AllianceBernstein Holding LP at Goldman Sachs U.S. Financial Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Okay. On to the agenda of the day. I was hoping we could start with asset allocation trends you see in the market today. Clearly, it's been a pretty robust environment macro-wise, equity markets up a lot, Credit spreads are really tight. US, obviously, a lot better than non-US and interest rates have started to come down. I guess this move out of money market funds into fixed income. It's taken a bit longer, but it feels like it's starting to finally kind of accelerate. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 4:20PM, AB.N - AllianceBernstein Holding LP at Goldman Sachs U.S. Financial Services Conference

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Right. So let's talk a little bit about that. What are you hearing on the ground? Are we -- is this acceleration sustainable? And how are you guys positioned to capture some of that money emotion?

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Great. All right. We'll dig into all of this over the course of the next 30 minutes or so. But I wanted to start with fixed income. It's clearly been a very big contributor to organic growth at AllianceBernstein for, not just this year, but over time, I think you guys are on track to do like north of $20 billion of net flows into fixed income year-to-date. You mentioned credit spreads, and I wanted to zone in on that a little bit. super tight environment for credit. Interest rates are starting to come down, so that's good news. But as you sort of think about the manager selection process in the world where credit spreads are so tight, how are you positioned? Are you seeing clients spending more time on individual manager as opposed to just broadly allocate into the asset class? And how are you positioned to win within fixed income when it comes to that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 4:20PM, AB.N - AllianceBernstein Holding LP at Goldman Sachs U.S. Financial Services Conference

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Yes, I mean, we've definitely seen dispersion widen amongst manager over the last couple of years, and that was granted mostly rates move, but you might --

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Yes. Makes sense. Makes sense. All right. Let's turn to equities for a couple of minutes. So it's really been a tale of two cities I feel like you guys you've seen good flows on the retail side actually positive flows in active equities in retail, which --

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : And not a lot of people could say that. I mean we all know the story for equities in the intermediary channel and retail channels were pretty challenged, offset by pretty significant redemption on the institutional side. So can you maybe just kind of walk us through what differentiates AllianceBernstein's success on the retail side. And at the same time, you alluded to that a little bit, but any signs of stabilization you're seeing on institutional -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 4:20PM, AB.N - AllianceBernstein Holding LP at Goldman Sachs U.S. Financial Services Conference

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : That's new because that would really help them around.

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Great. All right. Let's talk a little bit about some of the thematic kind of dynamics and the growth dynamics in the space. Active ETFs. That's a big -- it's been a big focus for you guys. You are sort of early to market with a couple of products there. It's grown nicely. It's not huge. It's like $5 billion -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 4:20PM, AB.N - AllianceBernstein Holding LP at Goldman Sachs U.S. Financial Services Conference

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Not a replica --

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : So importantly it didn't sound like it's cannibalizing any of the mutual fund complexes because these are all kind of newer --

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Yes. Got you. Okay. Let's spend a couple of minutes on private markets. It's been obviously a big area of focus for the firm. You guys had quite a bit of success there. I think you were at about $68 billion in AUM, and you previously talked about getting it to $100 billion by 2027, north of 20% of management fees, that's your goal for a couple of years out as well. Can you talk about the path of getting there? And with private credit in particular, being a pretty big part of that build, what are some of the key origination capabilities that differentiate AB relative to competitors and gives you kind of an edge in the marketplace.

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Got you. Let's spend a couple of more minutes on this. So equitable, you kind of started there has kind of been the cornerstone and what enabled you to kind of get to where you are now. There's about $9 billion, I think you said left in commitment to go. How are you thinking about the pace of deployment on that line, but also more importantly, what are some of the other opportunities you see for the two firms to collaborate together?

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Look, we've seen examples with obviously others funding it with third-party capital. You look at what Apollo has done with ADIP and what KKR is doing well, there's ways to do that as an investment product would --

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : You mentioned the IMA. I'm assuming you guys don't have anything public to announce because it sounds like you're negotiating that. But just sizing what that general account would look like for getting the fees what's that.

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : $1 billion of what you asked. Got it. And when you think about other psych opportunities like that or other opportunities with other insurance companies, what is the differentiated angle that you guys bring to the table? And does the partnership that you already have with Equitable, does that cut you out of a certain portion of the market?

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Right? Let's put it back to retail for a couple of minutes. Again, it's one of the building blocks you mentioned and getting to that $100 billion in private markets. You guys recently launched AB's CarVal Credit Opportunities Fund. This product is a bit different from most retail private credit strategies that are out there. that are largely focused on direct lending, this is not one of those like there's been more flexible and -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 4:20PM, AB.N - AllianceBernstein Holding LP at Goldman Sachs U.S. Financial Services Conference

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Yes. So just how are you thinking about distribution of that product externally, maybe talk a little bit about kind of platforms you're already on? What are your hopes for scaling that product? And what's next on the wealth product side from a [new car] operation perspective?

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Yes. I got you. All right. So a few things going on there. Let's shift gears, talk about the financials for a couple of minutes. You guys, as part of your growth algorithm you talked about improvement in the fee rate mostly due to the change in the business mix, right, like with Alts growing, private credit business, and I guess distribution channel. Right, exactly. And that's both on the retail side and the alt side, that's obviously quite helpful. So talk to us a little bit about how you expect it to progress the fee rate, I think, is hovering around 40 basis points now, how are you to progressive to in 2025.

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : I got you. I got you. That makes sense. Shifting to performance fees for a couple of minutes. It doesn't -- investors will spend a whole lot of time thinking about it, but there is a story here as well where it feels like there's a lot more durability and less volatility in that stream of income when it comes to you guys. I think a lot of that is a function of the fact that you guys are moving into private credit and just a little more on --

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Right. So I guess, how would you think about the growth algorithm in those performance fees over time? Should you just generally scale in line with your private credit business? Or is that --

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : I got you. Okay. Let's shift to margins. You guys are running at around 31% margin year-to-date that were take -- you gave a nice walk in your last earnings deck, just talking through the kind of some of the costs related to NYC relocation, that's 100 to 150 basis points.

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Exactly. So once that falls off, you're kind of like a 32.5% call it, and your baseline for '25 is 33%. That's kind of what you put out there, sort of a goalpost. Doesn't feel like it takes a lot to get there

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Exactly. So help us think about the incremental margin in the business as you grow organically, markets remain relatively supportive as well, what is the growth --

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Yes. I wanted to wrap things up with the question around just the structure of the company at a higher level. It's a question that comes up a lot. But when you look at AllianceBernstein, you guys are putting up some of the best organic growth in the group, both on the fee side and just the flow side. The multiple, most would argue, doesn't seem to reflect it. Obviously, that's been our view for a little while as well. The structure is part of the issue, the float with Equitable. I'm not sure if there's a whole lot to do there, probably not. But the structure in terms of publicly traded partnership versus a C-Corp matters as well. So where are you guys in the process of thinking about converting to C-Corp? What are some of the puts and takes? What are the pluses and minuses? What do you need to see so you can make the decision.

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Is that a discussion point with index providers I feel like you guys can get that answer from -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 10, 2024 / 4:20PM, AB.N - AllianceBernstein Holding LP at Goldman Sachs U.S. Financial Services Conference

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Certainly feels like in this space, yes.

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : Does Equitable have any sort of philosophical conviction one way or another, or are they ultimately --