Thank you for standing by. Welcome to the AllianceBernstein First Quarter 2020 Earnings Review. At this time, all participants are in a listen-only mode. After the remarks, there will be a question-and-answer session and I will give you instructions on how to ask questions at that time. As a reminder, this conference is being recorded and will be available for replay for one week.I would now like to turn the conference over to the host for this call, Head of Investor Relations for AB, Mr. Mark Griffin. Please go ahead.

Thank you, Heather. Good morning, everyone, and welcome to our first quarter 2020 earnings review. This conference call is being webcast and accompanied by a slide presentation that's posted in the Investor Relations section of our Web site, www.alliancebernstein.com.Seth Bernstein, our President and CEO; John Weisenseel, our CFO; and Jim Gingrich, our COO, will present our results and take questions after our prepared remarks.Some of the information we'll present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. So, I'd like to point out the Safe Harbor language on Slide 1 of our presentation.You can also find our Safe Harbor language in the MD&A of our first quarter 2020 10-Q, which we filed earlier this morning. Under Regulation FD, management may only address questions of material nature from the investment community in a public forum. So, please ask all such questions during this call.Now, I'll turn it over to Seth.

Thank you, Mark. Good morning. Thank you all for joining us today. First and foremost, on behalf of the AB, I want to sincerely thank those in our communities whose focus and dedication remains unwavering as we collectively address the pandemic and its impact on the broader economy.AB’s employees, the vast majority of whom are working remotely around the world, remain focused on serving our clients’ distinct needs during a time of pronounced stress. As a firm, we proactively implemented our business continuity plan as the crisis unfolded and has transitioned smoothly.Our firm entered the year and remains in very sound financial condition, enabling our teams to focus their efforts on business entrusted to us by our clients. Buoyant financial markets in the first half of the quarter were reversed by a sharp global selloff in March across virtually all asset classes, amplified by liquidity pressures and deleveraging as market participants reacted due to the pandemic deepening impact on the global economy.Against this backdrop, AB’s financial results improved versus the year ago period and declined sequentially. Despite the March selloff, we experienced robust retail sales throughout the quarter and achieved organic growth in both our institutional channel and our active equities platform. Investment performance was, however, mixed.While relative performance for active equities strengthened, fixed income performance was significantly challenged due to the illiquidity and asset decline in several sectors, notably high yield, emerging markets and structured credit. Bernstein Research benefited in this environment with strong growth as volatility led to global trading volumes doubling in March.Let’s get into the specifics, starting with a firmwide overview on Slide 3. Gross sales of 31.6 billion in the quarter were up 8.5 billion or 37% from a year ago and up 4.6 billion or 17% sequentially. Despite healthy inflows in January and February,…

Thank you, Seth. Let's start with the GAAP income statement on Slide 14. First quarter GAAP net revenues of 874 million increased 10% from the prior-year period, operating income of 178 million increased 6% and the 23.3% operating margin increased by 340 basis points. GAAP EPU of $0.63 compared to $0.49 in the first quarter of 2019.As always, I’ll focus my remarks from here on our adjusted results which remove the effect of certain items that are not considered part of our core operating business. We based our distribution to unitholders upon our adjusted results which we provide in addition to and not as substitutes for our GAAP results. Our standard GAAP reporting and a reconciliation of GAAP to adjusted results are in our presentation’s appendix, press release and 10-Q.Our adjusted financial highlights are included on Slide 15. First quarter revenues of 744 million, operating income of 206 million and our margin of 27.6%, all increased year-on-year. We earned and will distribute to our unitholders $0.64 per unit compared to $0.49 for last year’s first quarter.Higher base fees, Bernstein Research Services revenues combined with minimal G&A expense growth primarily drove the stronger results. Revenue, operating income and margin decreased from the fourth quarter of 2019 due to lower performance fees and the usual first quarter sequential increase in our compensation ratio. We delve into these items in more detail on our adjusted income statement on Slide 16.Beginning with revenues, first quarter net revenues of 744 million increased 13% year-on-year. First quarter base fees of 594 million increased 10% from the same prior-year period due to higher average AUM across all three distribution channels.Compared to the first quarter of 2019, total average AUM increased 11.7% and the portfolio of fee rate of 39.6 basis points declined 1.5% year-on-year calculated on a…

Thank you. [Operator Instructions]. Your first question will come from the line of Craig Siegenthaler [Credit Suisse]. Please go ahead with your question.

Thanks. Good morning, everyone. I wanted to go back to the elevated fixed income redemptions in March, just not for AB but for the whole industry. There was a record amount of retail derisking in the month. It looks like those trends have stabilized now, but what’s your perspective on what happened in March and do you think that period is really behind us now?

Hi, Craig. It’s Seth. Good morning. At the moment, things have certainly stabilized but that is I think principally a function of the comprehensive steps the Federal reserve and the treasury took to inject liquidity into, first, the frontend and then into the longer end of the market. What really happened is that the market just simply seized up and there was no liquidity or very little liquidity even in on-the-run treasury. And we've discussed in the past and I think you're all familiar with the evolution of fixed income market trading, the reduction of liquidity provided by broker-dealers. And all of that came back to haunt us in this moment which started with the pandemic, but frankly markets stopping everywhere simultaneously really I think exposed a vulnerability to broader fixed income markets. All of that said, Craig, those days in March were quite harrowing and reminiscent of the global financial crisis at least from my perspective, and I do think it was the rapid and enormous comprehensive approach that the Fed and other central banks took that has caused markets to begin to trade at tighter bid offers, in larger size. But it's fragile, there's no doubt about that. So I don't know that it's over but certainly over the course the month of April, conditions have normalized quite a bit. We've been able to sell at much higher prices securities that there wasn’t a bid for in late March. And we’ve been able to buy instruments we couldn’t otherwise get our hands on. So things have normalized as of now.

Thanks, Seth. And then just on your own bond business, we’re seeing broadly softer performance year-to-date. It looks like many of your funds were loan credit especially into March. How do you explain that recent performance to your clients versus the stronger longer-term performance?

Yes. I think the way you described it is accurate. The truth of the matter is despite near-term performance challenges, our strong long-term track records remain pretty consistently strong for the group and we don't think that clients are particularly flustered at the moment because we’ve demonstrated in the past the ability to bounce back. We underwrote the securities we owned. Rigorously to start with, we’ve re-underwritten them. We feel there is a lot of potential to recover. It could take quite a bit of time for that to happen. But there's no doubt that the underperformance will potentially create headwinds for us. Part of the issue that I think is distinctive to us, Craig, relative to others is that our income suite really takes a very broad market approach to investing. So, for example, our global high-yield allocations outside of the global high-yield market include securitized financials, emerging markets, all of which underperformed the global high-yield market generally. It was not the individual securities per se. It was the correlation of the underperformance of all of them. So we think there's value there. I think there's significant value, in particular, in the securitized area where we saw particularly volatile conditions and limited liquidity. So I think it's the fact that we take a much broader opportunity set that many of our peers do, because U.S. high yield was much the best performing sub-segment of that market. So as other markets normalize, I think you will see recovery.

Thank you.

Your next question comes from the line of Dan Fannon [Jefferies]. Please go ahead.

Thanks. Just kind of following up on that, some of your performance has gotten a lot of publicity given Itron and his position on the other side of it. I guess can you talk about some of the underlying holdings within some of the funds that have been written about? And I guess what that type of publicity you think has on obviously the impact of kind of gross sales or redemptions? And are you kind of actively looking to market against some of the negative press that’s been out there?

Thanks for the question. The negative press is really I think focused on CMBX.6, which, as you know, is a synthetic index that references about 25 CMBS securities issued back in 2012. The principal antagonist here has been pointing out that there's exposure within that index to malls and to retail that's significant. I would just point out it has exposure to retail, office apartment, hotels and others and it’s across 1,500 loans. We only have tranches rated BB and higher. Look, we have quite a lot of conviction around that trade but I should just be really straight about it and say, our exposure is in the mid single digits in these key products. So assertions that it had the risk of taking these products to much lower prices I think is just baseless on its face. We have been I think prudent in the way we size these exposures and we’ve made quite a lot of money on these positions for our clients over time. In fact, if you look, the losses that we saw in this fund attributable to CMBX at least in American income, for example, was worth 12 basis points in negative return versus the broader high-yield market. So it is not at all an issue from our perspective of a disproportionate impact. We feel that our underwriting was good that the exposures that we have through that particular derivative are really quite modest. The retail exposure within it is really to strip centers that haven't suffered to the extent the same headwinds that large regional malls have which has been I think the crux of this thesis. And so I think there's a lot of unfounded assertions here that are just not borne out by the fact of the position itself. We've articulated that in different forms and we continue to be comfortable with our underwritings. But I think the message to take away is this is not a position that's going to make or break our performance in any of these funds that we have. And I would further add that the securitized markets broadly are really more impacted by the consumer rather than corporate exposures. And while there's clearly a lot of uncertainty in the air, particularly around forbearance, we see a lot more liquidity returning to that market and we think the regulators and others know just how important it is to maintain a well functioning market for asset-backed securities. So we’re pretty comfortable with what we have today.

Great, that’s helpful. And just a further clarification on your April month-to-date comments in terms of the return to inflows. I assume that’s really to a reduction in redemptions plus some continued strong gross sales. But is it in the same products, the same regions that we’re seeing the same level of pressure? Could you maybe dissect a little bit more about the rate of change from March to April?

I’ll give a bit of color on it. It is in the same products, by and large. There hasn't been much of a rotation in products. We have seen AIP and global high-yield move to inflows again and those are principally sold in Asia, although they’re also sold in Europe and elsewhere in the United States as well we’re seeing positive flows and in Europe. But I would certainly say in all these are net flows just to your earlier point. I would say the overall level of net flows is certainly not at the level we saw in January or in early February. So it is positive. We continued to see strong gross sales as well. Equities continues to be an important part of our mix of what we’re selling.

Great. Thank you.

Your next question is from the line of Mike Carrier [Bank of America Merrill Lynch]. Please go ahead with your question.

Good morning and thanks for taking the questions. Seth, just one more on the fixed income performance and thanks for some of the color. Just given the sharp rebound that we have seen in April in some of the sectors and some of the asset classes and realize it’s a very short timeframe, but I guess any context on how much of the weakness in 1Q has been recaptured already? And maybe it’s just too short of a timeframe that you don’t have [indiscernible], just more curious if that’s helped quite a bit.

Hi, Mike. Thanks for your call. It certainly has helped. I was just looking at global high-yield, for example, which I think today is down 11% and was up 4% month-to-date just to give you some sense of that. And that was just looking at the Barclays global high yield index for that regard. We've seen real recoveries in high yield, in securitized, in emerging markets, but I think it's been more pronounced in the U.S. versus offshore. So it's there and there continues to be a pretty strong bid. But again, markets are fragile and it's too early to declare that we’re out of this stage of the market.

Okay. That makes sense. And then just as a follow up, John, just on the guidance, any change on the non-comp outlook and how you’re thinking about that given the backdrop? And then same thing on the pace of buybacks just given the normal seasonal [indiscernible]?

Mike, on the non-comp, the guidance would still stay the same. We think we can grow those or limit the growth to roughly around the rate of inflation. And the promotion and servicing was up obviously higher than that this particular period, but it was driven by the increased trade execution costs that come along with the increased revenue at Bernstein Research, so that’s a good thing. But absent that, we’re still looking at around the rate of inflation for both G&A and promotion and servicing. Excluding the ramp up in the occupancy expense for Nashville, which I mentioned, this particular quarter was the bulk of that 2 million increase that you see in G&A. In terms of the buybacks on your second question, our goal as we’ve spoken about in the past over the long haul is to offset the dilution that comes from the issuance of our stock base comp that we typically issue in December. And so we’ve been in the market and we’ve been buying units and we’ll continue to do that and continue to offset that dilution going forward.

Okay. Thanks a lot.

Your next question is from the line of Bill Katz [Citigroup]. Please go ahead with your question.

Okay. Thank you. Good morning, everyone. Good to hear everyone’s voice. So first question just going back to the institutional business, you haven’t spent too much time on that in this call. You mentioned you got two incremental consultant additions this quarter. Is there any way to sort of size the opportunity set underneath that, how large are these consultants maybe relative to your back book a little bit? And I think you mentioned that 70% of your volume, 3 billion pickup this quarter was consultant driven. Just trying to get a sense of magnitude here.

Hi, Bill. It’s Seth. Look, it’s hard to sort of identify it with strategies that aren’t really – haven’t been key sellers for us, so that’s new potential. But it’s clearly been and really important driver of demand for our institutional channel. We’ve really had a pretty strong and pretty – increasingly consistent appreciation with consultants of what we’ve been able to accomplish in the equities space. And so it’s been very heartening. Also in the alternatives space as well, we’ve seen additional support and that’s also outside the United States. But it’s hard to sort of dimension that for you.

Okay, but it’s incremental products though from what you’re saying?

Yes, at least in one case.

Understood. Okay. And then sort of a follow up, a little tactical in nature, but you had mentioned that April fixed income flows were positive with retail. You step back and look at the whole franchise, I recognize it’s still a couple of days to go in the month, but any sense of how you’re tracking overall in terms of unit growth and any allocation shifts you’re seeing incrementally?

Allocation shift in regard to flows?

Right.

I think it’s pretty much a similar pattern. I should check and get back to you, but the pattern I don’t think has really shifted meaningfully in terms of where the demand was. John, you want to add something?

Bill, it’s John. So no, it’s the same types of things. On the retail sector, it’s the high yield products have come back into vogue, as Seth had mentioned, with American income, global high yield, they’re currently running positive month-to-date. Also just in terms of – on the equity front as well, the active equities continue particularly both in the retail as well as in the institutional space as well.

Okay. So just to clarify, are you in net positive flow month-to-date overall?

We are today and again we’ll be reporting – we still have a couple of days to close out the month and then we’ll be reporting our flows in about another week or so.

Okay. Thanks for taking all the questions.

Your next question is from the line of Alex Blostein [Goldman Sachs]. Please go ahead.

Building on the fixed income discussion and little bit of a – more of an industry question I guess for you guys. So when we looked at the trends in the first quarter and margin particular, obviously it wasn’t just you that had challenging relative investment performance in high yield and other credit-related products. It was really more of an industry phenomenon across the board. How much do you guys think that’s going to matter once risk appetite comes back to a greater extent? In other words, how much does a relative investment performance within high yield and fixed income matters relative to what we’ve seen, let’s say, in equities in the past? And do you think this could result in a bigger shift towards passive products or individual credit selection will remain pretty important?

Alex, it’s Seth. I don’t think the underperformance portends necessarily moves to individual selection. I think the risk of passive continues. That hasn’t changed although I think that the sharp diversion between underlying net asset value and prices of ETFs matters a lot. So I think that creates its own arbs and uncertainties for non-professional investors. I think that ultimately this is a market that should favor active. It wasn’t – this has not been the situation at least for AB where we have seen material deterioration in our securities selection insight. We continue to have good securities selection insight in fixed income and that matters enormously because it’s the idiosyncratic blowups in fixed income that ultimately I think paralyze or destroy longer-term track records rather than sector allocation calls. I think that the real issue for fixed income isn’t necessarily at least in my mind the relative underperformance today, although that’s a challenge and it will create headwinds over time, but rather the overall level of interest rates. I think interest rates bordering on zero were potentially for governments going negative I think portend negative implications for broader fixed income demand and its place in portfolios.

Great. Thanks for that. And then just a follow-up question around the institutional business. Clearly strong pipeline – strong fees in the pipeline. Given the rapid decline at the end of the quarter and obviously continued uncertainty in the market, how should we think I guess about timing of that coming through? Understandably things obviously tend to slow down when volatility picks up, but just looking for a little color on when these --?

Yes, we continued to see funding, but I suspect it will slow down. John may have a different – an additional point to add there. But I think we will see some slowdown. But I will tell you active levels remain pretty high and so that’s encouraging for us.

Yes, I would just add to – it’s John. For the quarter, we actually added about 3 billion to the pipeline and we funded 2.4 billion. And in addition to that, we had what we call pass-throughs which are transactions that actually come into the firm and get funded and never end up in the pipeline, and that was one 1.2 billion for the quarter. And so I think even as we went through the crisis or the couple of weeks there in March, we were still pitching deals to institutions and continue all the way through April. So I think it still bodes very well for the pipeline and we look forward to seeing more funding from that kind of forward.

Great. Thanks for the color.

Your next question is from the line of Robert Lee [Keefe, Bruyette & Woods]. Please go ahead.

Great. Thank you. I hope everyone is doing well and feeling well. I guess maybe a question John for you. Just want to make sure I understood the comp guidance. So is that assuming kind of current asset levels and rebound quarter-to-date as opposed to kind of where everyone finished Q1?

Sorry, Rob, I missed the first part of that. Could you just repeat that please?

I’m sorry. On your comp ratio guidance, that was based on current asset levels as opposed to end of Q1 asset levels. Just want to make sure I’m clear on that.

Correct. So if we’re staying where the markets are currently now or we trend higher, would expect to accrue at the 40.5% in the second quarter.

Okay, thanks. And then maybe Seth, I’m just curious. It hasn’t come up in a while, I think in the last few calls, the whole performance fee, [indiscernible] feel, however you describe it on funds that had been pretty in a topic of conversation for a while and then kind of fell off. Just kind of curious how that initiative – where that initiative stands and how you’re kind of thinking about whether that’s had or having any type of demand impact?

Rob, I’m so glad you brought that up because it hasn’t come up in the last couple of calls. Look, we always said it was going to be a slow process but we are continuing on that road. We remain with 13 distributors. Total AUM in seven funds at the end of the quarter was roughly 280 million. Frankly, we are facing the same headwinds more generally toward active management, we’re doing somewhat better than others maybe, but we’re still facing those same headwinds. And so it’s fine, but we’ve tried to manage people’s expectations rather and I think to date has proven that to be the sensible path. So that’s where we stand now.

Okay, great. Thank you for taking my questions.

There are no further questions at this time. Mr. Griffin, I will now turn the call back over to you.

Thank you everyone for participating in our call today. Feel free to contact Investor Relations with any further questions. Have a great day. Goodbye.

Thank you for joining. You may now disconnect.