Updated with correction
AllianceBernstein expects AXA to terminate about $14 billion in fixed-income assets with the money manager in the first half of 2020.
AB President and CEO Seth P. Bernstein said Wednesday during an earnings call that the firm’s understanding is that the assets will move in-house to AXA subsidiary AXA Investment Managers.
AXA’s $14 billion in assets with AB is invested in taxable fixed income, he said.AB had $258.3 billion in taxable fixed-income assets under management as of Dec. 31, the company reported in its fourth quarter earnings. Total AUM at the firm was $622.9 billion, up 5% from the previous quarter and up 21% from Dec. 31, 2018.
The fees AB earns from managing the soon-to-be terminated fixed-income assets “are low” and “the revenue impact is not significant,” Mr. Bernstein said on the call.
Equitable Holdings is a controlling shareholder in AB, and has the ability to influence the money manager’s business, a March 29 ADV filing by AB said. AXA, however, owns about 10% of the outstanding common stock of Equitable Holdings and has announced its intention to sell its entire remaining interest in Equitable Holdings over time, according to a Nov. 13 news release from Equitable Holdings.
“Ultimately, AXA having sold out its ownership stake, would over time, we thought, move (us) to more of an arms-length business partnership,” Mr. Bernstein said during the earnings call.
“While we have continued to enjoy inflows in specific strategies with them in 2019, we knew that it was a potential possibility that they would begin to bring assets in-house which they’ve decided to do,” he said. “We don’t know what their long-term plans will be, but ... I think it will be more of an arms-length relationship. They’re pleased with the overall level and service performance that we are providing today.”
In a 10-K filing Wednesday with the SEC, AB also commented on AXA’s sale of the Equitable Holdings business and the impact the sale could have on AB.
“While we cannot at this time predict the eventual impact on AB of this transaction, such impact could include a reduction in the support AXA has provided to AB in the past with respect to AB’s investment management business, resulting in a decrease in our revenues and ability to initiate new investment services,” the filing said. “Also, AB relies on AXA, including its subsidiary, AXA Business Services, for a number of significant services, and AB has benefited from its affiliation with AXA in certain common vendor relationships. Some of these arrangements are expected to change with possible negative financial implications for AB.”
An AB spokeswoman declined further comment Wednesday on the matter.
An AXA IM spokeswoman Wednesday confirmed in an email that AXA plans to move the fixed-income assets with AB in-house. “AXA has decided to recover part of the funds invested in AB in order to manage them more directly by investing them in AXA Investment Managers,” the spokeswoman wrote.