AllianceBernstein continues to gather assets in segments such as emerging markets and small-cap equities, where performance has remained strong, as well as in fixed income, where returns have been “stellar,” Mr. Kraus said.
Among the firm's bond offerings, the $26 billion global high income strategy has outpaced its Citigroup World Global Bond index unhedged benchmark by an annualized 3.25 percentage points for the five years through Sept. 30, according to Marietta, Ga.-based data tracker eVestmentAlliance, which provided all of the performance and flow data. The strategy pulled in $322.3 million in net inflows during the first three quarters of the year.
The firm's $1.2 billion U.S. "smidcap' growth equity strategy, meanwhile, has outperformed its Russell 2500 Growth equity benchmark by an annualized 4.03 points over the same period, garnering inflows of $76 million,
In key segments such as domestic large-cap growth and value equities, however, performance has continued to suffer.
For example, the $11.3 billion Alliance large-cap growth equity strategy has lagged its Russell 1000 benchmark by an annualized 2.03 points for the five years through Sept. 30, with the loss of 18 institutional accounts year to date and net outflows of $4.5 billion.
On the value side, the $14.3 billion Bernstein U.S. strategic value equity strategy has trailed its Russell 1000 Value benchmark by an annualized 2.83 points over the same period, with net outflows of $739.1 million.
The fact that institutional investors — including recently Vanguard Group and the Oregon Investment Council — continue to defect almost two years after Mr. Kraus replaced Lewis A. Sanders, the architect of the investment culture he inherited, reflects the tricky balancing act Mr. Kraus faces. He needs to rebuild a firm with proud traditions — and many clients who were fans of Mr. Sanders — at a time when big swathes of its business remain in out-of-favor asset classes.
Another sell-side analyst, who declined to be named, said Mr. Kraus picked an extremely difficult moment to try to engineer a rebound in the firm's U.S. value and growth equity strategies, which began struggling even before the financial crisis reached fever pitch in 2008.
“No one is interested in U.S. stocks,” agreed Mr. Warren, who noted that net outflows from stock mutual funds have topped $60 billion for the first 10 months of the year.
Many observers give Mr. Kraus credit for the changes he has pursued, including:
c lowering the barriers between the firm's value and growth equity businesses, which remained largely separate almost a decade after growth equity firm Alliance Capital acquired value equity shop Bernstein & Co. In July, he promoted value equities head Sharon E. Fay to chief investment officer of equities after Lisa A. Shalett, who had led the firm's growth equity business, left to become CIO of Merrill Lynch Global Wealth Management.
c introducing a partnership structure and boosting the importance of AllianceBernstein stock within overall compensation;
c working to restructure the firm's damaged growth equity business with the help of new leadership such as Laurent Saltiel, former Janus Capital Management star portfolio manager hired in May as team leader of AllianceBernstein's international large-cap growth equity strategies; and
c working to expand the firm's alternatives business, with the October acquisition of SunAmerica's hedge fund-of-funds and private equity fund-of-funds business, which had $8 billion in subadvised assets.
Still, the scale of ongoing changes has left the environment at AllianceBernstein fragile, and many people there remain unsettled even if they agree with the direction Mr. Kraus is moving the firm, according to executive recruiters.