AUM stands at $70 billion as of year end, up 14% in 2024. We have now deployed approximately 20% of Equitable's second $10 billion commitment, and we continue to leverage our expertise and capabilities, tailoring them to insurance-oriented solutions. We're pleased with the momentum of our newly formed insurance vertical led by Jeff Cornell. AB's investment in RubyRee and our partnership of RGA represent significant milestones in the firm's strategy to become a leader in insurance asset management. Slide 5 reflects a summary page with our key financial metrics. Jackie will follow up with more commentary on our results. Turning to slide 6, I'll review our investment performance starting with fixed income. Long-term interest rates backed up considerably during the fourth quarter, driven by higher growth, persistent inflation, and fewer rate cut expectations. The Bloomberg U.S. Aggregate Index returned negative 3% in the fourth quarter, with intermediate and long duration selling off in response to fluctuating inflation rates and uncertainty over the Fed's future actions. Within credit, returns were driven by lower quality debt, with U.S. dollar hedge Bloomberg Global High Yield returning 1.1% in the fourth quarter. Our one-year performance softens during the fourth quarter, both in relative and absolute terms, given our yield curve position and our underweight to the lowest-rated issuers. Fifty-seven percent of our assets under management is outperforming over the past year, while 61 and 57 percent of our AUM outperformed over the three- and five-year periods. Although rates volatility continues to affect sentiment and appetite for duration, We remain constructive as the steeper curve means extended duration is finally outyielding cash. Credit remains an area of strong interest off the back of a solid 2024. Despite narrow spreads, yields remain high and fundamentals are supportive. As the market reprices future expectations, it creates opportunities for new investors. We remain optimistic on the outlook for fixed income demand into 2025, and we have the right strategies to compete for the next wave of the reallocation. Our marquee income strategies, including American income, global high yield, and our fast-growing mortgage income product, our growing active fixed income ETFs, and our industry-leading municipal platform. Turning equities, in the U.S., the S&P 500 returned 2.4% during the fourth quarter, with growth outperforming value by 900 basis points. Small caps ended flat as momentum waned in December. Global equities lagged the U.S. in the fourth quarter. Performance for our equity strategies remained challenged, with 40 percent of our AUM outperforming over the one year, while 35 percent outperformed over three years and 65 percent over the five-year period. Although we are encouraged by recent signs of improving market breadth, The headwinds from highly concentrated equity gains continue to impact some of our largest services. While performance has softened on account of this concentration, our client conversations around being underweight at the MAG-7 are healthy, and our investment philosophy still resonates with those who seek an active approach to investing. More than 20 strategies or funds across value, equity income, China, strategic core, and select U.S. outperform in their respective benchmarks or composites over the one, three, and five-year periods. Finally, I would highlight that our active strategies have had a robust start to the year. Diversification and equity allocations has become increasingly crucial, and an active approach that emphasizes company fundamentals can offer the necessary diversification. Moving on to slide seven to cover our retail highlights. Our retail channel extended its organic growth streak to six consecutive quarters, rounding out our second straight year of positive channel flows and growing 5% annually in 2024. Annual sales reached record 2021 levels, while annual flows were the highest in three years. Fourth quarter activity was led by $5 billion in tax-exempt inflows, as much as the channel's total leaning gains for the entirety of 2023. This was the highest-ever quarterly gain for retail munis, making 12 consecutive years of organic growth. Flows were negative for all other asset classes during the fourth quarter, reflecting seasonality trends and elevated rates volatility. For the year, retail demand was driven by $19 billion in active fixed income, with taxable and tax-exempt growing at 12% and 34%, respectively. Equity outflows during 2024 were largely concentrated within passive, while active also saw a 1% attrition rate. Versus the prior year, base management fees grew 24% during the fourth quarter and 17% during the full year 2024, reflective of market growth, net channel inflows, and base fee growth. Organic base fee growth exceeded 3% in 2024 and was slightly negative in the fourth quarter. Moving to slide eight. Institutional redemptions accelerated in the final quarter of the year, with active equities continuing to drive channel outflows. Additionally, fixed incomes' positive momentum reverted in response to higher interest rates, resulting in modest outflows during the fourth quarter. Net inflows in private placements, real estate debt, and private credit were offset by realizations from maturing vintages. For the full year, institutional demand was constructive for taxable fixed income, growing 3% annually. Net deployments into alternatives exceeded $2 billion, with modest multi-asset outflows partially offsetting the trend. We had $2 billion in pipeline fundings during the fourth quarter, with the pipeline now standing at $10.7 billion as of year-end. The pipeline fee rate ticked higher to 45 basis points, reflecting $2.7 billion in new additions, predominantly in alternatives. This included $1 billion in commitments from RGA across residential mortgages private placements, NAV lending, and middle market loans. These commitments reinforce our strategy of initiating and scaling insurance-oriented products in partnership with Equitable. A prime example is our NAV lending strategy, which we launched 14 months ago and is already garnering solid interest. We're seeing momentum start to build in our insurance vertical and continue to view it as an important growth driver for the enterprise. Moving to slide nine. Private wealth ended the year on a strong foothold, growing at 1% annualized rate in the fourth quarter, when tax off harvesting typically weighs on channel flows. 2024 marks our fourth consecutive year of organic growth for Bernstein, driven by strong client demand for all its multi-asset and tax exempt, growing at 13% and 8% respectively. As a reminder, our private wealth net flows exclude reinvested dividends and interest income, which is typically reported within net new assets across key wealth management peers. The channel's revenue surged during the fourth quarter, reflecting the three pillars of our platform's earnings power. Base fees, growing roughly in line with assets. Spread-based interest, growing with cash and margin balances. And performance fees, resilient for private market strategies with the added benefit of potential upside from public markets. This upside leverage was on full display in 2024. Bernstein Wealth Management has been a pioneer in bringing alternative assets to the U.S. high net worth segment. During 2024, we raised over $2.5 billion across our proprietary and third-party private alternative strategies. Off the back of a strong fundraising year, we deployed approximately $1.3 billion in net equity commitments, primarily driven by real estate equity. Ending with slide 10, I'd like to provide a brief update on our private markets business targets. We're pleased with the progress toward our goal of reaching 90 to 100 billion of private markets AUM by 2027, at which point these products should generate more than 20% of our asset management revenues. As of year-end 2024, our platform had reached 70 billion in fee-earning and fee-eligible AUM, representing over 16% of our total asset management revenue for the year. Over the past several years, we've successfully expanded our business, leveraging existing capabilities and market presence into new growth areas such as NAB lending, asset-based finance, and residential mortgages. Additionally, we've continued to deliver strong growth in corporate middle market direct lending. We're building upon our strategic partnership with Equitable to expand our capabilities in private investment grade, including specialty finance, NAV lending, mortgages, and other insurance-oriented vehicles. The pace of our collaboration with Equitable and our vision to build the business together has accelerated, having now deployed $12 billion out of the $20 billion commitment. This helps attract investment talent and scales our business faster as we are able to offer borrowers a range of solutions across the cost-to-capital spectrum and match those assets to the unique risk-reward profiles of our diversified client base. I'm very proud of the progress we've made as an organization, and I would like to thank our colleagues, clients, and unit holders for their support as we make continued progress toward our commitments. Now I'll pass it to Jackie to cover our financial results.