AllianceBernstein L.P.(AB) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Assets under management (AUM) reached a record $867 billion at year-end 2025, reflecting market appreciation and strong sales [5] - Adjusted earnings for Q4 2025 were $0.96 per unit, down 9% year-over-year, while full-year adjusted earnings increased 2% to $3.33 [23][24] - Total net revenues for Q4 were $957 million, down 2% year-over-year, with full-year revenues flat at $3.5 billion [24] - Adjusted operating margin for the year expanded to 33.7%, at the upper end of the 30%-35% target range [8][37] Business Line Data and Key Metrics Changes - Bernstein Private Wealth business had $156 billion in AUM, contributing approximately 37% of firm-wide revenues in 2025 [5] - Private markets platform closed the year with $82 billion in AUM, up 18% year-over-year [6] - SMA franchise reached $62 billion in AUM, growing 12% organically in 2025 [6] - Active ETF suite expanded to $14 billion across 24 strategies, delivering 65% organic growth in 2025 [6] Market Data and Key Metrics Changes - Firm-wide active net flows were negative for both the quarter and the full year, with total net active outflows of $9.4 billion in 2025 [6] - Taxable fixed income saw $2 billion in outflows in Q4 and $9.1 billion for the year, driven by geopolitical uncertainty [7] - Tax-exempt franchise generated $3.9 billion in inflows in Q4 and $11.6 billion for the year, marking 13 consecutive years of organic growth [7] Company Strategy and Development Direction - The company is focused on expanding its private markets capabilities and enhancing commercial real estate lending [9][22] - A partnership with Equitable is expected to onboard more than $10 billion of new long-duration assets by year-end 2026 [9] - The strategic direction includes disciplined investments in targeted growth initiatives, product innovation, and expanded marketing efforts [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the firm's ability to navigate macroeconomic challenges and maintain strong demand for its products [41][44] - The outlook for private markets AUM is ambitious, with expectations to exceed the $90 billion-$100 billion target by 2027 [55] - Management noted that the firm is well-positioned to capture fixed income's enduring value amid ongoing market trends [18] Other Important Information - The effective tax rate for 2025 was 5.9%, with a forecast of 6%-7% for 2026 [32] - The firm experienced a decline in performance fees, with full-year performance fees totaling $172 million, down 24% year-over-year [25][35] Q&A Session Summary Question: Outlook for high-yield funds in Asia - Management discussed macro factors influencing demand, including FX risk and interest rates, noting strong structural demand for U.S. dollar-denominated strategies [41][42][44] Question: Seasonality in private wealth - Management indicated that tax impacts in Q2 are significant, with overall positive sentiment about the pipeline for new client acquisition [47][48] Question: Private credit exposure to software - Management stated that exposure to software within the private credit portfolio is not significant, with diligent monitoring of credit risks [51][53] Question: Growth of private markets AUM beyond 2027 - Management expressed ambition to exceed the current target and indicated that onboarding from the commercial mortgage lending team will contribute to growth [55]