Thank you for standing by, and welcome to the AllianceBernstein Third Quarter 2021 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 a question at that time. As a reminder, this conference is being recorded and will be available for replay for two weeks. I would now like to turn the conference over to your host for this call, Head of Investor Relations for AB, Mr. Mark Griffin. Please go ahead.

Thank you, Misty. Good morning, everyone, and welcome to our third quarter 2021 earnings review. This conference call is being webcast and accompanied by a slide presentation that’s posted in the Investor Relations site of our website, www.alliancebernstein.com. With us today to discuss the Company’s results for the quarter are Seth Bernstein, our President and CEO; Ajai Kaul, Senior Vice President and CEO of Asia Pacific; and Ali Dibadj, CFO and Head of Strategy; Kate Burke, COO, will join us for 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 2 of our presentation. You can also find our safe harbor language in the MD&A of our third quarter 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.

Good morning, and thank you for joining us today. In the third quarter, we grew organically across all three channels for the fourth time in the last five quarters. Our geographically diversified and differentiated client-focused offerings continue to resonate globally with clients and intermediaries. Firm-wide active equities have now grown organically for eight quarters in a row. Municipals, once again, grew organically by more than 20%. Our investment performance strengthened across both, equities and fixed income, while our broadening institutional pipeline grew its annual fee base to nearly $60 million. For the quarter, we posted annualized organic revenue growth of 5%, including a 1% year-over-year fee rate improvement and expanded our adjusted operating margin to 31.8%. Further, we delivered 29% growth in both, adjusted earnings per unit and distributions to unitholders. Let’s get into the specifics, starting with the firm-wide overview on slide 4. Gross sales were $32.3 billion or up $3 billion or 10% from a year ago and down 11% from the second quarter, net of last quarter’s Venerable transaction. Firm-wide active net inflows were $6.7 billion, a 4% annualized organic growth rate. Quarter-end assets under management of $742 billion rose 18% year-over-year and 1% from the prior quarter, an average AUM of $747 billion increased 20% year-over-year and 3% sequentially. Slide 5 shows our quarterly flow trend by channel. Firm-wide, third quarter net -- total net inflows of $7.2 billion represented a 4% annualized organic growth rate. Net flows were positive in each channel for the fourth quarter of the last five. Retail generated its strongest gross sales ever with net inflows of $6.6 billion, driven by active equities and continued strength in munis, which once again offset moderating sequential outflows in taxable fixed income. Institutional sales of $2.6 billion led to net inflows of $200 million…

Thank you, Seth. It’s a pleasure to discuss our Asia business, a core part of AB, which is well positioned to capitalize on APAC’s growth potential, given the competitive advantage we have built over nearly four decades of operations. Today, I want to stress the following key points: Asia Pacific is a large, fast-growing region with significant growth potential as penetration of asset management increases from relatively modest levels. AllianceBernstein has a strong, competitively advantaged position in APAC, having built local businesses with strong market positions over the last several decades. We have a very healthy brand, which punches well above its weight in Asia. We have a robust opportunity set ahead of us, which we are focused on executing on. Let’s start on slide 14. Economic growth and high savings rates are two amongst many factors, which contribute to why asset managers are attracted to APAC. The region has historically led the world with high savings rates that have remained resilient through various economic and market events. Market-wide assets in APAC across retail and institution have grown at a 6% CAGR over the last 15 years and at a faster rate in the recent years. Importantly, the percentage of market AUM professionally managed is just 25%, low compared to the global average of almost 44%. On slide 15, this time line shows AB has roots in the region that go back four decades, an early mover advantage. Our first office was established in 1986 in Japan. And since then, we have built businesses in Australia, Singapore, Hong Kong, Taiwan, Korea and now in the process of building one in China. Strong investment performance, innovative product offerings and continued penetration of both retail and institutional channels have driven our growth. Some notable milestones include, launching our global high income, global…

Thanks, Ajay. Let’s start with the GAAP income statement on slide 22. Third quarter GAAP net revenues of $1.1 billion increased 21% from the prior year period; operating income of $280 million increased 29%; and operating margin of 25.7% increased by 160 basis points. GAAP EPU of $0.89 in the quarter increased by 27% year-over-year. 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 base our distribution to unitholders on our adjusted results, which we provide in addition to and not as a substitute for our GAAP results. Our standard GAAP reporting and a reconciliation of GAAP to adjusted results are in our presentation appendix, press release and 10-Q. Our adjusted financial highlights are shown on slide 23, which I’ll touch on as we talk through the P&L shown on slide 24. On Slide 24, beginning with revenues. Net revenues of $884 million increased 22% for the third quarter versus the same prior year period. Base fees increased 22% for the third quarter versus the prior year period, reflecting 20% higher average AUM, which grew at double-digit rates across all three distribution channels and a 1% higher fee rate. The third quarter fee rate of 38.8 basis points was slightly higher sequentially. We continue to believe that although our fee rate may be volatile from time to time, given large mandates such as CRS that may skew averages, the long-term trend should be grinding higher. Third quarter performance fees of $18 million increased by $11 million versus the prior year period, driven primarily by our private middle market lending business. Third quarter revenues for Bernstein Research Services of $113 million increased by 15% from the third quarter of 2020,…

Thank you, Ali. Turning to slide 26. In the third quarter, we continued to make progress on the dimensions we’ve previously outlined. We drove 5% annualized organic revenue growth, including a 1% increase in fee rate with net flows growing in each channel, led by active equities and municipals. We secured our first third-party client for our Equitable backed European commercial real estate debt platform and priced our third CLO also with the backing of Equitable. We drove healthy incremental margins in the third quarter and are on track with our long-term goal for the nine months of the year. As a partnership, we have a relatively low tax rate, and we will pay a distribution of $0.89 per unit for the third quarter for a robust trailing 12-month yield to 7% in a low-rate environment. With that, we are pleased to take your questions.

Your first question is from the line of Dan Fannon with Jefferies.

Hi, everyone. This is actually Rick Roy filling in for Dan. I hope you guys are doing well today. I had a question actually on the alternatives. Of course, you have highlighted it shown strong growth coming from private wealth channel. I was just curious how are you guys looking at demand from non-private wealth channels? Are you guys seeing flows become more diversified? And kind of on that point, whether it’s retail or otherwise, what sort of funds are you guys in the market raising AUM for outside sort of European commercial real estate fund that you guys have highlighted? So, yes, I was curious on those points.

Sure. Thanks, Rick, for the question. And thanks for focusing on private alternatives, which is a really important and growing part of both our business and it sounds like the industry as well. So, recall, we have north of $20 billion now in our broader private alternatives business. We continue to see that growing at a very, very good pace, not only in the businesses that we have right now, commercial real estate debt you mentioned, or middle market direct lending business as well, we have a U.S. and European real estate debt business as well as otherwise, but also in adjacencies of those that we’re building as well, and we expect that to continue to grow and have a lot of faith in it. From a channel perspective, it’s pretty well diversified, actually. About a quarter of the AUM right now is in -- is from the private wealth business that we have, and then 75% of it roughly is from the institutional channel. The institutional channel being both, third party as well as our partners with Equitable and others in insurance, particularly. So, we think that that diversification helps us both in terms of broader diversification in product as well as in channel. To your question of what’s around the corner? Look, there’s lots around the corner for us. Again, as I mentioned at the outset, we have high hopes for that business. We continue to want to grow it and diversify it both from a product perspective and a channel perspective, including down the line, certainly, hopefully, not overnight, but over time in retail as well. So, thanks for the question.

Your next question comes from the line of Bill Katz with Citigroup.

Joined a couple of minutes late, so I apologize, if you may have covered this in your prepared commentary. Just coming back to the recently announced $10 billion permanent capital initiative with Equitable. One, does the leadership change there, changed anything? I presume not. But secondly, can you give us an update of maybe where you stand in terms of transitioning the existing book and build in the second book, and maybe even some third-party opportunities beyond that?

Sure. Thanks very much. Yes. So, on the $10 billion agreement we have with Equitable to see a lot of our capital in private alternatives. Just a reminder, rough numbers, around half of that will be a reallocation of where they’ve invested right now with us and the other half will be new capital brought to bear to see things that we expect to grow. And if you remember, a couple of quarters ago, Matt Bass, who runs that business, went through our growth trajectories. And think about growing 4x to 5x roughly of what we’ve done historically, and we continue to believe that we can deliver that for our clients, most importantly and also for our shareholders. That process is in the early stages at $10 million in the early stages right now. We’re working together with Equitable to figure out what asset classes they want to expand into, whether it be areas that we have right now or areas that we want to go into, obviously, and grow those businesses. So, we’re still working on that front. And so far, the progress is going very well and exactly as planned. I think you’ll start to hear more about it in 2022. To your very specific question about the change in leadership, that does not change anything to those plans, both Equitable and AB, the virtuous cycle that we can both create and are both creating and expect that to be a bigger driver of our growth in private alternatives.

Okay. Thanks. And just as a follow-up I’m going to try to squeeze the second part, and I apologize. But I appreciate the added color and context of the Asia-Pac portfolio. And I certainly appreciate you saying that your fee rate should grind up from here overall. But, can you unpack that a little bit? How does Asia-Pac’s platform compare to maybe the rest of the asset management platform on a fee rate and margin perspective? And then, unrelatedly, as you look to G&A for next year, how should we think about the growth rate given what you gave guidance on for the fourth quarter? Thank you.

Why don’t I start and then maybe Ajai and Seth can chime in as well. So, to the first part of your question, on the fee rate, I think as you saw in some of the Ajai’s slides, which hopefully were helpful and gave you a little bit of a spotlight on the business we’re very proud of. The delivery of the products, obviously, from a fee rate perspective depends on both the channels and the actual products that we deliver, right? And if you look at the products that we’re delivering, certainly the shift to active equities in that marketplace and the partnership we have with wonderful distributors there that deliver to the end clients with us, you would expect that the fee rate will be higher from a mix perspective for us from that region. And your expectations would be true for us. And again, as long as we deliver the right product in the right channel to our clients, we believe that we will be rewarded with resistant fee rates in that marketplace. And again, we’re managing the mix across the board. From, I guess, G&A perspective, if that’s the second part of your question, Bill. Look, there are a couple of things we can go into, right? So, pure tax from a G&A, you saw this quarter was about a 12% year-on-year increase. If you look at that and disaggregate it, about 3 points of that 12% increase was in Nashville relocation. We’ve been pretty clear, hopefully, telegraphing that. So, 12% growth goes to something like 9% growth. Again, the Nashville move, delivering really good savings already this year at approximately $0.04 and we hope continue to be positive as we go forward in terms of savings there. So, that’s part of that move with those…

I’m not sure I have a lot more to add, Ali, but to the point that we are focused on continuing to diversify our equity services in the region, that should certainly support the fee rate -- the average fee rate and the mix there. And to the point that I made about continued demand or conversations on multi-asset services solutions and customization. If we succeed in those conversations and bring those assets on, that’s also beneficial to the average fee rate.

The next question is from the line of John Dunn with Evercore.

Maybe one on Private Wealth Management. You guys have talked about kind of a dichotomy between legacy clients outflowing and also high net worth liking new products. Maybe can you talk about that push and pull, where we are in the short term and then in the medium term as a way to keep all three legs in the stool contributing to growth?

Sure. Thanks for the question. This is Kate Burke here. But, we continue to see a strong mix shift towards the ultra high net worth business, which we categorize as sort of $20 billion -- or $20 million or greater, and that is growing at a faster rate -- organic growth rate than the rest of our organization, sort of mid single digits versus the 2% to 3% that we’ve put up as a net organic growth rate right now. And I think that’s largely attributed to a couple of intentional things we’re doing around segmentation. So one is, where we have these complex, high-value clients, and they tend to have opportunities and that is often -- and Seth messaged this in his comments around those pre-liquidity events. We think that the wealth advice and the work we’re doing with those clients is differentiated and enables us to be really an independent valued advisor to that client base. So, we continue to do the thought leadership in that area and drive that. But even more broadly, is this overall investment we’re also making in our asset allocation and the addition of the alternative and ESG into our SMA platform, to see things like portfolio with purpose, continuing to be adopted and growing well. It’s a little over $6 billion right now. That’s up 75% year-over-year. You’ve seen the alternatives business development, as we mentioned in earlier comments and doubling year-over-year. And we think that that continues to support our movement into that ultra high net worth space. That being said, the core platform continues to be very strong in terms of the full breadth of offering we have to that broader time base. And so you’ll continue to see segmentation for us being affluent our kind of traditional core client and then continue to grow in that ultra-high net worth space, I think over time, with a different -- and we’ll continue to invest in improving that offering as well as differentiating among those different segments.

Got you. And then, maybe one looking out further. As you build the China business over a bunch of years, what do you think -- what strategies might do you think might be in demand in that market? And do you think it’s going to be a different kind of market than the rest of Asia, product-wise?

Well, I think the market lends itself to active management. And so, we would expect to see ourselves launch a number of different active services in that market, leading off with probably an equity service. There are -- the market there is heavily focused in money market funds as well as hybrid funds, which are a mix of equity and fixed income funds. So, differentiated multi-asset services, equity, and at some point, customized or solution-type services would be the ones that we probably launch in China. So, you would see probably a number of services that looked like what we are selling in the rest of APAC, but we would certainly customize to the needs of the domestic market.

Your next question is from the line of Alex Blostein with Goldman Sachs.

Hi. This is Sheriq Sumar filling in for Alex. My question is on the Bernstein, the research revenues. Pretty strong growth in this quarter. So, I was just seeing if you can provide some color as to how much was it from increased client engagement or more client onboarding versus trading volumes? And if you can just spell out as to what’s the strategy for this segment within the U.S. and even outside the U.S. as well? Like we saw pretty strong growth in Asia and in Europe. Thank you.

Hi. It’s Seth. Thank you for the question. It was a strong quarter for Bernstein Research. Most of that was attributable to volume, particularly into September where we saw choppier markets, their activity levels rise in that context. Keep in mind that overall in the third quarter, U.S. volumes -- industry volumes were down a bit, but Europe and Asia were up pretty strongly. So, it was a nice offset for the business, given this diversification. And as you point out, Asia continues to grow quite rapidly for us. The other area where we were seeing was pretty strong receipt of checks for subscription research services, which is important, particularly, of course, in Europe, and that will continue. But, we are volume sensitive. And so, unless we saw a pickup in volatility again I wouldn’t necessarily see that element of it repeating. Look, our strategy is to continue to differentiate ourselves with fundamental research. And where we’ve been spending time and focus is by broadening our offerings in Asia in particular and also in Europe. So, we feel that the business continues to gain recognition for its distinctive approach. We have a point of view, which people want to see, but the secular competitive challenges of the research business remain. And while this will be a stronger year, particularly for those firms that have an IPO calendar or a prime brokerage business attached to it, for us, it’s been a pretty strong year, based on the quality of the research and trading support we’ve provided.

And your next question comes from the line of Robert Lee with Keefe, Bruyette & Woods.

Great. Good morning. Thank you for taking my questions. Just real quickly. In the Private Wealth business, you highlighted -- one of the things you highlighted was the success you’re having with your tax loss harvesting portfolio? And can you talk about ability or interest of rolling that out more broadly, just kind of clearly that seems to be a very popular and hot growth area for the broader wealth management industry. So, maybe touch on that first.

Well, I can start from the Private Wealth perspective. Yes, there are two things I think that are happening there. One is from Bernstein Wealth perspective, we have had a very strong tax aware campaign to highlight that diverse offering across the different asset classes. And so, that has enabled I think in many ways for that product to be positioned very well in the marketplace. And we are looking within Private Wealth for further extensions of that product into that channel. In terms of taking it further, I’ll turn to Seth or others to opine on the timing or questions around that.

Look, it’s a question we think about a lot. I mean, it fits very nicely in Bernstein Research because much of what Bernstein has always done has been an SMA form, which has allowed us to be quite aggressive in tax management. And we just thought that when we looked at what was publicly available out there, we thought we could build something that was as good or better for our clients. And we’re really proud of the team having put it in place. And we do think about where their commercial applications were beyond us. But what we’re -- come as to what the opportunities are given the competition out there. That being said, I think that the real opportunity is customized indexing, which I think is going to continue to grow, and it’s going to grow within both, private wealth in our business, but I think also among RIAs and others in the business more broadly, and this is an area we focus on and think about how we participate.

Great. And then, maybe just a quick follow-up. So, I mean, you’ve had obviously more success than the most and continuing to inflow into your active equities business. And I’m just curious, particularly within U.S. retail, obviously, performance helps -- can’t do it without performance. But, is there anything else that you could point to maybe specifically in the U.S., do you feel, whether it’s your size, scale, distribution footprint that’s kind of helped you maybe buck the trend a bit more? Because even some peers with good performance are struggling to get any kind of inflows. So, any additional color there?

Well, look, I mean, I think good performance is table stakes, and I think your question implies it. And so, we agree with that, but we are blessed with it. We’ve also had interesting products beyond large cap growth, which has been a real strong player for us in the domestic U.S. market, whether it’s sustainable U.S. thematic or other portfolios of purpose that seem to resonate with clients. And I think that’s maybe the important attribute. We have developed a number of strategies where clients want the return stream and can’t replicate it through passive management. And we have a differentiated return stream that speaks to them, particularly people who are building model portfolios and others who are looking for diversification within their existing models. And so, I think given that we were perhaps under scale in equities for a while and we’ve had products and the clients really value that diversification, I think that’s played to our strength, domestically. But, I think our calling effort is very thoughtful and increasingly tech enabled. And so, I think we’re seeing better efficiencies there and being more timely and engaging with clients. But, I don’t think there’s a silver bullet here. I think it’s a lot of different functions working very effectively together. And so, I guess, that’s my answer. I don’t know, Ali, if you have a different view or additional…

No, I think that’s great.

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

Thank you, Misty. Thanks everyone for participating in our conference call this morning. Feel free to reach out and contact Investor Relations with any further questions. And have a great rest of your day. Goodbye.

This concludes today’s conference call. You may now disconnect.