Q4 2023 AllianceBernstein Holding LP Earnings Call

Operator: So we'll all be on mute. Ladies and gentlemen, thank you for standing by, and welcome to the AllianceBernstein fourth quarter 2023 earnings review. At this time, all participants are in a listen-only mode.

Well.

Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the Alliance Bernstein fourth quarter 2023 earnings review.

Speaker Change: At this time all participants are in a listen only mode.

Operator: 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 on our website shortly after the conclusion of this call. I would now like to turn the conference over to the host for this call, Head of Investor Relations for AllianceBernstein, Mr. Mark Griffin. Thank you, operator.

Speaker Change: 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.

Speaker Change: As a reminder, this conference is being recorded and will be available for replay on our website. Shortly after the conclusion of this call.

Speaker Change: I would now like to turn the conference over to the host for this call head of Investor Relations for Alliance Bernstein, Mr. Marc Griffin.

Marc Griffin: Thank you operator, good morning, everyone and welcome to our fourth quarter 2023 earnings review this.

Mark C. Griffin: Good morning, everyone, and welcome to our fourth quarter 2023 earnings review. This conference call is being webcast and accompanied by a slide presentation that's posted in the investor relations section of our website, www.AllianceBernstein.com.

Marc Griffin: This conference call is being webcast and accompanied by a slide presentation. That's posted in the Investor Relations section of our website Www Dot Alliance Bernstein Dot com with.

Mark C. Griffin: With us today to discuss the company's results for the quarter are Seth Bernstein, our President and CEO, Matt Bass, Head of Private Alternatives, and Bill Siemers, Interim CFO. Onur Erzan, head of Global Client Group and Private Wealth, 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 Safe Harbor Language on slide 2 of our presentation. You can also find our Safe Harbor Language in the MD&A of our 10-K, which we will file on Friday, February 9th. 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.

Marc Griffin: With us today to discuss the company's results for the quarter or Seth Bernstein, our president and CEO, Matt That's had a private alternatives and built seamers interim CFO.

Speaker Change: <unk> head of global client growth in private wealth will join us for questions. After our prepared remarks.

Speaker Change: 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 two of our presentation. You can also find our safe Harbor language in the MD&A of our 10-K, which we will file on Friday February 9th.

Speaker Change: 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 SaaS.

Seth Perry Bernstein: Good morning, and thank you for joining us today. Financial markets enjoyed a strong rally to end 2023 as investors anticipated a shift in Fed policy to lower interest rates in 2024. In 2023, AB was among the beneficiaries of the early wave of fixed income reallocations, with two of the three channels growing organically. We drove continued market share gains in U.S. retail, led by municipal SMA and taxable fixed income. We also saw a strong cross-border fixed income flow.

SaaS: And thank you for joining us today.

SaaS: Financial markets enjoyed a strong rally to end 2023 as investors anticipated this shift in fed policy to lower interest rates in 2024.

In 2023, <unk> was among the beneficiaries of the early wave of fixed income reallocations with two or three channels growing organically. We drove continued market share gains in U S. Retail led by municipal SMA and taxable fixed income.

SaaS: We also saw strong cross border fixed income flows.

Seth Perry Bernstein: We made good progress on our key strategic initiatives, launching 10 active VTS, now 12 in total, at $1.5 billion in assets under management, receiving approval for our wholly owned China Fund Management Company license, and Growing Our Relationship with Equitable in Support of Our Private Markets Platform, which Matt Bass will touch on further. Looking ahead, U.S. money market funds entered the year at a record $6 trillion in AUM, some of which we expect will migrate to higher return opportunities as the rate cycle turns over later this year. Now, let's get into the specifics, starting with a firm-wide overview on slide four. Fourth quarter gross sales were $28.3 billion, down $2.6 billion from the year-ago period.

SaaS: We made good progress on our key strategic initiatives launching 10 active Etfs now 12 in total at $1 5 billion in assets under management.

SaaS: Receiving approval for our wholly owned China Fund management company license and.

SaaS: And growing our relationship with that group all in support of our private markets platform, which Matt bass will touch on further.

SaaS: Looking ahead U S money market funds entered the year at a record six trillion dollars and.

SaaS: Some of which we expect well migrate to higher return opportunities as the rate cycle churns over later this year.

Matt: Now, let's get into the specifics starting with a firm wide overview on slide four.

Matt: Fourth quarter gross sales were $28 3 billion down $2 6 billion from the year ago period.

Seth Perry Bernstein: Firmwide active net outflows were $2.8 billion, and full year gross sales of $101.5 billion compared to $115.6 billion last year. Adjusting for two large custom target date sales in 2022 totaling $16 billion, firm-wide sales rose slightly year over year. However, full-year active net outflows were $5.2 billion, snapping a streak of four straight years of firm-wide active organic growth. Year-end assets under management of $725 billion increased by 12% year-over-year and 8% from the end of the third quarter.

Matt: Firm wide active net outflows were $2 8 billion.

Matt: Full year gross sales of $101 5 billion compared to $115 6 billion last year.

Matt: Adjusting for two large custom target date sales in 2022 totaling 16 billion firm wide sales rose slightly year over year.

Matt: Full year active net outflows were $5 2 billion snapping a streak of four straight years of firm wide active organic growth.

Matt: Year end asset under management of 725 billion increased by 12% year over year and 8% from the end of the third quarter.

Seth Perry Bernstein: While fourth quarter average assets under management were up 8% from the prior year, and full year average AUM was down 1%, Slide 5 shows our quarterly flow trend by channel. Firm-wide, fourth quarter net outflows were $1.8 billion.

Matt: While fourth quarter average assets under management were up 8% from the prior year and full year average AUM was down 1%.

Slide five shows our quarterly flow trend by channel.

Matt: Firm wide fourth quarter net outflows were $1 8 billion.

Seth Perry Bernstein: Strong retail gross sales of $21 billion increased 47% year-over-year and 24% sequentially, driven by both fixed income and equity. Net inflows were $1.3 billion as we continued to gain share in fixed income, up 14% annualized organically. Our institutional channel had growth sales of $3 billion, down versus prior periods of last year's fourth quarter, including $6.4 billion from custom target date sales. Net outflows were $2.5 billion. In private wealth, gross sales were healthy at $4.3 billion, driven by taxable fixed income and muni. Net outflows were $600 million due to some seasonal impact from year-end tax-related planning.

Matt: Strong retail gross sales of 21 billion increased 47% year over year, and 24% sequentially driven by both fixed income and equities.

Matt: Net inflows were $1 3 billion as we continued to gain share in fixed income up 14% annualized organically.

Matt: Our institutional channel had gross sales of $3 billion down versus prior periods with last years fourth quarter, including $6 4 billion from custom target date sales.

Matt: Net outflows were $2 5 billion.

Matt: In private wealth gross sales were healthy at $4 3 billion driven by taxable fixed income <unk> net outflows were <unk> 600 million from some seasonal impact from year end tax related planning.

Seth Perry Bernstein: Turning to annual net flow trends on slide 6, in a challenging year for active managers, gross sales of $101 billion led to firm-wide net outflows of $7 billion, or 1.1 percent attrition. Still, our average organic growth rate over the last five years was positive 2 percent. Retail sells a 71 billion group by 8% year over year. Net inflows of $3.7 billion were driven by strength in taxable fixed-income immunities. However, institutional sales of $11.8 billion declined from $32 billion last year, as we compared them against last year's $16 billion in custom target date funding.

Matt: Turning to annual net flow trends on slide six and a challenging year for active managers gross sales of 101 billion led to firm wide net outflows of 7 billion or one 1% attrition still our average organic growth rate over the last five years was positive 2%.

Matt: Retail sales of 71 billion grew by 8% year over year.

Matt: Net inflows of $3 7 billion were driven by strength in taxable fixed income in munis.

Matt: Institutional sales of $11 8 billion declined from $32 billion last year as we compared against last year's $16 billion in custom target date fundings.

Seth Perry Bernstein: 2023 net outflows were $11.8 billion. Private wealth had strong growth sales of $18.6 billion, with net inflows of $1.1 billion, the third straight year of organic growth. Investment performance is shown on slide seven, starting with Fixed Income. Both government bonds and credit risk assets finished 2023 on a high note as bond yields fell sharply with most central banks ending their hiking cycle.

Matt: 2023, net outflows were $11 8 billion.

Matt: Private wealth had strong gross sales of $18 6 billion with net inflows of $1 1 billion, the third straight year of organic growth.

Matt: Investment performance as shown on slide seven.

Matt: Starting with fixed income.

Matt: Both government bonds and credit risk assets finished 2023 on a high note as bond yields fell sharply with most central banks ending their hiking cycles.

Seth Perry Bernstein: The fourth-quarter rally brought full-year developed market treasury returns to 6.7 percent as measured by the Bloomberg Global Treasury Index on a hedge-based basis. Most credit risk sectors posted strong relative returns to government bonds with developed markets high yield up 13.8 percent and emerging markets local currency bonds up 12.7 percent. AB's fixed income performance remained strong, with 75 percent of assets outperforming over the one-year period, 73 percent over the three-year, and 77 percent over the five-year. In 2023, we experienced $5.2 billion of net inflows into our American Income Fund, as clients looking to put cash to work became more comfortable taking durations. Turning to equity. For many of the same reasons that bonds rallied, equity markets also registered strong gains in the fourth quarter, with the S&P 500 up 12 percent.

Matt: The fourth quarter rally brought full year developed market Treasury turns to six 7% as measured by Bloomberg Global Treasury index on a hedge basis.

Matt: Most credit risk sectors posted strong relative returns to government bonds with developed markets high yield up 13, 8% in emerging markets local currency bonds up 12, 7%.

Matt: <unk> fixed income performance remained strong with 75% of assets outperforming over the one year period, 73% over the three year and 77% over the five year.

Matt: In 2023, we experienced $5 2 billion of net inflows into our American income fund as clients looking to put cash to work became more comfortable taking duration.

Matt: Turning to equities for many of the same reasons that bonds rallied equity markets also registered strong gains in the fourth quarter with the S&P 500 up 12%.

Seth Perry Bernstein: Market breadth improved, with previously lagging segments of the market rebounding, as small caps outperformed large caps and value outperformed growth. Large cap index returns in 2023 were concentrated within the magnificent seven stocks seen as leading beneficiaries of the AI revolution. Representing more than a quarter of the index, these stocks disproportionately drove the cap-weighted S&P 500's total return of 26 percent versus 14 percent for the equal-weighted

Matt: Market breath improved with previously lagging segments of the market rebounding as small caps outperform large gaps and value outperformed growth.

Matt: Large cap index returns in 2023 were concentrated within the magnificent seven stocks seen as leading beneficiaries of the AI Revolution.

Matt: Representing more than a quarter of the index. These stocks disproportionately drove cap weighted S&P 500, total return of 26% versus 14% for the equal weighted version.

Seth Perry Bernstein: When combined with stock selection, our performance continued to lag the Mega Cap Tilted Bench, with 26 percent of equity assets outperforming over the one-year period, 45 percent over the three-year, and 42 percent outperforming over the five-year period. However, our research process remains robust, and our views are fundamentally driven. Over time, we believe the sources of market returns will broaden relative to the recent period of concentrated returns, encompassing a more fundamentally driven environment. Relative to peers, we continue to outperform the Morningstar peer group over the longer term, with 62 percent and 68 percent of our equity assets outperforming over the three and five-year periods, respectively. Now I'll review our client channels, beginning with Retail on slide 8. Gross sales for the fourth quarter and the full year increased versus the prior period. The full-year redemption rate normalized to 28% versus a historically low 24% last year.

Matt: When combined with stock selection of our performance continued to lag the mega cap tilted benchmarks with 26% of equity assets outperforming over the one year period, 45% over the three year and 42% outperforming over the five year period.

Our research process remains robust and our views are fundamentally driven over time, we believe the sources of market returns will broaden relative to the recent periods concentrated returns encompassing a more fundamentally driven environment.

Matt: Relative to peers, we continue to outperform the Morningstar peer group over the longer term with 62% and 68% of our equity assets outperforming over three and five year periods respectively.

Matt: Now I'll review, our client channels, beginning with retail on slide eight.

Matt: Gross sales for the fourth quarter and the full year increased versus prior periods.

Matt: For full year redemption rate normalized to 28% versus a historically low 24% last year.

Seth Perry Bernstein: We generated net inflows of $1.3 billion in the quarter and $3.7 billion for the year, with strength in cross-border fixed income and U.S. retail outpacing equity output. U.S. retail grew organically for the fifth consecutive year with $9 billion of net inflows, up 11% in 2023 and up 9% on average over the last five years. Our U.S. large-cap growth product posted $1.4 billion of net inflows driven by U.S. demand. And we posted our 11th straight year of municipal growth with net flows up $5 billion, growing 19% organically. In taxable fixed income, we grew by 9% organically with $5.2 billion in net inflows in American income as well as money market. As shown on the bottom right, we ranked in the top 2% of U.S. retail flows, immunities, and cross-border fixed income flows, with number one rankings in muni income, global high yield, and US income.

Matt: We generated net inflows of $1 3 billion in the quarter and $3 7 billion for the year with strength in cross border fixed income and U S retail outpacing equity outflows.

Matt: U S retail grew organically for the fifth consecutive year with $9 billion of net inflows up 11% in 2023 and up 9% on average over the last five years.

Matt: Our U S large cap growth product posted $1 4 billion of net inflows driven by U S demand.

Matt: And we posted our 11th straight year of municipals growth with net flows up 5 billion growing 19% organically.

Matt: And taxable fixed income we grew by 9% organically with $5 2 billion in net inflows in American income as well as money markets.

Matt: As shown on the bottom right. We ranked in the top 2% of U S. Retail flows in munis and cross border fixed income flows with a number one rankings in Muni income global high yield and American income, we launched 10 active Etfs in 2023 with a total of 12 now at $1 5 billion in assets under management.

Seth Perry Bernstein: We launched 10 active ETFs in 2023, with a total of 12 now at $1.5 billion in assets under management. Turning institutional on slide 9, fourth quarter gross sales were $3 billion with net outflows of $2.5 billion. Full year gross sales were $11.8 billion. Coincidentally, net outflows were $11.8 billion driven by equities and multi-assets. Our pipeline was $12 billion at quarter end, down $500 million to quench

Matt: Turning to institutional on slide nine fourth quarter gross sales were 3 billion with net outflows of $2 5 billion full year gross sales were $11 8 billion. Coincidentally net outflows were 11 8 billion driven by equities and multi asset.

Matt: Our pipeline was $12 billion at quarter end down $500 million sequentially.

Seth Perry Bernstein: Fourth quarter fundings were $1.5 billion, led by A.B. Carvel's Residential Mortgage and Renewable Energy Strategies and Lobau High Yields. In the quarter, we added over $1 billion in active equity mandates, led by $600 million in Global Core and $325 million in U.S. SMID values. Equitable's initial $10 billion private market program is now 90 percent deployed, and we were pleased in December to announce the launch of the PCI NAV lending strategy, supported by a $500 million commitment from Equitable. Moving to private wealth on slide 10, fourth quarter growth sales of 4.3 billion rose 6 percent year over year and 7 percent sequentially. 2023 growth sales of $18.6 billion were up 6% year-over-year. We posted strong sales in money market funds, municipal bonds, and our proprietary passive equity tax harvesting strategy, which grew to $3.6 billion, posting strong annualized organic growth of 41 percent. Fourth quarter net outflows of $600 million reflected some seasonal impact from year-end tax-related planning, while full-year net inflows of $1.1 billion represented our third straight year of organic growth.

Matt: Fourth quarter fundings were $1 5 billion led by a carve out residential mortgage and renewable energy strategies and low vol high yield.

Matt: In the quarter, we added over $1 billion in active equity mandates led by $600 million in global core and $325 million and U S. Smid value Equitable's initial 10 billion private market program is now 90% deployed and we were pleased in December to announce the launch of the PCI nap lending strategy.

Matt: Supported by a $500 million commitment from equitable move.

Matt: Moving to private wealth on slide 10 fourth quarter gross sales of $4 3 billion rose, 6% year over year and 7% sequentially.

Matt: In 2023 gross sales of $18 6 billion were up 6% year over year.

Matt: We posted strong sales in money market funds municipals, and our proprietary passive equity tax harvesting strategy, which grew to $3 6 billion posting strong annualized organic growth of 41%.

Matt: First quarter net outflows of $600 million reflected some seasonal impact from year end tax related planning, while full year net inflows of $1 1 billion represented our third straight year of organic growth.

Matt: We've experienced strong productivity growth in our financial advisers, averaging 8% annually since 2018, and we continue to invest in FAA head count up 5% at year end versus the prior year.

Matt: Turning to the capital raises were $1 9 billion led by our secondaries partnership with <unk> real estate equity and a private credit business.

Seth Perry Bernstein: We've experienced strong productivity growth in our financial advisors, averaging 8 percent annually since 2018, and we continue to invest in FAA headcount of 5 percent at year end versus the prior year. Alternative capital raises were $1.9 billion, led by our secondaries partnership with LSV, real estate equity, and our private credit. I'll finish our business overview with the sell side on slide 11. For the fourth quarter, Bernstein Research revenues of $100 million were flat year-over-year and increased 7% sequentially. We saw modest improvement in the U.S., though key global markets remain subdued. Full-year revenues of $386 million declined by 7 percent as institutional trading activity remained constrained.

Matt: I'll finish our business I'll review with the sell side on slide 11.

Matt: Fourth quarter Bernstein research revenues of $100 million were flat year over year and increased 7% sequentially.

Matt: We saw modest improvement in the U S. Though key global markets remain subdued full year revenues of $386 million declined by 7% as institutional trading activity remained constrained.

Matt: We launched diversified new sector coverage and hosted two client centric conferences healthcare services Disruptors in U S client we.

Matt: We had 12 top ranked analyst and institutional investors All American research team survey and ranked in the top 10, and generalist sales and trading.

Matt: Our joint venture with Societe Generale is on track to close in the first half of 2024, we anticipate disclosing further financial details closer to that time.

Seth Perry Bernstein: We launched diversified news sector coverage and hosted two client-centric conferences, Healthcare Services Disruptors and U.S. Quants. We had 12 top-ranked analysts in the Social Investors All-American Research Team Survey and ranked in the top 10 in generalist sales and trading. Our joint venture with Societe Generale is on track to close in the first half of 2024, and we anticipate disclosing further financial details closer to that time. [inaudible] Performance in fixed income was strong for all periods, while equities continued to lag based on SOX selection versus concentrated large-cap benchmarks.

Matt: I'll conclude by reviewing the status of our strategic initiatives on slide 12.

Matt: Performance in fixed income was strong for all periods, while equities continued to lag based on stock selection versus concentrated large cap benchmarks.

Matt: Two of our three channels grew organically retail and private wealth.

Matt: Income net flows grew by 5% with robust growth in U S retail, where our Muni SMA platform reached 23 billion in AUM up 36% versus the prior year.

Matt: We were also pleased to be awarded a license for our wholly owned China Fund management company.

Fourth quarter adjusted operating income was up 6% year over year operating margin of 29, 2% was down 80 basis points and earnings and unit holder distributions at <unk> 77 per unit were up 10%.

Seth Perry Bernstein: Two of our three channels grew organically, retail and private wealth. Fixed income net flows grew by 5% with robust growth in U.S. retail, where our Muni SMA platform reached $23 billion in AUM, up 36% versus the prior year. We were also pleased to be awarded a license for our wholly owned China fund management. Fourth quarter adjusted operating income was up 6% year over year, operating margin of 29.2% was down 80 basis points, and earnings in unit holder distributions of 77 cents per unit were up 10%. Full year 2023 operating income declined by 1%, margins of 28.2% declined by 70 basis points, and earnings per unit of $2.69 declined 9% year-over-year.

Matt: Full year 2023 operating income declined by 1% margins of 28, 2% declined by 70 basis points and earnings per unit of $2 69 declined 9% year over year.

Lastly, we're pleased that Jackie marks has joined our team and will be appointed Chief Financial Officer on March 1st week.

Matt: We think our interim CFO Bill Seamers for his dedication and service to <unk> and I wish him all the best in his retirement.

Matt: Now I'll turn the call over to Matt <unk> head of private alternatives to discuss our middle market lending business Matt.

Matt: Thanks, Jeff and good morning, everyone I'm excited to discuss with you today <unk> private markets business with a focus on our corporate direct lending business a private credit investors.

Matthew Bass: Lastly, we're pleased that Jackie Marks has joined our team and will be appointed Chief Financial Officer on March 1st. We thank our interim CFO, Bill Siemers, for his dedication and service to AB, and I wish him all the best in his retirement. Now, I'll turn the call over to Matt Bass, Head of Private Alternatives, to discuss our middle market lending business. Matt.

Matt: Turning to slide 14.

Matt: Over the last decade, we built a scaled private markets platform now approximately 61 billion in AUM were up about 9% year over year. Our focus is on credit oriented strategies, a core competency that aligns with the firm's long standing liquid credit business, notably with the acquisition of Avi carve out which.

Matthew Bass: Thanks, Seth, and good morning, everyone. I'm excited to discuss with you today AB's private market. Let's focus on our corporate direct lending business, AB Private. Turning to slide 14. Over the last decade, we've built a scaled private markets platform. Now with approximately $61 billion in AUM, we're up about 9% year-over-year. Our focus is on credit-oriented strategies.

Matt: In 2022, <unk> now ranks in the top 20 private debt managers, according to private debt investor.

Matt: Highlighted at last May's equitable Investor day, our goal is to grow private markets AUM to $90 billion to $100 billion by 2027% supported by Equitable's $20 billion permanent capital commitment.

Matt: This level of AUM private markets will represent more than 20% of our asset management revenues are well along on our path with private markets generating approximately 14% of asset management revenue in 2023 up from approximately 9% in the prior year.

Matthew Bass: A core competency that aligns with the firm's longstanding liquid credit. Notably, with the acquisition of A.B. Carvalho, which closed in 2022, A.B.

Matt: Today, we're focusing on <unk> private credit investors or PCI, our middle market private lending in sponsor fund finance business, which manages more than 17 billion in AUM.

Matthew Bass: now ranks in the top 20 private debt managers, according to Private Debt Investors. As highlighted at last May's Equitable Investor Day, our goal is to grow private markets AUM to $90 to $100 billion by 2027, supported by Equitable's $20 billion permanent capital commitment. At this level of AUM, private markets will represent more than 20% of our asset management. We're well along on our path to private markets generating approximately 14% of asset management revenue in 2023, up from approximately 9% the prior year. Today, we're focusing on AB Private Credit Investors, or ABPCI, a middle-market private lending and sponsor fund finance business that manages more than $17 billion in assets.

Matt: Turning to slide 15, <unk> scaled platform and team with a strong reputation team focuses on lending businesses in the core middle market with further focus on sectors that exhibit our targeted investment characteristics. We have a strong track record of performance, which has been delivered to a diverse array of clients through a number of different.

Matt: Actual vehicles, we're excited to highlight the differentiating aspects of this platform and our plan to execute on a focused organic growth strategy.

Matt: On the next slide we introduced the team we got to know brand Humphreys and <unk>. Other founding team members in 2013, when we were looking to expand into direct lending.

Matt: Would love to have <unk> join us today, but he is in Europe. This week meeting with clients.

Matt: Following the lift out of the team that led a comparable investment strategy at Barclays from 2008 to 2013, a b PCI was established in 2014 with the founding team of five and initial capital provided by equitable.

Matt: The team has grown to more than 75 professionals facilitated by continued investment and strong retention, notably team is based in Austin, Texas, Although it is origination capabilities across the U S.

Matthew Bass: Turning to slide 15, ABPCI is a scaled platform and team with a strong reputation. It focuses on lending to businesses in the core middle market with further focus on sectors that exhibit our targeted investment characteristics. We have a strong track record of performance, which has been delivered to a diverse array of clients through a number of different perpetual views. We're excited to highlight the differentiating aspects of this platform and our plan to execute on a focused organic growth strategy. On the next slide, we introduce the... We got to know Bren Humphreys and ABPCI's other founding team members in 2013 when we were looking to expand into direct. We'd love to have Brent join us today, but he's in Europe this week meeting with...

Matt: A b PCI currently manages more than $17 billion in capital as I mentioned has invested nearly 25 billion since inception spanning nearly 600 transactions and aided by our broad sponsor relationships turning.

Matt: Turning to slide 17, the following factors differentiate <unk> investment strategy.

Matt: PCI focuses on directly originated and privately negotiated senior secured loans, specifically loans to borrowers in the core U S. Middle market that are backed by leading financial sponsors we invest in sectors that exhibit our target investment characteristics, such as recurring revenue or sectors with defensive characteristics. This has led to <unk>.

Matt: Principally investing in sectors, such as software and technology digital infrastructure and services health care and related IP.

Matt: In business services lastly, we're highly selective on the transactions, we execute evident in our 4% historical close rates.

Matthew Bass: Following the departure of the team that led a comparable investment strategy at Barclays from 2008 to 2013, ABPCI was established in 2014 with a founding team of five and initial capital provided by. The firm has grown to more than 75 professionals, facilitated by continued investment and strong retention. Notably, the team is based in Austin, Texas, although it has origination capabilities across the U.S. AVPCI currently manages more than $17 billion in capital, as I mentioned, and has invested nearly $25 billion since inception, spanning nearly 600 transactions and aided by our broad sponsor relations. Turning to slide 17, the following factors differentiate ABPCI's investment. ABPCI focuses on directly originated and privately negotiated senior security.

Matt: Additional statistics at the bottom of this slide further dimension, our market positioning and the profile of our borrowers.

Matt: Slide 18 highlights <unk> consistent long term performance track record underpinned by a proven asset selection strategy as previously mentioned <unk> target investment characteristics have led our team to invested principally in select sectors, which ultimately has contributed to the strong performance we have generated for our clients.

Matt: We realized consistent low double digit returns for all three of our Levered core institutional vehicles, including the predecessor funds the team manage dating back to 2008.

Matt: Turning to slide 19, let's talk about how we deliver investment solutions to our clients along with some of our newer product innovations within our direct lending strategy ADP Ci manages perpetual vehicles, including four commingled accounts and three customized accounts with large institutional clients. The various funds generally employed the same asset selection.

Matthew Bass: Specifically, loans to borrowers in the core U.S. middle market that are backed by leading financial institutions. We invest in sectors that exhibit our target investment characteristics, such as recurring revenue or sectors with defensive characteristics. This has led to ABPCI principally investing in sectors such as software and technology, digital infrastructure and services, healthcare and related IT, and business. Lastly, we are highly selective in the transactions we execute, evident in our 4% historical. Additional statistics at the bottom of this slide further dimension our market positioning and the profile of our bar.

<unk> and therefore, a b PCI typically has launched new funds to provide solutions to new clients subsets. For example, we launched our first direct lending fund in 2015, which provided a solution for taxable and Super tax exempt clients. In 2018, we launched the second direct lending fund to accommodate tax exempt clients thereafter in <unk>.

Matt: <unk> thousand 20, <unk> launched a third private fund and Unlevered solution, principally to accommodate select non U S clients on a tax efficient basis looking ahead for this year and we anticipate launching a fourth private fund and will accommodate a wider range of non U S. Clients. Furthermore, we plan to launch a public non traded BDC in 2020 for providing.

Matthew Bass: Slide 18 highlights ABPCI's consistent long-term performance track record, underpinned by our proven asset selection strategy. As previously mentioned, ABTCI's target investment characteristics have led our team to invest principally in select sectors, which ultimately has contributed to the strong performance we have generated for our class. We realized consistent, low double-digit returns for all three of our levered core institutional vehicles, including the predecessor funds the team managed dating back to 2009.

Matt: A solution to retail clients globally. This BDC will complement our existing private BDC, which we have historically distributed exclusively through the Bernstein private wealth channel.

Matt: Lastly, we plan to launch an insurance dedicated funds in 2024 with an emphasis on tax efficiency.

Matt: Importantly, direct lending solutions are perpetual which provides clients with ongoing exposure to the asset class in a number of other benefits. The perpetual nature of the funds also allow the platform to scale more easily without the launch of consecutive more traditional vintage style funds.

Matt: On the private equity solutions side, a b PCI co manage a series of closed end funds focused on private equity fund investments and minority equity co investments in partnership with Abbott capital.

Matthew Bass: Turning to slide 19, let's talk about how we deliver investment solutions to our clients, along with some of our newer product innovations. Within our direct lending strategy, ABPCI manages perpetual vehicles, including four commingled accounts and three customized accounts with large institutional clients. The various funds generally employ the same asset selection strategy, and therefore, ABPCI typically has launched new funds to provide solutions to new clients. For example, we launched our first direct lending fund in 2015, which provided a solution for taxable and super-tax-exempt clients.

Matt: Here, we have annual vintages dating back to 2019.

Matt: And in early December we announced the launch of a new Nab lending strategy supported by an initial $500 million commitment from equitable.

Matt: Slide 20 shows the robust organic growth that we have realized over the past nine years, we've grown the platform from just $500 million at the time of the initial team lift out to over 17 billion today or a CAGR of nearly 50% over the last decade. We believe this growth reflects <unk> ability to generate strong performance in our.

Matt: Our core investment strategy delivered to an expanding client base and perpetual funds through <unk> global distribution.

Matthew Bass: In 2018, we launched the second direct lending fund to accommodate tax exemptions. Thereafter, in 2020, ABPCI launched a third private fund, an unlevered solution, principally to accommodate select non-U.S. clients on a tax-efficient basis. Looking ahead for this year, we anticipate launching a fourth private fund that will accommodate a wider range of non-U.S. Furthermore, we plan to launch a public non-traded BDC in 2024, providing a solution to retail clients globally. This BDC will complement our existing private BDC, which we have historically distributed exclusively through the Bernstein Private Wealth Fund. Lastly, we plan to launch an insurance-dedicated fund in 2024 with an emphasis on tax efficiency. Importantly, direct lending solutions are perpetual, which provides clients with ongoing exposure to the asset class and a number of other benefits. The perpetual nature of the funds also allows the platform to scale more easily without the launch of consecutive or traditional vintage style funds. On the private equity solution side, ABPCI co-manages a series of closed-end funds focused on private equity fund investments and minority equity co-investments in partnership with Abbott Capital. Here we have annual vintages dating back to 2009.

Matt: We're excited to make meaningful progress towards our 2027 targets through expanding our existing solutions accessing new client segments and extending into adjacencies.

Matt: Let's discuss each of these on slide 21, we plan to continue to scale, our core strategy through a combination of factors first growing existing vehicles and solutions in particular, our perpetual funds, thereby providing additional capital for our core investment strategy second launching new vehicles and solutions such as our expected new launches for 2012.

Matt: For the further penetrate existing client channels and access new ones.

Matt: Institutional private wealth and retail and insurance.

Matt: Final part of our growth strategy is to extend into adjacencies as exemplified by our recently announced extension into NAV lending, we will continue to work with clients, including equitable to assess future adjacencies that leverage our core capabilities.

Matt: Summarize we're excited about the breadth and strength of 80 private credit investors, we have a strong team with proven performance and a well structured platform with evergreen vehicles, serving a wide array of clients, allowing us to drive consistent growth we have an organic.

Matt: <unk> growth plan that we're executing.

Matt: That contributes to our private markets target of 90 to 100 billion in AUM by 2027, all supported by Equitable's permanent capital commitments, <unk> private wealth business, and <unk> broad global institutional and retail footprint.

Now I'll turn it over to bill to walk through the financials Bill.

Bill Katz: Let's start with the GAAP income statement on slide 23 fourth.

Bill: Fourth quarter GAAP net revenues of $1 1 billion increased 10% from the prior year period operating income of $238 million increased 17% and operating margin of 26% increased by 60 basis points.

Matthew Bass: And in early December, we announced the launch of a new NAB lending strategy, supported by an initial $500 million commitment from Slide 20 shows the robust organic growth that we have realized over the past nine years. We've grown the platform from just $500 million at the time of the initial team lifting to over $17 billion today, for a CAGR of nearly 50% over the last. We believe this growth reflects ABPCI's ability to generate strong performance in our core investment strategy delivered to an expanding client base in perpetual funds through AB's global distribution. We are excited to make meaningful progress towards our 2027 targets by expanding our existing solutions, accessing new client segments, and extending into a new generation. Let's discuss each of these on slide 21.

Speaker Change: <unk> of <unk> 71 in the quarter increased by 20% year over year.

Speaker Change: For the full year GAAP net revenues of $4 2 billion increased 3%.

Speaker Change: Operating income of $818 million increased by $3 million and operating margin of 19, 1% decreased by 240 basis points.

Speaker Change: Full year GAAP EPS of $2 34, <unk> decreased by 13% year over year.

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.

Speaker Change: 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-K.

Matthew Bass: We plan to continue to scale our core strategy through a combination of factors. First, growing existing vehicles and solutions, particularly our perpetual funds, thereby providing additional capital for our core investors. Second, launching new vehicles and solutions, such as our expected new launches for 2024, to further penetrate existing client channels and access new ones, such as cross-institutional, private wealth, and retail, and insurance.

Speaker Change: Our adjusted financial highlights are shown on slide 24, which I'll touch on as we talked through the P&L shown on slide 25.

Speaker Change: On slide 25, beginning with revenues net revenues of $871 million increased 9% versus the prior year period.

Speaker Change: For the full year net revenues of $3 4 billion increased by 1% versus 2022.

Matthew Bass: The final part of our growth strategy is to extend into adjacent areas, as exemplified by our recently announced extension in Tanavel. We will continue to work with clients, including Equitable, to assess future opportunities that leverage our core capabilities. To summarize, we're excited about the breadth and strength of A.D.'s private credit investment. We have a strong team with proven performance and a well-structured platform with evergreen vehicles serving a wide array of customers. Allowing us to drive consistently.

Speaker Change: Fourth quarter base fees increased by 3% versus the prior year period is 8% higher average AUM was offset by a lower fee rate.

Speaker Change: The fourth quarter fee rate of 39, six basis points decreased 4% year over year driven by mix.

Speaker Change: Reflecting organic growth and to lower fee rate fixed income products and a full quarter impact from last December as large low fee custom target date inflow.

Speaker Change: The full year fee rate of 39 nine basis points was flat year over year.

Matthew Bass: We have an organic growth plan that we are executing. That contributes to our private market's target of $90 to $100 billion in AUM by 2027, all supported by Equitable's permanent capital commitments, AB's private wealth business, and AB's broad global institutional and retail distribution. Now I'll turn it over to Bill to walk through the financials. Bill?

Speaker Change: Fourth quarter performance fees of $51 million increased by $33 million from the prior year period, and full year performance fees of $126 million were up $35 million from the prior year.

Speaker Change: <unk> driven by higher fees at private credit services and API carve out.

Speaker Change: Fourth quarter revenues for Bernstein research services of $100 million were flat with the prior year period full year revenues of $386 million declined 7%, reflecting declines in customer trading activity across all regions as a result of market conditions.

Bill Siemers: Thanks. Let's start with the GAAP income statement on slide 23. Fourth quarter GAAP net revenues of $1.1 billion increased 10% from the prior period. Operating income of $238 million increased 17%, and operating margin of 20.6% increased by 60 basis points. Gap PPU of 71 cents in the quarter increased by 20% year over year.

Speaker Change: Fourth quarter dividend and interest revenues increased by 4% versus the prior year due to higher dividends and interest earned on broker dealer investments.

Speaker Change: At the same time fourth quarter broker dealer interest expense associated with our private wealth brokerage accounts decreased by 22% due to lower interest paid on customer balances.

Speaker Change: For the full year dividend and interest revenues increased 103% versus last year due to higher dividends and interest earned on broker dealer investments, while broker dealer interest expense increased 62% due to higher interest paid on customer balances.

Bill Siemers: For the full year, gap net revenues of $4.2 billion increased 3%, operating income of $818 million increased by $3 million, and operating margin of 19.1% decreased by 240 basis points. Full year gap EPU of $2.34 decreased by 13% year over year. 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 unit holders on our adjusted results, which we provide in addition to, and not as a substitute for, our gap results. Our standard GAAP reporting and a reconciliation of GAAP to adjust the results are in our presentation appendix, press release, and 10-K. Our adjusted financial highlights are shown on slide 24, which I'll touch on as we talk through the P&L shown on slide 25.

Speaker Change: Moving to adjusted expenses all in our total fourth quarter operating expenses of $617 million were up 10% year over year full year operating expenses of $2 4 billion rose by 2% versus the prior year well below inflation levels.

Speaker Change: Fourth quarter total compensation and benefits expense was up 12% versus the prior year period, driven by a 9% increase in revenues and slightly higher compensation ratio of 47, 7% of adjusted net revenues as compared to 46, 4% in the prior year period.

Speaker Change: Our fourth quarter compensation ratio of 47, 7% came in below our expectations, reflecting the fourth quarter market rally and continued discipline in our compensation process.

Bill Siemers: On slide 25, beginning with revenues, net revenues of $871 million increased 9% versus the prior year period. For the full year, net revenues of $3.4 billion increased by 1% versus 2022. Fourth quarter base fees increased by 3% versus the prior year period, as 8% higher average AUM was offset by a lower fee rate. The fourth quarter fee rate of 39.6 basis points decreased 4% year-over-year, driven by MIPS, reflecting organic growth into lower fee-rate fixed income products and a full quarter impact from last December's large low fee custom target date inflow. The full year fee rate of 39.9 basis points was flat year-over-year. Fourth quarter performance fees of $51 million increased by $33 million from the prior year period, and full year performance fees of $126 million were up $35 million from the prior year, both driven by higher fees at Private Credit Services and A.B. Carvalho.

Speaker Change: For the full year compensation and benefits increased by 2% driven by a 9% increase in base compensation offset by a 13% decrease in commissions for.

Speaker Change: For the full year 2023 compensation ratio was 49.0% 60 basis points above the prior year as wage inflation outpaced a 1% increase in revenues.

Speaker Change: We entered 2024 with AUM levels, 7% above the 2023 average driven by 2023 as market rally give.

Speaker Change: Given market conditions, we plan to accrue at a 49.0% compensation ratio in the first quarter of 2024 built.

Speaker Change: Below last year's first quarter level of 49, 5% and may adjust further throughout the year.

Speaker Change: Promotion and servicing costs increased by 18% from the prior year period, driven by higher <unk> and firm meetings for.

Speaker Change: For the full year promotion and servicing costs increased 2% or 1%, excluding AEP carve out for which we had four quarters in 2023 versus two quarters in 2022.

Speaker Change: As higher <unk> and firm meetings were partially offset by lower trade execution and clearance.

Speaker Change: G&A expenses were up 2% in the fourth quarter versus the prior year period below inflation levels for the full year G&A increased by 1% and was down 1% excluding carve out.

Bill Siemers: Fourth quarter revenues for Bernstein Research Services of $100 million were flat with the prior year period. However, full year revenues of $386 million declined 7%, reflecting declines in customer trading activity across all regions as a result of market conditions. Fourth quarter dividend and interest revenues increased by 4% versus the prior year due to higher dividends and interest earned on broker-dealer investments. At the same time, fourth quarter broker-dealer interest expense associated with our private wealth brokerage accounts decreased by 22 percent due to lower interest paid on customer balances. For the full year, dividend and interest revenues increased 103% versus last year due to higher dividends and interest earned on broker-dealer investments, while broker-dealer interest expense increased 62% due to higher interest paid on customer balances. Moving to adjusted expenses, all in, our total fourth quarter operating expenses of $617 million. We're up 10% year over year. Full-year operating expenses of $2.4 billion rose by 2% versus the prior year, well below inflation.

Speaker Change: Higher office related expenses and professional fees were offset by lower portfolio services expenses and a favorable FX impact.

Speaker Change: Looking forward to 2024, we are targeting promotion and servicing and G&A growth up low single digits below inflation levels.

Speaker Change: We remain committed to managing expenses, given the continued volatile macroeconomic environment fourth quarter adjusted operating income of $254 million increased by 6% versus the prior year period, while full year 2023 operating income of $951 million decreased by 1%.

Speaker Change: Fourth quarter adjusted operating margin of 29, 2% decreased 80 basis points year on year, while full year 2023 operating margin of 28, 2% decreased 70 basis points from 2022.

Speaker Change: Below the adjusted operating income line fourth quarter interest expense increased by $4 million from the prior year period and for the full year.

Speaker Change: Interest expense increased by $36 million, reflecting higher interest rates and higher average borrowings.

Speaker Change: As outlined in the appendix of our presentation fourth quarter earnings exclude certain items, which are not part of our core business operations.

Speaker Change: In the fourth quarter adjusted operating earnings were $16 million above GAAP operating earnings due to the acquisition related expenses and interest expense.

Bill Siemers: Fourth quarter total compensation and benefits expense was up 12 percent versus the prior year period, driven by a 9 percent increase in revenues and a slightly higher compensation ratio of 47.7 percent of adjusted net revenues, as compared to 46.4 percent in the prior year period. Our fourth quarter compensation ratio of 47.7 percent came in below our expectations, reflecting the fourth quarter market rally and continued discipline in our compensation process. For the full year, compensation and benefits increased by 2 percent, driven by a 9 percent increase in base compensation, offset by a 13 percent decrease in commission.

Speaker Change: non-GAAP EPS was <unk> <unk> above GAAP, EPS, primarily reflecting acquisition related expenses.

Speaker Change: The fourth quarter effective tax rate for <unk> was an approximate 1% tax credit, reflecting a one time tax benefit of $22 $5 million from the release of a valuation allowance on a capital loss tax asset.

Speaker Change: For the full year, the effective tax rate for ABL P was three 6%. This compares to four 9% in 2022, lower principally due to the aforementioned valuation allowance release, our guidance for Aplp's effective tax rate in 2024 is a range of seven to seven 5%.

Speaker Change: Reflecting our expanding business in non U S markets, some of which are experiencing higher tax rates.

Bill Siemers: For the full year, 2023, the compensation ratio was 49.0 percent, 60 basis points above the prior year, as wage inflation outpaced a 1 percent increase in revenue. We entered 2024 with AUM levels 7% above the 2023 average, driven by 2023's market round. Given market conditions, we plan to accrue at a 49.0% compensation ratio in the first quarter of 2024, below last year's first quarter level of 49.5% and may adjust further throughout the year. Promotion and servicing costs increased by 18 percent from the prior year period, driven by a higher T&E and firm rating. For the full year, promotion and servicing costs increased by 2%, or 1%, excluding A.B.

Speaker Change: We also expect the Bernstein research JV transaction to trigger a onetime tax gain in 2024.

Speaker Change: Post 2020 for a normalized effective tax rate would be a range of 6% to six 5%.

Speaker Change: For the full year 2023, the Nashville relocation generated $23 million of savings or <unk> <unk> per unit was compensation related savings more than offsetting increased occupancy costs.

Speaker Change: This compares with $19 million of savings in 2022.

Speaker Change: We expect the Nashville relocation will be accretive for the full year 2024 and are on track to realize the full annual savings of approximately $75 million in 2025. Following the lease expiration at 13 45 sixth Avenue in December 2024.

Speaker Change: With that we are pleased to answer your questions operator.

Speaker Change: Thank you.

Speaker Change: If you would like to ask a question at this time. Please press star one on your telephone keypad.

Bill Siemers: Carval, for which we had four quarters in 2023 versus two quarters in 2022, or 1%, excluding A.B. Carval, for which we had four quarters in 2023 versus two quarters in 2022, as higher T&A and firm meetings were partially offset by lower trade execution and clearance. G&A expenses were up 2 percent in the fourth quarter versus the prior year period below inflation.

Speaker Change: If you would like to withdraw your question Press Star one a second time.

Speaker Change: We ask that you. Please limit your initial questions to two in order to provide all callers an opportunity to ask questions. You are welcome to return to the queue to ask follow up questions.

Speaker Change: And we will take our first question from.

Speaker Change: Alex Blaustein with Goldman Sachs. Your line is open.

Alex Blostein: Hey, Jeff Hey, everybody. Good morning, Thanks for thanks for the question.

Alex Blostein: I appreciate the extra discussion around private lending definitely really helpful and an important driver for the firm. So I guess on that note you highlighted a number of new initiatives and private markets for 2024.

Bill Siemers: For the full year, GNA increased by 1% and was down 1%, excluding Carvalho. Higher office and related expenses and professional fees were offset by lower portfolio services expenses and a favorable effect impact. Looking forward to 2024, we are targeting promotion and servicing and G&A growth in low single digits below inflation. We remain committed to managing expenses given a continued volatile macroeconomic environment. Fourth quarter adjusted operating income of $254 million increased by 6 percent versus the prior year period, while full-year 2023 operating income of $951 million decreased by 1%. Fourth quarter adjusted operating margin of 29.2 percent decreased 80 basis points year on year, while full-year 2023 operating margin of 28.2 percent decreased 70 basis points from 2022. Below the adjusted operating income line, fourth quarter interest expense increased by $4 million from the prior year period and for the full year.

Alex Blostein: And based on the public data.

Alex Blostein: It looks like the retail dynamics are still quite strong up to a pretty good start in January so just maybe zooming out or what are your guys' expectations for organic base fee growth for 2024 since it feels like there's some positive dynamics on the fee rate that are that are also unfolding in the business.

Alex Blostein: Okay.

Bill: Alex This is bill.

Bill: 20%.

Bill: While we expect the fee rate it will continue to be mix dependent.

Bill: And <unk> III as you know, we experienced organic growth in lower fee products, such as money markets Muni Sma's.

Bill: We have seen outflows in higher fee active equities.

Bill: So I mean, we're going to continue to be dependent on the market on interest rate movements during the year.

Bill: And investor risk return appetite.

I mean.

Bill: The positive side here. It's also institutionalized we've mentioned are supported by a high private office exposure.

Bill: The pipeline for you right at around three times the channel average.

Speaker Change: So there's no specific guidance at this point.

Speaker Change: I guess, maybe just asked another way maybe keeping the fee rate aside if we don't want to go to the like organic base fee growth discussion, but in terms of the flows in the organic base and organic growth in the business between good momentum in retail and obviously a lot of these new initiatives that you are about to rollout in private markets. I was just curious if you could give us a range.

Bill Siemers: Interest expense increased by $36 million, reflecting higher interest rates and higher average borrowing. As outlined in the appendix of our presentation, fourth-quarter earnings exclude certain items which are not part of our core business operation. In the fourth quarter, adjusted operating earnings were $16 million above GAAP operating earnings due to acquisition-related expenses and interest expenses. Non-GAAP EPU was six cents above GAAP EPU, primarily reflecting acquisition-related expenses. The fourth quarter effective tax rate for ABLP was an approximately 1 percent tax credit, reflecting a one-time tax benefit of $22.5 million from the release of a valuation allowance on a capital loss tax asset. For the full year, the effective tax rate for AVLP was 3.6 percent.

Speaker Change: Or kind of what are your expectations for AR to flows our organic growth for the year.

Speaker Change: Yeah, Hi, Alex this owner thanks for the question yes.

Speaker Change: Yes, we remain confident about our sales growth and 24, we have good momentum starting the year on the sales front and this is a wide based in multiple businesses is a continuation of the last few years right we delivered.

Speaker Change: Positive five consecutive years of organic growth in the U S. Retail we delivered three years of organic growth in private wealth as you know.

Speaker Change: The Asia ex Japan taxable fixed income had a very strong momentum as well so a number of power.

Speaker Change: Strong.

Speaker Change: Engines are humming, so we feel very good about the sales prospects.

Speaker Change: You mentioned on private adults, we have a strong pipeline as also bill mentioned and we are adding more solutions to that to participate in high growth opportunities, whether it's retail whether it's the insurance segment to the strategic priority for us and we are seeing traction there obviously.

Bill Siemers: This compares to 4.9% in 2022, lower principally due to the aforementioned valuation allowance. Our guidance for AVLP's effective tax rate in 2024 is a range of 7 to 7.5 percent, reflecting our expanding business in non-U.S. markets, some of which are experiencing higher taxes. We also expect the Bernstein Research JV transaction to trigger a one-time tax gain in 2024. Post-2024, a normalized effective tax rate would be a range of 6 to 6.5 percent. For the full year 2023, the Nashville relocation generated $23 million in savings, or $0.08 per unit.

Speaker Change: There will be some continued pressure on the institutional side.

Speaker Change: Is concentrated in a narrow set of equity strategies, we had some recent.

Speaker Change: Performance challenges and it's very hard to predict.

Speaker Change: <unk> outflows given it tends to be individual mandates on lumpy.

Speaker Change: So strong confidence in sales hopefully contributing to positive flows.

Speaker Change: With the uncertainty of the institutional side and and narrow set of equity strategies gotcha.

Bill Siemers: With compensation-related savings more than offsetting increased occupancy costs, this compares with $19 million of savings in 2022. We expect the Nashville relocation will be accretive for the full year 2024 and are on track to realize the full annual savings of approximately $75 million in 2025, following the lease expiration at 1345 6th Avenue in December 2024. With that, we are pleased to answer your questions. Operator?

Speaker Change: Got you that's great Yeah, that's what I was looking for for my follow up one of the products you mentioned in private credit was around I think non traded BDC that you're likely to launch this year that will be more broadly disseminated.

Speaker Change: When you look at that part of the market, it's gotten really crowded over the last 12 to 18 months. There are some established players there some traditional firms that are entered the market with new product.

Speaker Change: What gives you confidence I guess that this is the right time to go after that opportunity and what makes you feel like the guests you'll be successful in that product and is there anything differentiated with that with respect to that non traded BDC that doesn't already exists out there like what would be the pitch. Thanks.

Operator: Thank you. If you would like to ask a question at this time, please press star one on your telephone keypad. If you would like to withdraw your question, press star one a second time.

Speaker Change: Sure.

Speaker Change: So look I think stepping back first of all hopefully based on the.

Operator: We ask that you please limit your initial questions to two in order to provide all callers an opportunity to ask questions. You are welcome to return to the queue to ask follow-up questions. And we will take our first question from Alex Blostein with Goldman Sachs. Your line is open. Hey, Seth.

Speaker Change: The commentary on <unk>, we were able to kind of articulate the competitive advantage and an edge in the market. If its historical track record kind of the consistency of the team.

Speaker Change: Our focus our sector, let's focus our focus on the core middle market et cetera. So we believe we have a right to win from certainly from an investment perspective, and now look as it relates to the BDC as a vehicle to market. Yes, there have been a lot of launches in a lot of capital raise but the backdrop, there as well as a very large.

Alexander Blostein: Hey, everybody. Good morning. Thanks for the question. I appreciate the extra discussion around private lending. Definitely really helpful and an important driver for the firm. So, on that note, you highlighted a number of new initiatives in private markets for 2024. And based on the public data, it looks like the retail dynamics are still quite strong and off to a pretty good start in January. So, just maybe, what are your guys' expectations for organic base fee growth for 2024, since it feels like there's some positive dynamics in the fee rate that are also unfolding in the business? Hey Alex, this is Bill.

Speaker Change: <unk> growing market for private credit, which has gone from call. It 15 years ago, a niche asset class into a market that rival the size of the BSL market and their continued tailwind for growth there from a supply perspective and also from a demand perspective is retail.

Retail interest in allocations increase over time, so we think that the long term supply demand dynamic is solid.

Bill Siemers: For 2024, we expect the fee rate to continue to be mixed dependent. In 23, as you know, we experienced organic growth in lower fee products, such as money markets and muni SMAs, while seeing outflows in higher fee active equity. So, I mean, we're going to continue to be dependent on the markets, on interest rate movements during the year, and investor risk and return appetite. But, on the positive side here, it's also, as we've mentioned, institutional, as we've mentioned, is supported by a high private wealth exposure, with the pipeline fee rate at around three times the channel average. [inaudible] So there's no specific guy.

Speaker Change: But.

Speaker Change: We have a right to win from from a capability perspective. This will be our second BDC, we have a private BDC as I mentioned in our in our private wealth channel. So have experience with the wrapper and and really distributing this sort of product individual investors in there.

Great. Thank you so much.

Speaker Change: We will take our next question from Bill Katz with TD Cowen Your line is open.

Bill Katz: Thank you very much for taking the question. This morning I appreciate the added discussion and Bill best of luck in your retirement bit jealous I'll say.

Bill Katz: Couple of questions.

Bill Katz: Maybe just a big picture down Matt for you just really appreciate the extra insight one of the building debates for private credit is just sort of the reentry of banks sort of leverage lending and the high yield market has a potential impact to volume and or pricing I was wondering if you could address.

Onur Erzan: I guess maybe just asked another way, you know, maybe keeping the fee rate aside if we don't want to go to the like organic basic growth discussion, but in terms of the flows and the organic base and organic growth in the business between good momentum and retail and, you know, obviously a lot of these new initiatives that you're about to roll out in private markets, I was just curious if you could give us a range of kind of your expectations for the Hi Alex. It's Onur.

Bill Katz: How are you positioned to potentially compete against a wider set of lenders and then secondly, I wonder if you could just expand a little bit on the opportunity set into these third party insurance sector in particular.

Matt: Sure happy to.

Speaker Change: I guess on the first question.

Onur Erzan: Thanks for the question. Yes, we remain confident about our sales growth in 2024. We have good momentum starting there on the sales front, and this is wide-based in multiple businesses as a continuation of the last few years, right? We delivered positive five consecutive years of organic growth in U.S. retail.

Speaker Change: And ill kind of team up with owner on the second one as well.

Speaker Change: As it relates to the first question the growth I mentioned in in private credit rattling the size of the BSL market now.

Speaker Change: A lot of that has been driven by share shift deals that had historically been executed in the BSL market coming into the private market and thats, either driven through ability to execute quicker more flexibility certainty of close.

Onur Erzan: We delivered three years of organic growth in private wealth. As you know, the Asia ex-Japan taxable fixed income market had a very strong momentum as well, so a number of our strong engines are humming, so we feel very good about the sales prospects. As you mentioned, on private wealth, we have a strong pipeline, as Bill mentioned, and we are adding more solutions to that to participate in high-growth opportunities, whether it's retail, or the insurance segment, which is a strategic priority for us, and we are seeing traction there. Obviously, there will be some continued pressure on the institutional side. It is concentrated in a narrow set of equity strategies. We had some recent performance challenges, and it's very hard to predict those outflows, given it tends to be individual mandates and lumpy, so strong confidence in sales, hopefully contributing to positive flows with the uncertainty of the institutional side in a narrow set of equity strategies. Gotcha. That's great. Yep. That's what I was looking for.

Speaker Change: Now some of that secular some of it certainly cyclical and we've seen banks become more offensive and aggressive and we've seen a lot of releases recently about banks moving more closely back into that market. So yes.

Speaker Change: Again, it's a trend and there'll be some some cyclical ups and downs as it relates to our business specifically, we have a focus on the core middle market. There are a lot of ways to define that but.

Speaker Change: Average cash flow perspective median cash flow perspective around $50 million of median EBITDA.

And that combined with our with our sector focus and the continuity of the team gives us we believe a well entrenched position in that market.

Speaker Change: Well, we can go up market in certain instances, but we focus we focus on the core.

Speaker Change: As it relates to the insurance side and owner definitely China and given given the focus.

Speaker Change: A key part of our of our growth strategy. So this is part of the car valve thesis it applies to our other businesses as well as leveraging existing investment capabilities that our teams out from an origination or asset class perspective into lower cost of capital strategies, So think private.

Alexander Blostein: For my follow-up, one of the products you mentioned in private credit was the non-traded BTC that you're likely to launch this year that will be more broadly disseminated. I guess when you look at that part of the market, it's gotten really crowded over the last 12 to 18 months. There are some established players.

Speaker Change: Investment grade credit as an example.

Speaker Change: So.

Speaker Change: Carve out historically has invested in markets such as residential mortgage consumer finance transportation.

Matthew Bass: There are some traditional firms that are entering the market with new products. What gives you confidence, I guess, that this is the right time to go after that opportunity, and what makes you feel like you'll be successful with that product? And is there anything differentiated with respect to that non-traded BTC that doesn't already exist out there? What would be the pitch?

Speaker Change: In the context of higher risk higher return strategies, so the flagship funds.

We will continue to do that but increasingly working on delivering those investments to two insurers on an unlevered basis or the senior part of the capital structure. So the residential mortgage mandate with equitable is a good example, there.

Matthew Bass: Sure. So, look, I think stepping back, first of all, hopefully, based on the commentary on ABCCI, we're able to kind of articulate the competitive advantage and edge in the market if it's, you know, our historical track record, the kind of consistency of the team, our focus, our sector-led focus, our focus on the core middle market, et cetera. So, we believe we have a right to win, certainly from an investment perspective. And now, you know, look, as it relates to the BDC as a vehicle, the market, yes, there have been a lot of launches and a lot of capital raised, but the backdrop there, as well, is a very large, growing market for private credit, which has gone from, call it 15 years ago, a niche asset class into a market that rivals the size of the BSL market.

Speaker Change: That set previously.

Speaker Change: You mentioned.

Speaker Change: Where we were able to leverage our existing origination capability in that asset class and deliver those loans at a whole loan basis to equitable and what we think that could be interesting to other third party insurers owing to attractive capital treatment et cetera, and there are other asset classes as well that we're actively looking at.

Yeah, Thanks, Matt the only.

Speaker Change: Couple of things I would add one obviously a recap for bill as you know insurance is that large portion of our assets roughly a quarter of our assets.

Speaker Change: <unk>.

Speaker Change: Managed on behalf of insurance clients, So it's core to our business.

Speaker Change: And second as Matt briefly mentioned.

Speaker Change: We have the ability and expertise to marry these specialized origination engines with insurance friendly wrappers that structuring is very important right at spur.

Matthew Bass: And there are continued tailwinds for growth there from a supply perspective and also from a demand perspective as, you know, retail interest and allocations increase over time. So, we think the long-term supply-demand dynamic is solid, but we have a right to win from a capability perspective. This will be our second BDC. We have a private BDC, as I mentioned, in our private wealth channel. So, I have experience with the wrapper and really distributing this sort of product to individuals. Great. Thank you so much. We will take our next question from Bill Katz with T.D. Cowan

Speaker Change: Specialty finance or is it mortgages NAV lending related fee there is for a middle market lending.

We have deep expertise in terms of packaging those solutions in our capital around regulatory efficient way for the insurance companies, both in United States as well as globally and that I think creates a solid foundation for our continued growth in the insurance space.

Speaker Change: Great. Thank you and just as my follow up for you is just sort of wondering what was your and the board's decision to bring this marks in given where I think maybe the evolution of the alliance Bernstein motto might sit and then within that given that your margin today is sort of bucking up against your 30% margin you laid out at the Investor day more recently.

William Raymond Katz: Your line is open. Thank you very much for taking the question this morning. I appreciate the added discussion, and Bill, best of luck in your retirement. A bit jealous, I'll say.

Speaker Change: How should we be thinking about that in light of just obviously a higher level of assets and just your incremental cost guidance is 30 now a bit of a still outlook ex markets or is there more opportunity here to get to a higher run rate margin. Thank you.

William Raymond Katz: A couple of questions. Maybe for a bigger picture down, Matt, for you. I just really appreciate the extra insight. One of the building debates for private credit is just sort of the reentry of banks into the leveraged lending and the high-yield market as a potential impact on volume and or pricing. I was wondering if you could address how you're positioned to potentially compete against a wider set of lenders. And then, secondly, I wonder if you could just expand the opportunity set a little bit on the third-party insurance sector, in particular. Sure, I'll be happy to.

Speaker Change: Bill Thanks, very much for the question good morning, everybody.

Speaker Change: I'm going to actually defer.

Speaker Change: Third to bill to talk about the margin impact, but let me let me touch on Jackie.

Speaker Change: And her role.

Bill: Have been blessed for a number of years by having an incredibly capable.

Bill: And well regarded.

Bill: Controller, who has been CFO a couple of times now.

Bill: Basis, and it's precisely to reinforce the skills.

Bill: And disciplines that billing has it has embedded into our team.

Matthew Bass: I guess on the first question, and I'll kind of team up with Onur on the second one as well, as it relates to the first question, you know, the growth I mentioned in private credit, you know, rattling the size of the BSL market now, a lot of that has been driven by share shift, you know, deals that have historically been executed in the BSL market coming into the private market, and that's either driven by Now, some of that's secular, some of it's certainly cyclical, and we've seen banks become more offensive and aggressive, and, you know, we've seen a lot of releases recently about banks moving more closely back into that market. So, again, this is a trend, and there'll be some cyclical ups and downs.

Bill: I found Jackie so compelling she has a very deep skill set and experience and.

Bill: And in the controller's function generally but also.

Bill: And global Treasury and tax.

Bill: As well as her skill sets and strategy.

Bill: So I think she brought a package of skills that brings a package of skills together.

Bill: That are quite complementary to what we have in the firm and I think she has the leadership skills to move forward without skipping a beat.

Bill: Bill moves onto the golf course.

Bill: So I would I would simply say that we're very pleased that she has arrived.

Bill: And.

Bill: Bill will transition after this quarter and.

Bill: So I think she is well positioned to take the roll forward I think with respect to the relationship with equitable.

Matthew Bass: As it relates to our business specifically, you know, we have a focus on the core middle market. There are a lot of ways to define that, but, you know, from an average cash flow perspective, a median cash flow perspective, we're around $50 million of median EBITDA, and that, combined with our sector focus and the continuity of the team, gives us, we believe, a well-entrenched position in that market. You know, we can go up market in certain instances, but we focus on the core middle market. As it relates to the insurance side, and Onur, definitely, you know, chime in, given the focus. A key part of our growth strategy, so this is part of the Carvalho thesis that applies to our other businesses as well, is leveraging existing investment capabilities that our teams have from an origination or asset class perspective into lower cost of capital strategies, so think private investment grade credit as an example.

Bill: I think.

Bill: <unk> said this quite complementary to what the equitable team would be looking for.

Bill: I think she will be an added voice with respect to <unk>.

Bill: Because see FERC AP, its strategic goals and needs and I think we're off to a pretty good start so let me pass it over to Bill to give you a little more color on our expectations that margin.

Bill: Thanks Bill.

Bill: Bill I mean, we don't give.

Bill: As you know specific margin targets, particularly for next year, but we did give the top side.

Bill: 2027 targets at the equitable Investor day.

Bill: But that said, yes, I mean, we are starting at a better AUM level this year than last year.

Bill: AUM, starting point being almost $80 billion.

Bill: Higher.

Bill: But with that we're going to continue to invest in our business for growth.

Bill: And then we have to continue.

Bill: Main competitive and pay our people performance for performance and then.

Matthew Bass: So, Carvalho historically has invested in markets such as residential mortgage, consumer finance, and transportation in the context of higher risk, higher return strategies, so the flagship. We'll continue to do that, but increasingly work on delivering those investments to insurers on an unlevered basis or in the senior part of the capital structure. So the residential mortgage mandate with Equitable is a good example there that Seth previously mentioned, where we were able to leverage our existing origination capability in that asset class and deliver those loans on a whole loan basis to Equitable. And we think that could be interesting to other third-party insurers owing to the attractive capital treatment, et cetera. Thanks, Matt.

Bill: Manage all our non comp expenses.

Speaker Change: So with that said.

Speaker Change: From the Investor Day, we mentioned that the Brs JV, we were going to.

Speaker Change: On a run rate going forward annual basis get 200, 250 basis points of improvement.

Speaker Change: That's definitely going to commit.

Speaker Change: Coming to fruition this year.

Speaker Change: To what extent, we don't know its according to when the transaction takes place. So we might only get a piece of that.

Speaker Change: And then as we've mentioned.

Speaker Change: The completion of the relocation is going to add another 100 to 150 bps.

Speaker Change: That'll actually trigger first thing next year.

Speaker Change: Right now we're in the Hudson yards.

Speaker Change: And also $13 45.

Speaker Change: So I mean, once we get up $13 45, this year that will trigger and then of course the other remaining stuff is just growth investments and private all round.

Onur Erzan: The only couple of things I would add, one, obviously a recap for Bill, as you know, insurance is a large portion of our assets; roughly a quarter of our assets AUM is managed on behalf of insurance clients, so it's core to our business. And second, as Matt briefly mentioned, we have the ability and the expertise to marry these specialized origination engines with insurance-friendly wrappers, so that structuring is very important, whether it's specialty finance, resume mortgages, net lending, or rated feeders for middle market lending. We have deep expertise in terms of packaging those solutions in a capital and regulatory efficient way for insurance companies, both in the United States as well as globally, and that, I think, creates a solid foundation for our continued growth in the insurance business. Thank you.

Speaker Change: Rounding out that number.

Speaker Change: But the big thing to note also is all of these improvements and I'm talking about I mean thats potential benefit.

Speaker Change: Without market improvements in there right now so we put some market improvements and there we would be able to.

Speaker Change: Beat those numbers.

Speaker Change: Thank you and best of luck again bye bye. Thank you very much.

Speaker Change: And we will take our next question from Craig Siegenthaler with Bank of America. Your line is open.

Craig Siegenthaler: Good morning, Seth Thank you for taking my questions.

Craig Siegenthaler: So good to hear you get your perspective on how you think your fixed income lineup is positioned for money in motion duration extension with future fed rate cuts and the yield curve steepening and what I'm getting at is do you think youre missing or a light on any capabilities like <unk>.

Craig Siegenthaler: For total return that could limit your ability to win some of the money motion.

Craig Siegenthaler: Craig Thanks for the question look I think it's clear.

Craig Siegenthaler: At.

Onur Erzan: And as a follow-up, Seth, for you, I was just sort of wondering what your and the Board's decision to bring Ms. Marks in, given where I think maybe the evolution of the AllianceBernstein model might sit. And then within that, given that your margin today is sort of bucking up against your 30% margin you laid out at investor day more recently, how should we be thinking about that in light of just obviously a higher level of assets and just your incremental cost guidance? Is 30% now a bit of a stale outlook for X markets, or is there more opportunity here to get to a higher run rate margin? Thank you. Bill, thanks very much for the question. Good morning everybody.

Craig Siegenthaler: We're at the end and the issues right.

Craig Siegenthaler: Raises in rates and the issue now is when does that start easing we had thought it's later in the year all along.

Craig Siegenthaler: And the recent strength, we've seen in payrolls and ISN.

Craig Siegenthaler: Don't change our expectations in that regard.

Craig Siegenthaler: And while we do see the economy slow we do think that we're in a soft landing for the first time that I can remember and so I'm going to rejoice in that and what we're seeing quite clearly is that investors are now increasingly comfortable extending duration.

Seth Perry Bernstein: I'm going to actually defer to Bill to talk about the margin impact, but let me touch on Jackie and her role. We have been blessed for a number of years by having an incredibly capable and well-regarded controller who has been CFO a couple of times now on an interim basis. And it's precisely to reinforce the skills and disciplines that Bill has embedded into our team that I found Jackie so compelling. She has a very deep skill set and experience in the controller's functions generally, but also in global treasury, in tax, as well as in her own skill sets and strategy. So I think she brings a package of skills, or brings a package of skills together that are quite complementary to what we have in the firm. And I think she has the leadership skills to move forward without skipping a beat as Bill moves on to the golf course.

Speaker Change: Got it.

Speaker Change: We're seeing that most definitively offshore and the very strong growth.

Speaker Change: That we've had.

Speaker Change: In Asia, and we think that continues in fact that <unk>.

Speaker Change: I think reflects both.

Speaker Change: Increased comfort with extending duration.

Speaker Change: But and and having higher yields switch between AIP MGH American income and global high yield range between 5%, 7% today.

Speaker Change: But I think what's most interesting is that the alternatives available to our local investors are less attractive to them, namely onshore Chinese equities.

Speaker Change: I think that.

Speaker Change: I think a pretty compelling case for us and we hope to ride that I.

Bill Siemers: So I would simply say that we're very pleased that she's arrived and Bill will transition after this quarter. And so I think she's well-positioned to take the role forward. I think with respect to the relationship with Equitable, I think, as Bill said, it's quite complementary to what the Equitable team would be looking for. I think she will be an added voice with respect to advocacy for AB and its strategic goals and needs. And I think we're off to a pretty good start. So, let me pass it over to Bill to give you a little more color on our expectations for that. Thanks, Seth.

Speaker Change: Retail in the U S. I think we're quite well positioned.

Speaker Change: With high network individuals who are focused on the municipal marketplace. The tactics that marketplace. We've been building share as you know for years and we think we have a differentiated product proposition in how we build these separately managed accounts, which is where we see all of the growth there in Etfs.

Speaker Change: That.

Speaker Change: I think will really drive pretty strong demand over the course of this year and hopefully into next.

Bill Siemers: Bill, I mean, we don't give, as you know, specific margin targets, particularly for next year, but we did give the topside 2027 targets at Equitable Investor Day, but that said, yes, I mean, we are starting at a better AUM level this year than last year, the AUM starting point being almost $80 billion higher, but with that, I mean, we're going to continue to invest in our business for growth. And then we have to continue to, you know, remain competitive and pay our people for performance, and then, you know, manage all our non-profits. You know, so with that said,

Speaker Change: We also feel that we benefit from <unk>.

Speaker Change: Institutional capability with insurance.

Speaker Change: Companies that.

Speaker Change: Well continue to pay us dividends as they seek better ways managing.

Speaker Change: Public market investment grade credit our systematic strategies have proven to have very strong risk return characteristics and we can do so at a quite a competitive costs that we're seeing.

Increasingly they're not just in the U S, but really outside the U S as well.

Speaker Change: But it's certainly true bill that we don't have an installed base of traditional DB DC.

Bill Siemers: You know, from the investor day, we mentioned that, with the BRSJB, we were going to, you know, on a run rate going forward annually, get 200 and 250 basis points of improvement. That's definitely going to come into fruition this year. To what extent, we don't know. It's according to, you know, when the transaction takes place.

Speaker Change: Hi.

Owner: AG based core strategies, although we think we have a pretty compelling product proposition that may be better at addressing our clients' needs, particularly are becoming increasingly cost competitive so I'm going to actually ask owner if he has anything to add to that Dan.

Bill Siemers: So we might only get a piece of that. You know, and then, as we've mentioned, the completion of the relocation is going to add another 100 to 150 bits. That'll actually start the first thing next year. Right now, we're in the huts and yards and also at 1345.

Dan: Great summary, two turns of our institutional sales in the fourth quarter was fixed income sorry without definitely.

Speaker Change: <unk> strength in institutional in fixed income as well.

Speaker Change: Upset.

Dan: Perfect that summarize the strength in retail across U S and international markets.

Bill Siemers: So I mean, once we get up to 1345 this year, that'll trigger. And then, of course, the other remaining stuff was, you know, just growth investments and private alternative investments rounding out that number. But you know, the big thing to note also is all these improvements that I'm talking about. I mean, that's a potential benefit without market improvements in there right now. I mean, so if we put some market improvements in there, you know, we would be able to beat those. Thank you. And best of luck again. Bye-bye.

Dan: As a highlight.

Dan: Growing ETF product range, we have where we participate in core and other.

Dan: Taxable and tax exempt fixed income categories. We are very pleased with.

Dan: Build out then the asset capture of our ETF franchise and that should help us.

Dan: Increase our penetration in taxable fixed income, including core and core plus categories as well again early days.

Dan: But the signs are very encouraging combined with our distribution power in U S retail.

Craig William Siegenthaler: And we will take our next question from Craig Siegenthaler with Bank of America. Your line is open. Good morning, Seth.

Dan: Yeah.

Dan: Thanks sonar SaaS.

And I actually have a credit one so I might take advantage that Matthew <unk> on the line too, but I know you launched a NAV lending strategy last year.

Seth Perry Bernstein: So we want to get your perspective on how you think your fixed income line is performing for Money in Motion. Federate, Katz. And what I'm getting at is, do you think you're missing or light?

Dan: And we know the Ltvs are quite low in this product from a lender standpoint.

Speaker Change: But I wanted to see if you think it's a good idea for buyout funds to cross collateralize their portfolio companies in order to get early cash flow events to their Lps.

Craig William Siegenthaler: could limit your. Craig, thanks for the question. Look, I think it's clear that we're at the end and the issue of the raises in rates, and the issue now is when does the Fed start easing? We have thought it's later in the year all along, and the recent strength we've seen in payrolls and ISM doesn't change our expectations in that regard. And while we do see the economy slowing, we do think that we're in a soft landing for the first time that I can remember. And so I'm going to rejoice in that.

Speaker Change: Yeah sure. So I think stepping back their various use of proceeds for Nab loans and I think considered along with a kind of growing and functioning secondaries market is it just another way to provide liquidity to a growing private equity market right. So think of it holistically.

Speaker Change: <unk>.

Speaker Change: Now the loans have been around for a while they can be used offensively.

Speaker Change: To enable portfolio companies to make.

Seth Perry Bernstein: And what we're seeing quite clearly is that investors are now increasingly comfortable extending duration and moving into credit. We're seeing that most definitively offshore in the very strong growth that we've had in Asia. And we think that continues. And, in fact, that strength, I think, reflects both increased comfort with extending duration and having higher yields, which between AIP and American income and global high yield range between 5 and 7 percent today. And we hope to ride that again.

Speaker Change: Make acquisitions when capital is not available or funds outside of its investment period can be used.

Speaker Change: Defensively to Delever portfolio companies at a lower cost of capital. It could be also be used to your point is the liquidity tool for GPS to rich.

Speaker Change: <unk> returned capital to Lps so.

Speaker Change: We would look at all three types of transactions ultimately it depends on the quality of the sponsor and the underlying but there are various use cases that may or may not make sense for a different sponsors based on the particular situations are very very very situation specific I would say.

Seth Perry Bernstein: I think on retail in the U.S., I think we're quite well positioned with high net worth individuals who are focused on the municipal marketplace, the tax-exempt marketplace. We've been building shares, you know, for years, and we think we have a differentiated product proposition in how we build these separately managed accounts, which is where we see all the growth in ETFs that I think will really drive pretty strong demand over the course of this year and, hopefully, into next. We also feel that we benefit from institutional capability with insurance companies that will continue to pay us dividends as they seek better ways of managing public market investment grade credit. Our systematic strategies have proven to have very strong risk-return characteristics, and we can do so at quite a competitive cost, and we're seeing increasing interest there, not just in the U.S. but really outside the U.S. as well. But it's certainly true, Bill, that we don't have an installed base of traditional DB, DC, and agriculture-based core strategies, although we think we have a pretty compelling product proposition that may be better at addressing our clients' needs, particularly as they're becoming increasingly cost-competitive. So I'm going to actually ask Onur if he has anything to add to that answer. Great summary.

Thanks Matthew.

Speaker Change: And we will take our next question from Dan Fannon with Jefferies. Your line is open.

Daniel T. Fannon: Thanks, Good morning wanted to talk about the private wealth.

Daniel T. Fannon: Channel and advisor growth our productivity increased year over year I was just curious as you think about 2024.

Daniel T. Fannon: Those metrics should track and maybe any changes or plans to accelerate hiring or growth in that segment.

Daniel T. Fannon: Thanks for the question.

Speaker Change: Yes, youre right in pointing out to our consistent growth pattern with.

Speaker Change: Financial adviser, which we now call wealth advisors and the productivity.

Speaker Change: Along with that.

Speaker Change: We take it through the cycle mindset.

Speaker Change: Growing our client facing head count. So we will continue to stay at that same pace.

Speaker Change: Obviously, it takes time for the new wealth advisers to become fully productive, but we have high confidence in our.

Speaker Change: Long standing well regarded training programs as you know we have a heavy bias towards organic growth by hiring new advisors to the industry, which takes up.

Onur Erzan: Two-thirds of our institutional sales in the fourth quarter were fixed income, so we are definitely showing strength in institutional and fixed income as well. That's perfect to summarize the strength in retail across U.S. and international markets. I would also highlight the growing ETF product range we have, where we participate in core and other taxable and tax-exempt fixed income categories. We are very pleased with the build-out and asset capture of our ETF franchise, and that should help us increase our penetration in taxable fixed income, including core and core plus categories as well. Again, early days, but the signs are very encouraging, combined with our distribution power in U.S. retail. Onur, Seth, and I actually have a credit card, so I might take advantage of it. I know you launched an NAV lending product, and we know the LTVs are quite low in this product.

Speaker Change: Time to grow into our culture, but then David.

Speaker Change: Data was very strong outcomes as you have seen on the sales productivity side.

Speaker Change: In addition to that we continue to be open minded about.

Speaker Change: Financial advisers with existing clients and books as well as adjacent opportunities in the <unk> space.

Speaker Change: Again, we are always looking for the best value for our shareholders and we will continue to stay on the organic growth path and be open minded about any add ons.

Speaker Change: Great. Thank you and then just as a follow up on.

Speaker Change: And your active ETF business I know, it's small, but you've launched a bunch of products here in 2023, how do you think about that landscape over the next several years and your role within that and kind of.

Speaker Change: And what the growth potential of those products could be.

Speaker Change: Yes, let me start and then I'll pass it over to owner.

Craig William Siegenthaler: But, you know, I wanted to see if you think it's a good idea for a bio... Cross-collaboration, in order to get it early. Yeah, sure. So, I think stepping back, there are various uses of proceeds for NAB loans, and I think, considered along with a kind of growing and functioning secondary market, is it just another way to provide liquidity to a growing private equity market, right? So, think of it holistically. You know, NAB loans have been around for a while.

Owner: To give more color to it in our view.

Owner: Etfs.

Owner: Our eight better wrapper for many of our clients.

Owner: And we think that increasingly and in fact, it's been the case for AB.

Owner: We are going to introduce new strategies via Etfs to the extent feasible from an underlying securities perspective, do soup do so getting the better tax treatment for taxable investors as well as.

Matthew Bass: They can be used offensively to enable portfolio companies to make acquisitions when capital is not available or funds outside of its investment period. Or, it could be used, you know, defensively to de-lever portfolio companies at a lower cost of capital. It could also be used, to your point, as a liquidity tool for GPs to return capital to LPs. So, we would look at all three types of transactions. Ultimately, it depends on the quality of the sponsor and the underlying, but there are various use cases that may or may not make sense for different sponsors based on the particular situation.

Owner: Just the day to day perceptions of liquidity in <unk>.

Owner: Transparency, which we think actually offers real advantages and comfort to our investing clients.

What I would say to you is we continue to plan to expand the range, particularly in focused on new strategies and where we see.

Differentiated opportunities that align well with the capabilities that we have so to the extent for example.

Owner: We see.

Owner: Tax aware fixed income.

Owner: As a place where we have an edge and it's a very efficient tax vehicle for our clients will launch strategies like that and tap fee, which is our vehicle has been.

Daniel Thomas Fannon: So, very situation-specific, I would say. And we will take our next question from Dan Fannon with Jeffreys. Your line is open. Thanks. Good morning.

Owner: Successful product in that array.

You should expect to see most of our issuance activity through Etfs going forward owner please jump in.

Onur Erzan: Wanted to talk about the private wealth channel and advisor growth and productivity increased year-over-year. I was just curious as you think about 2024, how those metrics should track, and maybe any changes or plans to accelerate hiring or growth in that segment. Thanks for the question.

Speaker Change: No. Thank you said you have in our strategy is very clear.

We look at basically areas, where we can differentiate etfs allow us to.

Speaker Change: Complement supplement our SMA, which has been very successful in the U S. Retail so we typically.

Onur Erzan: Yes, you're right in pointing out our consistent growth pattern with the financial advisors, which we now call wealth advisors, and the productivity along with that. We take a cycle mindset to growing our client-facing headcount, so we'll continue to stay at that same pace. Obviously, it takes time for the new wealth advisors to become fully productive, but we have high confidence in our longstanding and well-regarded training programs.

Speaker Change: See that pairing quite powerful.

Speaker Change: The fixed income space for instance.

Speaker Change: Also take advantage of conversions when it makes sense, obviously like any vehicle etfs have their limitations, particularly in the retirement plan space.

Speaker Change: And as a result, we are mindful about that but in general partake in the nonqualified space Etfs remain our dominance vehicle preference that along with the SMA than cities, where we see the future.

Onur Erzan: As you know, we have a heavy bias towards organic growth by hiring new advisors into the industry, which takes time to grow into our culture but then delivers very strong outcomes, as we have seen on the sales productivity side. In addition to that, we continue to be open-minded about financial advisors with existing clients and books, as well as adjacent opportunities in the REA space. Again, we are always looking for the best value for our shareholders, and we'll continue to stay on the organic growth path and be open-minded about any add-ons. Great, thank you.

And then internationally.

More nuanced picture for the active Etfs the regulatory framework is now catching up.

Speaker Change: And there might be opening up opportunities, where we could potentially leverage our distribution reach to disrupt some markets by offering etfs, but it's more exploratory at this stage. We don't have any concrete plans I would say, it's an option on the table. Our primary focus remains in the U S.

Seth Perry Bernstein: And then, Seth, just as a follow-up on your active ETF business, I know it's small, but you've launched a bunch of products here in 2023. How do you think about that, you know, landscape over the next several years and your role within that and kind of, obviously, what the growth, you know, potential of those products could be? Yeah, let me start, Dan, and then I'll pass it over to Onur to give it more color.

Speaker Change: And you will see us build on the good momentum that you have seen in the last year and a half with the 12 Etfs on growing.

Speaker Change: Okay. Thank you.

Speaker Change: And we will take our next question from John Dunn with Evercore ISI. Your line is open.

John Dunn: Thank you.

John Dunn: Maybe could you expand a little more on like the product demand trends youre seeing in retail and institutional overseas, maybe ex American income in global high yield funds.

John Dunn: Sure happy to take that.

Seth Perry Bernstein: In our view, ETFs are a better wrapper for many of our clients. And we think that increasingly, and this has actually been the case for AB, we are going to introduce new strategies via ETFs to the extent they're feasible from an underlying securities perspective to do so, getting their better tax treatment for taxable investors, as well as, you know, just the day-to-day perceptions of liquidity and transparency, which we think actually offer real advantages and comfort to our investing clients. What I would say to you is we continue to plan to expand the range, particularly in areas focused on new strategies and where we see differentiating opportunities that align well with the capabilities that we have. So to the extent, for example, we see tax-aware fixed income as a place where we have an edge, and it's a very efficient tax vehicle for our clients, we'll launch strategies like that. And Taffy, which is our vehicle, has been a successful product in that array. But I think you should expect to see most of our issuance activity through ETFs going forward. Onur, please jump in. Onur, thank you, Seth.

John Dunn: As you know in addition to Asia ex Japan, we have a strong franchise in Japan.

John Dunn: Continue to remain.

Speaker Change: Very strong in U S equities.

Speaker Change: Have a very dominant position in large cap growth that continues to be strong.

Speaker Change: Here for us so it definitely.

Speaker Change: I want to highlight outside Asia ex Japan outside the AIP and global high yield.

Speaker Change: Definitely our U S or EMEA.

Speaker Change: EMEA business.

Speaker Change: Tends to be skewed towards equities as well because the European buyers like the U S and global equity products, we continue to see demand in some.

Speaker Change: Some of the strategies, we offer in the use of formats.

Sometimes more lower volatility Carlos strategies that a little bit more defensive for instance would be an example of that.

Speaker Change: And then <unk>.

Speaker Change: Definitely.

Speaker Change: The non traded.

Speaker Change: BDC, we would be targeting.

Speaker Change: UK and Swiss market, along with the Asian markets are definitely obviously demand towards private credits.

Onur Erzan: Yeah, I mean, our strategy is very clear. We look at basically areas where we can differentiate ETFs that allow us to complement and supplement our SMAs, which have been very successful in U.S. retail. So we typically see that pairing quite powerful in the fixed income space, for instance. We also take advantage of conversions when it makes sense. Obviously, like any vehicle, ETFs have their limitations, particularly in the retirement plan space. And as a result, we are mindful about that.

Speaker Change: And then finally, we.

Speaker Change: We have a strong position in Latam with.

Speaker Change: The pension.

Speaker Change: Our systems, whether it's in Mexico, or with the forest or with the Chilean pension systems and that tends to be a pretty strong demand for equities, including emerging markets given there.

Speaker Change: Bias towards emerging markets and then on the institutional side, we touched on it but.

Onur Erzan: But in general, particularly in the non-qualified space, ETFs remain our dominant vehicle preference along with SMAs and CITs where we see the future. And then, internationally, it's a little bit more nuanced picture for active ETFs. The regulatory framework is now catching up, and there might be opportunities where we could potentially leverage our distribution reach to disrupt some markets by offering ETFs. But it's more exploratory at this stage, and we don't have any concrete plans. I would say it's an option on the table. Our primary focus remains in the U.S., and you will see us build on the good momentum that you have seen in the last year and a half with the 12 ETFs and growth. And thank you. Now, we will take our next question from John Dunn with Evercore ISI. Your line is open. Thank you.

Speaker Change: But private markets as a client.

Speaker Change: Great focus area for us and I see that as a global phenomenon again, there might be different soft.

Speaker Change: <unk> patterns, when you think about different geographies and different types of clients in insurance versus cash implants versus sovereign wealth, but depending on the risk appetite constrained yield expectations.

Speaker Change: Cross middle market lending real estate lending as well as specialized.

Speaker Change: Our strategy is through car, while we see demand.

Speaker Change: And if I could just jump in I think longer term.

Speaker Change: China does present, a real opportunity for us.

Speaker Change: Now we did get our license from the Chinese regulator at the end of the year and we're hopeful to launch our first strategy in the near term China Asia strategy seven minutes is not great. Obviously in China, but we think theres strong demand ultimately and we plan to launch a number of strategy.

John Dunn: Maybe could you expand a little more on the product demand trends you're seeing in retail and institutional overseas, maybe ex-American income and global high yield funds? Sure, happy to take that. As you know, in addition to Asia ex-Japan, we have a strong franchise in Japan. We continue to remain very strong in U.S. equities. We have a very dominant position in large-cap growth, and that continues to be a strong area for us. So, definitely one to highlight outside Asia ex-Japan, outside the AIP, and global high yields. Definitely, our EMEA business tends to be skewed towards equities as well because European buyers like U.S. and global equity products.

Speaker Change: So over the course of the next two to three years.

Speaker Change: Air which would.

Speaker Change: With both reflect equities as well as fixed income.

Speaker Change: Yeah.

Speaker Change: Got it and then Theres been recently uptick in private markets firms.

Speaker Change: Im joined traditional as are other larger.

Speaker Change: Firms, maybe just what you guys see a lot of activity what are you seeing.

Any change in your appetite for maybe adding teams.

Onur Erzan: We continue to see demand for some of the strategies that we offer in the USIT format, sometimes more lower volatility kind of strategies that are a little bit more defensive, for instance, would be an example of that. And then definitely, with the non-traded BDC, we would be targeting the UK and Swiss market along with the Asian market, so definitely, we see demand for private credit. And then finally, we have a strong position in LATAM with the pension systems, whether it's in Mexico with DAFORES or with the Chilean pension system.

Speaker Change: Or even bolt ons.

Speaker Change: Well, let me, let me start and Matt were owner.

Speaker Change: May join in but.

Speaker Change: My view is we have a pretty full set of capabilities today.

Speaker Change: And private office for example, while we've had a good start with carve out Theres a lot more work to do there to get.

Speaker Change: Private credit investors up in our commercial real estate business up to their full scale that doesn't mean, there aren't niche services and capabilities, we would we would.

Seth Perry Bernstein: And that tends to be pretty strong demand for equities, including emerging markets, given their bias towards emerging markets. And then on the institutional side, we touched on it, but private markets is a great focus area for us, and I see that as a global phenomenon. Again, there might be different sub-patterns when you think about different geographies and different types of clients, insurance versus pension plans versus soaring wealth, but depending on the risk appetite, constraints, yield expectations across middle market lending, real estate lending, as well as specialized strategies through Carwell, we see demand. And if I could just jump in, I think, longer term, China does present a real opportunity for us. As you may know, we did get our license from the Chinese regulator at the end of the year, and we're hopeful to launch our first strategy in the near term.

Speaker Change: <unk> be interested in we do when we look at them.

But I think they would be smaller in size and Barry.

Speaker Change: Specific in terms of the needs at least at the moment and private all switching over to <unk>.

Speaker Change: More traditional.

Speaker Change: As I think we've also disclosed we have.

Speaker Change: Acquired a very talented team in Europe.

Speaker Change: Focused on global growth and has an excellent European capability as well and so we're it's early days there but were upbeat about the potential of that service the short.

Short summary is we have we always are looking for teams. We're always looking for ways of refining and updating our product suite, but theres nothing imminent or large at the moment.

Seth Perry Bernstein: China-Asia strategy sentiment is not great, obviously, in China, but we think there's strong demand ultimately, and we plan to launch a number of strategies over the course of the next two to three years there, which would both reflect equities as well as, Got it. And then there's been an uptick in private markets firms, you know, deciding to join traditionals or other larger old firms. Maybe just what you know, you guys see a lot of activity. What are you seeing and any change in your appetite for maybe adding teams or even fault ons? Well, let me start, and Matt or Onur may join in later.

Speaker Change: Yeah.

Speaker Change: Thanks very much.

Speaker Change: And ladies and gentlemen that is all the time, we have for questions today, Mr. Griffin and I will now turn the call back over to you.

Thank you everyone for participating in the call today are please leave reach back out to Investor relations with any questions and have a great day.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Sure.

Speaker Change: [music].

Seth Perry Bernstein: But my view is we have a pretty full set of capabilities today. In private alts, for example, while we've had a good start with CarVal, there's a lot more work to do there and to get private credit investors up in our commercial real estate business up to their full scale. That doesn't mean there aren't niche services and capabilities. [inaudible] We're looking at a number of different things. We've acquired a very talented team in Europe focused on global growth and with an excellent European capability as well. And so we're, you know, it's early days there, but we're upbeat as to the potential of that service. The short summary is we have, and we're always looking for teams. We're always looking for ways of refining and updating our product suite, but there's nothing imminent or large at the moment we're looking at.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Thank you.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

John Dunn: Thanks very much. And, ladies and gentlemen, that is all the time we have for questions today. Mr. Griffin, I will now turn the call back over to you. Thank you, everyone, for participating in the call today. Please reach back out to Investor Relations with any questions, and have a great day.

Speaker Change: Okay.