Alliance Bernstein (NYSE: AB) reported its third quarter 2023 earnings, demonstrating resilience amid a challenging market environment characterized by a pullback in equity and fixed-income markets. Despite these conditions, the firm achieved organic growth across key services, including retail, municipal SMA platform, active equity, and private markets.
Key takeaways from the earnings call include:
- Gross sales rose to $25.2 billion, marking a 27% increase from the previous year.
- Net outflows were reported at $1.9 billion.
- Strong performance was noted in fixed income, with 73% of assets outperforming over a one-year period.
- The firm's retail channel saw net inflows of $1.6 billion, driven by demand for taxable and municipal fixed income.
- Institutional channel experienced net outflows of $3.5 billion, primarily in fixed income and passive equities.
- The firm's strategic initiatives, including performance in fixed income and growth in retail and private wealth, showed positive results.
During the call, the company reported a 3% year-over-year increase and a 2% sequential increase in net revenues. However, growth in research payments was modest compared to previous periods. Institutional equity trading volumes remained constrained globally, except for an improvement in Japanese equities.
Alliance Bernstein also revealed that its joint venture with Societe Generale (OTC:SCGLY) is expected to close in the first half of 2024, with further financial details to be disclosed at a later date. The firm's strategic initiatives showed strong performance in fixed income, while equities lagged behind capitalization-weighted benchmarks.
The firm's muni SMA platform reached $20 billion in assets under management, doubling in the last five years. Adjusted financial comparisons showed improvements over the previous year, with operating income up 13% and earnings and unit holder distributions of $0.65 per unit up 2%.
In terms of future outlook, the company expects positive flows in muni bonds as interest rates stay elevated and inflation is controlled. The alternatives business has significant dry powder for deployment, and new initiatives, such as the launch of an interval fund and the growth of the active ETF business, are expected to contribute to future growth.
The firm also discussed its fundraising goals for the CarVal Value 6 fund, targeting $2.5 billion. Despite headwinds in the fundraising market, the company expressed optimism about new opportunities and deployments. The company also announced plans to launch an opportunistic credit interval fund, their first interval fund for both internal and external clients.
Onur Erzan, the speaker during the earnings call, discussed the growth strategies for private wealth management in the coming year. He expressed optimism about deploying private credit in the channel and expanding the alternative offerings. On the topic of passive investments, Erzan mentioned that they have model portfolios for lower-complexity clients and expect a migration towards higher-risk strategies with higher fees when rates stabilize and risk appetite returns.
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