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Money Management

AllianceBernstein AUM down 6.2% in quarter, drops 6.9% for year

AllianceBernstein (AB) reported assets under management of $516.4 billion as of Dec. 31, down 6.2% from Sept. 30 and down 6.9% from Dec. 31, 2017, the company said in an earnings statement released Wednesday.

Net inflows across the firm totaled $800 million in the fourth quarter vs. net inflows of $1.3 billion in the third quarter and net inflows of $4.2 billion in the year-earlier fourth quarter.

Net inflows from institutional investors were $1 billion in the fourth quarter, compared to net outflows of $200 million in the third quarter and net inflows of $3 billion in the quarter ending Dec. 31, 2017.

The firm's fourth-quarter decline in total assets under management was attributed to "significant declines in the equity and certain fixed-income markets" over the period, particularly in December, a presentation that accompanied its earnings release said.

"Given the impact we expect this lower AUM will have on our ability to generate the level of investment advisory fee revenues we initially forecast when establishing the 2020 margin target, presently we do not believe that achieving the 2020 margin target is likely," the presentation said.

AllianceBernstein previously adopted a goal to increase its adjusted operating margin to a target of 30% by 2020. Its adjusted operating margin for 2018 was 29.1%, the presentation materials said.

By asset class, AllianceBernstein (AB)'s passively managed equity strategies had the most net inflows of $2.3 billion during the fourth quarter, followed by net inflows of $1.6 billion into actively managed equity strategies.

The rest of the firm's assets classes experiencing net inflows were in its "other" segment, which includes multiasset class strategies and alternatives and experienced net inflows of $1.5 billion.

Assets classes that experienced net outflows during the three months ended Dec. 31 were:

  • Taxable fixed income, with $3.4 billion in net outflows.
  • Tax-exempt fixed income, with $800 million in net outflows.
  • Passive fixed income strategies, with $400 million in net outflows.

AllianceBernstein's net revenue for the fourth quarter was $804.7 million, down 5.4% from the third quarter and down 12.5% from the fourth quarter of 2017.

Net income was $199.4 million, down 6.8% from the third quarter and down 29.6% from the fourth quarter of 2017.

Providing an update on the company's headquarters relocation to Nashville from New York, CFO John C. Weisenseel said the relocation was "going very well and proceeding faster than we originally expected."

The firm announced the move in May, which entails relocating about 1,050 jobs to Nashville over the next few years, where the firm's executive team, finance, information technology, operations, legal, compliance, internal audit, human capital, and sales and marketing organizations will eventually be housed.

"We're in the process of securing additional temporary office space, which will facilitate the acceleration of our relocation so that the majority of the positions in scope will be relocated to Nashville prior to the completion of our new permanent office building, currently scheduled for the fourth quarter of 2020," Mr. Weisenseel said during the earnings call.

"As a result of the acceleration, we now anticipate both higher transition costs and higher expense savings related to the Nashville relocation," he later added.

The firm estimates that it will incur total transition costs of $155 million to $165 million between 2018 and 2024, when its New York City building lease expires, while total expense savings of $190 million to $200 million are expected over the same period, Mr. Weisenseel said.

"(By) the beginning of 2025, once the transition period has been completed, we estimate ongoing annual expense savings of approximately $70 (million) to $75 million," he added.