AllianceBernstein Holding L.P. Units

and welcome to the Alliance First Teens First Quarter 2025 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 instruction on how to ask 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. I would now like to turn the conference over to the host for this call, Head of Impressor Relations for AV, Mr. Yanis Regali. Please go ahead.

Good morning, everyone, and welcome to our first quarter 2025 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 Tom Simeone, CFO. Honor Erzon, 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 to 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-Q, which we filed this morning. 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-Q. 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. Against the backdrop of escalating uncertainty around trade policy and economic growth, Alliance Bernstein delivered another strong quarter. Our results highlight the strength of our franchise, the depth of our investment expertise, and the breadth of our globally diversified platform. On slide three, I'll review the key business highlights of our first quarter. First, all three of our distribution channels grew organically in the first quarter, generating $2.7 billion in Firmwide active net inflows. Our differentiated distribution platform gives us an edge in growing markets like Asia, U.S. high net worth, and insurance, where we've consistently gained market share, including in the first quarter of 2025. Coupled with the extensive range of our investment capabilities that span across traditional and alternative assets, we're strategically positioned to help our clients navigate turbulent markets and benefit from rapidly emerging trends. The fixed income reallocation theme is a prime example of our ability to capture demand where it exists, having generated over $35 billion of active fixed income inflows over the last two years. Even amidst the return of rates volatility and heightened policy risks, we successfully generated $1 billion in active fixed income inflows during the first quarter of 2025. Despite the downturn in overseas demand for our taxable fixed income strategies, largely driving a $1.4 billion in firm-wide taxable outflows, we continued to enjoy robust growth for our tax-exempt franchise, which generated $2.4 billion of inflows. Our industry-leading retail muni platform has been driving force of organic growth, achieving an impressive 19% annualized growth rate in the first quarter. Over the past five years, retail tax exempt has consistently grown at double-digit rates, reaching $46 billion in AUM, more than doubling in size since 2020. Secular growth and private alternatives is another theme that benefits us. During the quarter, we had over $2.5 billion of institutional deployments into our private markets platform, coupled with inflows from high net worth into our asset-based finance and private credit strategies. Active equity outflows of $2.5 billion moderated compared to recent quarters, with institutional redemption slowing down while retail flows flipped back to positive. In the first quarter of 2025, we generated $500 million of retail inflows driven by solid demand for our U.S. large-cap growth global strategic core, U.S. select, and our security of the future strategies. Secondly, we are actively expanding our private market platform by deepening existing partnerships, establishing new ones, and diversifying the growth avenues of our business. Our fee-paying and fee-eligible assets under management have reached $75 billion as of quarter end, marking a 20% increase compared to a year ago. We have successfully deployed nearly 40% of Equivalent's second $10 billion commitment and are leveraging our expertise to extend the addressable market with institutional and retail-oriented solutions. We are replicating the success of our evergreen capabilities in middle market lending that have been historically marketed within our private wealth channel. We're excited with the momentum we're seeing as we extend our private credit franchise to the institutional channel with customized solutions. In asset-based finance, we're expanding our retail offerings to help our own private wealth clients access this exciting new asset class, while also venturing into new distribution platforms. Our Credit Opportunities Interval Fund has exceeded $200 million in assets under management, including allocation from third-party retail clients. In the first quarter, we've engaged with nearly a dozen new RIAs, and we're encouraged by the increasing number of advisors exploring alternative investments with AB. We continue to leverage our strong local relationships in the RIA channel where we already partner with national aggregators and independent advisors in areas such as municipal bonds. Third, our diversified asset mix coupled with our enhanced operational efficiency provides downside protection to our revenue base and to our margins. As asset managers, we value diversification, and we've developed an all-weather platform that mitigates concentration risks by geography or asset class. With liquid and illiquid credit accounting for nearly half of our assets under management, we believe we're less vulnerable to significant equity market downturns. The strategic initiatives we've completed last year optimized our expense structure to expand the upside from favorable market conditions while also fortifying our business against downturns. We enter a turbulent market environment from a position of strength. Fourth, we have a durable base fee rate that has held relatively steady over the past several years. Our all-in fee rate, including base and performance fees, is another differentiating factor for AB. This relative stability results in symmetrical growth between our management fees and our AUM. Moving on to slide four, I'll highlight our strengthening relationship with Equitable. We firmly believe that being affiliated with a leading insurance provider is a competitive advantage for AB. Leveraging the permanent capital commitment from Equitable helps us seed and scale our higher fee, longer dated private alternative strategies. Investment grade quality private credit is a key growth opportunity for both Equitable and Alliance Bernstein, and we've now deployed nearly $14 billion of the $20 billion committed by Equitable. This has enabled us to build out new capabilities like residential mortgages and private ABS, which we intend to expand with our other insurance and institutional clients. We continue to scale our distribution, leveraging our leading brand awareness and our expertise in vehicle versatility to expand our third-party growth avenues. This virtuous circle of delivering additional yield to our partners' balance sheet while seeding new strategies with permanent capital enables Alliance Bernstein to sustainably expand our business. We remain on target to grow our private markets AUM to 90 to 100 billion by 2027. Slide five reflects a summary page with our key financial metrics. Tom will follow up with more commentary on our results. Turning to slide six, I'll review our investment performance starting with fixed income. Despite resurgent rates volatility driven by inflationary pressures caused by policy uncertainty, bonds served as a safe haven during the first quarter of 25, with Bloomberg's U.S. aggregate index returning 2.8%. Our fixed income performance benefited from active duration management and our allocation to investment grade, while our security selection within high yield detracted from relative performance. Overall, our performance improved with 64 percent and 63 percent of our AUM outperforming over the one- and three-year periods, while 81 percent outperformed over the five-year period. Quarter-to-date dynamics have been tumultuous, with markets reacting sharply to tariff headlines, global growth uncertainty, and shifting demand for U.S. Treasuries. Despite policy risks intensifying and credit spreads widening to levels reminiscent of the regional banking crisis in 2023, Fixed income is proving relatively resilient compared to the significant drawdowns we've seen in U.S. equity markets. For example, at the peak of the drawdown caused by a tariff announcement, the S&P 500 was down 15%, while the U.S. high yield index was down less than 2%. While the elevated rate volatility may dampen sentiment and appetite for duration, we view the value proposition for fixed income as intact. Specifically, we see the belly of the yield curve as an attractive spot to manage duration risk, given the ongoing buildup of term premium. Credit remains an area of opportunity, with all-year yields over 8% presenting an appealing risk-adjusted return profile compared to long-term equity forecasts. With policies still in motion, markets may continue to react faster than fundamentals, creating dislocations as well as opportunities for new investors. In this environment, we're constructive on fixed income and we have the right strategies to compete for the next wave of the reallocation. Turning to equities, near record high valuations in U.S. equities combined with a dimming economic outlook for the U.S. arising from a changing trade policy triggered a rotation into international equities. The percentage of AUM outperforming over the one-year period deteriorated to 23%. The shift was primarily driven by our U.S. large-cap growth fund distributed in Japan flipping from above to below median. A significant factor contributing to this change was the strengthening of the yen during the quarter, impacting comparisons against other local growth managers. The three-year figure had improved to 52% while the five-year declined to 45%. This performance trend reflects the market dynamic of excessive concentration and a few mega-cap names within the AI scene. Our investment focus on companies demonstrating consistent growth with disciplined approach to valuation also posed challenges in the later half of 2024. Year-to-date, despite the volatility following the tariff announcements in April, our active platform has demonstrated significant relative performance. U.S. orchard growth has generated nearly 300 basis points of relative outperformance, positioning it near the top decile year-to-date. Our strategic core portfolios designed to offer downside protection in volatile environments have outperformed their benchmarks by 300 to 400 basis points year-to-date. Furthermore, our global, international, and emerging markets portfolios have established track records that have exhibited strong performance. Additionally, our U.S. core strategies, select equities, and U.S. strategic equities have continued to deliver robust returns following a successful year. showcasing their ability to generate alpha across various market conditions and attracting client interest. Overall, we had eight active equity strategies that generated over $100 million in inflows during the first quarter of 2025. Now turning to slide seven. Retail posted its seventh straight quarter of positive net flows with sales continuing to track at record pace levels, offsetting elevated redemptions during a turbulent quarter. Actively managed asset classes were inflowing in the first quarter, led by enduring organic gains in tax exempt, solid inflows into multi-asset, and modest inflows into active equities. We continued to gain retail market share in tax exempt for the ninth consecutive quarter, growing at a 19% annualized rate. Our all-market income strategy drove multi-asset sales in the first quarter, particularly out of the Asia-Pacific region. Active equity also grew organically, supported by continued inflows into our U.S. large-cap growth strategy in addition to global strategic core and U.S. select equities. Dematic investing is another area with significant potential. Our security of the future portfolio continues to attract solid inflows, surpassing $1 billion in AUM just one year since we launched. Diversifying our product offerings remains a cornerstone of our distribution strategy, and we're very pleased with the early success we're seeing as we scale our services across our global footprint. Offsetting our organic gains, our taxable fixed income franchise posted outflows of $1.4 billion, primarily as our marquee income strategies AIP and GHY had outflows given the uncertain rate outlook. Base management fees grew 10% year-over-year, reflective of of market growth and organic flows while they were down 3% versus the prior quarter due to the equity drawdown. Organic-based fee growth was 2% over the last 12 months and slightly below 1% as of the first quarter. Moving to slide eight. Institutional sales and flows rebounded in the first quarter of 2025 to the highest levels since fourth quarter 2022, breaking a streak of persistent outflows. Channel inflows were driven by an accelerated pace in alternative deployments across various services, including private placements, commercial real estate debt, residential loans, and CLOs. Active equity outflows of $1.9 billion in the first quarter moderated versus recent trends. Our pipeline grew to $13.5 billion in the first quarter, up $2.8 billion sequentially, reaching its highest levels in seven quarters. Note that institutional fundings also accelerated with roughly $3 billion in pass-through mandates that were not captured within our pipeline. The decrease in the pipeline fee rate was mainly attributed to the addition of a sizable lower fee mandates, including an $800 million in passive index equities and $1.1 billion in systematic fixed income. Our ongoing efforts to market our systematic strategy continues to attract strong client interest, enabling us to grow our institutional market share and fixed income. However, these mandates tend to be lower feed and will impact pipeline fee rate. Turning to slide nine, private wealth posted solid inflows in the first quarter, growing to an annualized organic growth rate of more than 2%. The fastest pace in two years. As a reminder, our private wealth net inflows exclude reinvested dividends and interest income. which is typically reported within net assets across key wealth management peers. Our organic growth was fueled by increased sales momentum, underscoring robust client engagement and advisor productivity. We're still focused on supporting and growing our advisor sales force, ramping up our recruiting effort in line with our long-term target of 5% headcount growth. Demand dynamics within the channel were positive across all asset classes, except for active equities. Fixed income inflows exceeded $800 million, driven by our muni tax-aware strategies, money markets, and Global Plus. Solid demand for our passive tax harvesting strategy led to $600 million in inflows into passive equities, growing organically at nearly 10% annualized rate. Alt-MAS inflows of nearly $500 million, growing at 7% annualized rate, marked the eighth consecutive quarter of organic growth through alternatives and multi-asset within Bernstein. Private alternatives, including real estate debt, Carvel, and private credit, accounted for approximately half of those inflows. Fundraising and private alternatives continued to be a significant driver of channel activity, with approximately $400 million raised in the first quarter. Base management fees grew 10 percent year-over-year and came in flat sequentially. Channel revenues were up 6 percent versus the prior year and down 17 percent quarter-over-quarter, primarily due to performance fees typically crystallizing in the fourth quarter. Before moving on to our financial review, I'm delighted to introduce our newly appointed CFO, Tom Simeone. Having had the privilege of collaborating with Tom for several years, I'm eager for our unit holders, analysts, and all stakeholders to have the opportunity to become acquainted with him. Tom?