AllianceBernstein: Executing for a Strong Future AXA IR Day Presentation

Transcription

1 November 20, 2014 AllianceBernstein: Executing for a Strong Future AXA IR Day Presentation Peter S. Kraus Chairman & Chief Executive Officer Member of the AXA Management Committee

2 Cautions Regarding Forward-Looking Statements Certain statements provided by management in this presentation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The most significant of these factors include, but are not limited to, the following: the performance of financial markets, the investment performance of sponsored investment products and separately-managed accounts, general economic conditions, industry trends, future acquisitions, competitive conditions, and current and proposed government regulations, including changes in tax regulations and rates and the manner in which the earnings of publicly-traded partnerships are taxed. AllianceBernstein cautions readers to carefully consider such factors. Further, such forward-looking statements speak only as of the date on which such statements are made; AllianceBernstein undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. For further information regarding these forward-looking statements and the factors that could cause actual results to differ, see Risk Factors and Cautions Regarding Forward-Looking Statements in AllianceBernstein s Form 10-K for the year ended December 31, 2013 and subsequent Forms 10-Q. Any or all of the forward-looking statements made in this presentation, Form 10-K, Form 10-Qs, other documents AllianceBernstein files with or furnishes to the SEC, and any other public statements issued by AllianceBernstein, may turn out to be wrong. It is important to remember that other factors besides those listed in Risk Factors and Cautions Regarding Forward- Looking Statements, and those listed above, could also adversely affect AllianceBernstein s financial condition, results of operations and business prospects. G1

3 AllianceBernstein: Executing for a Strong Future AllianceBernstein is a major global asset manager with a culture of research, investment discipline and collaboration We have a diverse array of relevant client offerings, broad global distribution capabilities and the resources to grow and evolve along with our industry We work in partnership with the AXA Group to participate in the global savings industry We are in the midst of executing a multi-year strategy to: Maintain and improve our investment performance Diversify and globalize our business Innovate for our clients with our offering Strengthen our financials Our strategy is working and today we are well positioned to deliver for our clients and capitalize on long-term secular growth trends in global asset management G2

4 AllianceBernstein: At A Glance A major global asset manager $473B in AUM as of September 30, ,447 employees worldwide located in 46 cities and 22 countries Billions in asset flows Gross sales of $57B YTD 14, $80B+ annually in 2013 and 2012 $6.7B in YTD net flows positive across all distribution channels; +2% annualized organic growth +$5.8B in Institutions, +$0.7B in Retail, +$0.2B in Private Client Strong top line and improving profitability Adjusted revenues of $2.4B in 2013, $2.3B in 2012 and $2.4B in adjusted profit margin of 24.0% up 7ppts from 2011 Solid balance sheet and high credit ratings Zero long-term debt and $535 million of cash on hand at September 30, 2014 High credit ratings from all three rating agencies Fitch, S&P and Moody s Strong Financials $1.9 billion Adj. Revs YTD $425 million Adj. Op. Inc. YTD A+/A2 Credit Rating Zero Long-term Debt Year-to-date (YTD) figures are as of September 30, 2014 G3

5 Firmwide Overview: Strong Year-to-Date Momentum Across the Board All figures in USD Billions, unless otherwise noted $57.3 $65.7 $1.9 $1.7 Gross Sales Adjusted Revenues YTD 14 YTD 13 YTD 14 YTD 13 $6.7 $1.4 $1.4 Net Flows Adjusted Expenses $(2.0) YTD 14 YTD 13 YTD 14 YTD 13 $473.0 $ % 22.3% End of Period AUM Adjusted Operating Margin 3Q14 3Q13 YTD 14 YTD 13 Average AUM $464.7 $441.2 ABH Adjusted EPU (USD) $1.29 $1.20 YTD 14 YTD 13 Year-to-date (YTD) figures for 2013 and 2014 are for first nine months through September 30 YTD 14 YTD 13 G4

6 AB and AXA: A Strong Strategic Partnership AXA is AB s Largest Client by AUM AXA is a Core Investor in Various AB Growth Initiatives AB manages $110B in AUM for AXA* 177 portfolios in 77 investment services Partnering across 16 countries Real Estate Funds I and II Real Estate Debt Direct Middle Market Lending Concentrated Growth Equities (WPS) Multi-Asset Solutions Geographic Breakdown of AXA AUM 23% of Total AB AUM US 76% Europe 12% Japan 9% Asia ex Japan 3% Upcoming Opportunities in 2015 Risk Reducing Global Credit ex Euro Emerging Market Debt US Credit US Residential Mortgage Return Seeking Opportunistic Finance Infrastructure Debt Mezzanine Alternatives Credit Long / Short AB Securitized Assets As of August 31, *Includes AXA s Clients and Affiliates G5

7 The Four Pillars of Our Long-Term Strategy for Growth Maintain and improve investment performance and deliver for clients Diversify our business across channels, investment services and geographies Develop innovative new products and services to meet clients evolving needs Achieve greater operating leverage and better financial results G6

8 Maintain Investment Performance: Fixed Income % of FI Assets in Outperforming Strategies 80 As of September 30, AB Fixed Income AUM: $262B AB FI Products Top Quartile* Across Periods Strategy 1-Yr 3-Yr 5-Yr Global High Income 3-Yr Period United States 5-Yr Period Global Bond Fund Global Income Funds over 10 Years Lipper Fund Awards 2014 High Income Fund High Yield Funds over 10 Years Lipper Fund Awards 2014 Muni Income Fund Massachusetts Massachusetts Municipal Debt Funds over 10 Years Lipper Fund Awards 2014 High Income Fund High Yield Funds over 10 Years Lipper Fund Awards 2013 *As of September 30,2014; Source: evestment Global Recognition for Performance and Innovation Europe European Income Bond Europe over 5 Years Lipper Fund Awards 2014 (Austria, Europe, Germany, Netherlands, Nordics and Switzerland) Global High Yield Bond Global High Yield over 10 Years Lipper Fund Awards 2014 (Austria, Europe, Germany, Netherlands, Switzerland and UK) Euro High Yield Bond Euro High Yield over 3 Years Lipper Fund Awards 2014 (Europe, Germany, Netherlands, Nordics, Switzerland and UK) TIPS Plus US High Yield UK Core Plus European Income Asia Best Retail House (Taiwan) Asia Asset Management Best of the Best Awards 2013 Europe Bond Group BENCHMARK Funds of the Year Award 2013 American Income Bond over 5 and 10 Years Lipper Fund Awards 2014 (Hong Kong) American Income Bond over 10 Years Lipper Fund Awards 2014 (Singapore and Taiwan) G7

9 Improve Investment Performance: Equities Percentage of Active Equity Assets in Outperforming Strategies for 3-Yr Period September 30, 2013 Total AUM: $101B September 30, 2014 Total AUM: $112B 42% 70% Top Quartile Performers* 1-Year 3-Year 5-Year US SMID Cap Value US Large Cap Growth Concentrated US Growth Global Core Equity Global Strategic Value Global Active Low Vol Global REIT Emerging Markets Growth US Strategic Value US Large Cap Growth Global Strategic Value Global Active Low Vol Emerging Markets Value Emerging Markets Growth Australian Value *As of September 30, 2014; Source: evestment. Bold strategies introduced since January US SMID Cap Growth Select US Equity Concentrated US Growth US Growth & Income G8

10 Diversify and Globalize: Evolving Our Business Mix The Old Prescription The New Prescription Fixed Income Return Seeking Risk Reducing Equities Bonds 40% Stocks 60% Risk Reducing Multi Asset Solutions Return Seeking Newer Diversifiers of Risk and Return Alternatives G9

11 Diversify and Globalize: A Broad and Balanced Fixed Income Platform Category Objective Newer* Offerings Legacy Offerings Return Seeking / Income Return seeking strategies with less sensitivity to interest rates EM Debt Local Currency EM Corporate RMB Income Plus Asia Pacific Income Securitized Assets Private Placements Low Vol High Yield Global HY / High Income American Income European Income EM Debt Hard Currency Bank Loans Corporate High Yield Risk Reducing / Core Core strategies designed to offset equity volatility Global Dynamic Duration EM Debt High-Grade US Muni Bond Inflation Global/Regional Core Global/Regional Core Plus Global/Regional Credit Long Duration US TIPS Plus US Core Mortgage US Max-After-Tax US Municipals Risk Reducing / Stability Lower risk strategies that limit risk to capital Global Short Duration Regional Short & Low Duration Stable Value Cash Management Absolute Return Uncorrelated sources of return Unconstrained Bond Credit L/S Diversified Yield Plus *Introduced since 1Q09 G10

12 Diversify and Globalize: Building an Illiquid Credit Business Residential Mortgage Commercial Mortgage Middle Market Corporate Infrastructure Opportunity US Housing recovery Pullback of US government footprint in housing finance ~$1 trillion of maturities over next 3 years Attractive opportunities in underserved, transitional loan space Demand for financing by middle market borrowers Competition based on relationships, creative structuring and certainty of execution Strained public resources Up to $200B needed annually to bridge investment gap Strategy Directly sourced new origination and GSE risk sharing transactions Invest in legacy and new issue non-agency RMBS and CMBS Directly originate first mortgage loans secured by highquality, transitional US properties Directly originate middle market private credit investments throughout the capital structure on a relative value basis Arrange and participate in infrastructure debt facilities throughout the capital structure Focus on developed European markets AB Approach AB Securitized Assets (ABSA) Fund Second fundraise underway for Commercial Real Estate Debt Fund Hired middle market direct lending team Cross Asset-Class Opportunistic and Specialty Lending Building global infrastructure team G11

13 Diversify and Globalize: Evolving Our Equities Client Offering Seeking equity return potential with Objective limited downside risk stable and consistent alpha income style diversification unique alpha Representative Strategies European Flexible Equity Low Volatility Select US Long/Short Global Core Equity Select US Equity Emerging Markets Multi-Asset Equity Income Global REIT Growth Value Concentrated US & Global Growth European Opportunities US & Global Thematic G12

14 Diversify and Globalize: Client-Focused and Complementary Acquisitions Select Equities W.P. Stewart CPH Capital Acquired May 2011 December 2013 June 2014 Assets at acquisition $1.1B $2.1B $3.0B Investment description Relative return and absolute return US equities Concentrated growth equities Style- and factor-neutral global equities Investment strategies Select US Equity (Long Only) Select US Equity Long/Short Concentrated US Growth Concentrated Global Growth Concentrated EAFE Growth Global Equity Global Consumer Equity Vehicles Separate Accounts: 4Q11 Long Only US Mutual Funds: 4Q11 Long/Short Lux Mutual Fund: 1Q12 Long/Short US Mutual Fund: 4Q12 Separate Accounts: 4Q13 US & Global Lux Mutual Fund: 1Q14 US & Global US Mutual Fund: 1H14 Separate Accounts: 1H14 Global Lux Mutual Fund: 1H14 Global US Mutual Fund: 2H14 AUM potential High: $14B AUM as of 9/30/14 High: 25+ DDQ/RFPs underway $175M in YTD Retail flows High: first $500M mandate funded Relevant to clients Global appeal Complementary fit Long-term track record Investment discipline Research culture G13

15 Diversify and Globalize: Broadening Our Global Retail Platform Newer* Offerings as % of Retail Gross Sales Newer Offerings Gross Sales CAGR **: +52% YTD '14 Success with Newer Offerings Nine strategies with >$500M in assets Select US Equity (Lux): $4.5B (4Q11) High Income Muni: $1.8B (1Q10) SMA Tax Aware: $1.8B (1Q11) Select Absolute Alpha: $1.7B (1Q12) Select Equity L/S: $1.7B (4Q12) Short Duration High Yield: $1.0B (3Q11) Muni Bond Inflation: $900M (1Q10) RMB Income Plus: $700M (2Q11) Real Asset: $600M (1Q10) Faster Asset Gathering with 2014 Launches Multi-Asset Income and Fixed Income Fund-of-Funds Taiwan launches: $400M in combined AUM (1Q14) Global Hybrid Fund Japan: $250M+ (1Q14) Multi-Manager Liquid Alternative: $400M (2Q14) Global Core Equity (Lux): $400M (2Q14) *Introduced since January **YTD Retail gross sales of newer offerings have been annualized for CAGR calculation. G14

16 Diversify and Globalize: Global Expansion of Bernstein Research Services Expanding Global Footprint Stockholm Opened new offices in Boston and Frankfurt San Francisco Los Angeles London Boston New York Frankfurt Zurich Hong Kong Singapore New trading desks in Zurich and Singapore Launched coverage on 29 sectors in Europe & Asia since % international revenues CAGR* Global Research Recognition International BRS Revenues ($M) YTD 14 International Revenues as % of BRS Revenues YTD 14 Advanced in 2014 annual Institutional Investor All- America Research Team survey Tenth straight year ranked among the top ten firms Rose to #6 ranking overall from #7 Six analysts ranked #1 in seven sectors Strong showing in 2014 annual Extel survey Highest ever share of total research vote Maintained overall #11 ranking Four analysts ranked #1 in five sectors *Full year 2014 International BRS revenues annualized from YTD 14 revenues G15

17 Diversify and Globalize: Building an Alternatives Presence Total AUM: $22.8B (1) Multi-Manager Hedge Fund Non-Traditional Equity Multi-Asset $2.4B Non-Traditional Equity $4.2B Commingled Hedge Fund of Portfolios Custom Hedge Fund Portfolios Multi-Manager Alternative Strategies* Long/Short Equity Multi-Manager* Select US Equity Long/Short* European Flexible* Global Equity Market Neutral* Financial Service Opportunities Next 50 Emerging Markets Real Estate Fixed Income / Alternative Credit Real Estate $2.0B Fixed Income / Alt Credit $1.8B US Real Estate Equity US Real Estate Debt Global REITS* US REITS* Infrastructure Residential Mortgage Credit Middle Market Direct Lending Unconstrained Bond* Global Opportunistic Finance Credit Long/Short* Mortgage Income* Multi-Asset Multi-Manager (2) $12.4B Infrastructure Debt Global Risk Allocation* Dynamic All-Market* Real Assets* Tail Hedge Drawdown Managed (1)Total AUM includes funded capital (excludes committed capital). (2)Includes hedge fund and private equity investments including a custom portfolio of private equity funds managed by the Multi-Manager team for an institutional investor. *Liquid Alternatives AUM includes non-traditional equity, fixed income/alternative credit, multiasset, and real estate liquid alternative products that are available; liquid alternative assets are included in the Total AUM figure. G16

18 Innovate for Clients: A Growing Liquid Alternatives Platform Real Assets (2010) Market Neutral (2010) Unconstrained Bond (2011) Select US Long/Short (2012) Credit Long/Short (2014) Multi-Manager Strategies (2014) Liquid Alternatives Platform Assets $7.5B $4.8B $2.7B $1.4B Total AB Alts AUM: $10.6B $11.6B $16.4B $22.8B As of September 30, 2014 G17

19 Innovate for Clients: Creating Multi-Asset Solutions Glidepath Strategies Asset Allocation Strategies Targeted Exposures What We Do Design and manage strategic glidepaths for retirement, education and pension markets Design and actively manage market exposures to generate unique client outcomes Build portfolios that access unique market index and factor exposures Our Solutions Customized Ret. Strategies Lifetime Income Retirement Strategies Education Strategies Dynamic Asset Allocation Real Asset Wealth Strategies Dynamic All Market Market Indexes Custom Indexes Factor Portfolios Market Neutral Our Experience Custom target-date manager for three of the 15 largest US DC plans* First to offer multi-insurer secure lifetime income solution One of the largest 529 plan managers with over $7 billion in assets** $45 billion in assets covered by DAA Private Asset Management award for Innovation in DAA Highly regarded Real Asset research 30 years of experience managing index strategies Broad range of enhanced and custom solutions Deep capabilities in managing custom and traditional portfolios for insurers, with more than $27 billion in AUM *Measured by assets under management; according to Pensions & Investments. **Fifth largest 529 plan in the US according to Strategic Insight, 2Q: Private Asset Management award for Private Client Investment Platform Innovation. G18

20 Innovate for Clients: Private Client Global Stocks Bonds Real Asset and Bond Inflation: For clients vulnerable to inflation spikes Alternatives: Multi-manager fund of funds offerings Real Estate Opportunities AB Securitized Assets European Opportunities Targeted Solutions DAA US Strategic Equities Non-US Stocks Real Asset Bond Inflation Bonds RIC Alternatives Targeted Services Dynamic Asset Allocation: Adjusts equity exposure in changing risk conditions Public Private Investment Partnership (PPIP) Strategic Equities: Multistyle, all-cap portfolio seeks reliable returns in different markets RIC: Fund-of-hedge-funds RIC provides broader client access to alternatives Financial Services Opportunities Frontier Markets G19

21 Improve Financials: Right-Sizing and Expanding Our Margin Success with expense management and margin expansion Reduced headcount by 40% from peak, in line with decline in adjusted revenues 2013 adjusted operating margin of 24% up 7ppts vs $125M+ in adjusted non-compensation expense reductions since 2011 Global real estate consolidation plan on track ~$70M in annual occupancy savings realized Phase I 100% completed; Phase II 80%+ completed Successfully sublet 48% of total global office space Accelerated legacy deferred-comp expense in 2011 better aligned compensation and revenues Maintaining expense discipline YTD adjusted revenue growth has outpaced increase in expenses G20

22 Sources of Future Growth: Alternatives and Multi-Asset AUM Growth Estimates Outcome-Oriented Solutions Growth Rates % 97% 30% 31% 32% 25% 26% 34% 42% 18% 22% Active Fixed Income Cash / Passive Active Equities Alts Balanced / Multi-Asset "Go Anywhere" Asset Allocation Inflation Linked Income Managed Volatility Products Absolute Return Target Date Source: McKinsey Global Asset Management Growth Cube (left); McKinsey: The Asset Management Industry: Outcomes are the New Alpha (right) G21

23 AB in the Next Five Years: Pursuing High Potential Growth Opportunities Equities: extending our platform CPH, WPS and Low Volatility Fixed Income: exploiting emerging opportunities in global and illiquid credit Private credit, infrastructure, real estate Greater adoption of global credit in the United States Multi-Asset and Alternatives: build our presence Factor- and income-oriented solutions factor funds, Lifetime Income Solutions Joint venture with Morningstar to provide open architecture target-date funds Liquid alternatives, multi- and single-manager hedge funds Private Client: new and enhanced solutions to reach a broader client base Targeted solutions Stabilizing and growing our traditional business Bernstein Research: differentiated growth through global expansion Building strong franchises in Asia and Europe as others retrench G22

24 Appendix G23

25 BIOGRAPHY PETER KRAUS CHAIRMAN AND CEO, ALLIANCEBERNSTEIN MEMBER OF THE AXA MANAGEMENT COMMITTEE Peter Kraus is Chairman & CEO of AllianceBernstein. He joined AllianceBernstein in December 2008 from Merrill Lynch & Company Inc., where he served as an executive vice president, the head of global strategy and a member of the Management Committee from September 2008 through December Peter spent 22 years with Goldman Sachs Group, where he most recently served as co-head of the Investment Management Division and a member of the Management Committee, as well as head of firmwide strategy and chairman of the Strategy Committee. Since 2010, Peter has been a member of the Management Committee of AXA. C24 G24

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