AllianceBernstein (AB) Q3 2026 Earnings Call Transcript

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DATE

Oct. 27, 2026

CALL PARTICIPANTS

• Head of Investor Relations - Ioannis Georgali
• Chief Executive Officer - Seth Perry Bernstein
• Chief Financial Officer - Thomas Rudolph Simeone
• President - Ahmet Onur Erzan

TAKEAWAYS

• Adjusted EPU -- $0.88, increasing 2.3% year over year driven by higher base and performance fees.
• Adjusted Net Revenues -- $904 million, rising 2.2% compared to the prior year period.
• Total Assets Under Management -- $900.4 billion, growing 4.7% year over year despite 1% market-driven sequential decline.
• Average Assets Under Management -- $908.3 billion, representing an 8% increase versus the prior year period.
• Firm-wide Net Inflows -- $6.6 billion, reflecting an annualized organic growth rate of 3%.
• Institutional Net Inflows -- $15.7 billion, driven by the onboarding of $12 billion in commercial mortgage loans from Equitable.
• Retail Net Outflows -- $8.4 billion, reflecting continued pressure in active equities and rate-sensitive redemptions in taxable fixed income.
• Private Markets AUM -- $105 billion, surpassing the firm's 2027 target of $90 billion to $100 billion more than one year ahead of schedule.
• Active ETF AUM -- $21 billion, expanding 68% over the last 12 months.
• Performance Fee Guidance -- $135 million to $150 million for fiscal 2026, raised from the previous outlook of $115 million to $135 million.
• Adjusted Operating Margin -- 33.5%, decreasing 70 basis points year over year but increasing 50 basis points sequentially.
• Bernstein Private Wealth AUM -- $165.1 billion, contributing more than one-third of firm-wide revenues.
• Tax-Exempt Net Inflows -- $1.6 billion, marking the 15th consecutive quarter of positive flows despite the weakest municipal market performance in 30 years.
• Active Equity Net Outflows -- $12.5 billion, concentrated across the company's largest mutual funds.
• Passive Strategy Net Inflows -- $2.5 billion, driven primarily by institutional and private wealth client demand.
• Non-compensation Expense Guidance -- $620 million to $635 million for the full year, narrowed from the previous range of $620 million to $640 million.
• Compensation Ratio -- 48.5% of adjusted net revenues, which management expects to maintain through the fourth quarter.
• Full Year Tax Rate -- 5% to 6%, consistent with prior management expectations.
• Retail SMA Platform AUM -- $68 billion, generating 17% organic growth over the last 12 months.
• Institutional Pipeline AUM -- $13.1 billion at quarter end, which excludes the expected $100 billion mandate from Corebridge.
• Alternatives and Multi-Asset Net Inflows -- $15 billion, marking seven consecutive quarters of positive organic growth for the asset class.
• Private Wealth Net New Asset Growth -- 2% on an annualized basis, supported by reinvested dividends and distributions.
• Fixed Income Investment Performance -- 72% of AUM outperforming benchmarks over a three-year period.
• AB Holding Unit Repurchases -- $38.4 million, representing 1.1 million units purchased or retained during the quarter.
• Cash Distribution -- $0.88 per unit, payable on Nov. 19, 2026, to holders of record as of Nov. 6, 2026.

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RISKS

• Bernstein stated, "While the elevated rates volatility may dampen sentiment and appetite for duration, we believe the long term value from fixed income is now compelling," noting a headwind for retail demand.
• Erzan noted that for retail and Asian investors, "it might take several quarters for them to come back on a full scale" into taxable fixed income as they wait for the interest rate environment to stabilize.

SUMMARY

AllianceBernstein Holding L.P. (NYSE:AB) reported a quarter defined by record institutional inflows and the accelerated expansion of its private markets platform. Management discussed the strategic importance of its insurance, wealth, and retirement ecosystems, noting that these channels now represent approximately half of firm-wide assets under management. The company confirmed its progress in onboarding $100 billion in Corebridge assets and indicated that its private markets business reached its multiyear asset target one year ahead of schedule. Leadership stated that the firm's focus on scaling long-duration capital and maintaining expense discipline is intended to drive operating leverage and enhance the resiliency of the business across various market cycles.

• CEO Bernstein highlighted the Corebridge partnership, stating, "The opportunity extends well beyond managing the company's existing assets, as the combined Corebridge and Equitable are expected to generate sizable ongoing net flows."
• Bernstein noted the active ETF franchise has scaled to generate "annualized management fees of roughly $100 million" from a near standing start less than four years ago.
• Onur Erzan noted that participating in the AI-driven capital expenditure cycle was a key factor in the firm reaching $105 billion in private credit assets.
• Regarding private wealth, Erzan reported continued success in high-end recruitment, stating, "We are winning in ultra-high-net-worths, including some of the pre IPO companies."
• Bernstein indicated that the retail SMA platform is a significant growth area where "personalization, technology, and adviser demand continue to converge."

INDUSTRY GLOSSARY

• AUM: Assets under management, representing the total market value of the investments a person or entity manages on behalf of clients.
• EPU: Earnings per unit, a financial metric for master limited partnerships similar to earnings per share.
• Active ETF: An exchange-traded fund that is managed by an individual or team that makes specific investment decisions rather than passively tracking an index.
• SMA: Separately managed account, a personalized investment portfolio managed by a professional firm.
• MAS: Multi-Asset Solutions, investment strategies that allocate across various asset classes like equities, fixed income, and alternatives.
• UCITS: Undertakings for Collective Investment in Transferable Securities, a regulatory framework that allows for the sale of mutual funds across the European Union.
• RubyRe: A reinsurance sidecar entity used by the firm for insurance-related asset management.
• Private Placements: The sale of securities to a limited number of sophisticated investors rather than to the general public on the open market.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the AllianceBernstein Third Quarter 26 Earnings Review. At this time, all participants are in a listen-only mode. After today's prepared remarks, we will host a question-and-answer session. 1 to raise your hand. To withdraw your question, press *1 again. 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, mister Ioannis Georgali. Please go ahead.

Ioannis Georgali: Good morning, everyone, and welcome to our third quarter 26 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 Perry Bernstein, our Chief Executive Officer; and Tom Simeone, our Chief Financial Officer. Onur Erzan, our President, will join us for the question and answer session following our prepared remarks. Some of the information we will 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 and A of our 10 Q which we will file later this week. We base our distribution to unitholders on our adjusted results. Which we provide in addition to and not as a substitute for our GAAP results. Our standard GAAP reporting and reconciliation of GAAP to adjusted Are in our presentation appendix, press release and our 10 Q. 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 will turn it over to Seth.

Seth Perry Bernstein: Good morning and thank you for joining us today. Before reviewing our results, I want to briefly address our transition that was announced in September. For nearly a decade, I have been privileged to lead Alliance Bernstein. Working alongside an exceptional group of colleagues whose dedication to our clients, our culture, and 1 another empowered the firm to grow through a period of profound industry evolution. Together, we transformed our private markets platform from a niche capability into a scale global franchise. We built leading positions in insurance asset management, municipals, retirement solutions, thematic investing, and private wealth. We relocated our corporate headquarters to Nashville.

And continued to invest in talent and capabilities that will position AB for long term success. While I am proud of what we have accomplished, these achievements are not an endpoint. They are foundation upon which AB's next chapter of growth will be built. Few people have contributed more to that foundation than Onur Erzan. who, in addition to being president, will become AB's chief executive officer on April 1, 2027. Onur has been a driving force behind many of AB's most important strategic initiatives, and I believe he is uniquely positioned to lead the firm forward. His vision, leadership, and track record of execution give me tremendous confidence in AB's future.

A future I look forward to supporting as a board member after my retirement. Now moving on to slide 3, I will review the key business highlights of our third quarter. First, we ended the quarter with approximately $900 billion in assets under management. As we onboard $100 billion of core bridge assets over time, we see a clear path to reaching the $1 trillion in AUM. I am pleased with the progress we are making, not only on the operational groundwork, to onboard these assets, but more importantly, in deepening our strategic partnership with Corebridge. The opportunity extends well beyond managing the company's existing assets, as the combined Corebridge and Equitable are expected to generate sizable ongoing net flows.

We are also focused on identifying paths to further commercialize Corebridge's existing private asset capabilities and private placements, mortgage loans, and real estate equity. As the insurance marketplace continues to evolve, traditional asset liability management is giving way to more strategic balance sheet construction, Public and private markets are increasingly converging and insurers are seeking integrated solutions that optimize risk, capital, and return. These trends align directly with AB's differentiated capabilities and position us for further growth in asset management and in derivatives execution. We managed $226 billion in net insurance assets including $58 billion of third party insurance AUM across more than 100 clients. General accounts total $139 billion up 18% year over year.

Bernstein Private Wealth ended the quarter with $165 billion in client assets representing 18% of firm wide AUM contributing more than 1/3 of firmwide revenues. We are expanding relationships with ultra high net worth clients family offices, entrepreneurs, and business owners. Client segments whose complex needs require a high degree of customization and service. That is difficult to replicate. Our platform enables advisors to focus on advice and relationship development while leveraging specialized expertise across financial and tax planning, trust and estate services, and family governance. We believe Bernstein is a compelling platform for recruiting and retaining top advisor talent with a differentiated value proposition that empowers industry leading productivity while strengthening client outcomes.

Our customized retirement platform accounts for nearly $117 billion in assets as plan sponsors increasingly seek personalized retirement solutions, lifetime income capabilities, and broader access to public and private markets, we believe we believe AB is ideally positioned to help improve participant outcomes. Taken together, our insurance, wealth, and retirement businesses provide direct access to large and growing pools of long duration capital. These channels now represent approximately half of firm wide AUM and enhance the resiliency, visibility, and long term growth profile of our business across market environments. Second, we continue to expand our investment and distribution footprint through strategic partnerships, greater customization, and vehicle innovation.

Customization is reaching an inflection point across retail asset management, Increasingly, clients are seeking investment capabilities in vehicles and formats that best fit their unique financial objectives. A core element of our strategy is ensuring that AB's investment expertise can be delivered in the wrappers, channels, and solutions our clients prefer. 1 example is our active ETF franchise, which we continue to globalize. Today, the platform spans 34 products and $21 billion of AUM. With assets growing 31% organically during the third quarter and 68% over the last 12 months. From a near standing start less than 4 years ago, the business is scaled to generate annualized management fees of roughly $100 million.

This growth reflects both increasing demand for active investment strategies and more efficient wrappers and our ability to extend successful investment capabilities across geographies, channels, and client segments. We are seeing a similar trend in separately managed accounts. Our retail SMA platform stands at $68 billion of AUM and generated 15% annualized organic growth during the quarter and 17% over the last 12 months. While municipals are still the foundation of the platform, we are encouraged by the early momentum we are seeing as we extend these capabilities into taxable fixed income. Over time, we believe SMAs will be a significant growth opportunity as personalization, technology, and adviser demand continue to converge.

Creating a larger addressable market for customized investment solutions. Third, firm wide net inflows approach $7 billion in the third quarter. Growing organically for the second straight quarter at a 3% annualized rate. Alternatives and multi asset solutions led the way, generating $15 billion of net inflows, reflecting the onboarding of approximately $12 billion of commercial mortgage loans from Equitable. Importantly, the segment generated positive net inflows even excluding the CML mandate. Marking 7 consecutive quarters of positive organic growth. In municipals, AB delivered positive net inflows for the 15th consecutive quarter despite 1 of the most challenging markets for fixed income in decades.

While rising rates created significant, our investment performance distribution strength, market leadership allowed us to continue gaining share in tax exempt with nearly $2 billion of net inflows. Within taxable fixed income demand varied by client channel, Institutional clients contributed nearly $4 billion of net inflows primarily to our investment grade strategies. These gains were largely offset by more than $3 billion of retail net outflows as heightened rate volatility continued to weigh on demand for our income franchise. Equities, passive strategies generated over $2 billion of net inflows, driven largely by institutional demand.

Active equities remain under pressure with more than $12 billion of net outflows concentrated across our largest mutual funds, partially offset by continued growth in active ETFs and thematic portfolios. Slide 4 provides an overview of our financial results which Tom will discuss in greater detail shortly. Skipping to slide 5, I will review our investment performance starting with fixed income. Bond markets faced particularly challenging third quarter as inflation concerns intensified on the back of higher energy prices and structurally growing debt issuance, pushing rate expectations higher. Against the backdrop of a resilient growth and healthy labor markets, global central banks turned hawkish with the Fed raising rates for the first time since 2023.

Higher rates push total returns into negative territory across fixed income with high yield outperforming investment grade given its higher income and lower duration. Municipals posted the weakest quarterly performance for the asset class of more than 30 years. During the quarter, the Bloomberg US aggregate index returned -3.5%. The global high yielding index returned -2%, and the Bloomberg Municipal Index returned -6.3%. 49% of our fixed income AUM over the 1 year period. With 72%, 60% outperforming over 3 and 5 years. Decline over the 1 year performance was primarily driven by our duration exposure as yields moved higher. Our short and intermediate duration portfolios and securitized strategies largely outperformed their respective benchmarks over the shorter term periods.

With mortgage income maintaining a top decile performance over 1, 5, and 10 years. While the elevated rates volatility may dampen sentiment and appetite for duration, we believe the long term value from fixed income is now compelling. And AB has the right strategies to compete for the next wave of the reallocation. Credit is still an area of opportunity with all in yields presenting an appealing risk adjusted return profile compared to long term equity forecasts. Turning to equities, markets posted modest gains but dispersion between geographies, styles, industries rose. The S&P 500 returned 2.3% outperforming the Russell 2,000 by nearly 10 percentage points.

Against this backdrop, 26%, 27%, and 33% of equity AUM outperformed over the 1, 3, and 5 year periods. The AI build out is no longer a single sector story. It now ties together firms, industries, and even asset classes that once moved independently. As a result, traditional diversification provides less protection than it used to. Diversification may be getting harder to find, but that only makes it more valuable. That is exactly where our platform is built to help clients. Quality companies with durable free cash flow, value, and dividend growth strategies that have historically benefited when rates are higher, and lower correlation exposures in Europe, Japan, US small-cap, and emerging markets beyond AI-linked chips.

We have 25 services with over $40 billion of combined AUM that continue to outperform over 3 and 5 years, led by international strategic equities, US Select, and various international small cap and value strategies. We believe diversification across fixed and quality oriented equities can help clients generate income, stay invested, and broaden their sources of return beyond a handful of market leaders leveraged to the AI build out. Now turning to slide 6. Retail activity softened during the quarter as investors remained selective amid higher market volatility. Tax-exempt was a bright spot with our municipal strategy continuing to gain share against a very challenging macro backdrop for this asset class.

While active equity and taxable fixed income redemptions remained elevated, we continue to see encouraging demand for ETFs, SMAs, and thematic strategies reflecting the benefits of a more diversified retail platform. As we have discussed before, clients increasingly want access to the same investment capabilities through the vehicles and formats that best fit their financial objectives. Our broad product set positions us well to meet that demand across mutual funds, ETFs, and managed account solutions. Moving to slide 7, I will cover our institutional channel. Institutional net inflows reached a record of nearly $16 billion in the quarter. making the channel's second consecutive quarter of positive flows.

As expected, commercial mortgage loans were the primary contributor accounting for approximately $12 billion of inflows. Importantly, flows were positive ex-CML, supported by a broad-based demand across fixed income, passive equity, and other alternatives and multi asset solutions. Alternatives and multi asset generated more than $13 billion of net inflows and remained organically positive for the 7th consecutive quarter. Pipeline conversions continue to accelerate as we gain scale. During the quarter, we funded nearly $5 billion in previously awarded mandates in addition to the CML mandate. Institutional engagement is still healthy with $13 billion in pipeline AUM at quarter end, notably excluding the expected $100 billion of Corebridge opportunity.

More broadly, these results reinforce the strategic progress we are making in insurance asset management and private markets. The successful onboarding of CML demonstrates our ability to originate, manage, and service large scale private assets while further strengthening the flywheel between long duration insurance capital and AB's alternatives platform. Turning to slide 8. I will cover Bernstein Private Wealth. Private wealth continued to deliver resilient net new asset growth despite a volatile market backdrop. While third quarter net flows were negative, we continued to grow net new at a 2% annualized rate as of the third quarter and 4% over the last 12 months.

Importantly, approximately $500 million of this quarter's net outflows resulted from rebalancing and are being redeployed back into the platform during the fourth quarter. Client demand continued to favor alternatives and passive equity with more than $1 billion in net inflows into alternatives and approximately $300 million into direct index equities. At the same time, newly launched alternative strategies gained further track raising approximately $600 million during the quarter. Bernstein Private Wealth's value propositions continues to strengthen. Clients are seeking integrated advice spanning public and private markets, tax, estate planning, and charitable solutions, and our platform is uniquely positioned to meet those needs.

As a result, we continue to add new relationships at a strong rate in the ultra high net worth global families and family office segments across market cycles. We have generated consistent net inflows for 5 consecutive years reflecting the durability of our model. The fourth quarter is already shaping up to be strong, and we are optimistic about our momentum heading into next year. Beyond flows, Bernstein private wealth is 1 of our most important strategic assets. The business sources more than 1/3 of firm wide revenues, while representing less than 1/5 of firm wide assets. Highlighting the strength of its advice led model and our differentiated farm to table distribution of asset management capabilities.

I will now turn to slide 9, which highlights the continued growth of our private alternatives platform. I am pleased to report the private market AUM now exceeds $105 billion, surpassing the $90 billion to $100 billion target more than a year ahead of our original 2027 commitment. This milestone reflects years of disciplined execution and the successful build out of a diversified platform spanning private placements, direct lending, alternative credit, and commercial real estate lending. Importantly, the growth is broad based across institutional insurance, private wealth, retail clients, a diversified and growing demand for long duration assets. We also see significant runway ahead.

Commercial real estate lending now exceeds $20 billion following the successful onboarding of nearly $12 billion of commercial mortgage loans from Equitable. 10 years ago, AB managed less than $20 billion of private assets firm wide, Today, each of our 4 private markets platforms is larger than our entire private market business was then. This scale is increasingly a competitive advantage. Larger platforms support stronger origination capabilities deeper client relationships, and provide access to a wider range of investment opportunities. Creating a flywheel that reinforces our sustainable growth over time.

Turning to slide 10, this illustrates what we believe is AB's most important competitive advantage our ability to source and manage retirement assets through both accumulation and decumulation phases by connecting private and public markets insurance and wealth management in a single retirement ecosystem. Historically, these markets operated independently. Today, they are increasingly converging, creating opportunities for firms with broad capabilities and multiple distribution channels. Through our private wealth business, retirement platform, SMAs, and active ETFs, we help clients accumulate assets. Lifetime income solutions and insurance products help convert savings into durable retirement income. These long duration liabilities create demand for differentiated private market assets.

Through our relationships with Equitable, Corebridge, and third party insurers, we can originate and scale investment capabilities across private markets, direct lending, commercial real estate debt, and asset based finance. Importantly, insurance capital does more than generate assets under management. It helps seed new investment capabilities, build scale, establish track records, and create investment solutions that can ultimately be delivered across our insurance, institutional retirement, private wealth, and retail channels. The combination of Equitable and Corebridge will further strengthen this ecosystem. Approximately $100 billion of Corebridge assets will be onboarded over time providing greater scale to support asset origination innovation, and the development of new investment capabilities.

We believe insurance, retirement, wealth management, and private markets are some of the largest and fastest growing pools of capital globally. Increasingly, AB's differentiation arises at the intersection of these opportunities, combining investment breadth customization, direct client relationships, and long duration capital in ways that are difficult to replicate. Now I will pass it to Tom to review our financial results. Tom?

Thomas Rudolph Simeone: Thank you, Seth. Good morning, everyone, and thank you for joining our call. Adjusted earnings for the third quarter of 26 were $0.88 per unit, representing a 2% increase year over year and a 7% sequential increase. Distributions grew uniformly with EPU as we distribute 100% of our adjusted earnings to unitholders. In the third quarter, we continued to execute on our plan delivering upside to our near term outlook while advancing our long term objectives. Results reflect the diversified growth in basin performance fees disciplined expense management, and continued operating leverage across the platform. On slide 11, we present our adjusted results, which exclude certain items not considered part of our core operating business.

For a detailed reconciliation of GAAP and adjusted financials, Please refer to our presentation appendix or our 10 Q. In the third quarter, adjusted net revenues reached $904 million up 2% versus both year over year and sequentially. Base fees grew 3% year over year and 2% sequentially $845 million reflecting higher average AUM across the platform, partially offset by the impact of changes in product and channel mix. Performance fees totaled approximately $26 million compared with $20 million in the prior year and $24 million in the prior quarter. Private markets performance fees were $21 million while public strategies contributed $5 million in the third quarter.

Dividend and interest revenue along with broker dealer related interest expense declined year over year. Reflecting lower cash and margin balances within private wealth. Investment gains totaled approximately $1 million while other revenues totaled $18 million roughly in line with prior periods. Turning to expenses. Third quarter total operating expenses were $601 million up 3% year over year and 1% sequentially. Total compensation and benefits rose 2% year over year, and our compensation ratio of 48.5% of adjusted net revenues was consistent with our guidance. We expect the compensation ratio to remain at 48.5% in the fourth quarter in line with our year to date accrual.

We do not anticipate the full year ratio falling below this level, reflecting our continued investment in talent, distribution, and strategic growth initiatives. Promotion and servicing expenses increased $2 million year over year, while G&A increased by $7 million reflecting normalization in spending and continued investment in technology, strategic capabilities Sequentially, our non compensation expenses were roughly flat. Given our continued expense discipline and operating efficiency, we are narrowing our full year non compensation expense outlook of $620 million to $635 million from $620 million to $640 million previously. We expect promotion and servicing to represent approximately 20% to 25% of non compensation expenses with G&A comprising the remaining 75% to 80%.

Interest expense declined $2 million from the prior year period. Looking ahead, we expect interest expense to increase modestly reflecting the funding of our $100 million commitment to the RubyRe sidecar slightly higher interest rates, and temporary seasonal increase in fourth quarter borrowings. ABLP's effective tax rate was 4.5% during the quarter, reflecting favorable earnings mix. We continue to expect the full year ABLP tax rate to be between 5% to 6%. Operating income of $303 million was flat versus the prior year and 3% higher versus the prior quarter. Adjusted operating margin was 33.5% up from 33% in the second quarter. The year to date margin of 33.3% is in line with the prior year.

Despite ongoing investments to enhance our investment and distribution capabilities, along with the necessary infrastructure and some revenue timing impacts associated with onboarding the CML assets. Importantly, our margin remains above the midpoint of our 30% to 35% Investor Day target range which we originally expected to achieve by 2027. We remain focused on balancing near term profitability disciplined investment and capabilities that expand the firm's long term earnings power. In the third quarter, our firm wide base fee rate net of distribution expense was 37.1 basis points.

The sequential decline primarily reflected the full quarter impact from the low fee passive fixed income index mandate that funded on June 30 and the onboarding of the commercial mortgage loan portfolio in July. In the third quarter, our firm wide base fee rate net of distribution expense was 37.1 basis points. The sequential decline primarily reflected the full quarter impact from the low fee past fixed income index mandate that funded on June 30 the onboarding of the commercial mortgage loan portfolio in July. Excluding the impact from these 2 large mandates, the firm wide fee rate would have been roughly flat, sequentially.

As we mentioned previously, the commercial mortgage loan portfolio onboarded in July did not generate management fees until the fourth quarter. Looking forward, we continue to see attractive growth opportunities across insurance asset management, retirement, SMAs, institutional solutions, and private markets. While several of these businesses carry fee rates below the firm-wide average, they provide scalable long duration capital that will produce attractive incremental margins as they scale. Consistent with our strategy, we remain focused on building scale in areas that enhance the durability of our business. Support sustainable organic growth, and drive long term profitability. In our view, this is more valuable than optimizing solely for near term fee rate outcomes.

Finally, turning to Slide 12 and our outlook, we now expect total fiscal 2026 performance fees $135 million to $150 million up from our prior outlook of $115 million to $135 million. This assumes roughly flat markets for the remainder of the year. The increase reflects improved expectations across both private and public markets. In private markets, we now expect $60 million to $65 million of performance fees driven primarily by AB-PCI and a more normalized middle market lending environment. In public markets, we now expect $75 million to $85 million of performance fees with the upside largely attributable to continued strong performance of our alpha generating financial services opportunities fund.

As mentioned earlier, we are also lowering our full year non compensation expense outlook to $620 million to $635 million and our expected ABLP tax rate remains between 5% to 6%. Let me conclude by summarizing some of the key themes from this call. We were able to improve our financial outlook while continuing to build momentum across several strategic growth areas, including insurance, wealth, private markets, SMAs, and active ETFs. Private markets AUM surpassed our original Investor Day target more than a year ahead of schedule, we continue to see strong client demand and a healthy pipeline across credit, real estate, and alternatives.

Looking ahead, the addition of approximately $100 billion of CoreBridge assets represent the next step in scaling our insurance platform. Similar to the themes discussed throughout today's call, these assets enhance the firm's base of long duration capital. Can be onboarded with limited incremental expense, and should support attractive earnings growth over time. The Corbridge assets will be onboarded onto our existing infrastructure with relatively limited incremental operational expense. As a result, while they may have a lower average fee rate, they have high incremental margins and will be accretive to earnings.

Finally, we will continue to be disciplined in investing to build new sources of growth, recognizing that it may take time for platforms to scale and reach their full earnings potential. With that, operator, please open the line for questions.

Operator: We will now begin the question-and-answer session. 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. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press *1 again. We do ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Craig Siegenthaler with Bank of America. Your line is open.

Please go ahead.

Craig Siegenthaler: Good morning, Seth. Hope you and the team are doing well. So our question on the evolving backdrop and fixed income. Triple a rated 10-year muni bonds are now yielding 6% after tax. And high yield bonds are yielding 8%. Now I know you know these numbers, but it is been a long time since we had yields at these levels. So in parallel, have a leading fixed income franchise with 70% of AUM outperforming on a 3 year basis. So if we strip out the sizable incoming core bridge inflows that we have good visibility into, What is the net flow outlook across your fixed income business?

And what has been the recent feedback from large institutions and wealth gatekeepers? Post the spike in the 10-year US treasury yield?

Ahmet Onur Erzan: Thanks, Craig. it is Onur. Let me take a first crack at your question. We definitely are bullish about the outlook for our fixed income franchise. Given the higher rate environment. So you are absolutely right. This gives investors a unique opportunity to rebalance their portfolios with higher yielding fixed income assets, and we play in fixed income expertise Across tax exempt as well as taxable across retail, institutional, domestic, and Asia. So definitely seeing a lot of different ways to benefit from it. In terms of our pipeline, we definitely added significant amount of fixed income assets to our pipeline in the third quarter. We had the significant emerging market debt win, from a large institutional client.

We had another, securitized, fixed income mandate win from another large institutional investor. So definitely, are seeing several, segments of the institutional market weighing in and taking action to benefit from the higher rates across investment grade and high yield. Despite the worst muni environment, we continued to generate positive flows in our market-leading muni franchise in retail. Our ETFs continue to gather significant assets in fixed income, including our Taiwan active ETFs exceeding $500 million in AUM. So all positive signs. That all being said, particularly on the taxable side, particularly retail investors and Asian investors tend to wait until the rate environment stabilizes with the Fed actions, before they go full into income.

So as a result, it might take several quarters for them to come back on a full scale. So it is going to play out across multiple quarters. But we expect fixed income to be a positive contributor and tailwind to our business. Independent of the Corbridge merger.

Seth Perry Bernstein: Craig, I would just add that we are beginning to see gatekeepers begin to pound the table which is, I think, what your inclination is. That this is a very good entry point, particularly for munis. Now, of course, you have the crosswinds of people trying to tax loss harvest, following September. But we do see that interest growing, and we see it particularly given the that the underlying economy continues to be pretty robust. So both muni and corporate credit is in pretty good shape. So I share your underlying optimism, but I am. I would note Onur's point that it will take several quarters for this to really find its way through.

Craig Siegenthaler: Thanks, Seth. Just for a follow-up and, Onur, you may have just hit on that a little bit, but I wanted to narrow the fixed income topic into the Asian geography. We have a leading business, especially in the retail channel. And there is some flagships that have historically done very well there. Like American Income and Global High Yield, I think might have been the 2 biggest in the bond side. Are you hearing that investors there are ready to buy the dip, or are they still reacting to negative near term performance? And I think you said that might take a little bit of time. And then also what funds in Asia you think are best positioned?

Ahmet Onur Erzan: Sure. Yeah. We need to your point, answer that question more bottom up. The trend with global high yield, which tends to have a very strong followership in Taiwan, particularly, but also broader Asia, that has been more a story of risk on appetite from the retail investors. Particularly with the AI trade favoring high risk high growth AI stocks. So that has been more a little bit of an asset reallocation trend. With the strength of the technology market. So it was not related with the fixed income, dynamics. It was mostly driven by, surprisingly, equity market dynamics. As we know, markets are cyclical. there is going to be market corrections.

And we remain constructive that clients will take advantage of, to your point, high effective tax rates in high yields. And we have pretty good capacity in our global high yield fund to build up back to full capacity, if you will. So that is quite positive. Particularly, there is more skepticism around AI, at least for some of the fixed income strategies there that could be a positive. While I also recognize it might create some other issues in other parts of the business. On the American Income portfolio, which is our second strategy, that tends to do well and gain market share.

When the rates stabilize, given that is typically a long duration or duration long strategy, It tends to do well when the rate outlook is more stable So that is what I was commenting on. Given, you know, still remaining uncertainty around the Fed's decisions, that might take another few quarters for them to watch what Fed is doing, whether they are continuing to hike or hold. We believe, you know, it is most likely to be hold then hike. And if they see that stability in the rates, they will decide to come in. So that is my point around few quarters, watching the external environment and the Fed decisions.

And then on top of that, we have a number of more, I would call, quote unquote emerging strategies, like our active text taxable fixed income suite in Taiwan, Again, those are getting good traction as we are unlocking a new client channel through the brokerage channel, unlike our traditional intermediary channel. So that is new, net new opportunity for us. Even in a market where we have high market share. So that will be additive, but I from a scale perspective, you are talking about, you know, on 1 end, $20 billion flex products. On the other hand, relatively emerging ETF suite starting from a low base. Thank you.

Operator: Your next question is from the line of Alexander Blostein with Goldman Sachs. Your line is open. Please go ahead.

Alexander Blostein: Hey. Good morning. Seth, Onur. Congratulations to you guys both. Post the announcement. Wanted. No. Of course. Wanted to go back to some of the comments you made around margin obviously, we have seen a number of very large mandates, and you talked about you know, the long term, you know, NPV sort of benefits from having long duration capital, yes, lower fee rate, but more attractive margin. So when we think about the profitability in the business year to date, you guys are running at about, I think, 33% operating margin within the 30% to 35% target.

How do you think that margin range will evolve over time we think of you being 35 plus over the next couple years as these bigger mandates come in on the old side?

Thomas Rudolph Simeone: Hey, Alex. it is Tom. How are doing? I would continue to think of us in the 30% to 35% range while we continue to invest in the platforms and take on these lower fee, larger scalable assays and assets and mandates. And it allows us room to continue to invest in the business. Okay.

Alexander Blostein: That makes sense. To Second question for you guys. I wanted to ask about some of the financing deals we see in the AI ecosystem. It looks like, AllianceBernstein's team has a number of building blocks that are sort of necessary for participation here, whether it comes to alternative credit, asset backed finance, obviously, corporate and infrastructure structured products. And, of course, you have a large insurance business affiliation, which is an anchor to a lot of these. So have not seen you in the headlines really in most of them, but curious how you think about that opportunity and whether or not you see AllianceBernstein participating in some of these dynamics. Thanks.

Ahmet Onur Erzan: Yeah. Absolutely. Typically, we try to stay away from the headlines, focused on core investment process, and managing risk. In terms of our activity there, definitely very active. We have done several deals in the data center space financing attractive returns. Typically, we get high yield type returns with investment grade credits. To your point, that has been 1 of the bigger drivers of us exceeding our end of 27 goal. We had a goal of $90 billion to $100 billion in private credit. By end of 27, and we hit that 36 months earlier. With almost $10$5 billion. So definitely, participating in the AI driven CapEx cycle is the driver of that.

But, also, being affiliated with the insurance shareholder gives us a front row seat in terms of understanding the risk dynamics and not overstretching ourselves. And we have seen with some of the different parts of the data center environment, there could be stress points as well. So overall, we are also cautious in terms of our concentration, and we are managing our concentration very carefully. So it is an overall positive. But we also given we are, very heavy in IG investment grade, we are managing concentration and any risk very carefully. Great. Alrighty. Thank you very much.

Operator: Your next question comes from the line of Bill Katz with TD Cowen. Your line is open. Please go ahead.

William Katz: Okay. Good morning, everybody. Thank you for taking the questions, and Seth and Onur, congratulations to you both respectively. Just maybe wanted to pick up what you mentioned on the high net worth side. You have mentioned that you are the fourth quarter in 2027 are feeling pretty good. I was wondering if you might be able to quantify what that might look like. And can you maybe talk a little bit about the competitive backdrop? I appreciate you operate in the higher net worth component piece of the industry, but it does seem like there is just very intense competition for financial advisers.

So sort of wondering if you could unpack what that look like for you as you look to build your pipeline. Thank you.

Ahmet Onur Erzan: No. So, yeah, definitely, we remain very constructive about the fourth quarter of this year. October numbers so far are looking in that direction. As we noted there has been asset rebalancing trade in the third quarter. Given the accounting rules for net flow accounting that might create a transitionary or short term outflow which reverses itself in the subsequent months. If you look at it on a net new asset basis, which is typically how the wealth look at it, in the third quarter, we were still positive around 2%. As you know, we tend to average 5% to 6% so it was a low quarter from that perspective. We own it.

That said, I think the fourth quarter is looking much stronger In terms of dynamics, you are absolutely right. We believe we are participating in the most attractive part of the wealth management space ultra-high-net-worth, because there are stronger moats in that part of the market. We are not making our money from lazy cash or sweep economics, which is under more pressure from AI trades. Are not dependent on balance sheet heavy lending kind of solutions. So there is a. that is a positive that makes our business relatively consistent. And we are seeing strong growth with ultra-high-net-worth clients, global families and family offices given we have a global asset management franchise.

In terms of hitting that question head on, in terms of our adviser headcount, we are positive year over year. So we are definitely adding headcount, adviser headcount despite heavy recruiting activity. We are able to attract talent, including internal promotes. We had 25 or so new advisers year to date. And we already have several other advisers who accepted and about to join us in the fourth quarter. So continuing to see, how headcount increase in our adviser ranks and the surrounding, teams.

And probably higher rates might also bring more rational behavior perhaps to some of the competitive strategies because we recognize in certain cases some of the more kind of commission heavy driven packages and upfront payments might not make more sense, in this kind of high rate environment. So, hence, we believe a, we have the right proposition for the advisers. We are winning in ultra-high-net-worths, including some of the pre IPO companies. And as a result, we will continue to attract talent, and, hopefully, competition will normalize when people make their math and update their spreadsheets with hopefully more realistic assumptions.

William Katz: Okay. Thank you for that. Very helpful. And then just so maybe my second question. Just appreciate you are doing very well in the alts bucket and then running ahead of your prior plan. As I think about that pie chart that you provided in your slide deck, it is very strong within the segment broadly of credit. Are you thinking strategically beyond credit? And how think about other areas of maybe real assets or secondary's footprint infrastructure more broadly? Just how do sort of see the evolution of that over the next several years? Thank you.

Ahmet Onur Erzan: Sure. You are absolutely right. Our focus on private credit was deliberate. Given we had a right to win with our privileged access to insurance balance sheets and given demand for income from our alternate birth clients, that was the right place to focus our energy on. We participate from the broader alts demand in our private wealth channel. As you know, we also use third party managers and we participate from the attractive economics. From that, including revenue share kind of arrangements that flows through. So as a result, our ability to benefit from rise of alternatives, parting in the retail channels is not limited to our manufacturing. We like distribution as much as we like manufacturing.

And then we are definitely looking at the adjacencies with the also Corebridge, Equitable merger, the synergies, what we can do in the private equity space, definitely is an area As we look at longer duration liabilities, what we can do with some of our strategic partners, definitely infrastructure plays into that across equity and debt. And there might be some synergies between real estate debt capabilities given we have a very large scale platform now, including the $12 billion we added this quarter. So maybe there might be opportunities, adjacencies, which real estate equity as well. Also, some of our vehicles getting invested real estate equity, so we have that flexibility to go into that space.

So those are the ones that I would circle. And our private wealth channel, again, might allow us to do some, you know, strategic deals with, up and coming, asset managers with attractive economics because we typically like the next generation managers that are looking for a scalable distribution platform. And we can have a win-win partnership as we have done in the past with other managers like private equity secondaries.

Seth Perry Bernstein: But 1 of the things that I. I am I am particularly excited about with corporates is they have a very different liability outlook than does Equitable. And so the interest for us in, for example, infrastructure with Corbridge as our affiliate and majority owner through Equitable actually presents a much more interesting opportunity for us now than it did in the past. So those are areas we would like to explore more.

William Katz: Thank you.

Operator: Your next question is coming from the line of Daniel Fannon with Jefferies. Your line is open. Please go ahead.

Daniel Fannon: You know, continues to come in a bit lower than your original guidance. And so curious as to what maybe coming in below budget. And as we think about the growth longer term, I know it is bit early for 2027 guidance, but how to think about the kinda the outlook for noncomp on a multiyear basis in terms of that growth rate?

Thomas Rudolph Simeone: Hey, Daniel. How are doing? I missed the first part of your question, but I think what you were getting at is our noncomp spend is coming in lower than budget. Look. that is just through cost discipline and expense discipline. that is really what it is. We continue to stay in contact with all the teams and ask them to save anywhere and everywhere they can, and they continue to deliver. In 4 q, there is always some seasonality, so I do expect it, and it will tick up. In 4 q.

As, it as we meet clients, and there is gonna be higher volume of meetings in T and E as always in 4 q, And then was there a second part to your question there, Daniel?

Daniel Fannon: Just the longer term outlook for. You know, I know it is early for 2027 full guidance on this, but just to think about the growth rate in non comp. On a multiyear basis.

Thomas Rudolph Simeone: Okay. Longer term growth rate, as I was telling Alexis, I think we continue to live 30% to 35% for a while. And we are building our 2027 plan right now, so nothing to share there. But what I would expect is continue to build up build out platforms where needed. Certainly, gonna invest in AI and things of that nature, but we just have not finalized our 20 seventh plan yet. But when it is finalized, we are gonna share those guides with you as soon as possible in a call.

Daniel Fannon: Understood. And then just broadly, you know, tax-aware investing is a significant theme across the space with a lot of growth. You guys highlighted SMAs and ETFs, but as you go beyond that into, you know, various indexing or direct indexing long short strategies, are these things that capabilities that you are offering clients through your private wealth, or you are looking to invest in more holistically as a firm.

Ahmet Onur Erzan: Yeah. So I will take that question in parts, then, speaking. 1, and, obviously, our first starting point with these strategies is tax and implementation feature, not a primary objective. And our strategies almost stand on always stand on their economic merits. Right? So that is an important distinction. Right? So if you look at the latest comments from treasury and the IRS obviously, they are targeting products that do not follow those principles, so we feel very good about the quality of our thinking, in terms of tax-aware investing, and we recognize they are not targeting tax-aware investing, tax plus harvesting ETFs, or exchange funds or traditional preplanning. Those are all the categories we have strong capabilities.

So we feel very well managed in that regard, and we will continue to benefit from our clients' needs for, tax-aware investing and traditional tax planning, and that is the growth area for us. We have a large direct indexing platform that is about $10 billion. As you know, our mini SMA platform is industry leading across private wealth and US retail. And we are very pleased with our success with the ETFs. Including a recent launch. We are now getting close to $25 billion almost in 4 years in the business. So that is definitely another area.

So all in all, it is a positive given our clients are typically high net worth and ultra high net worth, and we are good at tax-aware investing, and we are doing it the right way from our perspective. Thank you.

Operator: Your next question comes from the line of Glenn Schorr with Evercore. Your line is open. Please go ahead.

John Dunn: Hi. This is John Dunn. On the pipeline, you mentioned the additions in the quarter, but maybe what are some of the larger components right now and maybe any chunky mandates And then how should we maybe think about general time to funding and can any areas fund more quickly than others?

Ahmet Onur Erzan: Hi, John. Yeah. You did not sound like Glenn. Just kidding. In terms of the pipeline, yeah, as we look at the pipeline, as I mentioned in the first question around fixed income, we have seen definitely a strong pipeline adds in traditional fixed income, emerging market debt, securitized credit were a couple of good examples. As you know, some of those public fixed income mandates tend to deploy quite fast, unlike some of the other longer deployment cycle private credit products. Terms of our average deployments, I would not be surprised if it is more, like, 6 months rather than the longer end that we had in the, previous years. So definitely relatively quick deployment.

As you know, in the pipeline, there are couple of exceptions. 1, do not take credit for any new Corebridge-Equitable assets. that is gonna be net new. Second, any of our private alt strategies that go into our private wealth channel, even when we have visibility into that, do not go into the pipeline because it is by definition, just a third party institutional pipeline. So it tends to understate our knowledge of already committed capital from a private alts perspective. And in private wealth, in terms of our gross capital raise in alts, it is 50% higher than last So that has been definitely an area of strength, including private credits.

Including some of the interval fund kind of more semi liquid strategies.

John Dunn: Gotcha. And then maybe on. You mentioned the globalization of active ETFs I tend to think of that as more a domestic thing. But so can you bring that a little more to life with maybe some examples of where you are seeing that? And then just more broadly, any areas of active that you are working on now that you would highlight that are seeing demand?

Ahmet Onur Erzan: Sure. Yeah. No. You are absolutely right. Active has started as a more domestic phenomenon, given some of the unique tax treatment of in kind redemptions in The US. Legislation, and some of those tax benefits do not translate in international markets. That being said, liquidity of ETFs the intraday pricing, real time pricing, and accessibility tends to make ETFs popular even if they might not have the same tax benefits of domestic. So it is a little bit more client preference in international markets. The adoption is slower in other markets relative to US. Depending on how we look at it, probably 5 years behind.

But we are seeing definitely a pickup in demand, particularly in the last couple of years. It definitely is a global phenomenon. It depends on local infrastructure, the depth on the breadth of the retail buyer and the online platforms, etcetera. But definitely, we are seeing opportunities for us in several key markets, including Taiwan, as I mentioned in my previous comments, Japan, as you know, we have a joint venture there that has not been activated yet, but that definitely provides upside. And then we launched our UCITS ETFs very recently and that allows us access to the large continental European market as well as several other Asian markets that might prefer invest in UCITS product.

So all in all, I would say, Taiwan, Japan, parts of Continental Europe are a few that I would highlight. Maybe after that, a couple of Latin American markets like Mexico as well.

In terms of what we are working on in equities, I mean, first and foremost, obviously, we are monitoring the markets and AI trade. it is impact on broader sectors, and incorporating all of that into our investment process is first and foremost priority for us And then from a new successes or where we are focused on from a new product perspective, We have seen great momentum with our thematic strategies If you think about more technology oriented disruptors, strategy or the more security oriented security of the future products, security of the future. I think approaching $10 billion. Disruptors is approaching $5 billion in terms of trajectory.

So we are definitely seeing a lot of demand for those kind of innovative thematic solutions. And some of our traditional strategies are getting some demand as well. there is been definitely renewed interest in emerging markets. Definitely, our. The value strategies continue to do well, like large cap value. We believe we can be very competitive there. Given we report performance on a more AUM weighted basis, sometimes it skews towards high AUM products. We have a long list of outperforming products in relatively attractive categories that we believe will catch some client demand. So those are a few that I would highlight. Thank you.

Operator: Your next question comes from the line of Benjamin Budish with Barclays. Your line is open. Please go ahead. Benjamin, your line is open. Please go ahead. Let's move on to the next caller. Which is Bill Katz, from Cowen. Your line is open. Please go ahead.

William Katz: Great. Thanks. I just have a couple of cleanup questions for you guys. You mentioned that there is a building appetite for fixed income. We have certainly heard that from some of your peers. Be curious when you are talking with the gatekeepers, whether it be on the institutional side or the retail side, where might those accounts be funded And then, second question I have for you guys, is, it looks like you had a pretty strong third quarter for private market performance fees. And then the implied guidance would assume relatively flattish to slightly up fourth quarter. Is the cadence shift here just a little bit, maybe you can unpack the dynamics?

And then given it is October 27, I am sort of curious, you would be willing to provide how the net flows are looking for the quarter for the month. Excuse me. Thank you.

Ahmet Onur Erzan: Yeah. I will defer to Tom on the performance fees question. But maybe taking the first part of question and the flow outlook Bill, yeah, I mean, in terms of where the money is gonna come from, I would say some of it is gonna come from cash. Some of it is gonna come from rebalancing of the equity portfolios. Given some of the portfolios are now heavily skewed towards equities, particularly if you have been investing in large cap and large cap growth kind of stocks. Right? So those are the expectations talking to gatekeepers.

But, again, there is gonna be some nuances depending on the geography, depending on the local rate environment and local politics and stuff like that.

Thomas Rudolph Simeone: In terms of the flow outlook I think we touched on every aspect of it, but if you sum it up, feeling quite constructive about private wealth, October is proving to be a relatively strong month. Still another few days left in October, so I do not want to conclude. So feeling good about the momentum with private wealth, which tends to. Fourth quarter tends to be typically seasonally a positive quarter as well. In terms of other channels, definitely insurance looks robust. Institutional, if I look at the active side, is looking relatively good from a pipeline perspective.

Sometimes we have ebbs and flows because we have some smaller portion of AUM passive mandates that tend to follow relatively random patterns, start to predict, given it is not our core business, that might skew the numbers a bit. But on the active side, it looks pretty solid. Retail, as we mentioned, it is gonna take a few quarters for I think, things to normalize. it is a combination of as I mentioned, Asian investors will typically wait for the rate environment stabilizes more before they come back. Sometimes they also wait for Chinese New Year in January, etcetera, to, you know, revisit their asset allocation. So those are a few drivers.

And on the equity side, some of the flagship products like large cap growth, continues to have some outflow pressure as you have seen in the third quarter. So take, I think, another few quarters for it to normalize as well. Given the broader equity market environment, the volatility, as well as our own unique circumstance.

Ahmet Onur Erzan: And then, Bill, on the performance fees, let's start with the Q3 performance fees. They were largely driven by PCI. And due to the normalization of the middle market lending environment. Then on your point about Q4, yeah, I agree with your math there. Obviously, I would not say that the cadence has changed much. In Q4, there is always an uptick in performance fees. that is largely because many of the funds crystallized in Q4. In particular, our FSOF fund, crystallizes in 4 q, and that is gonna be a large driver of the public side. Then we will continue to get performance fees out of PCI in 4 q as well. Great. Thank you.

Operator: There are no further questions at this time. Mr. Georgali, I turn the call back to you.

Ioannis Georgali: Thank you, Tracy, and thank you to everyone who joined our call today. We look forward to catching up with you next quarter. Have a good one.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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