Item 1. Business
Item 1. Business
The words “ we ” and “ our ” in this Form 10-K refer collectively to AB Holding and AB and its subsidiaries, or to their officers and employees. Similarly, the words “ company ” and “ firm ” refer to both AB Holding and AB. Where the context requires distinguishing between AB Holding and AB, we identify which company is being discussed. Cross-references are in italics.
We use “ global ” in this Form 10-K to refer to all nations, including the United States; we use “ international ” or “ non-U.S. ” to refer to nations other than the United States.
We use “ emerging markets ” in this Form 10-K to refer to countries included in the Morgan Stanley Capital International (“ MSCI ”) emerging markets index, which are, as of December 31, 2020: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
Clients
We provide diversified investment management, research and related services globally to a broad range of clients through our three buy-side distribution channels: Institutions, Retail and Private Wealth Management, and our sell-side business, Bernstein Research Services. See “Distribution Channels” in this Item 1 for additional information.
As of December 31, 2020, 2019 and 2018, our AUM were approximately $686 billion, $623 billion and $516 billion, respectively, and our net revenues were approximately $3.7 billion, $3.5 billion and $3.4 billion, as of December 31, 2020, 2019 and 2018, respectively. EQH (our parent company) and its subsidiaries, whose AUM consist primarily of fixed income investments, is our largest client. Our EQH affiliates represented approximately 19%, 18% and 18% of our AUM as of December 31, 2020, 2019 and 2018, and we earned approximately 3% of our net revenues from services we provided to them in each of those years. Also, AXA and its subsidiaries represented approximately 3%, 5% and 6% of our AUM as of December 31, 2020, 2019 and 2018, and we earned approximately 2% of our net revenues from services we provided to them in each of those years. See “Distribution Channels” below and “Assets Under Management” and “Net Revenues” in Item 7 for additional information regarding our AUM and net revenues.
Generally, we are compensated for our investment services on the basis of investment advisory and services fees calculated as a percentage of AUM. For additional information about our investment advisory and services fees, including performance-based fees, see “ Risk Factors ” in Item 1A and “Net Revenues – Investment Advisory and Services Fees” in Item 7 .
Research
Our high-quality, in-depth research is the foundation of our business. We believe that our global team of research professionals, whose disciplines include economic, fundamental equity, fixed income and quantitative research, gives us a competitive advantage in achieving investment success for our clients. We also have experts focused on multi-asset strategies, wealth management, environmental, social and governance (“ ESG ”) and alternative investments.
Corporate Responsibility
At AB, we constantly are working to become a better firm. To us, this means giving back to the communities in which we work through our firm-wide philanthropic initiative, AB Gives Back, and reducing our environmental footprint by increasing our use of “green buildings,” such as our new headquarters in Nashville, Tennessee. Additionally, by promoting diversity and inclusion, we are afforded different perspectives and ways of thinking, which can lead to better outcomes for our clients ( See Diversity and Inclusion below ).
Also, striving to be more responsible gives us a richer perspective for evaluating other companies. As longtime fundamental investors with a strong research heritage, we have integrated ESG considerations into various processes. This helps us make fully informed risk/return assessments and draw insightful investment conclusions. Our investors — research analysts and portfolio managers — understand the companies and industries they cover in-depth. This positions them well to determine which ESG issues are material to particular companies, to determine the financial impact of an ESG issue and to incorporate that insight into their cash-flow, earnings and credit models. And, we continue to invest in technology and innovation to further enable our investment teams to formalize their ESG evaluations and share insights from our engagements with other companies.
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COVID-19 has caused vast suffering and disruption to the global economy, while also causing significant volatility in the financial markets through much of 2020. As a firm, AB has adapted rapidly to protect our employees' health and welfare, support our communities and ensure we can continue managing clients' investments safely and securely. Furthermore, COVID-19 has become a prominent theme in engagement: it not only impacts business models but also highlights corporate ESG practices. We are advocating that issuers be responsible corporate citizens, and we are working to better understand opportunities and threats created by the pandemic.
We provide additional information in this regard in our corporate responsibility report, which is entitled "Advancing Responsible Investing" and can be found under “Corporate Responsibility - Overview” on www.alliancebernstein.com.
Investment Services
We provide a broad range of investment services with expertise in:
• Actively-managed equity strategies, with global and regional portfolios across capitalization ranges, concentration ranges and investment strategies, including value, growth and core equities;
• Actively-managed traditional and unconstrained fixed income strategies, including taxable and tax-exempt strategies;
• Alternative investments, including hedge funds, fund of funds, direct lending, real estate and private equity;
• Multi-asset solutions and services, including dynamic asset allocation, customized target-date funds and target-risk funds; and
• Some passive management, including index and enhanced index strategies.
Our AUM by client domicile and investment service as of December 31, 2020, 2019 and 2018 were as follows:
By Client Domicile ($ in billions):
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By Investment Service ($ in billions):
Distribution Channels
Institutions
We offer to our institutional clients, which include private and public pension plans, foundations and endowments, insurance companies, central banks and governments worldwide, and affiliates such as EQH and its subsidiaries, separately-managed accounts, sub-advisory relationships, structured products, collective investment trusts, mutual funds, hedge funds and other investment vehicles (“ Institutional Services ”).
We manage the assets of our institutional clients pursuant to written investment management agreements or other arrangements, which generally are terminable at any time or upon relatively short notice by either party. In general, our written investment management agreements may not be assigned without the client's consent. For information about our institutional investment advisory and services fees, including performance-based fees, see “ Risk Factors ” in Item 1A and “Net Revenues – Investment Advisory and Services Fees” in Item 7 .
EQH and its subsidiaries constitute our largest institutional client. EQH and its subsidiaries combined AUM accounted for approximately 29%, 28% and 26% of our institutional AUM as of December 31, 2020, 2019 and 2018, respectively, and approximately 18%, 17% and 16% of our institutional revenues for 2020, 2019 and 2018, respectively. Also, AXA and its subsidiaries combined AUM accounted for approximately 5%, 10% and 11% of our institutional AUM as of December 31, 2020, 2019 and 2018, respectively, and approximately 12%, 11% and 11% of our institutional revenues for 2020, 2019 and 2018, respectively. No single institutional client other than EQH, AXA and their respective subsidiaries accounted for more than approximately 1% of our net revenues for the year ended December 31, 2020.
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As of December 31, 2020, 2019 and 2018, Institutional Services represented approximately 46%, 45% and 48%, respectively, of our AUM, and the fees we earned from providing these services represented approximately 14% of our net revenues for each of those years. Our AUM and revenues are as follows:
Institutional Services Assets Under Management
(by Investment Service)
December 31, % Change
2020 2019 2018 2020-19 2019-18
(in millions)
Equity Actively Managed:
U.S. $ 17,435 $ 13,861 $ 9,629 25.8 % 44.0 %
Global & Non-US 42,632 30,767 23,335 38.6 31.8
Total 60,067 44,628 32,964 34.6 35.4
Equity Passively Managed (1) :
U.S. 23,806 21,349 17,481 11.5 22.1
Global & Non-US 4,067 3,951 3,174 2.9 24.5
Total 27,873 25,300 20,655 10.2 22.5
Total Equity 87,940 69,928 53,619 25.8 30.4
Fixed Income Taxable:
U.S. 115,488 107,436 96,913 7.5 10.9
Global & Non-US 48,560 50,281 51,156 (3.4) (1.7)
Total 164,048 157,717 148,069 4.0 6.5
Fixed Income Tax-Exempt:
U.S. 1,271 1,209 1,046 5.1 15.6
Global & Non-US — — — — —
Total 1,271 1,209 1,046 5.1 15.6
Fixed Income Passively Managed (1) :
U.S. 74 69 73 7.2 (5.5)
Global & Non-US 10 20 15 (50.0) 33.3
Total 84 89 88 (5.6) 1.1
Total Fixed Income 165,403 159,015 149,203 4.0 6.6
Alternatives/Multi-Asset Solutions (2) :
U.S. 6,104 5,568 5,024 9.6 10.8
Global & Non-US 56,151 48,179 38,433 16.5 25.4
Total Alternatives/Multi-Asset Solutions 62,255 53,747 43,457 15.8 23.7
Total:
U.S. 164,178 149,492 130,166 9.8 14.8
Global & Non-US 151,420 133,198 116,113 13.7 14.7
Total $ 315,598 $ 282,690 $ 246,279 11.6 14.8
Affiliated - EQH $ 91,396 $ 78,506 $ 64,447 16.4 21.8
AXA 16,448 27,136 25,948 (39.4) 4.6
Non-affiliated 207,754 177,048 155,884 17.3 13.6
Total $ 315,598 $ 282,690 $ 246,279 11.6 14.8
________________________________________________________________________________________________________________________
(1) Includes index and enhanced index services.
(2) Includes certain multi-asset solutions and services not included in equity or fixed income services.
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Revenues from Institutional Services
(by Investment Service)
Years Ended December 31, % Change
2020 2019 2018 2020-19 2019-18
(in thousands)
Equity Actively Managed:
U.S. $ 66,118 $ 62,252 $ 60,465 6.2 % 3.0 %
Global & Non-US 104,684 98,169 103,763 6.6 (5.4)
Total 170,802 160,421 164,228 6.5 (2.3)
Equity Passively Managed (1) :
U.S. 3,677 3,846 3,713 (4.4) 3.6
Global & Non-US 2,174 1,992 1,880 9.1 6.0
Total 5,851 5,838 5,593 0.2 4.4
Total Equity 176,653 166,259 169,821 6.3 (2.1)
Fixed Income Taxable:
U.S. 103,414 103,735 102,356 (0.3) 1.3
Global & Non-US 90,612 100,352 106,314 (9.7) (5.6)
Total 194,026 204,087 208,670 (4.9) (2.2)
Fixed Income Tax-Exempt:
U.S. 1,355 1,309 1,217 3.5 7.6
Global & Non-US — — — — —
Total 1,355 1,309 1,217 3.5 7.6
Fixed Income Passively Managed (1) :
U.S. 47 86 49 (45.3) 75.5
Global & Non-US 35 21 28 66.7 (25.0)
Total 82 107 77 (23.4) 39.0
Fixed Income Servicing (2) :
U.S. 14,108 13,215 12,708 6.8 4.0
Global & Non-US — — — — —
Total 14,108 13,215 12,708 6.8 4.0
Total Fixed Income 209,571 218,718 222,672 (4.2) (1.8)
Alternatives/Multi-Asset Solutions (3) :
U.S. 52,222 54,582 52,131 (4.3) 4.7
Global & Non-US 73,354 39,405 33,530 86.2 17.5
Total Alternatives/Multi-Asset Solutions 125,576 93,987 85,661 33.6 9.7
Total Investment Advisory and Services Fees:
U.S. 240,941 239,025 232,639 0.8 2.7
Global & Non-US 270,859 239,939 245,515 12.9 (2.3)
Consolidated company-sponsored investment funds — — (372) — 100.0
Total 511,800 478,964 477,782 6.9 0.2
Distribution Revenues 588 704 757 (16.5) (7.0)
Shareholder Servicing Fees 526 476 529 10.5 (10.0)
Total $ 512,914 $ 480,144 $ 479,068 6.8 0.2
Affiliated - EQH (4)
$ 90,101 $ 82,413 $ 78,011 9.3 5.6
AXA 62,999 55,135 53,745 14.3 2.6
Non-affiliated (4)
359,814 342,596 347,312 5.0 (1.4)
Total $ 512,914 $ 480,144 $ 479,068 6.8 0.2
________________________________________________________________________________________________________________________
(1) Includes index and enhanced index services.
(2) Fixed Income Servicing includes advisory-related services fees that are not based on AUM, including derivative transaction fees, capital purchase program-related advisory services and other fixed income advisory services.
(3) Includes certain multi-asset solutions and services not included in equity or fixed income services.
(4) Amounts in 2019 and 2018 have been reclassified to conform to the current period's presentation.
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Retail
We provide investment management and related services to a wide variety of individual retail investors, both in the U.S. and internationally, through retail mutual funds we sponsor, mutual fund sub-advisory relationships, separately-managed account programs ( see below ), and other investment vehicles (“ Retail Products and Services ”).
We distribute our Retail Products and Services through financial intermediaries, including broker-dealers, insurance sales representatives, banks, registered investment advisers and financial planners. These products and services include open-end and closed-end funds that are either (i) registered as investment companies under the Investment Company Act (“ U.S. Funds ”), or (ii) not registered under the Investment Company Act and generally not offered to U.S. persons (“ Non-U.S. Funds ” and, collectively with the U.S. Funds, “ AB Funds ”). They also include separately-managed account programs, which are sponsored by financial intermediaries and generally charge an all-inclusive fee covering investment management, trade execution, asset allocation, and custodial and administrative services. In addition, we provide distribution, shareholder servicing, transfer agency services and administrative services for our Retail Products and Services. See “Net Revenues – Investment Advisory and Services Fees” in Item 7 for information about our retail investment advisory and services fees. See Note 2 to AB’s consolidated financial statements in Item 8 for a discussion of the commissions we pay to financial intermediaries in connection with the sale of open-end AB Funds.
Fees paid by the U.S. Funds are reflected in the applicable investment management agreement, which generally must be approved annually by the board of directors or trustees of those funds, by a majority vote of the independent directors or trustees. Increases in these fees must be approved by fund shareholders; decreases need not be, including any decreases implemented by a fund’s directors or trustees. In general, each investment management agreement with the U.S. Funds provides for termination by either party, at any time, upon 60 days’ notice.
Fees paid by Non-U.S. Funds are reflected in management agreements that continue until they are terminated. Increases in these fees generally must be approved by the relevant regulatory authority, depending on the domicile and structure of the fund, and Non-U.S. Fund shareholders must be given advance notice of any fee increases.
The mutual funds we sub-advise for EQH and its subsidiaries constitute our largest retail client. EQH and its subsidiaries accounted for approximately 14%, 14% and 16% of our retail AUM as of December 31, 2020, 2019 and 2018, respectively, and approximately 1%, 2% and 2% of our retail net revenues for the years ended December 31, 2020, 2019 and 2018, respectively. Also, AXA and its subsidiaries accounted for approximately 2%, 2% and 3% of our retail AUM as of December 31, 2020, 2019 and 2018, respectively, and approximately 1%, 1% and 2% of our retail net revenues for the years ended December 31, 2020, 2019 and 2018, respectively.
HSBC was responsible for approximately 6%, 14% and 7% of our open-end mutual fund sales in 2020, 2019 and 2018, respectively. HSBC is not under any obligation to sell a specific amount of AB Fund shares and is not our affiliate.
Most open-end U.S. Funds have adopted a plan under Rule 12b-1 of the Investment Company Act that allows the fund to pay, out of assets of the fund, distribution and service fees for the distribution and sale of its shares (“ Rule 12b-1 Fees ”). The open-end U.S. Funds have entered into such agreements with us, and we have entered into selling and distribution agreements pursuant to which we pay sales commissions to the financial intermediaries that distribute our open-end U.S. Funds. These agreements are terminable by either party upon notice (generally 30 days) and do not obligate the financial intermediary to sell any specific amount of fund shares.
As of December 31, 2020, retail U.S. Fund AUM were approximately $62 billion, or 23% of retail AUM, as compared to $55 billion, or 23%, as of December 31, 2019, and $43 billion, or 24%, as of December 31, 2018. Non-U.S. Fund AUM, as of December 31, 2020, totaled $110 billion, or 41% of retail AUM, as compared to $103 billion, or 43%, as of December 31, 2019, and $71 billion, or 39%, as of December 31, 2018.
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Our Retail Services represented approximately 39%, 39% and 35% of our AUM as of December 31, 2020, 2019 and 2018, respectively, and the fees we earned from providing these services represented approximately 49%, 46% and 44% of our net revenues for the years ended December 31, 2020, 2019 and 2018, respectively. Our AUM and revenues are as follows:
Retail Services Assets Under Management
(by Investment Service)
December 31, % Change
2020 2019 2018 2020-19 2019-18
(in millions)
Equity Actively Managed:
U.S. $ 79,569 $ 57,125 $ 41,450 39.3 % 37.8 %
Global & Non-US 27,297 24,497 19,475 11.4 25.8
Total 106,866 81,622 60,925 30.9 34.0
Equity Passively Managed (1) :
U.S. 28,937 27,153 22,658 6.6 19.8
Global & Non-US 7,058 7,530 6,697 (6.3) 12.4
Total 35,995 34,683 29,355 3.8 18.2
Total Equity 142,861 116,305 90,280 22.8 28.8
Fixed Income Taxable:
U.S. 8,510 9,093 7,029 (6.4) 29.4
Global & Non-US 76,144 79,315 53,413 (4.0) 48.5
Total 84,654 88,408 60,442 (4.2) 46.3
Fixed Income Tax-Exempt:
U.S. 23,167 20,706 16,403 11.9 26.2
Global & Non-US 35 44 42 (20.5) 4.8
Total 23,202 20,750 16,445 11.8 26.2
Fixed Income Passively Managed (1) :
U.S. 4,460 5,031 4,965 (11.3) 1.3
Global & Non-US 3,771 3,794 3,964 (0.6) (4.3)
Total 8,231 8,825 8,929 (6.7) (1.2)
Total Fixed Income 116,087 117,983 85,816 (1.6) 37.5
Alternatives/Multi-Asset Solutions (2) :
U.S. 3,071 2,470 2,476 24.3 (0.2)
Global & Non-US 3,321 2,408 2,197 37.9 9.6
Total Alternatives/Multi-Asset Solutions 6,392 4,878 4,673 31.0 4.4
Total:
U.S. 147,714 121,578 94,981 21.5 28.0
Global & Non-US 117,626 117,588 85,788 — 37.1
Total $ 265,340 $ 239,166 $ 180,769 10.9 32.3
Affiliated - EQH $ 36,765 $ 34,448 $ 29,206 6.7 17.9
AXA 6,150 5,680 5,471 8.3 3.8
Non-affiliated 222,425 199,038 146,092 11.8 36.2
Total $ 265,340 $ 239,166 $ 180,769 10.9 32.3
________________________________________________________________________________________________________________________
(1) Includes index and enhanced index services.
(2) Includes certain multi-asset solutions and services not included in equity or fixed income services.
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Revenues from Retail Services
(by Investment Service)
Years Ended December 31, % Change
2020 2019 2018 2020-19 2019-18
(in thousands)
Equity Actively Managed:
U.S. $ 346,538 $ 283,461 $ 235,611 22.3 % 20.3 %
Global & Non-US 162,435 153,156 149,995 6.1 2.1
Total 508,973 436,617 385,606 16.6 13.2
Equity Passively Managed (1) :
U.S. 9,004 9,179 8,901 (1.9) 3.1
Global & Non-US 5,343 6,994 7,861 (23.6) (11.0)
Total 14,347 16,173 16,762 (11.3) (3.5)
Total Equity 523,320 452,790 402,368 15.6 12.5
Fixed Income Taxable:
U.S. 25,127 26,963 25,194 (6.8) 7.0
Global & Non-US 509,037 479,886 438,048 6.1 9.6
Total 534,164 506,849 463,242 5.4 9.4
Fixed Income Tax-Exempt:
U.S. 70,661 65,375 58,824 8.1 11.1
Global & Non-US 73 99 132 (26.3) (25.0)
Total 70,734 65,474 58,956 8.0 11.1
Fixed Income Passively Managed (1) :
U.S. 6,037 5,972 6,086 1.1 (1.9)
Global & Non-US 6,192 6,133 6,809 1.0 (9.9)
Total 12,229 12,105 12,895 1.0 (6.1)
Total Fixed Income 617,127 584,428 535,093 5.6 9.2
Alternatives/Multi-Asset Solutions (2) :
U.S. 57,069 51,958 63,232 9.8 (17.8)
Global & Non-US 12,723 8,946 8,575 42.2 4.3
Total Alternatives/Multi-Asset Solutions 69,792 60,904 71,807 14.6 (15.2)
Total Investment Advisory and Services Fees:
U.S. 514,436 442,908 397,848 16.1 11.3
Global & Non-US 695,803 655,214 611,420 6.2 7.2
Consolidated company-sponsored investment funds 733 883 1,047 (17.0) (15.7)
Total 1,210,972 1,099,005 1,010,315 10.2 8.8
Distribution Revenues 522,056 447,050 411,996 16.8 8.5
Shareholder Servicing Fees 78,920 73,777 72,134 7.0 2.3
Total $ 1,811,948 $ 1,619,832 $ 1,494,445 11.9 8.4
Affiliated - EQH $ 27,130 $ 27,737 $ 27,814 (2.2) (0.3)
AXA 23,762 23,293 24,946 2.0 (6.6)
Non-affiliated 1,761,056 1,568,802 1,441,685 12.3 8.8
Total $ 1,811,948 $ 1,619,832 $ 1,494,445 11.9 8.4
________________________________________________________________________________________________________________________
(1) Includes index and enhanced index services.
(2) Includes certain multi-asset solutions and services not included in equity or fixed income services.
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Private Wealth Management
We offer to our private wealth clients, which include high-net-worth individuals and families, trusts and estates, charitable foundations, partnerships, private and family corporations, and other entities, separately-managed accounts, hedge funds, mutual funds and other investment vehicles (“ Private Wealth Services ”).
We manage these accounts pursuant to written investment advisory agreements, which generally are terminable at any time or upon relatively short notice by any party, and may not be assigned without the client's consent. For information about our investment advisory and services fees, including performance-based fees, see “ Risk Factors ” in Item 1A and “Net Revenues – Investment Advisory and Services Fees” in Item 7 .
Our Private Wealth Services represented approximately 15%, 16% and 17% of our AUM as of December 31, 2020, 2019 and 2018, respectively. The fees we earned from providing these services represented approximately 24%, 26% and 26% of our net revenues for 2020, 2019 and 2018, respectively. Our AUM and revenues are as follows:
Private Wealth Services Assets Under Management
(by Investment Service)
December 31, % Change
2020 2019 2018 2020-19 2019-18
(in millions)
Equity Actively Managed:
U.S. $ 28,135 $ 26,840 $ 22,504 4.8 % 19.3 %
Global & Non-US 22,719 24,094 19,809 (5.7) 21.6
Total 50,854 50,934 42,313 (0.2) 20.4
Equity Passively Managed (1) :
U.S. 641 142 113 n/m 25.7
Global & Non-US 25 32 42 (21.9) (23.8)
Total 666 174 155 n/m 12.3
Total Equity 51,520 51,108 42,468 0.8 20.3
Fixed Income Taxable:
U.S. 9,293 7,583 7,022 22.6 8.0
Global & Non-US 5,222 4,587 4,154 13.8 10.4
Total 14,515 12,170 11,176 19.3 8.9
Fixed Income Tax-Exempt:
U.S. 25,749 25,102 24,129 2.6 4.0
Global & Non-US 15 15 15 — —
Total 25,764 25,117 24,144 2.6 4.0
Fixed Income Passively Managed (1) :
U.S. — — 11 — (100.0)
Global & Non-US 195 372 404 (47.6) (7.9)
Total 195 372 415 (47.6) (10.4)
Total Fixed Income 40,474 37,659 35,735 7.5 5.4
Alternatives/Multi-Asset Solutions (2) :
U.S. 5,927 6,808 5,762 (12.9) 18.2
Global & Non-US 7,064 5,484 5,340 28.8 2.7
Total Alternatives/Multi-Asset Solutions 12,991 12,292 11,102 5.7 10.7
Total:
U.S. 69,745 66,475 59,541 4.9 11.6
Global & Non-US 35,240 34,584 29,764 1.9 16.2
Total $ 104,985 $ 101,059 $ 89,305 3.9 13.2
________________________________________________________________________________________________________________________
(1) Includes index and enhanced index services.
(2) Includes certain multi-asset solutions and services not included in equity or fixed income services.
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Revenues from Private Wealth Services
(by Investment Service)
Years Ended December 31, % Change
2020 2019 2018 2020-19 2019-18
(in thousands)
Equity Actively Managed:
U.S. $ 262,885 $ 267,671 $ 274,320 (1.8) % (2.4) %
Global & Non-US (3)
225,014 243,240 240,332 (7.5) 1.2
Total 487,899 510,911 514,652 (4.5) (0.7)
Equity Passively Managed (1) :
U.S. 1,053 144 117 n/m 23.1
Global & Non-US 60 190 254 (68.4) (25.2)
Total 1,113 334 371 n/m (10.0)
Total Equity 489,012 511,245 515,023 (4.3) (0.7)
Fixed Income Taxable:
U.S. 36,789 34,546 33,034 6.5 4.6
Global & Non-US 34,786 29,418 28,358 18.2 3.7
Total 71,575 63,964 61,392 11.9 4.2
Fixed Income Tax-Exempt:
U.S. 123,871 122,350 118,811 1.2 3.0
Global & Non-US 81 97 109 (16.5) (11.0)
Total 123,952 122,447 118,920 1.2 3.0
Fixed Income Passively Managed (1) :
U.S. 6 13 156 (53.8) (91.7)
Global & Non-US (3)
2,885 4,462 5,312 (35.3) (16.0)
Total 2,891 4,475 5,468 (35.4) (18.2)
Total Fixed Income 198,418 190,886 185,780 3.9 2.7
Alternatives/Multi-Asset Solutions (2) :
U.S. 109,169 123,216 122,686 (11.4) 0.4
Global & Non-US (3)
76,065 68,728 51,839 10.7 32.6
Total Alternatives/Multi-Asset Solutions 185,234 191,944 174,525 (3.5) 10.0
Total Investment Advisory and Services Fees:
U.S. 533,773 547,940 549,124 (2.6) (0.2)
Global & Non-US 338,891 346,135 326,204 (2.1) 6.1
Consolidated company-sponsored investment funds — — (1,214) — 100.0
Total 872,664 894,075 874,114 (2.4) 2.3
Distribution Revenues 7,137 7,289 5,809 (2.1) 25.5
Shareholder Servicing Fees 2,871 3,141 3,311 (8.6) (5.1)
Total $ 882,672 $ 904,505 $ 883,234 (2.4) 2.4
________________________________________________________________________________________________________________________
(1) Includes index and enhanced index services.
(2) Includes certain multi-asset solutions and services not included in equity or fixed income services.
(3) Amounts in 2019 have been reclassified to conform to the current period's presentation.
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Bernstein Research Services
We offer high-quality fundamental research, quantitative services and brokerage-related services in equities and listed options to institutional investors, such as pension fund, hedge fund and mutual fund managers, and other institutional investors (“ Bernstein Research Services ”). We serve our clients, which are based in the United States and in other major markets around the world, through our trading professionals, who are primarily based in New York, London and Hong Kong, and our sell-side analysts, who provide fundamental company and industry research along with quantitative research into securities valuation and factors affecting stock-price movements.
We earn revenues for providing investment research to, and executing brokerage transactions for, institutional clients. These clients compensate us principally by directing us to execute brokerage transactions on their behalf, for which we earn commissions, and to a lesser but increasing extent, by paying us directly for research through commission sharing agreements or cash payments. Bernstein Research Services accounted for approximately 12%, 12% and 13% of our net revenues as of December 31, 2020, 2019 and 2018, respectively.
For information regarding trends in fee rates charged for brokerage transactions, see “Risk Factors” in Item 1A .
Our Bernstein Research Services revenues are as follows:
Revenues from Bernstein Research Services
Years Ended December 31, % Change
2020 2019 2018 2020-19 2019-18
(in thousands)
Bernstein Research Services $ 459,744 $ 407,911 $ 439,432 12.7 % (7.2) %
Custody
Our U.S. based broker-dealer subsidiary acts as custodian for the majority of our Private Wealth Management AUM and some of our Institutional AUM. Other custodian arrangements, directed by clients, include banks, trust companies, brokerage firms and other financial institutions.
Human Capital Management
As a leading global investment-management and research firm, we bring together a wide range of insights, expertise and innovations to advance the interests of our clients around the world. The intellectual capital of our employees is collectively the most important asset of our firm, so the long-term sustainability of our firm is heavily dependent on our people. We are constantly focused on:
• fostering an inclusive culture by incorporating diversity and inclusion in all levels of our business;
• encouraging innovation;
• developing, retaining and recruiting high quality talent; and
• aligning employees’ incentives and risk taking with those of the firm.
As a result, we have a strong firm culture that helps us maximize performance and drive excellence. Further, our firm’s role as a fiduciary is embedded in our culture. As a fiduciary, our firm’s primary objective is to help our clients reach their financial goals.
Also, our Board of Directors and committees of the Board, particularly our Compensation and Workplace Practices Committee, provide oversight into various human capital matters, including emerging human capital management risks and strategies to mitigate our exposure to those risks. Furthermore, our Board and Board committees evaluate the overall effectiveness of our social responsibility policies, goals and programs and recommend changes to management as necessary. These collaborative efforts contribute to the overall framework that guides how AB attracts, retains and develops a workforce that supports our values and strategic initiatives.
Talent Acquisition
AB seeks to achieve excellence in business and investment performance by recruiting and hiring a workforce with diversity of thought, backgrounds and experiences. We believe that diverse and inclusive teams generate better ideas and reach more
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balanced decisions. We seek to leverage the unique backgrounds of our employees to meet the needs of a broad range of clients and engage with the communities in which we operate. We engage several external organizations to assist in attracting and recruiting top talent at all levels, with a particular focus on attracting diverse talent. We have a sizable group of internal human capital associates focused on recruiting, and we have implemented various human capital initiatives to develop and provide for a balanced workforce. Additionally, we offer internship programs for students to work in positions across functional areas of the firm; an important part of our college recruitment strategy is to convert a high percentage of our interns into full-time employees.
Employee Engagement
We believe a workforce is most productive, effective and highly engaged when they feel connected to our business and culture. We seek to provide diverse work experiences, professional development opportunities, competitive compensation and benefits, an inclusive and diverse culture and social engagement projects to keep our employees motivated, connected to our firm and engaged throughout their careers. We strive to create a culture of intellectual curiosity and collaboration, creating an environment where our employees can thrive and do their best work. We foster growth and advancement through different training avenues to develop skill sets, create opportunities for networking, both internally and externally, and we encourage internal mobility as a part of our employees' career trajectory. It is important that our employees are not only connected to our business but also to the communities in which we operate. As such, AB offers many opportunities for our employees to volunteer in the communities in which we serve including our firm-wide philanthropic initiative, AB Gives Back. Other initiatives in support of these objectives include a five-year refresh award for employees that mark a five-year anniversary are eligible to receive two additional weeks off. In addition, we utilize AB Voice, a periodic survey designed to measure employee satisfaction and engagement, allowing us to identify and address performance gaps.
Diversity and Inclusion
As noted previously, we believe that diverse and inclusive teams generate better ideas and best serve the needs of our clients. As such, we strive to cultivate a dynamic, diverse and inclusive workplace where employees feel challenged and valued for their contributions. We offer leadership development programs that cater to the needs of various groups, including an African American Leadership program, an Asian Leadership program, a Women's leadership program and a variety of Employee Resource Groups (" ERGs "). These ERG programs, which are central to our diversity and inclusion efforts, share a common purpose, interest and backgrounds and accelerate the advancement of our employees from traditionally underrepresented groups. Our ERG groups are spread across seven categories, including AB Asians, Black ERG, Family Matters, AB Veterans, AB Out (LGBTQ), Synergy (Women) and Adelante (Latinx). These groups serve as a source of inclusion, and they help to support our acquisition of diverse talent. Our senior leadership is committed to our diversity and inclusion efforts and is active in a variety of coalitions pledging to advance diversity and inclusion. Additionally, the Firm has implemented several measures to help ensure accountability for contributing to our diversity and inclusion initiatives. For i nstance, our senior business leaders have diversity and inclusion objectives embedded in their annual performance goals.
Compensation and Benefits
We have demonstrated a history of investing in our workforce by offering competitive compensation. We utilize a variety of compensation elements, including base salaries, annual short-term compensation awards (i.e., cash bonuses) and, for those of our employees who earn more than $200,000 annually, a long-term compensation award program. Long-term incentive compensation awards generally are denominated in restricted AB Holding Units. We utilize this structure to foster a stronger sense of ownership and align the interests of our employees directly with the interests of our Unitholders and indirectly with the interests of our clients, as strong performance for our clients generally contributes directly to increases in assets under management and improved financial performance for the firm. Furthermore, we offer health and welfare, 401(k) profit-sharing and other benefits programs to all eligible employees. In the U.S. (and elsewhere, although benefits may differ by jurisdiction):
• We provide employee wages that are competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location;
• We engage nationally recognized outside compensation and benefits consulting firms to independently evaluate the effectiveness of our executive compensation and benefit programs, as well as consulting services relating to the amount and form of compensation paid to employees other than executives, and to provide benchmarking against our peers;
• We provide merit-based and performance-based annual increases and incentive compensation, which are communicated to employees at the time of hiring and documented through our talent management process as part of our annual review procedures and upon internal transfer and/or promotion; and
• The firm makes benefits available to all eligible employees, including, health insurance, paid and unpaid leaves, a retirement plan and life and disability/accident coverage. We also offer a variety of voluntary benefits that allow
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employees to select the options that meet their needs, including flexible time-off, telemedicine, paid parental leave, adoption assistance, prescription savings solutions, Veterans' Health Administration coverage in U.S. medical plans, a personalized wellness program and a financial wellness program.
Health and Safety
The health and safety of our employees is our highest priority and is evident in our response to the COVID-19 pandemic around the globe. At the initial onset of COVID-19 during the first quarter of 2020, we quickly responded in the various jurisdictions where we operate, including the U.S., EMEA (including the U.K., Luxembourg, France and other jurisdictions), Hong Kong, Shanghai, Singapore and Taiwan. We implemented business continuity measures, including travel restrictions and a work-from-home requirement for almost all personnel (other than a relatively small number of employees whose physical presence in our offices was considered critical), which has remained in place (except in our Asia offices, most of which have reopened), to ensure operating continuity for all critical functions. We also instituted a confidential notification process for any employee who tests positive for COVID-19 or has been exposed to someone else who has tested positive. As the COVID-19 crisis has continued to evolve since the lockdown in the first quarter, certain key functions of the business, such as Risk Management, Business Continuity, Finance and Human Capital, have maintained constant communication and monitored the evolution of the pandemic to keep our employees safe and advised of key developments. Additionally, we continue to monitor communications from the World Health Organization and the U.S. Centers for Disease Control and Prevention to ensure we have current information. We have also instituted various other protocols in response to the COVID-19 pandemic, such as increased cleaning protocols, modifying workspaces to allow for social distancing and requiring masks to be worn in all office locations when social distancing cannot be maintained.
Employees
As of December 31, 2020, our firm had 3,929 full-time employees, representing a 3.1% increase compared to the end of 2019.
As of December 31, 2020, our employees reflected the following by gender and region:
Region: Female % Female Male % Male Grand Total % of Total
Americas 1,084 37 % 1,871 63 % 2,955 75 %
Asia ex Japan 210 52 % 197 48 % 407 10 %
EMEA 175 36 % 307 64 % 482 12 %
Japan 41 48 % 44 52 % 85 2 %
Grand Total 1,510 38 % 2,419 62 % 3,929 100 %
In connection with our establishing 1,250 roles in Nashville, Tennessee, we have relocated many of our employees from our New York City and White Plains, New York, locations. Employees whose roles are in-scope for the move, but who are not relocating, will receive a separation package. We expect layoffs to continue on a rolling basis until all in-scope roles are filled in Nashville.
Information about our Executive Officers
Please refer to "Item 10. Directors, Executive Officers and Corporate Governance" below for information relating to our firm's executive officers.
Service Marks
We have registered a number of service marks with the U.S. Patent and Trademark Office and various foreign trademark offices, including the mark “AllianceBernstein.” The logo set forth below is a service mark of AB:
In 2015, we established a new brand identity by prominently incorporating “AB” into our brand architecture, while maintaining the legal names of our corporate entities. With this and other related refinements, our company, and our Institutional and Retail businesses, are referred to as “AllianceBernstein (AB)” or simply “AB.” Private Wealth Management and Bernstein Research Services are referred to as “AB Bernstein.” Also, we adopted the logo service mark described above .
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In connection with the Bernstein Transaction, we acquired all of the rights in, and title to, the Bernstein service marks, including the mark “Bernstein.”
In connection with an acquisition we completed in 2013, we acquired all of the rights in, and title to, the W.P. Stewart & Co. service marks, including the logo “WPSTEWART.”
Service marks are generally valid and may be renewed indefinitely, as long as they are in use and/or their registrations are properly maintained.
Regulation
Virtually all aspects of our business are subject to various federal and state laws and regulations, rules of various securities regulators and exchanges, and laws in the foreign countries in which our subsidiaries conduct business. These laws and regulations primarily are intended to protect clients and fund shareholders and generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with such laws and regulations. Possible sanctions that may be imposed on us include the suspension of individual employees, limitations on engaging in business for specific periods, the revocation of the registration as an investment adviser or broker-dealer, censures and fines.
AB, AB Holding, the General Partner and five of our subsidiaries (Sanford C. Bernstein & Co., LLC (“ SCB LLC ”), AB Broadly Syndicated Loan Manager LLC, AB Custom Alternative Solutions LLC, AB Private Credit Investors LLC and W.P. Stewart Asset Management LLC) are registered with the SEC as investment advisers under the Investment Advisers Act. Additionally, AB Holding is an NYSE-listed company and, accordingly, is subject to applicable regulations promulgated by the NYSE. Also, AB, SCB LLC and AB Custom Alternative Solutions LLC are registered with the Commodity Futures Trading Commission (“ CFTC ”) as commodity pool operators and commodity trading advisers; SCB LLC also is registered with the CFTC as a commodities introducing broker.
Each U.S. Fund is registered with the SEC under the Investment Company Act and each Non-U.S. Fund is subject to the laws in the jurisdiction in which the fund is registered. For example, our platform of Luxembourg-based funds operates pursuant to Luxembourg laws and regulations, including Undertakings for the Collective Investment in Transferable Securities Directives, and is authorized and supervised by the Commission de Surveillance du Secteur Financier (“ CSSF ”), the primary regulator in Luxembourg. AllianceBernstein Investor Services, Inc., one of our subsidiaries, is registered with the SEC as a transfer and servicing agent.
SCB LLC and another of our subsidiaries, AllianceBernstein Investments, Inc., are registered with the SEC as broker-dealers, and both are members of the Financial Industry Regulatory Authority. In addition, SCB LLC is a member of the NYSE and other principal U.S. exchanges.
Many of our subsidiaries are subject to the oversight of regulatory authorities in the jurisdictions outside the United States in which they operate, including the Ontario Securities Commission, the Investment Industry Regulatory Organization of Canada, the European Securities and Markets Authority, the Financial Conduct Authority in the U.K., the CSSF in Luxembourg, the Financial Services Agency in Japan, the Securities & Futures Commission in Hong Kong, the Monetary Authority of Singapore, the Financial Services Commission in South Korea, the Financial Supervisory Commission in Taiwan and The Securities and Exchange Board of India. While these regulatory requirements often may be comparable to the requirements of the SEC and other U.S. regulators, they are sometimes more restrictive and may cause us to incur substantial expenditures of time and money related to our compliance efforts. For additional information relating to the regulations that impact our business, please refer to "Risk Factors" in Item 1A .
History and Structure
We have been in the investment research and management business for more than 50 years. Bernstein was founded in 1967. Alliance Capital was founded in 1971 when the investment management department of Donaldson, Lufkin & Jenrette, Inc. (since November 2000, a part of Credit Suisse Group) merged with the investment advisory business of Moody’s Investors Service, Inc.
In April 1988, AB Holding “went public” as a master limited partnership. AB Holding Units, which trade under the ticker symbol “AB,” have been listed on the NYSE since that time.
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In October 1999, AB Holding reorganized by transferring its business and assets to AB, a newly-formed operating partnership, in exchange for all of the AB Units (“ Reorganization ”). Since the date of the Reorganization, AB has conducted the business formerly conducted by AB Holding and AB Holding’s activities have consisted of owning AB Units and engaging in related activities. Unlike AB Holding Units, AB Units do not trade publicly and are subject to significant restrictions on transfer. The General Partner is the general partner of both AB and AB Holding.
In October 2000, our two legacy firms, Alliance Capital and Bernstein, combined, bringing together Alliance Capital’s expertise in growth equity and corporate fixed income investing and its family of retail mutual funds, with Bernstein’s expertise in value equity investing, tax-exempt fixed income management, and its Private Wealth Management and Bernstein Research Services businesses.
As of December 31, 2020, the condensed ownership structure of AB is as follows (for a more complete description of our ownership structure, see “Principal Security Holders” in Item 12 ):
The General Partner owns 100,000 general partnership units in AB Holding and a 1% general partnership interest in AB. Including these general partnership interests, EQH, directly and through certain of its subsidiaries ( see “Principal Security Holders” in Item 12 ), had an approximate 64.8% economic interest in AB as of December 31, 2020.
Competition
We compete in all aspects of our business with numerous investment management firms, mutual fund sponsors, brokerage and investment banking firms, insurance companies, banks, savings and loan associations, and other financial institutions that often provide investment products with similar features and objectives as those we offer. Our competitors offer a wide range of financial services to the same customers that we seek to serve. Some of our competitors are larger, have a broader range of product choices and investment capabilities, conduct business in more markets, and have substantially greater resources than we do. These factors may place us at a competitive disadvantage, and we can give no assurance that our strategies and efforts to maintain and enhance our current client relationships, and create new ones, will be successful.
In addition, EQH and its subsidiaries provide financial services, some of which compete with those we offer. The AB Partnership Agreement specifically allows EQH and its subsidiaries (other than the General Partner) to compete with AB and to pursue opportunities that may be available to us. EQH and certain of its subsidiaries have substantially greater financial resources than we do and are not obligated to provide resources to us.
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To grow our business, we believe we must be able to compete effectively for AUM. Key competitive factors include:
• our investment performance for clients;
• our commitment to place the interests of our clients first;
• the quality of our research;
• our ability to attract, motivate and retain highly skilled, and often highly specialized, personnel;
• the array of investment products we offer;
• the fees we charge;
• Morningstar/Lipper rankings for the AB Funds;
• our ability to sell our actively-managed investment services despite the fact that many investors favor passive services;
• our operational effectiveness;
• our ability to further develop and market our brand; and
• our global presence.
Competition is an important risk that our business faces and should be considered along with the other factors we discuss in “Risk Factors” in Item 1A .
Available Information
AB and AB Holding file or furnish annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to such reports, and other reports (and amendments thereto) required to comply with federal securities laws, including Section 16 beneficial ownership reports on Forms 3, 4 and 5, registration statements and proxy statements. We maintain an Internet site ( http://www.alliancebernstein.com ) where the public can view these reports, free of charge, as soon as reasonably practicable after each report is filed with, or furnished to, the SEC. In addition, the SEC maintains an Internet site ( http://www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
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