AllianceBernstein Holding L.P. Units

regardless. Please go ahead.

Good morning, everyone, and welcome to our second 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 of and Tom Simeone, CFO. Honorar Zahn, 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 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. During the second quarter, investors grappled with concerns about escalating geopolitical tensions, policy uncertainty, and debt sustainability. Sentiment improved as trade tensions eased, and risk assets ultimately delivered solid returns for the period. AB ended the quarter with record assets under management of $829 billion, which provides a helpful tailwind as we start the second half of the year. On slide three, I'll review key business highlights for the quarter. As I noted, firm-wide assets under management reached a post-financial crisis high of $829 billion. Private wealth represents 17 percent of our assets and 35 percent of our base management fees as of the second quarter. Approximately 10 percent of our $685 billion asset management business consists of permanent capital managed for equitable. While market turbulence can impact short-term flows, it doesn't impact our connectivity with clients. Our pipeline AUM reached nearly $22 billion, reflecting sizable mandate additions across retirement, insurance asset management, and passive equities. We are making good progress in accessing long-duration capital pools that we can rapidly scale, leveraging our partnership with Equitable and our differentiated distribution and investment capabilities. These include insurance asset management, alternatives, and retirement, where we've consistently gained market share, including in the second quarter of 2025. However, we did see pressure on firm-wide net flows, which turned negative in the second quarter, with active strategies shedding $4.8 billion. The outflows were largely concentrated in April during the height of the recent market volatility, and we observed steady improvement as this turbulence subsided, with June flows turning positive. Active equity shed $6 billion firm-wide, primarily led by retail. Client redemptions were broad-based across strategies, although we did see slight inflows into our active ETFs, thematic, and international strategies. After six consecutive quarters of organic growth, active fixed income experienced slight outflows. The downturn in overseas demand for our marquee income strategies resulted in $1.5 billion of firm-wide taxable outflows, which were largely offset by continued growth within our tax-exempt franchise, which generated $1.2 billion of inflows. Our industry-leading retail muni platform continues to deliver impressive market share gains, growing organically at 14% annualized in the second quarter. Alternatives multi-asset inflows totaled $1.6 billion, largely driven by strong deployments into our newly established private placements ABS strategy our U.S. real estate debt platform, CLOs, mortgages, and middle market lending. Our private markets platform reached $77 billion in fee-paying and fee-eligible AUMs for quarter end, growing 20% year-over-year. We're focused on delivering consistent and profitable growth supported by scale gains, improved operating leverage, and a durable fee rate. Our diversified asset mix, coupled with our enhanced operational efficiency, provides downside protection to our revenue base and margins while we retain upside leverage to favorable markets. We're on track to deliver a 33% operating margin in 2025, assuming flat markets versus the fourth quarter of 2024. This would put us above the midpoint of our 2027 margin range target of 30% to 35%, two years ahead of schedule. We see further potential for margin expansion over time as we scale our business. Finally, we continue to broaden our distribution coverage by expanding existing partnerships, forming new ones, and extending the addressable market for our differentiated investment capabilities via vehicle versatility. Year to date, we've added four new general account relationships across six strategies and five new mandates across existing relationships. These relationships require high-touch client service beyond conventional asset management. We've invested significant operational resources and institutional expertise to deliver a holistic client experience that is scalable, unlocking incremental revenue opportunities beyond management fees. We entered the second half of 2025 with 18 active ETFs and nearly $8 billion in AUM, more than double the prior year level. The majority of our flows are coming from net new assets. Our SMA platform has surpassed $54 billion in assets under management. generating more than 700 million of inflows in the second quarter, driven by munis. We were among the industry pioneers in tax-aware SMAs, delivering strong investment outcomes for our clients and the highest standards for client service. Moving on to slide four, I'll highlight our strategic relationship with Equitable. Partnering with a leading insurance provider gives Alliance Bernstein a competitive edge, supporting our client-focused asset-light approach. Leveraging the permanent capital commitment from Equibol helps us seed and scale our higher-fee, longer-dated private alternative strategies. To date, we've deployed over $15 billion of the $20 billion commitment Equibol has made to AB private markets strategies. The attractive yields produced by these strategies allow Equibol to offer compelling products to its policyholders, driving growth in sales and more general account assets for AB to manage. This creates a positive flywheel effect which benefits both companies. New capabilities we've developed for equitable, such as residential mortgages and private ABS, can then be commercialized and offered to other insurance and institutional clients, helping drive sustainable growth in private markets AUM. We remain on target to grow our private markets AUM to 90 to 100 billion by 2027, up from 77 billion today. Slide five reflects a summary page of our key financial metrics, which Tom will cover shortly. Turning to slide six, I'll review our investment performance starting with fixed income. During the second quarter, major government bond markets saw steepening yield curves amid escalating geopolitical and trade tensions. Despite the uncertain backdrop, credit markets displayed remarkable resilience, supported by high all-in yields and low net issuance. The Bloomberg U.S. Aggregate Index returned 1.2%, while the Global Aggregate returned 4.5% in the second quarter. reflecting U.S. dollar depreciation versus major currencies. Our portfolios continue to perform well in this challenging market, particularly through curve positioning and credit selection. More than half of our fixed income assets outperformed over a one-year period, while 87% outperformed over three years and 75% over the five-year period. Our tax-aware muni SMA is continuing to generate strong relative performance across all periods. Global high-yield performance has softened recently, underperforming both the benchmark and the category over the one year, largely due to underweight exposure to emerging market sovereigns. However, our three- and five-year relative returns remain compelling vis-à-vis the peer category. Our American income portfolio maintained strong absolute and relative performance in the second quarter, mainly driven by yield curve positioning. AIP is outperforming its benchmark over the one, three, and five years while also outperforming its category over the one and three-year periods for the institutional share class. Volatility in rates in foreign exchange coupled with concerns around unpredictable fiscal and trade policies in the United States have dampened demand for U.S. dollar-denominated assets. While the safe haven status of dollar-denominated assets is being questioned, the U.S. dollar remains the world's most liquid currency supported by compelling rate differentials and the world's deepest capital markets. Diversification is a healthy process, particularly given the severely overweight exposure to U.S. assets. We have built a robust all-weather platform that can help clients optimize their geographical exposures and capitalize on potential reallocations. We're already seeing increasing interest for our European income portfolio, balancing credit and duration, and offer a Euro-denominated barbell approach. The strategy has attracted over $200 million in inflows in the second quarter and continues to outperform its benchmark year-to-date. Today's environment also increases potential excess return from security selection. Active, systematic fixed-income approaches may help investors harvest these opportunities. We continue to see increased client interest for our systematic strategies, with over $1 billion in inflows in the second quarter. Turning to equities, following the sharp pullback in early April, U.S. equities quickly rebounded to new highs, with the S&P 500 rallying 10.6% in the second quarter. U.S. equity gains remain concentrated as big techs surge at the S&P growth outperforming value by more than 15%. European and emerging markets outperformed U.S. stocks in the first half of the year, largely driven by a weaker dollar. Our relative performance was mostly unchanged versus prior quarter, with 24% of our assets outperforming in one year and 48% over the three-year periods, continuing to reflect the narrow leadership of a few mega-cap companies. Our five-year performance improved, with 50% of our equity AUM outperforming. In the current environment, we maintain a proactive and disciplined approach to identifying high-quality, profitable companies with sustainable business models, and significant recurring revenue streams. These defensive characteristics serve as a buffer against sudden spikes in market volatility. Importantly, we have a diverse selection of active equity strategies with strong breadth and high-quality product offerings balanced across geographies. Examples include our highly-rated international low-volatility equity strategy, which was recently launched in ETF wrapper under the ticker ILOW. We have over 30 global, international, and emerging market services with established track records that have exhibited strong performance. Nearly all of them are outperforming their respective benchmarks or composites over the three- and five-year periods, and nearly three-quarters of the retail products sitting in the top quartile or top decile of their Morningstar categories for either the three- or five-year periods. This includes one of our largest retail offerings, International Strategic Equities, which continues to deliver alpha year-to-date and sits at the top 3 percent of its Morningstar category. We also launched our first active ETF in emerging markets. We recognize the enduring appeal of U.S. stocks, and we believe the U.S. market will continue to offer exceptional opportunities. We're also encouraged by the increased focus on fiscal and governance standards across Europe and Asia that could potentially attract more capital to these regions. In this landscape, flexibility is important. and opportunistic adjustments to regional and sector exposures is crucial to capitalize on emerging opportunities. We're witnessing growing momentum in systematic equity strategies as institutional investors are rekindling their appreciation for this style. We want a $500 million mandate for a global core equity portfolio that utilizes fundamental stock selection combined with proprietary quantitative risk and return tools. strategy has outperformed over the one, three, and five-year periods, delivering consistent alpha with a lower tracking error. Finally, our private alternatives platform remains invested in delivering better outcomes for our clients. AB Private Credit Investors, our middle market corporate lending platform, continues to exhibit solid long-term performance in line with stated objectives, supported by the resilience of our invested sectors and the rigorous underwriting process. AB Carvalho's investment from spanning U.S. and Europe underscores our belief in the benefits of geographic diversification for optimizing risk-adjusted returns. We're seeing increased deployment opportunities within our commercial real estate debt platform in the U.S. and Europe as the commercial real estate market has continued to show signs of stabilization. Now turning to slide seven. Retail flows turned negative in the second quarter as macro turbulence halted the streak of seven consecutive quarterly inflows. Active equity shed $3.7 billion across a wide range of different services. U.S. large-cap growth accounted for approximately $1.5 billion of those outflows, primarily concentrated within the United States. It's noteworthy that U.S. large-cap growth flows in Japan remained slightly positive for the quarter. Otherwise, client interest was limited to thematic, global, and international strategies. Taxable fixed income also generated $2.4 billion in outflows, as demand for our more key income strategies, such as American income and global high yield, remained weak in the second quarter. As rate volatility subsided, we observed a slight improvement in demand dynamics, particularly for AIP, where outflows decreased compared to prior quarter. we are seeing constructive demand for European income strategy, which replicates our barbell approach for Euro-denominated assets. We're also excited about our ETF-driven market share gains in the taxable fixed income space within the U.S. retail channel, where we have historically been underexposed to the asset class. We continue to gain retail market share and tax exempt for the 10th consecutive quarter, growing at a strong 14% annualized rate. Retail, ALT, and MAS generated $300 million in inflows in the second quarter. Our adjusted base management fees were up 6% versus prior year, while the channel fee rate was down 2% sequentially, reflective of lower daily average AUM for higher fee active equity services. Moving on to slide eight. Excluding the impact of passive redemptions, our core active strategies generated slight inflows within the institutional channel during the second quarter. Notably, a single institutional index redemption is expected to bring in a billion in net inflows over the coming quarters. The client's entrusting us to redeploy the proceeds from the redemption with incremental capital to manage impassive equities. This mandate is already reflected within our pipeline. Institutional organic growth was primarily driven by inflows of approximately a billion each into taxable fixed income and alternatives. Our U.S. investment-grade systematic fixed income strategy continues to gain strong traction with institutional clients and has received solid support from consultants, recently earning an A rating from a top consultant. Within alternatives, we continue to deploy at a healthy pace despite market volatility. Net of distributions, we put over $900 million to work across private placements, commercial real estate, asset-based finance, and private credit. Although active equity outflows continued in the second quarter, the trend continues to moderate year over year and sequentially. Our pipeline includes $5 billion from RGA, and we're thrilled to expand our relationship with this important partner. Note that these assets are related to the recent RGA equitable reinsurance transaction, which we expect to result in an overall net outflow of approximately $4 billion of lower fee AUM. Other notable wins in the second quarter included $3 billion in customized retirement and $500 million wins in third-party insurance and structured equity. Our best-in-class defined contribution platform manages nearly $100 billion in assets, including nearly $13 billion in lifetime income. The decrease in pipeline fee rate is influenced by the asset mix and the magnitude of the wins in the second quarter. Turning to slide nine. Net flows into our private wealth channel flip to negative, weighed by seasonal tax-related selling coupled with turbulent macro conditions. As we've discussed in the past, our private wealth net flows exclude reinvested dividends and interest income, which is typically reported within net new assets across key wealth management peers. On a net new assets basis, our client channel grew at a 2.6% annualized rate. Quarterly dividends and interest have ranged between $1.2 and $1.5 billion over the last four quarters. This is a durable and underappreciated source of growth for our private wealth asset base. Demand dynamics within the channel favored passive equities and alternatives to multi-asset. Our passive tax loss harvesting strategy eclipsed $7 billion in AUM, growing organically in the second quarter at a 7% annualized rate. We fundraised over half a billion dollars in private alternatives in the second quarter. General redemptions were primarily concentrated within active equities, totaling $1 billion in outflows. Taxable and tax-exempt fixed income posted marginal outflows. We continue to grow our high net worth and ultra-high net worth client base, underscoring the distinctive value proposition that Bernstein offers to this important client segment. Base management fees grew 5% year-over-year and declined marginally on a sequential basis. Now I will pass it to Tom to cover our financial results. Tom?