Alliancebernstein National Municipal Income Fund Q4 2025 Alliancebernstein National Municipal Income Fund Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Alliancebernstein National Municipal Income Fund Inc Earnings Call
Speaker #1: Thank you for standing now. by. And welcome to the ALLIANCEBERNSTEIN fourth quarter 2025 earnings review. At this time, all participants are in a listen-only mode.
Operator: Thank you for standing by, and welcome to the AllianceBernstein Fourth Quarter 2025 Earnings Review. At this time, all participants are in a listen-only mode. After the remarks, there will be a question and answer session, and I will give you instructions on how to ask questions at that time. As a reminder, this conference is being recorded and will be available for replay 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 AB, Mr. Yannis Georgalis. Please go ahead.
Speaker #1: 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 #1: As a reminder, this conference is being recorded. And we'll 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.
Speaker #1: of Investor Relations for Head AB, Mr. Yannis Djorgali, please go ahead.
Yannis Georgalis: Good morning, everyone, and welcome to our Q4 2025 earnings review. Today's conference call is being webcast and is accompanied by a slide presentation available in the investor relations section of our website at www.alliancebernstein.com. Joining us today to discuss the company's quarterly results are Seth Bernstein, our Chief Executive Officer, and Tom Simeoni, our Chief Financial Officer. Onur Erzan, our President, will join us for the question and answer session following 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 would like to point out the safe harbor language on slide 2 of our presentation. You can also find our safe harbor language in the MD&A of our 10-K, which will be filed next week.
Yannis Georgalis: Good morning, everyone, and welcome to our Q4 2025 earnings review. Today's conference call is being webcast and is accompanied by a slide presentation available in the investor relations section of our website at www.alliancebernstein.com. Joining us today to discuss the company's quarterly results are Seth Bernstein, our Chief Executive Officer, and Tom Simeoni, our Chief Financial Officer. Onur Erzan, our President, will join us for the question and answer session following 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 would like to point out the safe harbor language on slide 2 of our presentation. You can also find our safe harbor language in the MD&A of our 10-K, which will be filed next week.
Q4 2025 Alliancebernstein National Municipal Income Fund Inc Earnings Call
Speaker #2: 2025 earnings Good morning, review. Today's conference call is being webcast and is accompanied by a slide Investor Relations section of our presentation available in the everyone, and welcome to our fourth quarter website, at www.alliancebernstein.com.
Speaker #2: Joining us today to discuss the company's quarterly results are Seth Bernstein, our Chief Executive Officer, and Tom Simeone, our Chief Financial Officer. Honor Erzan, our President, will join us for the question-and-answer session following our prepared remarks.
Speaker #2: Some of the information we'll present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure, so I would like to point out the safe harbor language on slide two of our presentation.
Speaker #2: You can also find our safe harbor language in the MD&A of our 10-K, which will be filed next week. We base our distribution to unit holders on our adjusted results, which we provide in addition to and not as a substitute for our GAAP results.
Yannis Georgalis: 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 reconciliation of GAAP to adjusted results are in our presentation, appendix, press release, and our 10-K. 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.
Yannis Georgalis: 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 reconciliation of GAAP to adjusted results are in our presentation, appendix, press release, and our 10-K. 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.
Speaker #2: and reconciliation of GAAP-to-adjusted Our standard GAAP reporting results are in our presentation, appendix, press release, and our 10-K. 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.
Speaker #2: Now, I'll turn it over to
Speaker #2: Seth.
Speaker #3: Good morning, and thank you for joining
Seth Bernstein: Good morning, and thank you for joining us today. 2025 was a year of disciplined execution and strategic progress for AllianceBernstein. I'm very proud of the strides we've made as a firm, and I'm deeply grateful to my colleagues for their dedication and impact. One individual who has played a pivotal role in our transformation is our newly appointed president, Onur Erzan. With a proven leadership track record spanning our client group, private wealth, and more recently, our private markets businesses, Onur has consistently demonstrated strategic vision, a tireless work ethic, and a deep commitment to our clients, our people, and our unitholders. As CEO, I will continue to set the firm's strategic direction and guide our leadership team.
Seth Bernstein: Good morning, and thank you for joining us today. 2025 was a year of disciplined execution and strategic progress for AllianceBernstein. I'm very proud of the strides we've made as a firm, and I'm deeply grateful to my colleagues for their dedication and impact. One individual who has played a pivotal role in our transformation is our newly appointed president, Onur Erzan. With a proven leadership track record spanning our client group, private wealth, and more recently, our private markets businesses, Onur has consistently demonstrated strategic vision, a tireless work ethic, and a deep commitment to our clients, our people, and our unitholders. As CEO, I will continue to set the firm's strategic direction and guide our leadership team.
Speaker #3: us today. 2025 was a year of disciplined execution and strategic progress for ALLIANCEBERNSTEIN. I'm very proud of the strides we've made as a firm, and I'm deeply grateful to my colleagues for their dedication and impact.
Speaker #3: One individual who has played a pivotal role in our transformation is our newly appointed President, Owner Erzan. With a proven leadership track record spanning our Client Group, Private Wealth, and, more recently, our Private Markets businesses, Owner has consistently demonstrated strategic vision, a tireless work ethic, and a deep commitment to our clients, our people, and our unit holders.
Speaker #3: As CEO, I will continue to set the firm's strategic direction and guide our leadership team. I look forward to partnering with Owner, who will lead the transformation of our business, execute our strategic priorities, and drive profitable growth, working closely with equitable to deliver innovative, client-focused solutions.
Seth Bernstein: I look forward to partnering with Onur, who will lead the transformation of our business, execute our strategic priorities, and drive profitable growth, working closely with Equitable to deliver innovative, client-focused solutions. Now, let's dive into our key business highlights from the quarter and the year on slide 3. First, our assets under management reached a record $867 billion at year-end 2025, reflecting market appreciation, strong sales, and organic growth across ultra-high net worth, insurance general accounts, tax-exempt SMAs, and private markets. A notable positive is our Bernstein Private Wealth business, which has $156 billion in assets under management and contributed roughly 37% of our firm-wide revenues in 2025.
Seth Bernstein: I look forward to partnering with Onur, who will lead the transformation of our business, execute our strategic priorities, and drive profitable growth, working closely with Equitable to deliver innovative, client-focused solutions. Now, let's dive into our key business highlights from the quarter and the year on slide 3. First, our assets under management reached a record $867 billion at year-end 2025, reflecting market appreciation, strong sales, and organic growth across ultra-high net worth, insurance general accounts, tax-exempt SMAs, and private markets. A notable positive is our Bernstein Private Wealth business, which has $156 billion in assets under management and contributed roughly 37% of our firm-wide revenues in 2025.
Speaker #3: Now, let's dive into our key business highlights from the quarter and the year on slide three. First, our assets under management reached a record $867 billion at year-end appreciation, strong sales, and organic growth across ultra-high net worth, insurance general accounts, tax-exempt SMAs, and private markets.
Speaker #3: A notable positive is our Bernstein Private Wealth business, which has $156 billion in assets under management and contributed roughly 37% of our firm-wide revenues in 2025.
Speaker #3: In addition, our private markets platform closed the year with $82 billion in AUM, up 18% year over year. Driven by approximately $9 billion of deployments across all channels in 2025.
Seth Bernstein: In addition, our private markets platform closed the year with $82 billion in AUM, up 18% year-over-year, driven by approximately $9 billion of deployments across all channels in 2025. Finally, our SMA franchise reached $62 billion of AUM and grew 12% organically in 2025, led by our market-leading muni capabilities. Our active ETF suite expanded to $14 billion across 24 strategies, delivering 65% organic growth in 2025, excluding conversions. While we've seen strong inflows into targeted growth areas, firm-wide active net flows were negative for both the quarter and the full year. We had $9.4 billion of total net active outflows in 2025, including $3.8 billion outflows in Q4.
Seth Bernstein: In addition, our private markets platform closed the year with $82 billion in AUM, up 18% year-over-year, driven by approximately $9 billion of deployments across all channels in 2025. Finally, our SMA franchise reached $62 billion of AUM and grew 12% organically in 2025, led by our market-leading muni capabilities. Our active ETF suite expanded to $14 billion across 24 strategies, delivering 65% organic growth in 2025, excluding conversions. While we've seen strong inflows into targeted growth areas, firm-wide active net flows were negative for both the quarter and the full year. We had $9.4 billion of total net active outflows in 2025, including $3.8 billion outflows in Q4.
Speaker #3: Finally, our SMA franchise reached $62 billion of AUM and grew 12% organically in Q4 2025, led by our market-leading muni capabilities. Our active ETF suite expanded to $14 billion across 24 strategies, delivering 65% organic growth in 2025, excluding conversions.
Speaker #3: While we've seen strong inflows into targeted growth areas, firm-wide active net flows were negative for both the quarter and the full year. We had outflows in 2025, including $3.8 billion outflows in the fourth $9.4 billion of total net active quarter.
Speaker #3: Firm-wide active equity redemptions persisted as performance headwinds lingered. With $7.6 billion in outflows in the fourth quarter and $22.5 billion throughout the year, roughly half of these were driven by retail redemptions.
Seth Bernstein: Firm-wide active equity redemptions persisted as performance headwinds lingered, with $7.6 billion outflows in the fourth quarter and $22.5 billion throughout the year. Roughly half of these were driven by retail redemptions. Taxable fixed income saw $2 billion in outflows in the fourth quarter and $9.1 billion for the year, as overseas retail demand declined amid geopolitical uncertainty and a weaker dollar. Institutionally, we had roughly $4 billion of taxable outflows related to Equitable's reinsurance transaction with RGA. On the other hand, our tax-exempt franchise continues to deliver durable organic growth, with $3.9 billion in inflows in the fourth quarter and $11.6 billion for the year. The platform has generated organic growth for 13 consecutive years and long-term alpha for our clients.
Seth Bernstein: Firm-wide active equity redemptions persisted as performance headwinds lingered, with $7.6 billion outflows in the fourth quarter and $22.5 billion throughout the year. Roughly half of these were driven by retail redemptions. Taxable fixed income saw $2 billion in outflows in the fourth quarter and $9.1 billion for the year, as overseas retail demand declined amid geopolitical uncertainty and a weaker dollar. Institutionally, we had roughly $4 billion of taxable outflows related to Equitable's reinsurance transaction with RGA. On the other hand, our tax-exempt franchise continues to deliver durable organic growth, with $3.9 billion in inflows in the fourth quarter and $11.6 billion for the year. The platform has generated organic growth for 13 consecutive years and long-term alpha for our clients.
Speaker #3: Taxable fixed income saw $2 billion in outflows in the fourth quarter and $9.1 billion for the years as overseas retail demand declined amid GEOPOLITICAL uncertainty and a weaker dollar.
Speaker #3: Institutionally, we had roughly $4 billion of taxable outflows related transaction with to equitables reinsurance RGA. On the other hand, our tax-exempt franchise continues to deliver durable organic growth, with $3.9 billion in inflows in the fourth quarter and $11.6 billion for the year.
Speaker #3: The platform has generated organic growth for 13 consecutive years and long-term alpha for our clients. Alternatives and multi-asset strategies also remain the bright spot, posting $1.9 billion active net inflows in the fourth quarter and $10.6 billion for the full year, supported by strong private markets deployments.
Seth Bernstein: Alternatives and multi-asset strategies also remained a bright spot, posting $1.9 billion active net inflows in Q4 and $10.6 billion for the full year, supported by strong private markets deployments. Third, our scalable model and disciplined expense management continued to drive profitable growth. Our adjusted operating margin expanded to 33.7% for the year, at the upper end of our 30% to 35% investor day target range. With a streamlined expense base and robust operating leverage, we are delivering strong flow-through to earnings. Fourth, we've accelerated our collaboration with Equitable as we continue to expand our private markets capabilities and amplify the flywheel effect of this partnership. I'm pleased to share that we're making investments to enhance our commercial real estate lending capabilities and expand the scale of our platform.
Seth Bernstein: Alternatives and multi-asset strategies also remained a bright spot, posting $1.9 billion active net inflows in Q4 and $10.6 billion for the full year, supported by strong private markets deployments. Third, our scalable model and disciplined expense management continued to drive profitable growth. Our adjusted operating margin expanded to 33.7% for the year, at the upper end of our 30% to 35% investor day target range. With a streamlined expense base and robust operating leverage, we are delivering strong flow-through to earnings. Fourth, we've accelerated our collaboration with Equitable as we continue to expand our private markets capabilities and amplify the flywheel effect of this partnership. I'm pleased to share that we're making investments to enhance our commercial real estate lending capabilities and expand the scale of our platform.
Speaker #3: Third, our scalable model and disciplined expense management continue to drive profitable growth. Our adjusted operating margin expanded to 33.7% for the year at the upper end of our 30 to 35% investor-day target range.
Speaker #3: With a streamlined expense base and robust operating leverage, we are delivering strong flow-through to earnings. Fourth, we've accelerated our collaboration with equitables as we continue to expand our private markets capabilities and amplify the flywheel effect of this we're making investments to enhance our commercial real estate lending capabilities and expand the scale of our platform.
Speaker #3: As a result, while onboard more than $10 billion of new long-duration assets from equitable by year-end 2026. partnership. This represents a meaningful expansion of I'm pleased to share that our origination and servicing capabilities in commercial mortgages.
Seth Bernstein: As a result, we'll onboard more than $10 billion of new long-duration assets from Equitable by year-end 2026. This represents a meaningful expansion of our origination and servicing capabilities in commercial mortgages. Beyond the financially accretive nature of this commitment, it underscores the broader strategic value of our partnership with Equitable. It's a clear example of how our alignment continues to unlock incremental growth, well beyond the $10 billion+ of additional committed assets. Leveraging our expertise in commercial real estate lending, the adjacent capabilities will build upon our existing footprint in core and core plus real estate credit and bring insurance-tailored assets to over $20 billion. This enhances our scale and enables us to compete more effectively in the strategically important insurance channel.
Seth Bernstein: As a result, we'll onboard more than $10 billion of new long-duration assets from Equitable by year-end 2026. This represents a meaningful expansion of our origination and servicing capabilities in commercial mortgages. Beyond the financially accretive nature of this commitment, it underscores the broader strategic value of our partnership with Equitable. It's a clear example of how our alignment continues to unlock incremental growth, well beyond the $10 billion+ of additional committed assets. Leveraging our expertise in commercial real estate lending, the adjacent capabilities will build upon our existing footprint in core and core plus real estate credit and bring insurance-tailored assets to over $20 billion. This enhances our scale and enables us to compete more effectively in the strategically important insurance channel.
Speaker #3: Beyond the financially accretive nature of this commitment, it underscores the broader strategic value of clear example of how our alignment continues to unlock incremental our partnership with equitable.
Speaker #3: growth well beyond the $10 billion-plus of additional committed assets. Leveraging our expertise in commercial real estate lending, the adjacent capabilities will build upon our existing footprint in core and core-plus real estate credit and bring insurance-tailored assets to over $20 billion.
Speaker #3: This enhances our scale and enables us to compete more effectively in the strategically important insurance channel. As of year-end, we managed over $59 It's a billion on behalf of more than 90 third-party insurance clients, with general account assets growing 36% year over year.
Seth Bernstein: As of year-end, we managed over $59 billion on behalf of more than 90 third-party insurance clients, with general account assets growing 36% year-over-year. We see strong momentum in this business and expect to add $3 billion of new private asset mandates from strategic insurance partnerships in the first half of 2026. Slide 4 provides a summary page with our key financial metrics. Tom will follow up with more commentary on our results. Turning to Slide 5, I'll review our investment performance, starting with fixed income. Fixed income markets delivered broad-based gains in Q4 of 2025, despite softer labor market trends, and limited macroeconomic data due to the government shutdown. Short-term rates declined following the Fed's rate cuts, while long-end yields remained elevated, steepening the yield curve.
Seth Bernstein: As of year-end, we managed over $59 billion on behalf of more than 90 third-party insurance clients, with general account assets growing 36% year-over-year. We see strong momentum in this business and expect to add $3 billion of new private asset mandates from strategic insurance partnerships in the first half of 2026. Slide 4 provides a summary page with our key financial metrics. Tom will follow up with more commentary on our results. Turning to Slide 5, I'll review our investment performance, starting with fixed income. Fixed income markets delivered broad-based gains in Q4 of 2025, despite softer labor market trends, and limited macroeconomic data due to the government shutdown. Short-term rates declined following the Fed's rate cuts, while long-end yields remained elevated, steepening the yield curve.
Speaker #3: We see strong momentum in this business, and we expect to add $3 billion of new private asset mandates from strategic insurance partnerships in the first half of 2026.
Speaker #3: Slide four provides a summary page with our key financial metrics. Tom will follow up with more commentary on our results. Turning to slide five, I'll review our investment performance starting with fixed income.
Speaker #3: Fixed income markets delivered broad-based gains in the fourth quarter of 2025, despite softer labor market trends and limited macroeconomic data due to the government shutdown.
Speaker #3: Short-term rates declined following the Fed's rates cuts, while long-end yields remained elevated, steepening the yield curve. The US 10-year Treasury ended the year near 4.2%, reflecting persistent long-term inflation and fiscal concerns.
Seth Bernstein: The U.S. 10-year Treasury ended the year near 4.2%, reflecting persistent long-term inflation and fiscal concerns. The Bloomberg US Aggregate Index returned 1.1% in the fourth quarter and 7.3% in 2025, while Bloomberg's Global High Yield Index returned 2.4% in the fourth quarter and 10% in 2025. Overall, our one-year relative performance improved versus the prior quarter, supported by our higher quality exposure and global high yield, our longer duration positioning in American Income, and continued outperformance across our municipal strategies, where nearly all our funds are rated 4 or 5 stars by Morningstar. 86% of our AUM outperformed over the 1- and 3-year periods, while 67% of our AUM outperformed over the 5-year periods.
Seth Bernstein: The U.S. 10-year Treasury ended the year near 4.2%, reflecting persistent long-term inflation and fiscal concerns. The Bloomberg US Aggregate Index returned 1.1% in the fourth quarter and 7.3% in 2025, while Bloomberg's Global High Yield Index returned 2.4% in the fourth quarter and 10% in 2025. Overall, our one-year relative performance improved versus the prior quarter, supported by our higher quality exposure and global high yield, our longer duration positioning in American Income, and continued outperformance across our municipal strategies, where nearly all our funds are rated 4 or 5 stars by Morningstar. 86% of our AUM outperformed over the 1- and 3-year periods, while 67% of our AUM outperformed over the 5-year periods.
Speaker #3: The Bloomberg US Aggregate Index returned 1.1% in the fourth quarter and 7.3% in 2025, while Bloomberg's Global High Yield Index returned 2.4% in the fourth quarter and 10% in 2025.
Speaker #3: Overall, our one-year relative performance improved versus the prior quarter, supported by our higher-quality exposure in Global High Yield, our longer-duration positioning in American income, and continued outperformance across our municipal strategies, where nearly all our funds are rated 4 or 5 stars by Morningstar.
Speaker #3: 86% of our AUM outperformed over the one and three-year periods, while 67% of our periods. Demand for intermediate AUM outperformed over the five-year duration has strengthened, and fixed income volatility has declined meaningfully.
Seth Bernstein: Demand for intermediate duration has strengthened, and fixed income volatility has declined meaningfully, reducing two key headwinds to performance and enhancing the diversification value of the asset class. As the curve steepens, investors are rotating out of cash, floating rate, and short-duration instruments into intermediate-duration products to capture higher yields. US retail taxable flows continue to show encouraging momentum, with two consecutive years of organic growth and increasing adoption of our active ETF suite. In 2025, we ranked among the top 15 fund managers in taxable flows in the United States, a meaningful step forward in the market where we've historically been underpenetrated. Municipals remain well-positioned for continued inflows, supported by attractive tax-efficient returns and continued share gains of our market-leading SMA platform.
Seth Bernstein: Demand for intermediate duration has strengthened, and fixed income volatility has declined meaningfully, reducing two key headwinds to performance and enhancing the diversification value of the asset class. As the curve steepens, investors are rotating out of cash, floating rate, and short-duration instruments into intermediate-duration products to capture higher yields. US retail taxable flows continue to show encouraging momentum, with two consecutive years of organic growth and increasing adoption of our active ETF suite. In 2025, we ranked among the top 15 fund managers in taxable flows in the United States, a meaningful step forward in the market where we've historically been underpenetrated. Municipals remain well-positioned for continued inflows, supported by attractive tax-efficient returns and continued share gains of our market-leading SMA platform.
Speaker #3: Performance and enhancing the reducing two key headwinds to diversification value of the asset class. As the curve steepens, investors are rotating out of cash, floating rate, and short-duration instruments into intermediate-duration products to capture higher yields.
Speaker #3: US retail taxable flows continue to show encouraging momentum, with two consecutive years of organic growth and increasing adoption of our active ETF suite. In 2025, we ranked among the top 15 fund managers in taxable flows in the United States—a meaningful step forward in a market where we've historically been underpenetrated.
Speaker #3: Municipals remain well-positioned for continued inflows, supported by attractive tax-efficient returns and continued share gains of our market-leading SMA platform. Our systematic strategies are gaining traction in the investment-grade bond market, with strong institutional demand and consultant support in 2025, underpinned by our consistent track record of outperformance.
Seth Bernstein: Our systematic strategies are gaining traction in the investment-grade bond market, with strong institutional demand and consultant support in 2025, underpinned by our consistent track record of outperformance. Turning to equities, the S&P 500 returned 2.7% in the fourth quarter, closing near record highs and delivering a roughly 18% total return for 2025. This marks the index's third consecutive year of double-digit gains. For the first time in several years, international equities outperformed the US, supported by a weaker US dollar, more compelling relative valuations, and a rotation away from US mega-cap technology leadership. Our equity performance softened in 2025, with relative returns declining across the 1, 3, and 5-year periods. This was primarily driven by sustained underperformance in our largest US equity franchises, particularly growth, defensive, and sustainable strategies, amid a market environment dominated by speculative, momentum-driven names and narrow leadership.
Seth Bernstein: Our systematic strategies are gaining traction in the investment-grade bond market, with strong institutional demand and consultant support in 2025, underpinned by our consistent track record of outperformance. Turning to equities, the S&P 500 returned 2.7% in the fourth quarter, closing near record highs and delivering a roughly 18% total return for 2025. This marks the index's third consecutive year of double-digit gains. For the first time in several years, international equities outperformed the US, supported by a weaker US dollar, more compelling relative valuations, and a rotation away from US mega-cap technology leadership. Our equity performance softened in 2025, with relative returns declining across the 1, 3, and 5-year periods. This was primarily driven by sustained underperformance in our largest US equity franchises, particularly growth, defensive, and sustainable strategies, amid a market environment dominated by speculative, momentum-driven names and narrow leadership.
Speaker #3: Turning to equities, the S&P 500 returned 2.7% in the fourth quarter, closing the year record highs and delivering a roughly 18% total return for 2025.
Speaker #3: This marks the index's third consecutive year of double-digit gains. For the first time in several years, international equities outperformed the US, supported by a weaker US dollar, more compelling relative valuations, and a rotation away from US mega-cap technology equity performance softened in leadership.
Speaker #3: Our 2025, with relative returns declining across the one, three, and five-year periods. This was primarily driven by sustained underperformance in our largest US equity franchises, particularly growth, defensive and sustainable strategies, amid a market environment dominated by speculative momentum-driven names and narrow leadership.
Speaker #3: Twenty-one percent of our AUM outperformed over one year, thirty-seven percent over three years, and fifty-one percent over five years, with the most pronounced performance pressure on US large-cap growth-oriented services where benchmark concentrations remain acute.
Seth Bernstein: 21% of our AUM outperformed over 1 year, 37% over 3 years, and 51% over 5 years, with the most pronounced performance pressure in US large-cap, growth-oriented services, where benchmark concentrations remain acute. Outside of these areas, many value, core, and thematic strategies delivered strong, absolute, and relative results. Portfolios of exposure to cyclical sectors, such as industrials and financials, benefited from improving earnings breadth, especially in non-US markets. Emerging markets, China, and international value and core strategies were notable standouts. The highly concentrated nature of US equity market leadership and stretch valuations created a challenging backdrop for active managers. In response, we're sharpening execution against our investment philosophies, leveraging decision analytics to identify areas for improvement, implement targeted changes, and measure outcomes with greater discipline. Our equity platform is intentionally diversified across styles and regions, avoiding overexposure to any single market regime.
Seth Bernstein: 21% of our AUM outperformed over 1 year, 37% over 3 years, and 51% over 5 years, with the most pronounced performance pressure in US large-cap, growth-oriented services, where benchmark concentrations remain acute. Outside of these areas, many value, core, and thematic strategies delivered strong, absolute, and relative results. Portfolios of exposure to cyclical sectors, such as industrials and financials, benefited from improving earnings breadth, especially in non-US markets. Emerging markets, China, and international value and core strategies were notable standouts. The highly concentrated nature of US equity market leadership and stretch valuations created a challenging backdrop for active managers. In response, we're sharpening execution against our investment philosophies, leveraging decision analytics to identify areas for improvement, implement targeted changes, and measure outcomes with greater discipline. Our equity platform is intentionally diversified across styles and regions, avoiding overexposure to any single market regime.
Speaker #3: Outside of these areas, many value-core and thematic strategies delivered strong absolute and relative results. Portfolios of exposure to cyclical sectors such especially in non-US as industrials and financials benefited markets.
Speaker #3: Emerging markets, China, and international value and core strategies were notable for improving earnings breadth—standouts. The highly concentrated nature of U.S. equity market leadership and stretched valuations created a challenging backdrop for active managers.
Speaker #3: In response, we're sharpening execution against our investment philosophies, leveraging decision analytics to identify areas for improvement, implement targeted changes and measure outcomes with greater discipline.
Speaker #3: Our equity platform is intentionally diversified across styles and regions, avoiding overexposure to any single market regime. Thematic and cyclically oriented value strategies provide balance and upside participation in risk-on environments, complementing more defensively positioned portfolios.
Seth Bernstein: Thematic and cyclically oriented value strategies provide balance and upside participation in risk-on environments, complementing more defensively positioned portfolios. As market breadth began to improve in entering 2026, platform performance has started to rebound. A growing share of growth, value, core, and thematic strategies are now delivering stronger relative results, while defensive strategies have lagged into more risk-supportive conditions. Looking ahead, we believe the continued earnings breadth and stable economic growth could favor international and value strategies. Additionally, portfolios with lower tracking error may offer clients more consistent participation in narrow leadership environments, helping to diversify performance streams and reduce reliance on a concentrated set of products. Turning to slide 6, I'll discuss our retail highlights. Retail flows softened in 2025, ending a 2-year streak of organic gains.
Seth Bernstein: Thematic and cyclically oriented value strategies provide balance and upside participation in risk-on environments, complementing more defensively positioned portfolios. As market breadth began to improve in entering 2026, platform performance has started to rebound. A growing share of growth, value, core, and thematic strategies are now delivering stronger relative results, while defensive strategies have lagged into more risk-supportive conditions. Looking ahead, we believe the continued earnings breadth and stable economic growth could favor international and value strategies. Additionally, portfolios with lower tracking error may offer clients more consistent participation in narrow leadership environments, helping to diversify performance streams and reduce reliance on a concentrated set of products. Turning to slide 6, I'll discuss our retail highlights. Retail flows softened in 2025, ending a 2-year streak of organic gains.
Speaker #3: As market breadth began to improve entering 2026, platform performance has started to rebound. A growing share of growth value-core and thematic strategies are now delivering stronger relative results while defensive strategies have lagged in a more risk-supportive conditions.
Speaker #3: Looking ahead, we believe the continued earnings breadth and stable economic growth could favor strategies. Additionally, portfolios with lower tracking error may offer clients more consistent participation in narrow leadership environments.
Speaker #3: Helping to diversify performance streams and reduce reliance on a concentrated set of products. Turning to slide six, I'll discuss our retail highlights. Retail flows softened in 2025, ending a two-year streak of organic gains.
Speaker #3: The channel saw $3.5 billion in net outflows in the fourth quarter and $9.1 billion for the full year, driven by active equity redemptions and softness in taxable fixed income, partially offset by continuing strength in municipals.
Seth Bernstein: The channel saw $3.5 billion in net outflows in Q4 and $9.1 billion for the full year, driven by active equity redemptions and softness in taxable fixed income, partially offset by continuing strength in municipals. Active equities experienced outflows throughout the quarter and the year, primarily led by US growth-oriented services. Fixed income allocations favored tax-exempt strategies, while taxable flows reversed to modest outflows, driven primarily by APAC as the US dollar weakened.... Our retail muni platform delivered 23% organic growth in 2025, surpassing $56 billion in third-party retail AUM across SMAs, ETFs, and mutual funds. Despite overseas headwinds, US retail momentum remained durable. Taxable fixed income posted a second consecutive year of organic growth, supported by expanding adoption of our ETF suite, alongside continued market share gains in tax-exempt, extending a 13-year history of organic growth.
Seth Bernstein: The channel saw $3.5 billion in net outflows in Q4 and $9.1 billion for the full year, driven by active equity redemptions and softness in taxable fixed income, partially offset by continuing strength in municipals. Active equities experienced outflows throughout the quarter and the year, primarily led by US growth-oriented services. Fixed income allocations favored tax-exempt strategies, while taxable flows reversed to modest outflows, driven primarily by APAC as the US dollar weakened.... Our retail muni platform delivered 23% organic growth in 2025, surpassing $56 billion in third-party retail AUM across SMAs, ETFs, and mutual funds. Despite overseas headwinds, US retail momentum remained durable. Taxable fixed income posted a second consecutive year of organic growth, supported by expanding adoption of our ETF suite, alongside continued market share gains in tax-exempt, extending a 13-year history of organic growth.
Speaker #3: Active equities experienced outflows throughout the quarter and the year, primarily led by US growth-oriented services. Fixed income allocations favored tax-exempt strategies while taxable flows reversed to modest outflows, driven primarily by APAC, as the US dollar weakened.
Speaker #3: Our retail muni platform delivered 23% organic growth in 2025, surpassing 56 billion in third-party retail AUM across SMAs. ETFs and mutual funds. Despite overseas headwinds, US retail momentum remained durable.
Speaker #3: Taxable fixed income boasted a second consecutive year of organic growth, supported by expanding adoption of our ETF suite alongside continued market share gains in tax-exempt, extending a 13-year history of organic growth.
Speaker #3: In effect, we believe the bond reallocation trend has significant runway, and we're well-positioned to help clients capture fixed incomes enduring value, just as we've consistently demonstrated in the early waves in 2024.
Seth Bernstein: In effect, we believe the bond reallocation trend has significant runway, and we're well-positioned to help clients capture fixed income's enduring value, just as we've consistently demonstrated in the early waves in 2024. Moving to slide seven, I'll cover our institutional channel. Institutional outflows moderated year-over-year, narrowing to $1.9 billion in Q4 and $4.6 billion in 2025. Private alternatives remained a key growth engine, supported by strong inflows across existing, adjacent, and newly launched strategies. Channel deployments into private markets totaled approximately $2 billion in Q4 and nearly $8 billion for the year. Taxable fixed income outflows were modest in Q4, while outflows for the year were largely driven by Equitable RGA's reinsurance transaction, offsetting inflows into our growing systematic platform.
Seth Bernstein: In effect, we believe the bond reallocation trend has significant runway, and we're well-positioned to help clients capture fixed income's enduring value, just as we've consistently demonstrated in the early waves in 2024. Moving to slide seven, I'll cover our institutional channel. Institutional outflows moderated year-over-year, narrowing to $1.9 billion in Q4 and $4.6 billion in 2025. Private alternatives remained a key growth engine, supported by strong inflows across existing, adjacent, and newly launched strategies. Channel deployments into private markets totaled approximately $2 billion in Q4 and nearly $8 billion for the year. Taxable fixed income outflows were modest in Q4, while outflows for the year were largely driven by Equitable RGA's reinsurance transaction, offsetting inflows into our growing systematic platform.
Speaker #3: Moving to slide seven, I'll cover our institutional channel. Institutional outflows 1.9 billion in the fourth quarter and moderated year-over-year, narrowing to 2025. 4.6 billion in Private alternatives remained a key growth engine, supported by strong inflows across existing adjacent and newly launched strategies.
Speaker #3: into private markets totaled approximately Channel deployments $2 billion in the fourth quarter and nearly $8 billion for the year. Taxable fixed quarter, while outflows for the year were largely driven by equitable RGAs reinsurance transaction, offsetting inflows into our growing systematic platform.
Speaker #3: Active equities experienced roughly $2 billion in outflows in the fourth quarter and $7 billion for the year, primarily from our concentrated growth and strategies.
Seth Bernstein: Active equities experienced roughly $2 billion in outflows in Q4 and $7 billion for the year, primarily from our concentrated growth and global core strategies. Our institutional pipeline expanded to nearly $20 billion, bolstered by the addition of more than the above-mentioned $10 billion in commercial mortgage loans. As previously noted, we expect to add approximately $3 billion of mandates from strategic insurance partnerships over the coming quarters. Next, on slide 8, I will cover private wealth. Bernstein Private Wealth delivered its second consecutive quarter of organic growth and fifth straight year of positive net flows, supported by record-level advisory productivity. Net new client assets grew 7% in Q4 and 6% for the full year 2025, with annual organic growth of nearly 2% for both periods.
Seth Bernstein: Active equities experienced roughly $2 billion in outflows in Q4 and $7 billion for the year, primarily from our concentrated growth and global core strategies. Our institutional pipeline expanded to nearly $20 billion, bolstered by the addition of more than the above-mentioned $10 billion in commercial mortgage loans. As previously noted, we expect to add approximately $3 billion of mandates from strategic insurance partnerships over the coming quarters. Next, on slide 8, I will cover private wealth. Bernstein Private Wealth delivered its second consecutive quarter of organic growth and fifth straight year of positive net flows, supported by record-level advisory productivity. Net new client assets grew 7% in Q4 and 6% for the full year 2025, with annual organic growth of nearly 2% for both periods.
Speaker #3: Our institutional pipeline expanded to nearly $20 billion, bolstered by the global core addition of more than the above-mentioned $10 billion in commercial mortgage loans.
Speaker #3: As previously noted, we expect to add approximately $3 billion of mandates from strategic insurance partnerships over the coming quarters. Next on slide eight, I will cover private wealth.
Speaker #3: Bernstein Private Wealth delivered its second consecutive quarter of organic growth and fifth straight year of positive net flows, supported by record-level advisory productivity. Net new client assets grew 7% in the fourth quarter and 6% for the full year 2025, with annual organic growth of nearly 2% for both periods.
Speaker #3: Growth was broad-based across asset classes, driven by client rising adoption of alternatives and sustained demand for tax-efficient index equity solutions. As noted earlier, private wealth represents approximately 18% of firm-wide average AUM but contributes roughly 37% of total attractive fee profile and highly engaged client revenues, reflecting its base.
Seth Bernstein: Growth was broad-based across asset classes, driven by client reallocation to the fixed income, rising adoption of alternatives, and sustained demand for tax-efficient index equity solutions. As noted earlier, private wealth represents approximately 18% of firm-wide average AUM, but contributes roughly 37% of total revenues, reflecting its attractive fee profile and highly engaged client base. Importantly, these revenues are sourced directly, underscoring the strength of our differentiated farm-to-table model. I'll close with slides 9 and 10, which highlight both the momentum of our private markets platform and the strategic value of our partnership with Equitable. Over the past decade, we've scaled our private markets platform to $82 billion in fee-paying and fee-eligible AUM, delivering 18% year-over-year growth.
Seth Bernstein: Growth was broad-based across asset classes, driven by client reallocation to the fixed income, rising adoption of alternatives, and sustained demand for tax-efficient index equity solutions. As noted earlier, private wealth represents approximately 18% of firm-wide average AUM, but contributes roughly 37% of total revenues, reflecting its attractive fee profile and highly engaged client base. Importantly, these revenues are sourced directly, underscoring the strength of our differentiated farm-to-table model. I'll close with slides 9 and 10, which highlight both the momentum of our private markets platform and the strategic value of our partnership with Equitable. Over the past decade, we've scaled our private markets platform to $82 billion in fee-paying and fee-eligible AUM, delivering 18% year-over-year growth.
Speaker #3: Importantly, these revenues are sourced directly, underscoring the strength of our differentiated firm-to-table model. I'll close with slides nine and ten, which highlight both the momentum of our private markets platform and the strategic value of our partnership with Equitable.
Speaker #3: Over the past decade, we've scaled our private markets platform to $82 billion in fee-paying and fee-eligible AUM, delivering 18% year-over-year growth. Anchored in credit-oriented strategies, including direct lending and alternative placements, our platform serves a broad and growing base of retail, institutional, and insurance clients across a wide range of risk-return objectives in credit, commercial real estate debt, and private markets.
Seth Bernstein: Anchored in credit-oriented strategies, including direct lending, alternative credit, commercial real estate debt, and private placements, our platform serves a broad and growing base of retail, institutional, and insurance clients across a wide range of risk-return objectives. Equitable's $20 billion permanent capital commitment, now largely deployed, has accelerated our expansion in private markets and strengthened our ability to seed higher fee, longer duration strategies. Our collaboration continues to evolve beyond periodic commitment cycles, with the expansion of the commercial mortgage capabilities representing the latest in a series of successful initiatives spanning residential mortgages, structured private placements, and private credit. We view our strategic partnership with Equitable as a meaningful competitive advantage, reinforcing AB's capital-light, client-aligned model and enabling efficient and disciplined scaling of new offerings.
Seth Bernstein: Anchored in credit-oriented strategies, including direct lending, alternative credit, commercial real estate debt, and private placements, our platform serves a broad and growing base of retail, institutional, and insurance clients across a wide range of risk-return objectives. Equitable's $20 billion permanent capital commitment, now largely deployed, has accelerated our expansion in private markets and strengthened our ability to seed higher fee, longer duration strategies. Our collaboration continues to evolve beyond periodic commitment cycles, with the expansion of the commercial mortgage capabilities representing the latest in a series of successful initiatives spanning residential mortgages, structured private placements, and private credit. We view our strategic partnership with Equitable as a meaningful competitive advantage, reinforcing AB's capital-light, client-aligned model and enabling efficient and disciplined scaling of new offerings.
Speaker #3: Equitable's $20 billion permanent capital commitment, now largely deployed, has accelerated our expansion in private markets and strengthened our ability to seed higher-fee, longer-duration strategies.
Speaker #3: Our collaboration continues to evolve beyond periodic commitment cycles, with the expansion of the commercial mortgage capabilities representing the latest in a series of successful initiatives spanning residential mortgages, structured private placements, and private credit.
Speaker #3: We view our strategic partnership with Equitable as a meaningful competitive advantage, reinforcing AB's capital-like client-aligned model and enabling efficient and disciplined scaling of new offerings.
Speaker #3: With our proven track record and focused strategy, we're well-positioned to transform the business, unlock new opportunities for our clients, and exceed our 90 to 100 billion target for private markets 2027.
Seth Bernstein: With our proven track record and focused strategy, we're well-positioned to transform the business, unlock new opportunities for our clients, and exceed our $90 to 100 billion-dollar target for private markets AUM by 2027. With that, I'll hand it over to Tom to review our financial results. Tom?
Seth Bernstein: With our proven track record and focused strategy, we're well-positioned to transform the business, unlock new opportunities for our clients, and exceed our $90 to 100 billion-dollar target for private markets AUM by 2027. With that, I'll hand it over to Tom to review our financial results. Tom?
Speaker #3: With that, I'll hand it over to Tom to review our financials. Tom.
Speaker #2: Thank you, Seth, and thank you to everyone joining us today. AB
Tom Simeoni: Thank you, Seth, and thank you to everyone joining us today. AB enters 2026 with clear momentum, underscored by our Q4 and full year 2025 results and the progress we're making on our strategic priorities. Q4 adjusted earnings were $0.96 per unit, down 9% from the prior year period, reflecting lower performance fees, investment gains, and other revenues. Full year 2025 adjusted earnings of $3.33 increased 2% versus the prior year, while full year distributions were $3.38, up 4%. The difference between EPU and distributions reflect the mathematical impact of the lower average unit count and the higher income generated in the second half of 2025. On slide 11, we show our adjusted results, which remove the effect of certain items that are not considered part of our core operating business.
Tom Simeoni: Thank you, Seth, and thank you to everyone joining us today. AB enters 2026 with clear momentum, underscored by our Q4 and full year 2025 results and the progress we're making on our strategic priorities. Q4 adjusted earnings were $0.96 per unit, down 9% from the prior year period, reflecting lower performance fees, investment gains, and other revenues. Full year 2025 adjusted earnings of $3.33 increased 2% versus the prior year, while full year distributions were $3.38, up 4%. The difference between EPU and distributions reflect the mathematical impact of the lower average unit count and the higher income generated in the second half of 2025. On slide 11, we show our adjusted results, which remove the effect of certain items that are not considered part of our core operating business.
Speaker #2: enters 2026 with clear momentum, underscored by our fourth quarter and full year 2025 results and the progress we're making on our strategic priorities. Fourth quarter adjusted earnings were $0.96 per unit, down 9% from the prior year period, reflecting lower performance fees, investment gains, and other revenues.
Speaker #2: Full year 2025 adjusted earnings of $3.33 increased 2% versus the prior year, while full year distributions were $3.38, up 4%. The difference between EPU and distributions reflects the mathematical impact of the lower average unit count and the higher income generated in the second half of AUM by 2025.
Speaker #2: On slide 11, we show our adjusted results, which remove the effect of certain items that are not considered part of our core operating business.
Speaker #2: For a reconciliation of gap in adjusted financials, please refer to our presentation appendix. Fourth quarter net revenues were $957 million, down 2% versus the prior year, as higher base fees were offset by lower performance fees.
Tom Simeoni: For a reconciliation of GAAP and adjusted financials, please refer to our presentation appendix. Fourth quarter net revenues were $957 million, down 2% versus the prior year, as higher base fees were offset by lower performance fees. Full year revenues were $3.5 billion, flat year-over-year, and up 3% on a like-for-like basis when excluding the $96 million of Bernstein Research revenue recognized in 2024. Fourth quarter and full year base fees increased 5% year-over-year, driven by higher markets.... Fourth quarter performance fees were $82 million, below the prior year period's $133 million, which benefited from catch-up fees at CarVal on the private side, and strong contributions from several public market strategies, including ABSA and Aria.
Tom Simeoni: For a reconciliation of GAAP and adjusted financials, please refer to our presentation appendix. Fourth quarter net revenues were $957 million, down 2% versus the prior year, as higher base fees were offset by lower performance fees. Full year revenues were $3.5 billion, flat year-over-year, and up 3% on a like-for-like basis when excluding the $96 million of Bernstein Research revenue recognized in 2024. Fourth quarter and full year base fees increased 5% year-over-year, driven by higher markets.... Fourth quarter performance fees were $82 million, below the prior year period's $133 million, which benefited from catch-up fees at CarVal on the private side, and strong contributions from several public market strategies, including ABSA and Aria.
Speaker #2: Full year revenues were $3.5 up 3% on a like-for-like basis when excluding the $96 million of Bernstein research revenue recognized in billion, flat year-over-year, and 2024.
Speaker #2: Fourth quarter and full year base fees increased 5% year-over-year, driven by higher markets. Fourth quarter performance fees were $82 million, below the prior year period's $133 million which benefited from catch-up fees at CarVal on the private side and strong contributions from several public market strategies, including ABSA and ARIA.
Speaker #2: While full-year performance fees of $172 million declined 24% year-over-year, they came in above our $130 to $155 million guidance range, and I will provide additional details shortly.
Tom Simeoni: While full-year performance fees of $172 million declined 24% year-over-year, they came in above our $130 to $155 million guidance range, and I will provide additional details shortly. Dividend and interest revenue, along with broker-dealer related interest expense, declined in both the Q4 and full year, reflecting lower client cash and margin balances in private wealth. Moving to expenses, Q4 total operating expenses were $627 million, up 1% versus the prior year, driven by 2% higher compensation expenses and essentially flat non-compensation expenses. Full-year operating expenses were $2.3 billion, down 2%, as slightly higher compensation was more than offset by lower non-compensation expense.
Tom Simeoni: While full-year performance fees of $172 million declined 24% year-over-year, they came in above our $130 to $155 million guidance range, and I will provide additional details shortly. Dividend and interest revenue, along with broker-dealer related interest expense, declined in both the Q4 and full year, reflecting lower client cash and margin balances in private wealth. Moving to expenses, Q4 total operating expenses were $627 million, up 1% versus the prior year, driven by 2% higher compensation expenses and essentially flat non-compensation expenses. Full-year operating expenses were $2.3 billion, down 2%, as slightly higher compensation was more than offset by lower non-compensation expense.
Speaker #2: Dividend and interest revenue, along with broker-dealer-related interest expense, declined in both reflecting lower client cash and margin balances in private the fourth quarter and full year, expenses, fourth quarter total operating expenses were $627 million, up 1% versus the prior year, driven by 2% higher compensation expenses and essentially flat non-compensation expenses.
Speaker #2: Full year operating expenses were $2.3 billion, down 2%, as slightly higher compensation was more than offset by lower non-compensation expense. Fourth quarter total compensation and benefits increased 2% year-over-year, with a compensation ratio of revenues, this is above last year's 46% but better than our 48.5% guidance.
Tom Simeoni: Fourth quarter total compensation and benefits increased 2% year-over-year, with a Compensation Ratio of 47.7% of adjusted net revenues. This is above last year's 46%, but better than our 48.5% guidance. Full-year revenues exceeded our earlier expectations, allowing us to reduce the fourth quarter Compensation Ratio. As a result, our full-year Compensation Ratio was 48.3%, slightly better than the 48.5% included in our prior guidance. We will begin accruing at a 40.5% Compensation Ratio in Q1 of 2026, consistent with last year's accrual, and may adjust throughout the year, depending on market conditions. Our guidance includes the cost of investments in talent and capabilities, such as building out the Commercial Mortgage Loan platform that Seth referenced.
Tom Simeoni: Fourth quarter total compensation and benefits increased 2% year-over-year, with a Compensation Ratio of 47.7% of adjusted net revenues. This is above last year's 46%, but better than our 48.5% guidance. Full-year revenues exceeded our earlier expectations, allowing us to reduce the fourth quarter Compensation Ratio. As a result, our full-year Compensation Ratio was 48.3%, slightly better than the 48.5% included in our prior guidance. We will begin accruing at a 40.5% Compensation Ratio in Q1 of 2026, consistent with last year's accrual, and may adjust throughout the year, depending on market conditions. Our guidance includes the cost of investments in talent and capabilities, such as building out the Commercial Mortgage Loan platform that Seth referenced.
Speaker #2: Full year revenues exceeded our earlier expectations, allowing us to reduce the fourth quarter compensation ratio. As a result, our full year compensation ratio was 48.3%, slightly better than the 48.5% included in our guidance.
Speaker #2: We will begin accruing at a 48.5% compensation ratio in the first quarter of 2026, consistent with last year's accrual, and may adjust throughout the year depending on market conditions.
Speaker #2: Our guidance includes the cost of investments in talent and capabilities, such as building out the commercial mortgage loan platform that Seth referenced. Promotion and servicing costs decreased 1% in the fourth quarter and 10% for the full year, with the full year decline driven by the separation of Bernstein research.
Tom Simeoni: Promotion and servicing costs decreased 1% in the Q4 and 10% for the full year, with the full year decline driven by the separation of Bernstein Research. Q4 G&A expenses were flat year-over-year. Full year G&A declined 9%, driven by the lower occupancy costs associated with our Hudson Yards relocation, which dropped to the bottom line as planned. For full-year 2025, non-compensation operating expenses were $599 million, just below our prior guidance of $600 to $610 million. This reflects strong expense discipline amidst a volatile macro backdrop. For 2026, we expect full-year non-compensation expense to be in the range of $625 to $650 million.
Tom Simeoni: Promotion and servicing costs decreased 1% in the Q4 and 10% for the full year, with the full year decline driven by the separation of Bernstein Research. Q4 G&A expenses were flat year-over-year. Full year G&A declined 9%, driven by the lower occupancy costs associated with our Hudson Yards relocation, which dropped to the bottom line as planned. For full-year 2025, non-compensation operating expenses were $599 million, just below our prior guidance of $600 to $610 million. This reflects strong expense discipline amidst a volatile macro backdrop. For 2026, we expect full-year non-compensation expense to be in the range of $625 to $650 million.
Speaker #2: Fourth quarter G&A expenses were flat year-over-year. Full year G&A declined 9%, driven by the lower occupancy costs associated with our Hudson Yards relocation, which dropped to the bottom line as planned.
Speaker #2: For full year 2025, non-compensation operating expenses were $599 million, just below our prior guidance of $600 to $610 million. This reflects strong expense discipline amidst a volatile macro backdrop.
Speaker #2: For 2026, we expect full year non-compensation expense to be in the range of $625 to $650 million. The increase reflects normalization in promo and G&A expenses, recovering from last year's depressed levels, and includes discretionary investments in technology and the operational build-out of new strategies.
Tom Simeoni: The increase reflects normalization in promo and G&A expenses recovering from last year's depressed levels, and includes discretionary investments in technology and the operational build-out of new strategies. Promo and servicing are expected to represent 20 to 30% of non-compensation expenses, with G&A comprising the remaining 70 to 80%. As a reminder, promo and servicing includes transfer fees, which move directionally with markets. Our year-over-year non-comp outlook implies 6 to 7% growth at the midpoint, slightly above our long-term objective of keeping increases below the level of inflation. This reflects investments to integrate our new investment management platform and complete the onboarding of the commercial mortgage assets, both of which we expect to be accretive to earnings over time. After a robust selection process, we selected an investment management platform that we believe will materially enhance our foundational data model and prepare us for the future.
Tom Simeoni: The increase reflects normalization in promo and G&A expenses recovering from last year's depressed levels, and includes discretionary investments in technology and the operational build-out of new strategies. Promo and servicing are expected to represent 20 to 30% of non-compensation expenses, with G&A comprising the remaining 70 to 80%. As a reminder, promo and servicing includes transfer fees, which move directionally with markets. Our year-over-year non-comp outlook implies 6 to 7% growth at the midpoint, slightly above our long-term objective of keeping increases below the level of inflation. This reflects investments to integrate our new investment management platform and complete the onboarding of the commercial mortgage assets, both of which we expect to be accretive to earnings over time. After a robust selection process, we selected an investment management platform that we believe will materially enhance our foundational data model and prepare us for the future.
Speaker #2: Promo and servicing are expected to represent 20% to 30% of non-compensation expenses, with G&A comprising the remaining 70% to 80%. As a reminder, promo and servicing includes transfer fees, which move directionally with markets.
Speaker #2: Our year-over-year non-comp outlook implies 6 to 7% growth at the midpoint, slightly above our long-term objective of keeping inflation. This reflects investments to integrate our new investment management platform and complete the onboarding of the commercial mortgage assets, both of which increases below the level of we expect to be creative to earnings over time.
Speaker #2: After a robust selection process, we selected an investment management platform that we believe will materially enhance our foundational data model and prepare us for the future.
Speaker #2: Over the years, we have purpose-built technology that has served us well, but much of it is aligned to an individual investment team's and asset classes.
Tom Simeoni: Over the years, we have purpose-built technology that has served us well, but much of it is aligned to an individual investment teams and asset classes. This new platform will allow us to unify around a single source of data, improving analysis, decision-making, and reporting. We expect it to streamline operations and drive both business and cost efficiencies. The implementation is expected to result in approximately $40 million in total cash flow impact over the next four years, some of which will be capitalized before generating $20 to 25 million in annual net expense savings beginning in full year 2030, after all legacy systems are retired. Our full year 2026 non-comp guide assumes roughly $10 million of P&L impact from technology implementation expenses and the onboarding of our CML platform.
Tom Simeoni: Over the years, we have purpose-built technology that has served us well, but much of it is aligned to an individual investment teams and asset classes. This new platform will allow us to unify around a single source of data, improving analysis, decision-making, and reporting. We expect it to streamline operations and drive both business and cost efficiencies. The implementation is expected to result in approximately $40 million in total cash flow impact over the next four years, some of which will be capitalized before generating $20 to 25 million in annual net expense savings beginning in full year 2030, after all legacy systems are retired. Our full year 2026 non-comp guide assumes roughly $10 million of P&L impact from technology implementation expenses and the onboarding of our CML platform.
Speaker #2: The platform will allow us to unify around a single source of data, improving analysis, decision-making, and reporting. We expect it to streamline operations and drive both business and cost efficiencies.
Speaker #2: The implementation is expected to result in approximately $40 million in total cash flow impact over the next four years, some of which will be capitalized.
Speaker #2: Before generating $20 to $25 million in annual net expense savings beginning in full year 2030, after all legacy systems are guide assumes roughly $10 million of retired.
Speaker #2: P&L impact from technology implementation expenses and the onboarding of our Our full year 26 non-comp CML platform. As Seth mentioned, we are excited to expand our partnership with Equitable as we scale institutional and insurance-tailored solutions in commercial mortgages, an area where we believe we can rapidly scale.
Tom Simeoni: As Seth mentioned, we are excited to expand our partnership with Equitable as we scale institutional and insurance-tailored solutions in commercial mortgages, an area where we believe we can rapidly scale. The team and platform will be fully operational in the second half of 2026, and we expect to initially manage more than $10 billion of long-duration assets for Equitable, with asset onboarding expected by year-end. Excluding discretionary investment spend, non-compensation expense would increase in the low single digits, consistent with our long-term target. Interest on borrowings decreased by roughly $1 million in Q4 and $15 million for the full year 2025, compared to the prior year periods, reflecting lower interest rates and lower debt balances.
Tom Simeoni: As Seth mentioned, we are excited to expand our partnership with Equitable as we scale institutional and insurance-tailored solutions in commercial mortgages, an area where we believe we can rapidly scale. The team and platform will be fully operational in the second half of 2026, and we expect to initially manage more than $10 billion of long-duration assets for Equitable, with asset onboarding expected by year-end. Excluding discretionary investment spend, non-compensation expense would increase in the low single digits, consistent with our long-term target. Interest on borrowings decreased by roughly $1 million in Q4 and $15 million for the full year 2025, compared to the prior year periods, reflecting lower interest rates and lower debt balances.
Speaker #2: The team and platform will be fully operational in the second half of 2026, and we expect to initially manage more than $10 billion of long-duration assets for Equitable.
Speaker #2: With asset onboarding expected by year-end. Excluding discretionary investment spend, non-compensation expense would increase in the low single digits, consistent with our long-term target. Interest on borrowing is decreased by roughly $1 million in the fourth quarter and $15 million for the full year 2025 compared to the prior year periods, reflecting lower interest rates and lower debt balances.
Speaker #2: ABLP's effective tax rate was 5.9% in 2025, just shy of the low end of our 6 to 7% guidance range, which reflects a favorable mix of earnings.
Tom Simeoni: ABLP's effective tax rate was 5.9% in 2025, just shy of the low end of our 6% to 7% guidance range, which reflects a favorable mix of earnings. We forecast ABLP's effective tax rate in 2026 to be 6% to 7%. In Q4, our firm-wide fee rate was 38.7 basis points, and our full-year fee rate was 38.9 basis points. As we've said before, the fee rate will continue to be mix dependent, and several dynamics influenced both the quarter and full year. First, on the equity side, markets finished the year higher, but volatility meant that average AUM significantly lagged end of period levels.... We also saw outflows from higher fee active equity services, which put modest pressures on the fee rate.
Tom Simeoni: ABLP's effective tax rate was 5.9% in 2025, just shy of the low end of our 6% to 7% guidance range, which reflects a favorable mix of earnings. We forecast ABLP's effective tax rate in 2026 to be 6% to 7%. In Q4, our firm-wide fee rate was 38.7 basis points, and our full-year fee rate was 38.9 basis points. As we've said before, the fee rate will continue to be mix dependent, and several dynamics influenced both the quarter and full year. First, on the equity side, markets finished the year higher, but volatility meant that average AUM significantly lagged end of period levels.... We also saw outflows from higher fee active equity services, which put modest pressures on the fee rate.
Speaker #2: We forecast ABLP's effective tax rate in 2026 to 7%. In the fourth quarter, be 6 to our firm-wide fee rate was 38.7 basis points, and our full year fee rate was 38.9 basis points.
Speaker #2: As we've said before, the fee rate will continue to be mixed-dependent and several dynamics influence both the quarter and full year. First, on the equity side, markets finished the year higher but volatility meant that average AUM significantly lagged end-of-period levels.
Speaker #2: We also saw outflows from higher-fee active equity services, which put modest pressures on the fee rate. In fixed income, elevated rates and FX volatility weighed on taxable fixed income flows and AUM.
Tom Simeoni: In fixed income, elevated rates and FX volatility weighed on taxable fixed income flows and AUM. We experienced outflows in higher fee strategies, such as American Income, while most of our active fixed income inflows came from uni SMAs, which typically carry lower fees. Offsetting these pressures, we continue to grow our private markets capabilities, which remain a key structural support for our fee rate. Our regional sales mix and strategic growth initiatives have helped mitigate broader industry fee rate compression, and our all-in fee rate, including performance fees, has trended higher over time as private markets AUM has expanded. Slide 12 reflects a breakdown of our performance fees by private and public market strategies. Q4 performance fees were $82 million above our prior expectations.
Tom Simeoni: In fixed income, elevated rates and FX volatility weighed on taxable fixed income flows and AUM. We experienced outflows in higher fee strategies, such as American Income, while most of our active fixed income inflows came from uni SMAs, which typically carry lower fees. Offsetting these pressures, we continue to grow our private markets capabilities, which remain a key structural support for our fee rate. Our regional sales mix and strategic growth initiatives have helped mitigate broader industry fee rate compression, and our all-in fee rate, including performance fees, has trended higher over time as private markets AUM has expanded. Slide 12 reflects a breakdown of our performance fees by private and public market strategies. Q4 performance fees were $82 million above our prior expectations.
Speaker #2: We experienced as American Income, while most of our outflows and higher fee strategies, such active fixed income inflows came from UniSMAs, which typically carry lower fees.
Speaker #2: Offsetting these pressures, we continued to grow our private markets capabilities, which remain a key structural support for our fee rate. Our regional sales mix and strategic growth initiatives have helped mitigate broader industry fee rate compression and are all in fee rate, including performance fees, has trended higher over time as private markets AUM has expanded.
Speaker #2: Slide 12 reflects a breakdown of our performance fees by private and public market strategies. Fourth quarter performance fees were $82 million, above our prior expectations.
Speaker #2: Public market strategies contributed $37 million, well ahead of our 5 to 25 million guide, driven primarily by another strong year from our financial services opportunity strategy, which benefited from both idiosyncratic and sector-specific performance.
Tom Simeoni: Public market strategies contributed $37 million, well ahead of our $5 to 25 million guide, driven primarily by another strong year from our financial services opportunity strategy, which benefited from both idiosyncratic and sector-specific performance. Private market strategies contributed $45 million, slightly above our $35 to 40 million guide, with the upside largely driven by our middle market lending platform. As a result, full year 2025 performance fees totaled $172 million, above our $130 to 155 million outlook, though below last year's $227 million.
Tom Simeoni: Public market strategies contributed $37 million, well ahead of our $5 to 25 million guide, driven primarily by another strong year from our financial services opportunity strategy, which benefited from both idiosyncratic and sector-specific performance. Private market strategies contributed $45 million, slightly above our $35 to 40 million guide, with the upside largely driven by our middle market lending platform. As a result, full year 2025 performance fees totaled $172 million, above our $130 to 155 million outlook, though below last year's $227 million.
Speaker #2: contributed $45 million, slightly above Private market strategies our $35 to $40 million guide, with the upside largely driven by our middle market lending platform.
Speaker #2: As a result, full year 2025 performance fees totaled $172 million, above our $130 to $155 million outlook, though below last year's $227 million. The year-over-year decline reflects the unusually strong 2024 contributions from public market strategies, such as our securitized credit strategy, ABSA, and our long, short strategy ARIA, as well as one-time carve-out catch-up fees that we did not expect to recur in 2025, as we noted on last year's call.
Tom Simeoni: The year-over-year decline reflects the unusually strong 2024 contributions from public market strategies, such as our securitized credit strategy, ABSA, and our long, short strategy, Aria, as well as one-time CarVal catch-up fees that we did not expect to recur in 2025, as we noted on last year's call. Looking to 2026, we have good visibility for private market strategies to contribute $70 to 80 million in performance fees. We also expect public market strategies to contribute at least $10 to 20 million based on current market levels. Assuming no major market drawdown, we view this outlook as a floor, though we would caution that sector or asset class level dispersion can materially affect performance fees, even in constructive broader markets.
Tom Simeoni: The year-over-year decline reflects the unusually strong 2024 contributions from public market strategies, such as our securitized credit strategy, ABSA, and our long, short strategy, Aria, as well as one-time CarVal catch-up fees that we did not expect to recur in 2025, as we noted on last year's call. Looking to 2026, we have good visibility for private market strategies to contribute $70 to 80 million in performance fees. We also expect public market strategies to contribute at least $10 to 20 million based on current market levels. Assuming no major market drawdown, we view this outlook as a floor, though we would caution that sector or asset class level dispersion can materially affect performance fees, even in constructive broader markets.
Speaker #2: Looking to 2026, we have good visibility for private market strategies to contribute 70 to $80 million in performance fees. We also expect public market strategies to contribute at least 10 to $20 million based on current market levels.
Speaker #2: market drawdown, we view this outlook as a Assuming no major floor though we would caution that sector or asset class level dispersion can materially affect performance fees, even in constructive broader markets.
Speaker #2: While public market alpha is inherently volatile and difficult to forecast, our public alternative franchise provides meaningful upside and favorable market environments, and enhances our overall market leverage profile.
Tom Simeoni: While public market alpha is inherently volatile and difficult to forecast, our public alternative franchise provides meaningful upside in favorable market environments and enhances our overall market leverage profile. This upside potential complements the more steady and predictable performance fees generated by our private markets business, resulting in an attractive and diversified performance fee opportunity for the firm. Finally, closing with slide 13. As previously mentioned, the adjusted operating margin increased sequentially to 34.5% in Q4. 2025 results benefited from favorable markets and improved operational efficiency, resulting in a full year adjusted margin of 33.7%, above our 33% market neutral forecast. This margin is at the higher end of our Investor Day target of 30 to 35%, which we expected to achieve by 2027. We are pleased with the progress we've made in strengthening our margin profile.
Tom Simeoni: While public market alpha is inherently volatile and difficult to forecast, our public alternative franchise provides meaningful upside in favorable market environments and enhances our overall market leverage profile. This upside potential complements the more steady and predictable performance fees generated by our private markets business, resulting in an attractive and diversified performance fee opportunity for the firm. Finally, closing with slide 13. As previously mentioned, the adjusted operating margin increased sequentially to 34.5% in Q4. 2025 results benefited from favorable markets and improved operational efficiency, resulting in a full year adjusted margin of 33.7%, above our 33% market neutral forecast. This margin is at the higher end of our Investor Day target of 30 to 35%, which we expected to achieve by 2027. We are pleased with the progress we've made in strengthening our margin profile.
Speaker #2: This upside potential complements the more steady and predictable performance fees generated by our private markets business, resulting in an attractive and diversified performance fee opportunity for the firm.
Speaker #2: Finally, closing with Slide 13. As previously mentioned, the adjusted operating margin increased sequentially to 34.5% in the fourth quarter. 2025 results benefited from favorable markets and improved operational efficiency, resulting in a full year adjusted margin of 33.7%, above our 33% market neutral forecast.
Speaker #2: This margin is at the higher end of our investor date target of 30 to 35%, which we expected to achieve by 2027. We are pleased with the progress we've made in strengthening our margin profile.
Tom Simeoni: Having successfully executed our major market neutral initiatives, including the Bernstein Research separation and our North America relocation strategy, we now see market performance and scalability as the primary drivers of future margin expansion. We have demonstrated meaningful operating leverage from both markets and scale, with incremental margins well above our long-term 45 to 50% target. We expect constructive markets to continue boosting the profitability of our existing services, reflecting improved flow-through to earnings. While we remain disciplined on expenses, we are also committed to investing in growth to create durable value for our unitholders. We expect to continue allocating resources to high conviction initiatives that support organic growth and increased long-term profitability. Our strategic priorities include disciplined investments in targeted growth initiatives, such as new investment services, product innovation, and expanded marketing efforts designed to enhance earnings power over time.
Tom Simeoni: Having successfully executed our major market neutral initiatives, including the Bernstein Research separation and our North America relocation strategy, we now see market performance and scalability as the primary drivers of future margin expansion. We have demonstrated meaningful operating leverage from both markets and scale, with incremental margins well above our long-term 45 to 50% target. We expect constructive markets to continue boosting the profitability of our existing services, reflecting improved flow-through to earnings. While we remain disciplined on expenses, we are also committed to investing in growth to create durable value for our unitholders. We expect to continue allocating resources to high conviction initiatives that support organic growth and increased long-term profitability. Our strategic priorities include disciplined investments in targeted growth initiatives, such as new investment services, product innovation, and expanded marketing efforts designed to enhance earnings power over time.
Speaker #2: our major market neutral initiatives, Having successfully executed including the Bernstein Research Separation Strategy, we now see market performance and scalability as the primary drivers of future margin and our North America Relocation expansion.
Speaker #2: We have demonstrated meaningful incremental margins well above our long-term 45 to 50% target. We expect constructive markets to continue boosting the profitability of our existing services, reflecting improved flow through to earnings.
Speaker #2: While we remain disciplined on expenses, we are also committed to investing in growth to create durable value for our unit holders. We expect to continue allocating resources organic growth and increased long-term to high conviction initiatives that support profitability.
Speaker #2: Our strategic priorities include disciplined investments in targeted growth initiatives such as new investment services, product innovation, and expanded marketing efforts, designed to enhance earnings power over time.
Tom Simeoni: The expansion of our commercial mortgage lending capabilities is a clear example of an investment that we expect to be accretive and value-enhancing over the long run. Before opening the line for questions, I want to express my gratitude to our colleagues for their considerable efforts and unwavering commitment to our clients, unitholders, and all stakeholders. With that, we are pleased to answer your questions. Operator?
Tom Simeoni: The expansion of our commercial mortgage lending capabilities is a clear example of an investment that we expect to be accretive and value-enhancing over the long run. Before opening the line for questions, I want to express my gratitude to our colleagues for their considerable efforts and unwavering commitment to our clients, unitholders, and all stakeholders. With that, we are pleased to answer your questions. Operator?
Speaker #2: mortgage lending capabilities is a clear example of an investment that we expect to be a The expansion of our commercial creative and value-enhancing over the long run.
Speaker #2: Before opening the line for questions, I want to express my gratitude to our colleagues for their considerable efforts and unwavering commitment to our clients, unit holders, and all stakeholders.
Speaker #2: With that, we are pleased to answer your questions.
Speaker #2: Operator. At this time, if you would
Operator: At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, simply press star one again. 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. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of John Dunn with Evercore ISI. Please go ahead.
Operator: At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw your question, simply press star one again. 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. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of John Dunn with Evercore ISI. Please go ahead.
Speaker #1: like to ask a question, your telephone keypad. press star, then the number one on To withdraw your question, simply press star one again. Please limit your initial questions to two in order to provide all callers an opportunity to ask questions.
Speaker #1: You are welcome to return to the queue to ask a follow-up. We will pause for just a moment to compile questions for the Q&A roster. Your first question comes from the line of John Dunn with Evercore ISI. Please go ahead.
Speaker #1: ahead. Hi.
John Dunn: Hi, wanted to maybe get a little more on the outlook for high yield funds, distributed in Asia. Some of the, you know, almost beyond interest rates, some of the puts and takes of, you know, that influence demand, month to month.
John Dunn: Hi, wanted to maybe get a little more on the outlook for high yield funds, distributed in Asia. Some of the, you know, almost beyond interest rates, some of the puts and takes of, you know, that influence demand, month to month.
Speaker #2: I wanted to maybe get a little more on the outlook for high yield funds distributed in Asia. Some of the almost beyond interest rates, some of the puts and takes of that influence demand month to
Speaker #2: month.
Speaker #3: Sure. Hi,
Onur Erzan: Sure. Hi, John. Yeah, it's Onur. Let me take that question. In terms of the broader trends in Asia, obviously, there are macro factors such as...
Onur Erzan: Sure. Hi, John. Yeah, it's Onur. Let me take that question. In terms of the broader trends in Asia, obviously, there are macro factors such as...
Speaker #3: question. In terms of the broader trends in Asia, obviously there are macro factors such as the effects risk for foreign investors, relative to US dollar, the rates outlook, etc.
Onur Erzan: ... the FX risk for foreign investors relative to US dollar, the rates outlook, et cetera. I mean, obviously, we've been navigating those macro factors for decades. Some of our products in Asia has been in existence for 30 years. We have not seen a tremendous impact from a structural demand perspective in terms of the FX risk yet. Yes, there are some ebbs and flows, and on a relative basis, investors are a little bit more sensitive or concerned about the FX risk, but it has not dramatically impacted the structural fixed income demand. As you know, the Asia clients, the retail, particularly likes income, and still the US dollar-denominated strategies and global strategies deliver attractive income, hence, the structural demand remains strong.
Onur Erzan: ... the FX risk for foreign investors relative to US dollar, the rates outlook, et cetera. I mean, obviously, we've been navigating those macro factors for decades. Some of our products in Asia has been in existence for 30 years. We have not seen a tremendous impact from a structural demand perspective in terms of the FX risk yet. Yes, there are some ebbs and flows, and on a relative basis, investors are a little bit more sensitive or concerned about the FX risk, but it has not dramatically impacted the structural fixed income demand. As you know, the Asia clients, the retail, particularly likes income, and still the US dollar-denominated strategies and global strategies deliver attractive income, hence, the structural demand remains strong.
Speaker #3: navigating those macro factors for decades. Some of our products in Asia have been in I mean, obviously we've been existence for 30 years. We have not seen a tremendous impact from a structural demand perspective in terms of are some ebbs and flows and are relative the effects risk yet.
Speaker #3: Yes, there basis investors are a little bit more sensitive or concerned about the effects risk, but it has not dramatically impacted the structural fixed income demand.
Speaker #3: As you know, the Asia clients, the retail particularly, likes income, and still the US dollar denominated strategies and global strategies deliver attractive income. Hence, the structural demand remains strong.
Onur Erzan: In terms of our business, in terms of a couple of positives, as you know, we started globalizing our ETF franchise, and we started with fixed income, given our strong brand in Asia, particularly in fixed income. We added our second active ETF in Taiwan. If you recall, we were the first active fixed income ETF launcher in 2025. This year, we added a high-yield fund, and it was a successful IPO, top in its category. So we see broadening of the vehicles that will help us. Another thing that will help us in Taiwan, we were facing some regulatory constraints in terms of percentage of assets that can come from Taiwanese investors in some of our vehicles. Taiwan raised those minimums from 70% to 90% for us based on some of the commitments.
Onur Erzan: In terms of our business, in terms of a couple of positives, as you know, we started globalizing our ETF franchise, and we started with fixed income, given our strong brand in Asia, particularly in fixed income. We added our second active ETF in Taiwan. If you recall, we were the first active fixed income ETF launcher in 2025. This year, we added a high-yield fund, and it was a successful IPO, top in its category. So we see broadening of the vehicles that will help us. Another thing that will help us in Taiwan, we were facing some regulatory constraints in terms of percentage of assets that can come from Taiwanese investors in some of our vehicles. Taiwan raised those minimums from 70% to 90% for us based on some of the commitments.
Speaker #3: business, in terms of a couple In terms of our of positives, as you know, we started globalizing our ETF franchise and we started with fixed income, given our strong brand in Asia, particularly in fixed income.
Speaker #3: And we added our second active ETF in Taiwan. If you recall, we were the first active fixed income ETF launcher in '25. This year we added a high yield fund and it was a successful IPO, top in its category.
Speaker #3: vehicles that will help So we see broadening of the us. And another thing that will help us in Taiwan, we regulatory constraints in terms of percentage of Taiwanese investors in some of our assets that can come from vehicles.
Speaker #3: vehicles that will help So we see broadening of the us. And another thing that will help us in Taiwan, we regulatory constraints in terms of percentage of Taiwanese investors in some of our assets that can come from were facing some Taiwan raised those minimums from based on some of the help us unlock more commitments.
Speaker #3: 70% to 90% for us opportunity in Taiwan. So as a As a result, that will result, there are a couple of unique AB specific factors that will help with the demand in 2026.
Onur Erzan: As a result, that will help us unlock more opportunity in Taiwan. So as a result, there are a couple of unique AB specific factors that will help with the demand in 2026. And then obviously, in the broader markets, there will be definitely competition across strategies, and depending on how our strategies perform on a relative basis, we'll gain or lose market share. As you know, we hold very strong market share in cross-border vehicles that are used in markets like Hong Kong. We are typically a market leader. Sometimes we give up some market share or gain some market share, depending on particularly the positioning of the rate curve, given we tend to be long duration and long credit structurally in most of our products.
Onur Erzan: As a result, that will help us unlock more opportunity in Taiwan. So as a result, there are a couple of unique AB specific factors that will help with the demand in 2026. And then obviously, in the broader markets, there will be definitely competition across strategies, and depending on how our strategies perform on a relative basis, we'll gain or lose market share. As you know, we hold very strong market share in cross-border vehicles that are used in markets like Hong Kong. We are typically a market leader. Sometimes we give up some market share or gain some market share, depending on particularly the positioning of the rate curve, given we tend to be long duration and long credit structurally in most of our products.
Speaker #3: And then, obviously, in the broader market, there will definitely be competition across strategies, and depending on how our strategies perform on a relative basis, we'll gain or lose market share.
Speaker #3: As you know, we hold very strong market share in cross-border vehicles that are used in markets like Hong Kong. We are typically a market leader.
Speaker #3: Sometimes we give up some market share or gain some market share depending on particularly the positioning of the rate curve, given we tend to be long duration and long credit structurally in most of our
Speaker #2: Got it. And then
John Dunn: Got it. And then, you know, private wealth did well in the fourth quarter. Could you maybe talk about the seasonality you might expect over the course of the year, and then kind of frame a little more the areas where you expect to see flow demand?
John Dunn: Got it. And then, you know, private wealth did well in the fourth quarter. Could you maybe talk about the seasonality you might expect over the course of the year, and then kind of frame a little more the areas where you expect to see flow demand?
Speaker #2: private wealth did well in the fourth products. quarter. Could you maybe talk about the seasonality you might expect over the course of the year and then kind of frame a little more the areas where you expect to see flow demand?
Speaker #3: Sure. Yeah. As you pointed out, we are very pleased how we finished the year in private wealth. Almost 7% annualized—sorry, 7% net new assets organic growth rate.
Onur Erzan: Sure. Yeah, as you pointed out, we are very pleased how we finished the year in private wealth. Almost 7% annualized, seven percent net new assets organic growth rate, so feeling very good about that. In terms of seasonality, you always have the tax impact in the second quarter, so that's always the biggest thing to consider. Overall, other than that, seasonality, maybe sometimes you have a little bit of a softness in August with holidays and all that in most parts of the US. But broadly, I think it's a more second quarter tax-related seasonality for the most part. And beyond that, we are feeling pretty good about our pre-pipeline in terms of our business.
Onur Erzan: Sure. Yeah, as you pointed out, we are very pleased how we finished the year in private wealth. Almost 7% annualized, seven percent net new assets organic growth rate, so feeling very good about that. In terms of seasonality, you always have the tax impact in the second quarter, so that's always the biggest thing to consider. Overall, other than that, seasonality, maybe sometimes you have a little bit of a softness in August with holidays and all that in most parts of the US. But broadly, I think it's a more second quarter tax-related seasonality for the most part. And beyond that, we are feeling pretty good about our pre-pipeline in terms of our business.
Speaker #3: So, feeling very good about that. In terms of seasonality, you always have the tax impact in the second quarter, so that's always the biggest thing to consider.
Speaker #3: Overall, other than that, seasonality maybe sometimes you have a little bit of a softness in August with holidays and all that in most parts of the US.
Speaker #3: But broadly, I think it's a more second quarter tax related seasonality for the most part. And beyond that, we are feeling pretty good about our pre-pipeline in terms of our business.
Onur Erzan: As you recall, when we mentioned in the past, one of our big drivers of growth in terms of particular new client acquisition is the exits. As the M&A activity has been robust and given we have a very strong ultra network proposition with business owners and entrepreneurs, when we have strong exits through M&A, we tend to do quite well in terms of onboarding new ultra network clients. So we continue to see strength in that area, as an example.
Speaker #3: As you recall, when we mentioned in the past, one of our big drivers of growth in terms of particular new client acquisition is the exits.
Onur Erzan: As you recall, when we mentioned in the past, one of our big drivers of growth in terms of particular new client acquisition is the exits. As the M&A activity has been robust and given we have a very strong ultra network proposition with business owners and entrepreneurs, when we have strong exits through M&A, we tend to do quite well in terms of onboarding new ultra network clients. So we continue to see strength in that area, as an example.
Speaker #3: As the M&A activity has been robust and given we have a very strong ultra network proposition with business owners and entrepreneurs, when we have strong exits through M&A, we tend to do quite well in terms of onboarding new ultra network clients.
Speaker #3: see strength in that area as an So we continue to
Speaker #3: example.
Speaker #2: Thanks very
John Dunn: Thanks very much.
John Dunn: Thanks very much.
Speaker #2: much.
Speaker #1: Your next
Operator: Your next question comes from the line of Benjamin Budish with Barclays. Please go ahead.
Operator: Your next question comes from the line of Benjamin Budish with Barclays. Please go ahead.
Speaker #1: Benjamin Butish with Barclays. Please go ahead.
Speaker #4: Hi, this is Nathan off of Ben. Just a quick question—with AI-related volatility impacting software valuation, can you size AB's private credit exposure to software across the portfolio by percentage of AUM, maybe top exposures?
[Analyst] (Barclays): Hi, this is Nathan on for Ben. Just a quick question with AI-related volatility impacting software evaluation. Can you size AB's private credit exposure to software across the portfolio by, you know, percentage of AUM, maybe top exposures, and, like, any areas where you tighten underwriting or adjusted risk limits? Thank you.
Benjamin Budish: Hi, this is Nathan on for Ben. Just a quick question with AI-related volatility impacting software evaluation. Can you size AB's private credit exposure to software across the portfolio by, you know, percentage of AUM, maybe top exposures, and, like, any areas where you tighten underwriting or adjusted risk limits? Thank you.
Speaker #4: And like any areas where you tighten underwriting or adjusted risk limits? Thank you.
Speaker #3: Sure. It's an honor. Let me take that as well. It's not a very significant exposure for us, given our broadly diversified global asset management platform.
Onur Erzan: Sure. It's Onur. Let me take that as well. It's not a very significant exposure for us, given our broadly diversified global asset management platform. To recap, our private alts platform is around $82 billion of assets based on fee earning and fee-eligible AUM. Within that, roughly 25% is our corporate direct lending business, PCI. And in that business, typically it is, we are the lead underwriter in middle market loans against sponsors. Typically, we work with 250 sponsors in the United States. Typical companies we work with are in the $10 to 75 million EBITDA range. So within that PCI portfolio, we have exposure to technology or software kind of companies....
Onur Erzan: Sure. It's Onur. Let me take that as well. It's not a very significant exposure for us, given our broadly diversified global asset management platform. To recap, our private alts platform is around $82 billion of assets based on fee earning and fee-eligible AUM. Within that, roughly 25% is our corporate direct lending business, PCI. And in that business, typically it is, we are the lead underwriter in middle market loans against sponsors. Typically, we work with 250 sponsors in the United States. Typical companies we work with are in the $10 to 75 million EBITDA range. So within that PCI portfolio, we have exposure to technology or software kind of companies....
Speaker #3: To recap, our private alts platform is around $82 billion of assets based on fee earning and fee eligible AUM. Within that, roughly 25% is our corporate direct lending business, PCI.
Speaker #3: And in that business, typically it is we are the lead underwriter in middle markets loans against 250 sponsors in the United States, typical companies we work with are in the 10 range.
Speaker #3: So within that PCI to 75 million dollar EBITDA portfolio, we have exposure to technology or software kind of companies. Our exposure tends to be in line with the rest of the corporate direct lending markets.
Onur Erzan: Our exposure tends to be in line with the rest of the corporate direct lending markets. So typically around a quarter of the AUM tends to be related to software. We have a long-standing history in terms of operating in technology and software, and we have not seen any material change in terms of our loss experience. And we have been very diligent in monitoring our credit watches and staying close to those borrowers. But so far, again, no major deterioration, and even it was to deteriorate materially, it's not gonna impact our business given middle market lending is only roughly $25 billion of AUM, and within that, we only have a certain percentage exposure to software, as I mentioned. So overall, we are not that sensitive to it.
Onur Erzan: Our exposure tends to be in line with the rest of the corporate direct lending markets. So typically around a quarter of the AUM tends to be related to software. We have a long-standing history in terms of operating in technology and software, and we have not seen any material change in terms of our loss experience. And we have been very diligent in monitoring our credit watches and staying close to those borrowers. But so far, again, no major deterioration, and even it was to deteriorate materially, it's not gonna impact our business given middle market lending is only roughly $25 billion of AUM, and within that, we only have a certain percentage exposure to software, as I mentioned. So overall, we are not that sensitive to it.
Speaker #3: So typically around the quarter of the AUM tends to be related to software. We have a longstanding history in terms of operating in technology and software, and we have not seen any material change in terms of our loss experience.
Speaker #3: And we have been very diligent in monitoring our credit watches and staying close to those borrowers. But so far, again, no major deterioration. And even it was to deteriorate materially, it's not going to impact our business given middle market lending is only roughly 25 billion of AUM.
Speaker #3: And within that, we only have a certain percentage exposure to software, as I mentioned. So overall, we are not that sensitive to it.
Speaker #4: Thank you. And a follow-up would be, given we understand it's early to update, with the target of getting, like, $90 to $100 billion of private markets AUM.
[Analyst] (Barclays): Thank you. And a follow-up would be, you know, given we know, we understand that it's early to update on the target of getting like $90 to 100 billion of private markets AUM. But like, how are you thinking about growing that private markets piece beyond that time horizon?
Benjamin Budish: Thank you. And a follow-up would be, you know, given we know, we understand that it's early to update on the target of getting like $90 to 100 billion of private markets AUM. But like, how are you thinking about growing that private markets piece beyond that time horizon?
Speaker #4: But how are you thinking about growing that private markets piece beyond that time horizon?
Speaker #3: Well, let me answer it. It's Seth. Let me answer it this way. We're not including the money that we will be onboarding this year from the commercial mortgage lending.
Seth Bernstein: Well, let me answer it this way. It's Seth. We're not including the money that we will be onboarding this year from the commercial mortgage lending team. I mean, yes, that counts as private market assets, but we continue to focus on beating the $90 to 100 billion that we forecasted for 2027. We will, with our Q2 earnings, revise that target for you, but we are ambitious, and we see further opportunities to expand it.
Seth Bernstein: Well, let me answer it this way. It's Seth. We're not including the money that we will be onboarding this year from the commercial mortgage lending team. I mean, yes, that counts as private market assets, but we continue to focus on beating the $90 to 100 billion that we forecasted for 2027. We will, with our Q2 earnings, revise that target for you, but we are ambitious, and we see further opportunities to expand it.
Speaker #3: Team. mean, yes, that counts as I private market assets, but we continue to focus on beating the 90 to 100 billion that we we will, with our second forecasted.
Speaker #3: quarter earnings, revise that For 2027, target. For you, but we are ambitious and we see further opportunities to expand it.
Speaker #4: Thank
Speaker #4: you. Again, if you would like to
[Analyst] (Barclays): Thank you.
Benjamin Budish: Thank you.
Operator: Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. There are no further questions at this time. Mr. Dragaly, I turn the call back over to you.
Operator: Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. There are no further questions at this time. Mr. Dragaly, I turn the call back over to you.
Speaker #1: ask a question, please your telephone no further questions at this time. Mr. Dragali, I turn the call back over to you.
Speaker #2: All right. Thank you all for joining this busy day. Please follow up with us if you have any additional questions. you very Thank much.
Onur Erzan: All right. Thank you all for joining this busy day. Please follow up with us if you have any additional questions. Thank you very much.
Yannis Georgalis: All right. Thank you all for joining this busy day. Please follow up with us if you have any additional questions. Thank you very much.
