Speaker #1: Thank you for standing by, and welcome to the AllianceBernstein fourth quarter 2025 earnings review. At this time, all participants are in 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.
Operator: Thank you for standing by, and welcome to the AllianceBernstein Q4 2025 Earnings Review. At this time, all participants are in a listen-only mode. After the remarks, there will be a Q&A 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. Ioanis Jorgali. Please go ahead.
Speaker #1: 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 Investor Relations for AB, Head of Mr. Ioanis Jorgali. Please go ahead.
Ioanis Jorgali: 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 Simeone, our Chief Financial Officer. Onur Erzan, our President, will join us for the Q&A 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.
Speaker #2: Good morning, everyone, and welcome to our fourth quarter 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.
Speaker #2: Joining us today to results are Seth Bernstein, our Chief Executive Officer, and Thomas Simeone, our Chief Financial discuss the company's quarterly Officer. Honor Erzan, our President, will join us for the question and answer session following our prepared remarks.
Seth Bernstein: Joining us today to discuss the company's quarterly results are Seth Bernstein, our Chief Executive Officer, and Tom Simeone, our Chief Financial Officer. Onur Erzan, our President, will join us for the Q&A 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. 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. Our standard GAAP reporting and reconciliation of GAAP-to-adjusted results are in our presentation, appendix, press release, and our 10-K.
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 presentation.
Ioanis Jorgali: 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. 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: also find our safe harbor language in language on slide two of our You can the MD&A of our 10-K, which will be filed next week.
Speaker #2: 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.
Speaker #2: Our standard GAAP reporting and reconciliation of GAAP-to-adjusted results are in our presentation, appendix, press release, and our management may only address questions of material 10-K.
Seth Bernstein: Under Regulation FD, management may only address questions of material nature from the investment community in a public forum, so please ask all such questions during this call. Now I'll turn it over to Seth. Good morning, and thank you for joining us today. 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 unit holders.
Speaker #2: 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 #3: Good morning, and thank you for joining us today. 2025 was a year of disciplined execution and
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 unit holders.
Speaker #3: 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 Under regulation FD, who has played a pivotal role in our President, Honor Erzan.
Speaker #3: 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 Under regulation FD, who has played a pivotal role in our President, Honor Erzan. transformation is our newly appointed proven leadership track record spanning With a our client group, private wealth, and more recently, our private markets businesses, Honor has consistently demonstrated strategic vision, 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 Honor, 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: As CEO, I will continue to set the firm's strategic direction and guide our leadership team. 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: As CEO, I will continue to set the firm's strategic direction and guide our leadership team. 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: our key business highlights from the quarter and the year on slide Now, let's dive into three. 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, SMAs, and private markets.
Speaker #3: insurance general accounts, tax-exempt A notable positive is our Bernstein Private Wealth business, which has a $156 billion in assets under management and contributed roughly $37% of our firm-wide revenues in platform closed the year with $82 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 the fourth quarter. 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.
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 the fourth quarter. 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.
Speaker #3: billion in AUM, up 18% year over year. Driven In addition, our private markets by approximately $9 billion of deployments across all channels in 2025.
Speaker #3: 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 strong inflows into targeted growth areas, firm-wide active net flows conversions.
Speaker #3: 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 of outflows in the fourth quarter.
Speaker #3: 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.
Speaker #3: Taxable fixed income saw $2 billion $9.1 billion for the years as in outflows in the fourth quarter and overseas retail demand declined amid GEOPOLITICAL uncertainty and a weaker dollar.
Seth Bernstein: Taxable fixed income saw $2 billion in outflows in Q4 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 Q4 and $11.6 billion for the year. 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 Q4 and $10.6 billion for the full year, supported by strong private markets deployments. Third, our scalable model and disciplined expense management continue to drive profitable growth.
Seth Bernstein: Taxable fixed income saw $2 billion in outflows in Q4 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 Q4 and $11.6 billion for the year. 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 Q4 and $10.6 billion for the full year, supported by strong private markets deployments. Third, our scalable model and disciplined expense management continue to drive profitable growth.
Speaker #3: Institutionally, we had roughly $4 billion of taxable outflows related to the 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 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.
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.
Seth Bernstein: 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. 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.
Seth Bernstein: 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. 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.
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 partnership.
Speaker #3: investments to enhance our commercial real I'm pleased to share that we're making scale of our platform. As a result, while onboard more than $10 billion of new long-duration assets from equitable by year-end 2026.
Speaker #3: a meaningful expansion of our This represents origination and servicing capabilities in commercial mortgages. Beyond the financially accretive the broader strategic value of our example of how our alignment continues to nature of this commitment, it underscores unlock incremental growth well partnership with equitable.
Seth Bernstein: It's a clear example of how our alignment continues to unlock incremental 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. 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 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.
Seth Bernstein: It's a clear example of how our alignment continues to unlock incremental 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. 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 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.
Speaker #3: beyond the $10 billion-plus of additional committed assets. Leveraging our expertise in commercial real estate lending, the adjacent capabilities will build upon our It's a clear existing footprint in core and core-plus real estate credit and bring insurance-tailored assets to over $20 our scale and enables us to compete more effectively in the billion.
Speaker #3: strategically important insurance channel. As of year-end, we managed over $59 billion on behalf of more than 90 This enhances third-party insurance clients, with general account assets growing 36% year over year.
Speaker #3: 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.
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.
Seth Bernstein: Turning to slide 5, I'll review our investment performance starting with fixed income. 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. Short-term rates declined following the Fed's rate cuts, while long-end yields remained elevated, steepening the yield curve. The U.S. 10-year Treasury ended the year near 4.2%, reflecting persistent long-term inflation and fiscal concerns. The Bloomberg U.S. 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 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 four or five stars by Morningstar.
Seth Bernstein: Turning to slide 5, I'll review our investment performance starting with fixed income. 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. Short-term rates declined following the Fed's rate cuts, while long-end yields remained elevated, steepening the yield curve. The U.S. 10-year Treasury ended the year near 4.2%, reflecting persistent long-term inflation and fiscal concerns. The Bloomberg U.S. 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 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 four or five stars by Morningstar.
Speaker #3: Delivered broad-based gains in the fourth quarter of 2025, despite fixed income markets' 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 softer labor market trends and the yield curve.
Speaker #3: The US 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 in the fourth quarter and 10% in Yield Index returned 2.4% 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 AUM outperformed over the five-year periods. Demand for intermediate duration has strengthened, and fixed income volatility has declined meaningfully.
Seth Bernstein: 86% of our AUM outperformed over the one- and three-year periods, while 67% of our AUM outperformed over the five-year periods. 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 under-penetrated. 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: 86% of our AUM outperformed over the one- and three-year periods, while 67% of our AUM outperformed over the five-year periods. 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 under-penetrated. 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: 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.
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 the 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 strategies are gaining traction in the investment-grade bond market, with strong institutional platform.
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 Q4, 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 U.S., supported by a weaker U.S. dollar, more compelling relative valuations, and a rotation away from U.S. 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 U.S. 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 Q4, 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 U.S., supported by a weaker U.S. dollar, more compelling relative valuations, and a rotation away from U.S. 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 U.S. equity franchises, particularly growth, defensive, and sustainable strategies amid a market environment dominated by speculative momentum-driven names and narrow leadership.
Speaker #3: demand and consultant support in Our systematic 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.
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 leadership.
Speaker #3: Our equity performance softened in 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 one year, 37% over three years, and 51% over five 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 with 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 stretched valuations created the 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 one year, 37% over three years, and 51% over five 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 with 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 stretched valuations created the 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 as industrials and financials benefited from
Speaker #1: From improving earnings , breath , especially in , emerging markets , markets non-US and international value and core strategies were standouts . The highly notable concentrated nature of US market equity leadership and stretch and core strategies were notable standouts .
Speaker #1: concentrated nature of US equity leadership and market valuations created a challenging backdrop for active managers . In response , were sharpening against our execution investment philosophies , leveraging decision analytics to areas for identify , implement targeted changes improvement and measure outcomes with greater discipline .
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 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 more risk-supportive conditions. Looking ahead, we believe that 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 two-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 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 more risk-supportive conditions. Looking ahead, we believe that 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 two-year streak of organic gains.
Speaker #1: Our equity diversified across styles and platform is regions , avoiding intentionally overexposure to single market any regime . Thematic and cyclically oriented value strategies provide balance and upside participation in risk on environments , complementing more defensively positioned portfolios market as began to improve .
Speaker #1: breadth platform has performance rebound . A growing share of growth value , core and thematic Entering 2026 , strategies are delivering results . While stronger now strategies have defensive relative lagged in a more risk , supportive conditions .
Speaker #1: Looking ahead , we believe continued the earnings breadth and stable economic growth could favor international and value strategies . lower portfolios with tracking Additionally , error clients offer may more consistent in participation narrow leadership environments , helping diversify to performance and streams reduce reliance on a concentrated set of products .
Speaker #1: Turning to slide six . I'll discuss retail highlights . Retail flows softened in 2025 , a two year streak of ending gains . channel organic $3.5 billion in net outflows in the fourth saw $9.1 billion for the full quarter , by active driven and redemptions and equity in softness taxable fixed income .
Seth Bernstein: The channels 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. 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 and tax-exempt, extending a 13-year history of organic growth.
Seth Bernstein: The channels 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. 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 and tax-exempt, extending a 13-year history of organic growth.
Speaker #1: Partially offset by continuing strength in municipals equities Active experienced outflows the quarter and throughout the year , primarily led by US growth oriented services .
Speaker #1: Fixed income allocations favored tax exempt taxable flows while reversed to modest , driven by primarily US retail muni delivered 23% organic our growth in 2025 , surpassing $56 billion in third party retail across AUM SMAs , ETFs and mutual funds .
Speaker #1: Despite headwinds , overseas US retail momentum remained . Taxable fixed durable income posted a second consecutive year of organic growth by expanding , supported our suite continued alongside in market share tax gains ETF exempt growth organic extending a , 13 year history .
Seth Bernstein: 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. Moving to slide 7, I'll cover our institutional channel. Institutional outflows moderated year-over-year, narrowing to $1.9 billion in the fourth quarter and $4.6 billion in 2025. Private alternatives remain the key growth engine, supported by strong inflows across existing, adjacent, and newly launched strategies. Channeled deployments into private markets totaled approximately $2 billion in the fourth quarter and nearly $8 billion for the year. Taxable fixed income outflows were modest in the fourth quarter, 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 incomes' enduring value, just as we've consistently demonstrated in the early waves in 2024. Moving to slide 7, I'll cover our institutional channel. Institutional outflows moderated year-over-year, narrowing to $1.9 billion in the fourth quarter and $4.6 billion in 2025. Private alternatives remain the key growth engine, supported by strong inflows across existing, adjacent, and newly launched strategies. Channeled deployments into private markets totaled approximately $2 billion in the fourth quarter and nearly $8 billion for the year. Taxable fixed income outflows were modest in the fourth quarter, while outflows for the year were largely driven by Equitable RGA's reinsurance transaction, offsetting inflows into our growing systematic platform.
Speaker #1: we effect , believe the In bond reallocation trend has significant positioned to runway clients and capture were well help incomes , fixed enduring value just as we've consistently demonstrated early waves in the in 2024 , moving to slide seven , I'll cover our institutional channel .
Speaker #1: Institutional moderated year over outflows year , narrowing to $1.9 billion in the fourth and quarter in 2025 . Private $4.6 billion alternatives remained a key growth engine , supported strong by inflows across existing adjacent and newly launched strategies .
Speaker #1: deployments Channel private totaled markets into approximately in the fourth quarter , $2 billion and 8 billion for the nearly year . Taxable fixed income were outflows the fourth quarter , modest in outflows for the year were largely driven by equitable aga's reinsurance offsetting transaction , inflows our growing systematic into platform Active equities .
Seth Bernstein: Active equities experienced roughly $2 billion in outflows in the fourth quarter 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 the fourth quarter 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 the fourth quarter 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 the fourth quarter and 6% for the full year 2025, with annual organic growth of nearly 2% for both periods.
Speaker #1: outflows in the 2 billion in fourth quarter experienced year , primarily from our 7 billion for the concentrated and core strategies global . Our institutional pipeline expanded to growth more than the above while mentioned addition of mortgage 10 billion in commercial As loans previously noted , we .
Speaker #1: Add expect to approximately $3 billion of mandates, strategic from insurance partnerships, over the coming quarters. Next, we'll cover Wealth Private. Bernstein Private Wealth delivered its second consecutive quarter of organic growth and fifth straight year of net growth, supported by record flows, productivity, and level of client assets. Positive 7% in the net new for the fourth quarter and full 6% for the year 2025, with annual organic growth of nearly 2% for both periods. Growth was broad based.
Seth Bernstein: Growth was broad-based across asset classes, driven by client reallocations into 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 reallocations into 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 #1: across asset classes , driven by client into fixed reallocations income , rising adoption of sustained and for demand alternatives efficient index equity solutions .
Speaker #1: As noted, Private Wealth represents, earlier, 18% of firmwide average but contributes AUM—37% of total, roughly—reflecting an attractive fee profile and a highly client-focused base.
Speaker #1: engaged Importantly , these revenues are sourced directly , underscoring the strength of our differentiated farm to model table . with slides nine and ten , I'll close which the highlight both our private markets platform and the strategic value of our partnership with equitable .
Speaker #1: Over the decade , we've past scaled our private markets platform to $82 billion in fee paying and fee eligible AUM , delivering 18% year over year growth .
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 #1: oriented credit Anchored in strategies , direct lending , alternative commercial real credit , estate , debt and private placements . Our platform serves a broad and growing base of retail , institutional and insurance clients across wide range of risk return objectives momentum of including .
Speaker #1: Equitable's a $20 billion permanent capital commitment now largely deployed , has accelerated our expansion in private markets and strengthened our ability seed to higher fee , longer duration strategies .
Speaker #1: Our collaboration continues to evolve beyond periodic cycles with the commitment expansion of the commercial mortgage capabilities, latest in a representing the series of successful initiatives—residential spanning mortgages, structured private placements, and private credit.
Speaker #1: We view our strategic partnership equitable as a with meaningful , competitive advantage , reinforcing AB's capital like client aligned model and enabling efficient and disciplined scaling of offerings new .
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 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 target for private markets AUM by 2027. With that, I'll hand it over to Tom to review our financial results. Tom.
Speaker #1: our proven With track record and focused strategy . We're well positioned to the transform business , unlock new opportunities for our clients , and exceed 90 to $100 billion target for private markets .
Speaker #1: AUM by 2027. With that, I'll hand it over to Tom to review our financial results. Tom.
Tom Simeone: Thank you, Seth, and thank you to everyone joining us today. AB 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. 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 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. For a reconciliation of GAAP and adjusted financials, please refer to our presentation appendix.
Tom Simeone: Thank you, Seth, and thank you to everyone joining us today. AB 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. 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 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. For a reconciliation of GAAP and adjusted financials, please refer to our presentation appendix.
Speaker #2: Thank you . Seth , and thank you to everyone joining us today . AB enters 2026 with clear momentum underscored our by fourth full year quarter and And the we're results .
Speaker #2: Thank you . Seth , and thank you to everyone joining us today . AB enters 2026 with clear momentum underscored our by fourth full year quarter and And the we're making on our strategic .
Speaker #2: 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 prior year , while full year distributions the were $3.38 , up 4% . The difference between epu and distributions reflect the mathematical impact of the lower average count , and unit higher income the generated in the second half of 2025 .
Speaker #2: On slide 11 , we show our adjusted results , which remove the effect of certain items that considered part of are not our core operating business .
Speaker #2: For a reconciliation of GAAP and adjusted please financials , refer to our appendix presentation . Fourth quarter net revenues were down $957 million , 2% versus the prior year higher base were offset by fees as .
Speaker #2: For a reconciliation of GAAP and adjusted please financials , refer to our appendix presentation . Fourth quarter net revenues were down $957 million , 2% versus the prior year higher base were offset by fees as lower year Full performance revenues were $3.5 billion , flat year over year and 3% on a like for up like basis when excluding the Research $96 million of Bernstein revenue recognized in 2024 .
Tom Simeone: 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. 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 detail shortly.
Tom Simeone: 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. 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 detail shortly.
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 periods , $133 million , which benefited from fees at catchup Carvel .
Speaker #2: On the side, and strong contributions from several public market strategies, including APSA and Aria. While full year fees performance of $172 million declined 24% year over year.
Speaker #2: in They came above our 130 to $155 million guidance range , and I will provide additional detail shortly . Dividend and interest revenue , along with broker dealer expense , declined in both related interest full year , reflecting lower client cash and margin in balances wealth private .
Tom Simeone: 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. Q4 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 Q4 compensation ratio. As a result, our full year compensation ratio was 48.3%, slightly better than the 48.5% included in our prior guidance.
Tom Simeone: 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. Q4 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 Q4 compensation ratio. As a result, our full year compensation ratio was 48.3%, slightly better than the 48.5% included in our prior guidance.
Speaker #2: Moving to expenses fourth quarter total operating expenses were $627 million , up 1% versus the prior year , driven by compensation 2% higher expenses and essentially flat non-compensation expenses .
Speaker #2: Full year operating were $2.3 billion , expenses 2% , as slightly compensation was more than offset by lower non-compensation higher expense . Fourth quarter total compensation and benefits 2% year over increased compensation year , with ratio of 47.7% of adjusted net a revenues .
Speaker #2: This is above last year's 46% , but better than 48.5% guidance . Full year revenues exceeded our earlier expectations , allowing us to reduce the fourth quarter compensation ratio as a year result , our full compensation ratio was 48.3% , slightly better than the 48.5% included in our prior guidance .
Tom Simeone: We will begin accruing at a 48.5% compensation ratio in Q1 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. Promotion and servicing costs decreased 1% in 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.
Tom Simeone: We will begin accruing at a 48.5% compensation ratio in Q1 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. Promotion and servicing costs decreased 1% in 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.
Speaker #2: We’re accruing at a 48.5% compensation ratio in the first quarter of 2026, consistent with last year’s, 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 Research Bernstein .
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 prior guidance of 600 to $610 million . This reflects below our 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 Simeone: 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 buildout 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.
Tom Simeone: 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 buildout 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.
Speaker #2: increase reflects normalization in promo and G&A expenses , recovering from 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% .
Speaker #2: As a reminder , promo and servicing includes transfer fees , move which directionally with markets . Our year over year non-comp outlook implies 6 to 7% growth at the midpoint , slightly our long term above objective of keeping increases below the level inflation of .
Speaker #2: This reflects investments to integrate our new investment management and complete the onboarding of the commercial mortgage assets , both of which we expect to be accretive earnings over to time platform .
Tom Simeone: 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. Over the years, we have purpose-built technology that has served us well, but much of it is aligned to 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.
Tom Simeone: 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. Over the years, we have purpose-built technology that has served us well, but much of it is aligned to 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.
Speaker #2: After a robust selection process, we believe the platform investment that we selected will materially enhance our foundational model and data management, and prepare us for the future.
Speaker #2: Over the years , we have purpose built technology that has served us well , much of it is but aligned to an individual investment team's and asset classes .
Speaker #2: This new platform will us to unify around a allow 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 before generating $20 to $25 million in annual net expense savings beginning in full year 2030.
Tom Simeone: 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. 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 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.
Tom Simeone: 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. 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 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: After all , legacy systems are retired . Our full year 26 Non-comp guide assumes roughly impact $10 million of PNL from technology implementation expenses and the onboarding of our CML platform .
Speaker #2: As excited to expand our with equitable as partnership scale mentioned , we are institutional and insurance in solutions tailored commercial and believe we can rapidly scale the team in platform will be fully operational in the second half of 2026 , and we expect to manage more initially than $10 billion of long duration assets for equitable with asset onboarding expected by year end .
Speaker #2: Excluding discretionary investment spend . Non-compensation expense would increase in the low single , consistent with our long digits term target interest on borrowings roughly quarter , and $1 million in the fourth 15 million for the full year 2025 , compared to the year prior periods , reflecting lower interest rates and lower debt balances .
Tom Simeone: 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 the fourth quarter, 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. In fixed income, elevated rates and FX volatility weighed on taxable fixed income flows and AUM.
Tom Simeone: 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 the fourth quarter, 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. In fixed income, elevated rates and FX volatility weighed on taxable fixed income flows and AUM.
Speaker #2: ABP's effective tax rate was 5.9% in 2025, just shy of the low end of our 6 to 7% guidance range, which reflects favorable earnings.
Speaker #2: We forecast effective tax rate in Abp's 2026 to be 6 to 7% in the fourth quarter . Firmwide fee rate was 38.7 basis points , and our full year free Our was 38.9 basis points we've said before , .
Speaker #2: the fee rate will continue to be mixed , dependent As and several dynamics influenced both the quarter and full year . the First , on equity side , markets finished the year higher , volatility meant that AUM average significantly lagged .
Speaker #2: End of period levels. But we also saw outflows higher from fee equity active, which put modest pressures on services and on the fee rate.
Tom Simeone: 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. 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 Simeone: 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. 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.
Speaker #2: 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 While most of our income .
Speaker #2: active fixed income inflows came SMAs , uni from 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 .
Speaker #2: regional Our sales mix and strategic growth initiatives have mitigate broader helped industry fee rate compression and are all in including fee rate , performance Has fees .
Speaker #2: trended higher over time as private AUM has expanded . markets 12 reflects a breakdown of our fees performance by private and market public strategies .
Speaker #2: Fourth quarter performances were $82 million above our prior expectations . Public market strategies contributed $37 million , well ahead of our 5 to $25 million guide , driven primarily by another strong year our from financial services opportunity strategy , which from both benefited idiosyncratic and sector specific performance market strategies .
Tom Simeone: 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. 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.
Tom Simeone: 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. 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.
Speaker #2: contributed Private slightly $45 million , above our 35 to $40 million guide . upside largely our middle driven by lending platform market . As a result , full year 2025 performance fees totaled $172 million , above our 130 to $155 million below outlook , though last year's $227 million .
Speaker #2: The year over year decline reflects the unusually strong from public market strategies such as our securitized credit strategy and our short strategy . Aria , carve out as one time catch up fees that long not expect to recur in 2025 .
Speaker #2: As we noted on last year's call , looking to 2026 , we visibility have good for private market strategies to contribute 70 to $80 million in We also expect fees public market strategies to contribute at least 10 to $20 million based on current market levels , assuming major no market view this drawdown .
Tom Simeone: 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. 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.
Tom Simeone: 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. 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.
Speaker #2: outlook We as a though we would flaw , caution that or sector asset class level dispersion can materially affect performance fees even in constructive , broader markets market alpha .
Speaker #2: public inherently volatile and difficult to our public franchise alternative forecast , provides upside and meaningful market favorable environments and enhances overall our leverage , profile market upside potential .
Speaker #2: This complements the steady and more predictable performance generated by our private markets fees business , resulting in an attractive and diversified performance fee opportunity for the firm .
Speaker #2: Finally , closing with slide 13 . As previously the mentioned , adjusted operating margin increased sequentially to 34.5% in the fourth quarter Results benefited 2025 .
Speaker #2: from markets and favorable improved efficiency , operational resulting in a full year adjusted margin of 33.7% above our 33% margin . Neutral forecast .
Tom Simeone: 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. 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 unit holders.
Tom Simeone: 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. 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 unit holders.
Speaker #2: This margin is at the Investor Day our target of 30 to 35% , which we expect it to achieve by 2027 . We are pleased with the progress in we've made margin strengthening our , having profile major executed our market neutral successfully initiatives , including Bernstein Research the Separation and America our North Relocation we now see market performance and as the Strategy , primary scalability drivers future margin of expansion .
Speaker #2: We have demonstrated meaningful operating leverage from both markets and scale with incremental margins well above our long term 45 to 50% target . We markets continue to constructive boosting the profitability existing of our services , reflecting improved flow through to earnings while we remain disciplined on we while expenses , we also committed to investing in growth to create durable value for our unitholders .
Tom Simeone: 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. 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, unit holders, and all stakeholders. With that, we are pleased to answer your questions. Operator. At this time, if you would like to ask a question, press star, then the number 1 on your telephone keypad. To withdraw your question, simply press star 1 again.
Tom Simeone: 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. 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, unit holders, and all stakeholders. With that, we are pleased to answer your questions. Operator.
Speaker #2: We expect to continue allocating resources to conviction initiatives high that support organic growth and increased long term profitability . Our strategic priorities include investments in growth targeted initiatives such as new investment services , product innovation , and expanded marketing efforts designed to enhance time over power .
Speaker #2: of our expansion earnings commercial mortgage lending capabilities is a clear example of an investment expect to be that we and enhancing accretive value long run .
Speaker #2: Before opening the line for express my colleagues gratitude to our questions , I want to and efforts unwavering considerable commitment to our clients , unitholders , stakeholders .
Operator: At this time, if you would like to ask a question, press star, then the number 1 on your telephone keypad. To withdraw your question, simply press star 1 again. Please limit your initial questions to 2 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 #2: With that , we are pleased to answer your questions . Operator .
Speaker #3: At this if you would like time , to ask a question , press then the number one on your telephone keypad . To your question , withdraw press star one again , please limit your simply initial questions to two in order to star , provide all callers and opportunity to ask questions , you are welcome to to the to queue ask follow up questions .
Tom Simeone: Please limit your initial questions to 2 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. Hi. 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 month. Sure. Hi, John. It's Nathan Aunor. Let me take that question. In terms of the broader trends in Asia, obviously there are macro factors such as the FX risk for foreign investors relative to US dollar, the rate outlook, etc. I mean, obviously we've been navigating those macro factors for decades.
Speaker #3: We pause for will moment to just a compile the Q&A roster . Your first question from the comes John of Dunn with Evercore ISI .
John Dunn: Hi. 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 month.
Speaker #3: Please go ahead
Speaker #4: Hi .
John Dunn: Sure. Hi, John. It's Nathan Aunor. Let me take that question. In terms of the broader trends in Asia, obviously there are macro factors such as the FX risk for foreign investors relative to US dollar, the rate outlook, etc. I mean, obviously we've been navigating those macro factors for decades.
Speaker #4: you know , that influence demand month to month .
Speaker #5: Sure . Hi , John . It's honor . Let me take question . that In terms of the broader trends in Asia . Obviously there are factors such as macro the effects risk for foreign investors relative US to dollar .
Tom Simeone: Some of our products in Asia have 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. 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. And we added our second active ETF in Taiwan.
John Dunn: Some of our products in Asia have 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. 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. And we added our second active ETF in Taiwan.
Speaker #5: The rate outlook , etc. . I mean , obviously , we've been navigating macro factors those decades . Some of our for products in Asia has been in existence for 30 years .
Speaker #5: 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, concern about sensitive or the more effects risk, but it has not really impacted.
Speaker #5: the structural fixed Investors are a demand . dramatically As you know , the Asia income clients , the retail particularly income still likes the and US strategies dollar strategies deliver income .
Speaker #5: Hence , the attractive structural demand remains 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 .
Speaker #5: Given our strong brand in Asia , particularly in fixed . income we added our second ETF in Taiwan . If active recall , we were the first active fixed income ETF you launcher in 25 .
Tom Simeone: 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. And 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. 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.
John Dunn: 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. And 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. 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.
Speaker #5: This year . We yield was a fund and it successful category . in its top broadening So we see of the IPO that will help us .
Speaker #5: And another thing that will that help us Taiwan , in we facing were some constraints regulatory in terms of percentage of assets that can Taiwanese from investors in some of our vehicles .
Speaker #5: raised those Taiwan minimums from 70% to 90% for us , based on some of the commitments . As a result , will help us that unlock more in opportunity Taiwan .
Speaker #5: So as a there are a couple of result , ABS specific will help with the demand in 2026 . And then obviously broader in the there markets , will be definitely competition across strategies and depending on how our perform in relative basis , we will gain or lose market share .
Tom Simeone: 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. Got it. And then private wealth did well in Q4. 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? Sure. Yeah.
John Dunn: 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 #5: As you know , we hold very strong market share in cross border vehicles that are used markets like Hong Kong . We are in leader .
Speaker #5: Sometimes we give up some market share or market some , depending market share on particularly the rate we tend to curve . Given positioning of duration long and long credit structurally in most of our products .
John Dunn: Got it. And then private wealth did well in Q4. 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 #4: it . And you then , know , Got private wealth did well quarter . Could in the fourth maybe talk about the seasonality you might course of the year , and expect over the kind of a little frame more , the then areas where you expect to see demand flow , ?
Onur Erzan: 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. So feeling very good about that. In terms of seasonality, you always have the tax impact in Q2. 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 Q2 tax-related seasonality for the most part. And beyond that, we are feeling pretty good about our private pipeline in terms of our business. 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.
Tom Simeone: 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. So feeling very good about that. In terms of seasonality, you always have the tax impact in Q2. 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 Q2 tax-related seasonality for the most part. And beyond that, we are feeling pretty good about our private pipeline in terms of our business. 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.
Speaker #5: Sure . Yeah . As you pointed out , pleased how we the year in Private we are finished Wealth very , 7% annualized .
Speaker #5: almost Sorry , net new assets , 7% growth rate . So feeling very about good . In terms that of seasonality , you always have the tax impact in the second quarter .
Speaker #5: So that's always the biggest thing to consider . Overall . Other than that seasonality maybe little bit of sometimes you have a softness in a holidays with August and all that .
Speaker #5: But but parts I think US . it's a In second quarter tax of the for the most part more . beyond And that , we are feeling pretty good about our in terms of our pipeline business .
Speaker #5: As you recall , when we mentioned in the past , drivers of one of our big growth in terms particular new acquisition client is the exits as the M&A activity has been robust and of given we very have a ultra strong proposition with business owners and entrepreneurs , when we have exits through M&A , tend to we do quite terms of well in onboarding new ultra net worth clients .
Tom Simeone: 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. Thanks very much. Your next question comes from the line of Benjamin Budish with Barclays. Please go ahead. Hi. This is Nathan Aunor 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 percentage of AUM, maybe top exposures, and any areas where you tighten underwriting or adjusted risk limits? Thank you. Sure. So Aunor, 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: 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.
John Dunn: Thanks very much.
Operator: Your next question comes from the line of Benjamin Budish with Barclays. Please go ahead.
Speaker #5: So we continue to see strength in that an example area . As .
Speaker #4: Thanks very much .
[Analyst] (Barclays): Hi. This is Nathan Aunor 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 percentage of AUM, maybe top exposures, and any areas where you tighten underwriting or adjusted risk limits? Thank you.
Speaker #3: Your next question comes from the of line Benjamin Budish with Barclays . go Please ahead .
Speaker #6: this is Hi , Nathan Ben . Just a question quick with AI related impacting software volatility valuation . Can size Abbey's private you credit exposure software ?
Speaker #6: to The portfolio by percentage of maybe top exposures and like any areas where you tighten or underwriting adjusted limits . Thank you risk .
Onur Erzan: Sure. So Aunor, 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. Our exposure tends to be in line with the rest of the corporate direct lending markets.
Speaker #5: Sure , it's honor . Let take that as me well . It's not a significant very exposure for us given our broadly diversified global asset platform management .
Tom Simeone: 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. Our exposure tends to be in line with the rest of the corporate direct lending markets. So typically, around 1/4 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 #5: To recap , our private alts platform is around 8 to $2 billion of assets based on fee earning and eligible fee AUM that .
Speaker #5: , roughly Within 25% is our direct lending business . PCI business . And in it that is . We are the lead underwriter in markets .
Speaker #5: middle Loans against sponsors . we Typically , work with 250 sponsors in the United States companies we work with are in the 10 to $75 million EBITDA range .
Speaker #5: within that So PCI portfolio , we have exposure to technology or software kind of companies are exposure tends to be in line with corporate the direct lending the markets .
Onur Erzan: So typically, around 1/4 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. 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 if it was to deteriorate materially, it's not going to 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 #5: So typically around a quarter of the the AUM tends to be related software . We have a long standing history in terms of operating in technology and software .
Tom Simeone: 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 if it was to deteriorate materially, it's not going to 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. Thank you. And a follow-up would be, given we understand that it's early to update the target of getting $90 to 100 billion of private markets AUM. But how are you thinking about growing that private markets piece beyond that time horizon? 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 team.
Speaker #5: And we have not seen any material change in terms of our loss And we have been very diligent in monitoring our credit watches experience .
Speaker #5: to those borrowers . But but so far , again , no major deterioration . And even was the it materially . going to impact our business given market lending middle only is roughly 25 billion of And AUM .
[Analyst] (Barclays): Thank you. And a follow-up would be, given we understand that it's early to update the target of getting $90 to 100 billion of private markets AUM. But how are you thinking about growing that private markets piece beyond that time horizon?
Speaker #5: we only within that , have It's not certain percentage exposure software . to mentioned . So overall , we are not As I that that sensitive to that it .
Speaker #5: we only within that , have It's not certain percentage exposure software . to mentioned . So overall , we are not As I that that sensitive to that it .
Speaker #6: Thank you . And a follow up would be given we understand that it's early to update of the target of getting like 90 to 100 billion of private markets AUM .
Seth Bernstein: 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 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 second quarter earnings, revise that target for you, but we are ambitious, and we see further opportunities to expand it.
Speaker #6: how thinking But about growing that private are you piece time beyond that horizon ?
Speaker #1: let me Well , 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 team .
Tom Simeone: 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 second quarter earnings, revise that target for you, but we are ambitious, and we see further opportunities to expand it. Thank you. Again, if you would like to ask a question, please press star, then the number 1 on your telephone keypad. There are no further questions at this time. Mr. Jorgali, I turn the call back over to you. 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.
Speaker #1: I mean , that yes , as counts private market assets , we but we continue to focus on beating we 90 to 100 billion that the forecasted for 2027 .
Speaker #1: We will in with our second quarter earnings , revise target for you . But we are are we that see further ambitious and we to opportunities expand it .
[Analyst] (Barclays): Thank you.
Seth Bernstein: Again, if you would like to ask a question, please press star, then the number 1 on your telephone keypad. There are no further questions at this time. Mr. Jorgali, I turn the call back over to you.
Speaker #6: Thank you .
Speaker #3: Again , if you would like to ask a question , please star . Then the number one on your telephone keypad . no further questions at time .
Ioanis Jorgali: 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.
Speaker #3: There are Mr. this Dogali . I turn the call back over to you . .
Speaker #5: Thank you all for joining busy All right . this day . Please follow up with us if you have any additional questions . Thank you very much .
