Q1 2020 Earnings Call

Thank you for standing by and welcome to the Alliance Bernstein first quarter 2020.

Earnings for deal.

At this time all participants are in listen only mode. After their 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.

<unk> Investor Relations for a base, there's still Mark Griffin. Please go ahead.

Thank you how they're good morning, everyone and welcome to our first quarter 2020 earnings review. This conference is being webcast and accompanied by a slide presentation is posted in the Investor Relations section of our website www dot aligned Sting.

Except Bernstein, President and CEO, John wasn't Steele, our CFO, Jim Gingrich, our COO will present, our results and take questions. After our prepared remarks.

Some of the information will present today is forward looking and subject to certain FCC rules and regulations regarding disclosure.

I'd like to point out the Safe Harbor language on slide one of our presentation.

You can also find our safe Harbor language and the Mdna over first quarter 2020, 10-Q, two we filed earlier. This morning on regulation FD management may only address questions of material nature from investment community in a public forum. So please ask all questions. During this call.

Now turning it over.

Thank you. Thank you Mark good morning, and thank you all for joining us today.

First and foremost on behalf of baby 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.

Hey, these employees the vast majority of whom are working remotely around the world remain focused on serving our clients. They need during a time to pronounce dressed as a firm we proactively implemented our business continuity plan as the crisis unfolded and that transition smoothly.

Our from entered the year and remains in very sound financial condition, maybe more teams to focus the reference on business entrusted to us by our clients.

Boy financial markets in the first after the quarter burst by a sharp global sell off in March across virtually all asset classes amplified by liquidity pressures and de leveraging as market participants reacted to could pandemic deepening impact on the global economy.

Against this backdrop east financial results improved versus the year ago period and declined sequentially.

Despite the mark sell off we experienced robust retail sales throughout the quarter and achieved organic growth in both <unk> institutional channel and our active equities platform.

Investment performance was however mix well relative performance for active equity strength in fixed income performance was significantly challenged due to illiquidity, an asset decline in several sector, notably high yield emerging markets and structured credit.

Bernstein research benefit in this environment with strong growth as volatility, let the global trading volume doubling in March.

And then.

Okay.

Starting with Firmwide overview on slide three.

Gross sales at 31.6 billion in the quarter.

8.5 billion or 37% from a year ago and up 4.6 billion were 17% sequentially.

Despite healthy inflows in January February the market volatility in March resulted in Firmwide net outflows for the quarter 5.6 billion <unk>.

But more akin to contact combined industrywide U.S., an offshore taxable fixed income outflows were 365 billion in March the highest ever imported four times the next largest outflow month.

Quitter and assets under management of 542 billion declined slightly year over year and 13% from year end.

While average assets under management of 602 billion increased 12% year over year and decreased slightly sequentially.

Slide four shows our quarterly flow trend by channel.

Firmwide net outflows were 5.6 billion driven by retail fixed income <unk> institutional flows remain positive and private wealth experienced modest net outflows.

In retail we had record gross sales of 24.2 billion active equities generated inflows wall active fixed income experienced 5 billion of net outflows concentrated in the 13 day period in March.

When investors, but the safety of cats, and U.S. treasuries at the expense of other sectors.

Flows, including those from Asian retail investors bar I keep fixed income products stabilized in late March and we've experienced net inflows within retail for April month to date.

In the bottom left chart you can see institutional gross sales of 3.9 billion grew from the quarter at corporate the prior year period, resulting in net inflows of 400 million.

Continued active equity inflows of 1.5 billion grew by 13% upsetting fixed income outflows, including a previously disclosed $1 billion Axa withdrawal.

In private wealth gross else improved relative to sequential and prior year period, while we demonstrated flat to modest net outflows.

Now, let's turn to investment performance beginning on slide five.

First quarter fixed income performance was significantly challenge most of our fixed income strategies maintained a strategic overweight the credit sectors, several of which such as securitize markets in emerging market debt experienced liquidity challenges exacerbated by de leveraging as market participants sold assets at the height.

The crisis in March.

Hi yield spreads widened dramatically by more than 750 basis points to distressed levels of 1100 basis points in mid to late March impacting strategies with high yield allocations.

Sector and security selection also detracted from performance.

As a result, our one three and five year relative performance deteriorated with 32%, 38% and 45% of asset outperforming respectively.

That said, we have confidence that our sector allocations will benefit from conditions gradually normalizing over time.

Thus far in April we we are encouraged by better liquidity conditions, a stronger buyer appetite and moderating high yield spreads.

Global high yield to allocation to securitize assets financials, and emerging markets detracted from quarter, resulting in bottom core tile performance.

Our high income fund trailed significantly due to its wider multisector approach compared to peers as roughly half the portfolios invested in non U.S. high yield assets, which output which underperformed.

Despite a poor quarter. The fund still has a superb long term track record in its category and that's shown before it can bounce back.

Our experience fixed income investment teams are hard at work Revalidating investment decisions and we are confident or people process and approach.

By contrast, our first quarter equity investment performance strengthened with 75% of assets outperforming over three years up from 62% at year end.

In the most recent one year period, 72% of assets outperformed.

Several of our equity strategies had strong relative performance in a down market a quality body bias aided our large cap growth fund a lower beta helped our strategic equities portfolio and a less cyclical exposure benefited strategic equities and concentrated international growth the latter with no way.

Energy exposure and underway to financials.

Slide six and seven provide more insight on retail fixed income in equity investment performance.

The fixed income table on slide six reflect the performance challenges as mentioned among our key offshore strategies American income has outperformed the median over the one three and five year period.

Which was exhibited this quarter.

Despite challenging your turn performance the fun to send the sixth percentile over a 10 year period.

And our municipal strategy showed mix performance with high income intermediate diversified me any outperforming for the one three and five year periods, while municipal bond inflation lag.

Moving into equities on slide seven.

<unk> offshore offerings are global low ball strategy continued to place in the top floor tile and all time period, while global course top decimal for the three and five year periods and our growth strategy is did well this quarter.

Of our U.S. retail funds large cap growth continues to be it stand out in the top that's out for one three and five year period.

February gross global core equity and select U.S. long short or in the top quarter all over the three and five year period.

We've done our value offerings relative value outperformed while a broader <unk> offerings flag.

Relative to the broader market style headwinds persisted at the first quarter was the third worst quarter for <unk> do since 1975.

Additionally, every energy exposure detracted from performance.

Let's move onto our client channels, beginning with retail on Friday.

Retail sales continue to pace with record first quarter sales of 24.2 billion up 48%.

Year over year and up 28% sequentially.

January and February where our first and second highest gross sales months ever and despite the crisis March was our fourth highest gross sales month ever.

As the top left chart shows sales grew in all regions versus both the prior peer year period in sequential it.

That said, we were not immune to the fixed income redemptions experienced across the industry with 11 billion of net outflows in March.

Net flows, including those from Asian retail investors for our teeth fixed income product stabilized and late March has to have them positive April to date.

Importantly, we continue to see consistent strength inactive equities with 12 straight quarters of organic active equity growth.

Scale retail offerings from Maine to burst with 43 products with more than billion dollars and assets 17 of them equities 15 fixed income and 11 multi asset.

Node notable U.S. retail Netflow rankings include a b. income 16th out of 140, SEC large cap growth 16th out of 348.

All cap growth 12 out of 170 and global color equity eight that a 249.

Offshore Netflow ranking conclude low Val fourth that is 667 and American gross second at 80.

Now I'll discuss institutional on slide nine.

Gross sales were 3.9 million with Nat input Oh, it's a 400 million, excluding a billion of x. or redemptions net inflows would've been 1.4 billion.

Sales continue to be less by our active equity platform, which at 2.2 billion was more than 50% of channels sales.

Active equity gross sales up exceeded one building in for 10 of the past 11 quarters.

And plus a 1.5 billion in active equities translated into what 13% organic growth rate led by our global core international small cap and global concentrated grow strategies.

This is the eighth of the last nine quarters in which active equities have grown organically.

Are institutional pipeline include grew to 15.4 million billion at quarter end with 3 billion them pipeline annotations and the first quarter.

And for the third quarter in a row are pipeline <unk> succeeded 40 million well diversified across asset classes and geography.

We also had to consoling upgrades in the quarter, which 70% apart pipeline ads consultant linked.

In our multi acid strategies, we've successfully launch new merger arbitrage and event driven funds in our targeting it's systematic macro launching the second quarter.

We expected actually will redeem into remaining 13 billion and fixed income assets during the second quarter for which fees are low and the revenue impact is not significant.

Moving to private wealth management on slide 10.

Gross sales or 3.5 billion increased 8% year over year and 30% sequentially.

<unk> through February before turning negative for the quarter in March reflecting the market wide sell off.

Adding back a billion in assets converted to I manage cash during the quarter, which would be with capacity for future investment flows were positive.

50 billion up relationship assets are covered by ours, and amick asset allocation Oberlin strategy, which do you risk during the quarter reducing volatility for clients.

During the extraordinarily volatile period advisers for focused intently on Klein service in communications, providing reassurance to recreate engagement.

Webinars have doubled and videos have tripled versus our pride or prior occasions, while unique visitors to our blog increased by 80% of an end to strong climbing engagement.

<unk> routinely providing insight from market commentary to over 50000 contacts.

All of which occurred during a seamless transition to work from home environment, a testament in particular to where I T.N. operations group supporting those professionals.

We continue to innovate and support up are increasingly complex clients during the quarter, we waste 100 million through our proprietary S.M. eight Texas harvesting portfolio.

Assets under management focused on E.S.G. strategies increased 31 per cent year over year and alternatives committed in deployed grew to 11.4 billion 1.6 billion versus the prior year period.

Adviser head candidates up six parts that as targeted by advisor turnover remains low.

I'll finish our business suburbia, we're to sell side on slide 11.

Bernstein research had a very strong quarter as increase global market volatility, let the higher trading volume and customer engagement.

Quarter revenue screw by 43% year over year, and 17 per cent sequentially, excluding autonomous revenue exclude 31% year over year.

Global trade who's volumes were robust with March volumes doubling across all markets versus prior year period.

Well April month to date trading volumes have subsided from the March peak, they remain well above the prior year.

We also benefited from a mix shifts to hire touch trades and the quarter.

[noise] engagement with a key differentiator as we conducted 63 webinars with over 4000 clients and attendance with client phone call volume double bed up our prior year period.

While we're encouraged by we these results we note that the long term secular pressures facing this business remains.

We strengthen their offerings from the quarter by initiating coverage of three sectors U.S. Internet European retail and U.S. soil services.

At the one year anniversary of the autonomous acquisition, we are well positioned as a leader global financials research, we're capturing cost savings as expected and our cross selling efforts are on track with more than 100 potential new clients on trial through the end of April.

I'll close by highlighting some up our first quarter accomplishments on slide 12.

Active equity <unk>, they're strengthened across the board and diversified off offering was 75% of Bassett outperforming over three years, our retail equity offerings include 10 top cortiles bonds across multiple style capitalization and geographic categories.

As a result, we continue to drive net inflows, an active equities across both retail and institutional channels.

Our experience fixed income teams are laser focused on improving performance, which we have conviction will rebound over time.

Retail continued to drive record sales in the first quarter, while our institutional channel continued do enjoy growing pipe line up higher fee business.

Bernstein research benefit from higher market volatility driving strong global trading volumes and high customer engagement.

Alternative Boffins were bolstered by the first close up our 2020 j. be fun to funds as well as successful launches a bar merger or an event driven buttons.

In summary, A.B. remains well positioned to support our clients and to capitalize on the investment opportunities in front of US we continue to investing key longterm growth opportunities, while remaining ever attentive to today's dynamic challenges.

Now alternative Alberta, John to review our financial.

Thank you so let's start with the cap income statement on side 14 first quarter cap net revenues of 874 million increase 10% for the part of your period.

Operating income of 178 million increase 6% and the 23.3% operating margin increase by 340 basis points.

Kathy P.U. of 63 cents compared to 49 cents in the first quarter of 2019.

<unk> I'll focused on March from here on our adjusted results, which removes the effect of certain items, they're not consider part of our core operating business.

They started distribution to unitholders upon our Justin results, which we provide in addition to and not as substitutes for our calf results are standard gap reporting and a reconciliation of gap to adjust the results are in our presentations appendix press release and 10 Q.

Are adjusted financial highlights are included on side 15.

First quarter revenues of 744 million operating income of 206 million and I'm marching of 27.6% all increase ear and here.

We aren't they will distributor unit holders 64 cents per unit compared to 49 cents for last year as first quarter higher pace fees Bernstein research services revenues combined with minimal G.N.A. expense gross primarily drove the stronger results.

Revenue operating income and Marsh and decrease from the fourth quarter of 2019 to to do to lower performance fees and the usual first quarter <unk> sequential increase in our competition ratio.

We delve into these items in more detail on our Justice income statement aside 16.

Beginning with revenues first quarter net revenues of 744 million increased 13% here and here.

The first quarter base piece of 594 million increase 10% from the same part of your period to the higher average and U.M. across all three distribution channels.

Compared to the first quarter 2019, total average and U.M. increase 11.7% and <unk> p. rate of 39.6 basis points declined 1.5% <unk> calculated on a comparable basis.

Beginning of this quarter, we're reporting both are adjusted bases and portfolio fee rate netta fees paid to distributors from investment management based fees.

These fees told 15 million and 9 million for the first quarter of 2000 22019, respectively.

This adjustment reduced to see rate for the first quarter by approximately one based point.

In previous quarters, we reported these fees under a separate line item titled net distribution expense and the revenues section of our adjusted income statement.

First quarter performance fees declined sequentially from last year's fourth quarter as expected since most of our performance based feasts strategies have annual calculation pairs, which and and the fourth quarter.

First quarter first scene research revenues of 129 million increase 43% compared to the prior years first quarter and increase 17% sequentially.

Polluting revenues from the autonomous acquisition, which close on April 1st 2019 first scene research revenues increased 31% from the prior year first quarter to to higher revenues in the U.S., Europe, and Asia, resulting from increased customer trading activity attributed to greater global market volatility, which.

Also drills a sequential increase.

Investment losses of 7 million compared to gain a 4 million and the par yours first quarter and it's attributed to seat investment losses.

Other avenues decrease 18% compared to the same prior period to to lower dividends and interest earned on our broker dealer investments.

Interest expense decrease 47% for the first year for the first quarter year on year because of lower interest paid on broker dealer customer balances due to lower interest rates.

Moving to adjusted expenses all in our total first quarter operating expense of 538 million increase 8% hearing here for the first quarter. This year transition costs related to our Nashville corporate headquarters relocation totals 8 million compare to estimated expense savings of 6 million, resulting in a net.

2 million reduction in operating income and about a net one cent reduction in a P.U. The net 2 million represents increase occupancy costs.

For the first quarter 2019 relocation transition costs total sevenmillion compared to estimate expensive at least 3 million.

Thing in a net 4 million reduction operating income.

Of the net for a million approximately 3 million as compensation related and their meeting 1 million represents increase occupancy costs.

Total compensation and benefits expense increase 10 per cent here near different primarily by higher base and a sentence compensation.

As discussed on last quarter's call, we accrued compensation at a 48.5% of adjusted net revenues for the first quarter of this year compared to 49.5% for the same period of the prior year and 44.8% for last year's fourth quarter.

Assuming financial markets remain at the current levels or trend higher we plan to continue accruing compensation at a 48.5% ratio and the second quarter with the option to adjust accordingly throughout the remainder of the year if market conditions change.

First quarter promotion of servicing increase 10% for the same prior year period due to higher percent reach or services trade execution expenses on higher global trading client trading activity and higher transfer fees, partially offset by lower teeny expenses, resulting from covert 19 related travel restrict.

<unk>.

The a percent sequential decrease from last year's fourth quarter was due to lower <unk>, partially offset by higher trade execution costs attributed to hire Bernstein research trading volumes.

G.N.A. increase 2% versus the first quarter of the prior year to to hire occupancy related to our headquarters relocation technology expenses sent portfolio servicing fees, partially offset by lower professional fees.

The 4% Sequentials decrease was due to primarily to lower professional fees other taxes and favorable foreign exchange translation, partially offset by increased portfolio servicing fees.

First quarter operating income of 206 million increased 30% for the power year as revenue growth outpaced expense grows.

The first quarter operating margin of 27.6%, what's up 350 basis points yearn year.

The incremental marsh it was 54%, reflecting the operating Mart leverage of our business and I'll continue to focus on manichean expenses.

The sequential declined from last year's fourth quarter was due primarily to the higher comp ratio.

You may have noticed that our first quarter adjusted operating income was 27 million higher than our cap operating income.

Differences, primarily due to the deconsolidation of certain seed investments in our chests are results, which we had consolidated for gap reporting.

Consolidating these results decrease gap operating income, but it did not affect net income or <unk>.

In addition, our first quarter adjusted E.P.U. was one cent higher think <unk>, which is due primarily to the exclusion of acquisition related costs and the right off of an investment which had been received in exchange for the sale of software technology, which are not part of our core business operations.

All the non gap adjustments are outlined in the appendix of this presentation.

The first quarter effective tax rate for alliance Bernstein L.T. was 5.3%.

Going forward, we still expect a full year effective tax rate, 5.5% for 2020 based upon our current forecasted mix of domestic versus foreign pretax earnings.

Finally, our guidance for the impact of our Nashville corporate headquarters relocation currently remains unchanged, we still expect a 6% reduction in full year 2020 P. you.

Break even to slightly positive E.P.U. accretion and and 2021 and a P.U. accretion for each year. Thereafter. In addition, we estimate ongoing annual expense savings in the range of 75 to 80 million per year, beginning in 2025 wants to transition period is completed.

With that <unk> are pleased to ask your questions.

Thank you and at this time I would like to remind everyone. If you.

Question.

<unk>.

On your telephone.

To withdraw your question press the pound key.

Please remember to limit you were initial questions to in order to provide all caught up callers an opportunity to ask questions.

You're welcome to return to the keys to ASCII follow up question.

Hello pause for just a moment.

Your first question will come from the line that's Craig Seigenthaler. Please go ahead with your question.

Hey, scorning everyone.

I wanted to go back to the elevated fixed income redemptions in March just you know just not freebie, but for the whole industry. There was a record amount of retail d. risking in the month. It looks like there was trying to stabilize now what's your perspective on what happened in March.

And you think that period is really behind this now.

Hey, kragh it sounds good morning.

At the moment things certainly stabilize but that is I think principally a function of the comprehensive steps the federal reserve and the Treasury took to inject liquidity into for the front end 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 treasuries.

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 you know all with that came back to haunt us in this moment, which started with the you know the pandemic, but frankly market stopping everywhere simultaneously.

I think exposed to a vulnerability to to broader fixed income markets all of that said Craig.

Those days in March were quite harrowing and reminiscent of 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 has caused more it gets to to begin to trade.

At low you know tighter bit 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 of the month of April conditions have normalize quite a bit we've been able to so at much higher prices securities that to where it wasn't a bid for.

You know in late Mark <unk>. So am we've been able to buy instruments, we couldn't otherwise get our hands on so things have normalized as of now.

Thank sat and then just on your own on business, we're seeing broadly softer performance you to date it looks like many of your funds were long credit. So she into March how do you explain that recent performance to your clients versus the stronger longer term performance.

Well, yes, I think the way you described it it is accurate the truth of the matter is despite near term performance challenges.

Strong term long are strong long term track records from Maine.

Pretty consistently strong for the group 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 re underwritten.

We feel there is a lot of potential to recover it could take quite a bit of time for that to happen.

Ah, but there's no doubt that the underperformance will potentially create headwinds for us part of the issue that I think this distinctive to us Craig relative to others is that our income sweet really takes a very broad market approach to investing so.

For example, or 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 I. It was not the individual <unk> securities per say it was the correlation there'll be under performance of all of them.

So we we think there's value there I think there's significant value in particular into securitized area.

Where we saw a particular eight lee volatile conditions and and limited liquidity.

So I think it's the fact that we take a much broader opportunities said that the many of our peers do because U.S. high yield was much the best performing a sub segments.

Of that market so as other markets normalize they think you'll we'll see we'll see recovery.

Thank you.

Your next question comes from a line Dan Fannon. Please go ahead.

Things are just kind of following up on that you use some of your performances gotten a lot of publicity.

You know icon in in his positions on the other side of it I guess can you talk about you some of the underlying holdings within.

Written about.

And I guess, what that type of publicity usually has on you obviously the impact that kind of gross sales or redemptions in or you know kind of actively looking to market again. Some of the you know kind of negative press, what's been out there.

Thanks for the question. The negative press is really I think focused on C.M.B.X. six which is you know is synthetic index that references about 25, C.M.B.S. security said she'd back in 2012.

The the principal antagonist here has been pointing out that there's exposure within that index.

Two two malls and to retail, but that's significant.

I would just point out it has exposure to retail office apartment hotels, and others and it's a cross 1500 loans.

We only have traunches rated double b. and higher.

Look we have quite a lot of conviction around that that trade, but I should just be really straight about it and say or exposures in the mid single digits.

<unk> keep products. So assertions that you know it had the risk of taking these products.

<unk> too much lower prices I think is just baseless on its face.

We have been I think prudent in the way we've 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 C.M.B.X.

At least in the American income for example was worth 12 basis points in negative return versus the broader high yield market. So it is not at all in issue from our perspective, but but disproportionate impact.

We feel that our underwriting was good that the exposures that we have through that particular.

Derivative are really quite modest you know the retail exposure within it is really to strip centers that haven't suffered the to the extent the same headwinds that but large regional malls have which has been I think the crux with his thesis and so I think.

There's a lot of there's a lot of unfounded.

Assertions here that or just not borne out by the fact that the position itself, we've articulated that in different forums, and we continue to be comfortable with or underwritings, but I think the message to take away. As this is not a position that's gonna make or break our performance in any of these.

Ones that we have it I would further add that you know the securitize markets broadly are really more impacted by the consumer rather than corporate exposures and while there's clearly a lot of uncertainty near particularly around forbearance, we see a lot more liquidity return.

Into that market and we think the regulators and others know just how important it is to maintain a well functioning market for for for asset backed securities. So we're we're pretty comfortable with what we have today.

Great that's helpful.

Just a a further clarification on your April one today comments in terms of good return to enclosed.

I assume that's supposed to the reduction in redemptions plus some you know continued strong grew sales but is it in the same products that scene region that we're seeing the same level pressure could you maybe dissect a little bit more about the radiator changes for March or April.

I'll give it a bit of color on it it isn't the same products by and large there hasn't been much of a rotation in products.

We have seen A.I.P. and global high yield moved to inflows again and those are principally sold in Asia. Although there are also sold in Europe and elsewhere in the United States as well, we're seeing positive flows and and in Europe, but I would certainly saying all these are net flows just to you earlier point I would say.

Say the overall levels in that flows is certainly not at the level. We saw in in January or <unk> 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 our mix of what we're selling.

Great. Thank you.

Yeah. That's the question is from a line up Mike carrier. Please go ahead with your question.

Good morning, and thanks for taking the question so.

More than that they think.

Thanks to some of the color just getting this sharp rebound that we have seen in April you in some of the the sectors and some yes, it classes and realize it's a very short timeframe, but it gets any klein text on how much of the weakness you know in one you has been recaptured you know already and needed to short at a time frame that you're doing.

<unk> you know that you know health related.

[noise] look it's hey, Mike it's thanks for your call. It certainly has helped I was just looking.

That global high yield for example, which I think today is down 11% and was up four per cent month to date just to give you. Some sense of that I was just looking at the Barclays. You know global high yield index for that was our we've seen real recoveries in.

In high yield in securitized in emerging markets.

I think it's bit <unk> more pronounced.

In the U.S. versus offshore.

So it's there and they're continued to be a pretty strong bid, but again it markets are fragile and it's too early to to declare that we're all out of this stage of the market.

Okay.

Yeah. This is appalling John.

Guiding any change on the non on you know outlook and how you're thinking about that given the backdrop and then anything on the eight and by that just getting the normal seasonal yeah share.

No Mike on the the Noncomp, the Guy and switch they'll stay the same you know where we think we can grow those that are limited girls to roughly are right. There at the rate of inflation and you know the promotion and servicing was up obviously higher than that this this particular period, but it was driven by the increased trade execution costs to come along with the increased revenue it.

Bernstein research, but that's a good thing, but you're I've I've sent that we're still looking at around the the rate of inflation for both G.N.A. and promotion servicing.

The ramp up in the occupancy expense for Nashville, which I mentioned this particular quarter was to kill the bulk of that 2 million increase that you're seeing G.N.A. in terms of the buybacks on your second question you know a goal as we've spoken about in the past over the long haul this to offset the the the delusion that comes from.

<unk> of our stock based com that we typically issue in in December and so yeah. We've been in the market and we've been buying a units and will continue to do that and you know and continue to offset that pollution going forward.

Okay. Thanks, a lot.

Question is.

Cat.

Question.

Okay. Thank you get more you have one good to hear of his voice. So first question just going back institutional business have spent too much time and ends call.

And you got to incremental a consultant distances quarter, so anyway to sort of size the opportunity sitting underneath that you'll how large of these consoles may relative to your your back book, a little bit and I think you'd mentioned that 70% of your volume 3 billion pick up this quarter was consultant driven just trying to get a sense of magnitude here.

Well, Hey, <unk>. It you know look it's hard to to sort of identify it was for strategies that aren't really haven't been key sellers for us.

So that's that's new potential, but it's clearly men in the really important.

Driver of demand through our institutional channel, we've really had pretty strong.

I'm pretty <unk> increasingly consistent.

Appreciation consultants of what we've been able to accomplish and the equity space.

And so it's been very heartening also in the alternatives in space as well, we've we've we've seen it additional support and that's also outside the United States.

But it's hard to to sorta dimension that for you.

Okay, but it's incremental <unk> product, so you're saying.

Yes.

The one case.

<unk>, Okay, and then sort of follow up a little tactical nature, but you'd mentioned that April fixed income flows were pauses retail you step back look the whole franchise recognized still a couple of days to go in the in the month, but in any sense of how you tracking overall in terms of you know growth in any allocation shift you're seeing a incrementally.

Allocation shift in in in regard to flows right.

I think it's pretty much a similar pattern.

You know, we I should check and get back to you, but the pattern I don't think has really shifted meaningfully in terms of where to demand was a Jon you want to add something yep, Oh, a pill. It's John So no. It's it's the same types of things. So it's a you know the retail sector. It's the the how you'll products have come back into Voake as south of mention too.

American income.

Global high yield they're currently running you know positive a month to date also just in terms of you know on the equity front as well you know the active equities continue.

<unk>, both in the retail Aswell us in institutional space as well.

Okay. So just to clarify are you in net positive flow <unk> overall.

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

Okay. Thanks for taking all the question is more.

<unk>.

Your next question is from a line.

Oh.

Go ahead.

Holding on a fixed income discussion on a little bit of a Mormon industry question, I guess, where you guys someone will look at the trends in the first quarter and margin particular, obviously wasn't just you that that how challenging a relative investment performance in high yield another credit related products. It was really more you know more of a.

Industry phenomenon across the board how much do you guys think that's going to matter once risk up they come back comes back to greater extensive in other words, how how much does a relative investment performance with <unk> fixed income matters relative to what we've seen let's say inequities in the past and do you think this could result in a bigger shift words passive products or individual credits.

Action will remain a pretty important.

I don't think Alex et cetera, I don't think <unk>, the underperformance portends necessarily moves the individual selection I mean, I think the risk of of passive continues.

That hasn't changed although I think that the sharp.

Diversion between underlying that asset value and and prices of of E.T.S. matters, a lot and so I think that creates its own arbs and and uncertain to use for non professional investors.

I think that ultimately this is a market that should favor active.

It was and.

You know this is not been a situation at least for for A.B., where we have seen.

Material deterioration in our security selection inside we we continue to have good security selection insight in in fixed income and that matters enormously.

Because it's the it's the idiosyncratic blow ups in fixed income that ultimately I think paralyze or or destroyed longer term track records rather than a sector allocation calls I think.

I think that the real issue for fixed income isn't necessarily at least in my mind the relative underperformance today, although that to challenge and we'll create headwins over time, but rather overall level of interest rate I think interest rates bordering on zero or potentially for for governments going.

Negative I think does pretend for a negative implications for broader fixed income demand and its place in portfolios.

[noise] great. Thanks for that and then just to follow the question round institutional business.

Clearly strong pipeline strong trophies in the pipeline given the the rapid decline at the end of the quarter and obviously continued uncertainty in the market. How how should we think I guess about timing of that coming through you know understandably things thing things, obviously tend to slow down running onto it picks up but I'm just looking for a little color and one on one of the yellow.

So you didn't see fun things, but I suspect it will slow down John may have a different an additional points to add there, but I think we will see some slowed down but I will tell you activity levels remain.

<unk> <unk> pretty high and so that's encouraging for us.

Yeah, I was just had to us 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 we call pass throughs, which are transactions that actually come into the from and get funded and never end up in the pipeline and that was one point to build.

And for the quarter and so I think even as we went through the the crisis or you know the couple of weeks there in the in March we are still pitching deals to to institutions and and continue.

All the way through through April So I think it's it's still those very well for the pipeline.

And yeah, we look forward to seeing more funding from that coming forward.

[noise] great. Thanks for the color.

Your next question is from the line of Robert Lee. Please go ahead.

Great. Thank you and hope everyone is doing well and doing well.

I guess, maybe blessing John John you just want to make sure I understood. The.

That assuming kind of.

NASA levels rebound quarter data as opposed to kind of where you were born finished.

<unk>.

Oh, sorry, I missed the for rubber I missed the first part of that could you <unk>.

I'm, sorry, I'm that you're <unk> ratio guidance that was based on current asset levels as opposed to end to see what has a low.

<unk> currently right correct. So if we're saying you know where the markets are currently now or we try and higher.

I would expect to accrue at the 48.5% in the second quarter.

Okay. Thanks, and then maybe seven just curious.

Hasn't come up in in a while I think in the last few calls the the whole.

Formants feed focus on the <unk> <unk> have been pretty much and you know the topic of conversation for awhile and that kind of a law kind of curious.

How bad initiative.

<unk>, how you're kind of thinking about whether that's had or had any type of demand.

Rob I'm. So glad you brought that up because it has to come up in the last couple of calls.

Look at it we always said it was going to be a slow process and but we are continuing on that road, we remain with 13 distributors.

Totally U.M. in seven funds at the end of the quarter was roughly 280 million.

You know frankly.

You know we.

Are facing the same headwinds more generally toward active management were doing somewhat better.

Than than others, maybe but we're still facing those same headwinds and so it it's fine.

But we've we've tried to manage people's expectations rounded and I think kissed.

To date has has proven that to be the sensible path. So that's where we stand now.

Yeah, great they take my purse.

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

Thank you everyone for participating Paul today feel free to contact Investor relations with any further questions and have a great day bye-bye.

Thank you for joining you mean now.

Mhm.

Yeah.

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[noise] Oh.

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