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, 2021: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, 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, 2021, 2020 and 2019, our AUM were approximately $779 billion, $686 billion and $623 billion, respectively, and our net revenues were approximately $4.4 billion, $3.7 billion and $3.5 billion, respectively. EQH (our parent company) and its subsidiaries, whose AUM consist primarily of fixed income investments, is our largest client. Our EQH affiliates represented approximately 17%, 19% and 18% of our AUM as of December 31, 2021, 2020 and 2019, and we earned approximately 3% of our net revenues from services we provided to them in each of those years.
Assets Under
Management (AUM)
($ billions)
Net Revenues
($ billions)
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 .
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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 pursue insight that unlocks opportunity. This is our firm's purpose. Together with our firm's mission and values, which we have described below , our purpose forms the foundation of responsibility at AB.
AB's mission is to help our clients define and achieve their investment goals, explicitly stating what we do each day to unlock opportunity for our clients. As an active manager, our differentiated insights drive our ability to deliver alpha and design innovative investment solutions. ESG and climate issues are key elements in forming insights and in presenting potential risks and opportunities that can impact the performance of the companies and issuers in which we invest and the portfolios we build.
Our values provide a framework for the behaviors and actions that deliver on our purpose and mission. Values align our actions. Each value emerges from our firm's character, yet also is aspirational, and each value challenges us to become a better, more responsible version of AB:
• We invest in each other, meaning that we have a strong organizational culture in which diversity is celebrated and mentorship is critical to our success.
• We strive for distinctive insight, meaning that we collaboratively identify creative solutions to clients' economic, ESG and climate-related investment challenges through our expertise in a wide range of investment disciplines.
• We speak with courage and conviction, which informs how we engage with our AB colleagues and issuers.
• We act with integrity, which is the bedrock of our relationships and drives us to avoid activities that could create potential conflicts of interest or distract us from our singular focus to provide asset management and research to our clients.
As noted above , we consistently challenge ourselves to become a better version of AB. This means, in part, 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 corporate 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 in this Item 1 ).
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 consider ESG factors in 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.
Additionally, AB has prioritized our employees' health and welfare throughout the COVID-19 pandemic while ensuring that our firm has continued to meet our fiduciary obligations and provide exceptional client service and thoughtful investment advice. Furthermore, COVID-19 is 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, including supply chain disruptions and inflationary pressures, fueled 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 “Responsibility - Overview” on www.alliancebernstein.com.
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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, 2021, 2020 and 2019 were as follows:
AUM by Client Domicile
($ in billions)
AUM by Investment Service
($ in billions)
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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 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 25%, 29% and 28% of our institutional AUM as of December 31, 2021, 2020 and 2019, respectively, and approximately 18%, 18% and 17% of our institutional revenues for 2021, 2020 and 2019, respectively. No single institutional client other than EQH and its respective subsidiaries accounted for more than approximately 2% of our net revenues for the year ended December 31, 2021.
As of December 31, 2021, EQH and its subsidiaries combined AUM accounted for:
Approximately
25%
of our institutional AUM.
Approximately
18%
of our institutional revenues.
EQH and Subsidiaries as a % of our Institutional AUM EQH and Subsidiaries as a % of our Institutional Revenues
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As of December 31, 2021, 2020 and 2019, Institutional Services represented approximately 43%, 46% and 45%, respectively, of our AUM, and the fees we earned from providing these services represented approximately 13%, 14% and 14%, respectively, of our net revenues for each of those years. Our AUM and revenues are as follows:
Institutional Services Assets Under Management
(by Investment Service)
Years Ended December 31 % Change
2021 2020 2019 2021-20 2020-19
(in millions)
Equity:
Equity Actively Managed $ 73,726 $ 60,067 $ 44,628 22.7 % 34.6 %
Equity Passively Managed (1)
28,995 27,873 25,300 4.0 10.2
Total Equity 102,721 87,940 69,928 16.8 25.8
U.S. 47,409 41,241 35,210 15.0 17.1
Global & Non-US 55,312 46,699 34,718 18.4 34.5
Total Equity 102,721 87,940 69,928 16.8 25.8
Fixed Income:
Fixed Income Taxable 155,940 164,048 157,717 (4.9) 4.0
Fixed Income Tax-Exempt 1,108 1,271 1,209 (12.8) 5.1
Fixed Income Passively Managed (1)
224 84 89 166.7 (5.6)
Total Fixed Income 157,272 165,403 159,015 (4.9) 4.0
U.S. 110,312 116,833 108,714 (5.6) 7.5
Global & Non-US 46,960 48,570 50,301 26.1 9.6
Total Fixed Income 157,272 165,403 159,015 (4.9) 4.0
Alternatives/Multi-Asset Solutions (2) :
U.S. 7,697 6,104 5,568 26.1 9.6
Global & Non-US 69,390 56,151 48,179 23.6 16.5
Total Alternatives/Multi-Asset Solutions 77,087 62,255 53,747 23.8 15.8
Total:
U.S. 165,418 164,178 149,492 0.8 9.8
Global & Non-US 171,662 151,420 133,198 13.4 13.7
Total $ 337,080 $ 315,598 $ 282,690 6.8 11.6
Affiliated - EQH 84,096 91,396 78,506 (8.0) 16.4
Non-affiliated (3)
252,984 224,202 204,184 12.8 9.8
Total $ 337,080 $ 315,598 $ 282,690 6.8 11.6
(1) Includes index and enhanced index services.
(2) Includes certain multi-asset solutions and services not included in equity or fixed income services.
(3) As of 12/31/2021, AXA is no longer considered an affiliated party, as such, AXA-related AUM has been reclassified to non-affiliated in 2020 and 2019.
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Revenues from Institutional Services
(by Investment Service)
Years Ended December 31 % Change
2021 2020 2019 2021-20 2020-19
(in thousands)
Equity:
Equity Actively Managed $ 240,049 $ 170,802 $ 160,421 40.5 % 6.5 %
Equity Passively Managed (1)
6,119 5,851 5,838 4.6 0.2
Total Equity 246,168 176,653 166,259 39.4 6.3
U.S. 97,522 69,795 66,098 39.7 5.6
Global & Non-US 148,646 106,858 100,161 39.1 6.7
Total Equity 246,168 176,653 166,259 39.4 6.3
Fixed Income:
Fixed Income Taxable 199,866 194,026 204,087 3.0 (4.9)
Fixed Income Tax-Exempt 1,356 1,355 1,309 0.1 3.5
Fixed Income Passively Managed (1)
105 82 107 28.0 (23.4)
Fixed Income Servicing (2)
14,738 14,108 13,215 4.5 6.8
Total Fixed Income 216,065 209,571 218,718 3.1 (4.2)
U.S. 124,004 118,924 118,345 4.3 0.5
Global & Non-US 92,061 90,647 100,373 1.6 (9.7)
Total Fixed Income 216,065 209,571 218,718 3.1 (4.2)
Alternatives/Multi-Asset Solutions (3) :
U.S. 64,646 52,222 54,582 23.8 (4.3)
Global & Non-US 59,179 73,354 39,405 (19.3) 86.2
Total Alternatives/Multi-Asset Solutions 123,825 125,576 93,987 (1.4) 33.6
Total Investment Advisory and Services Fees:
U.S. 286,172 240,941 239,025 18.8 0.8
Global & Non-US 299,886 270,859 239,939 10.7 12.9
Total 586,058 511,800 478,964 14.5 6.9
Distribution Revenues 474 588 704 (19.4) (16.5)
Shareholder Servicing Fees 485 526 476 (7.8) 10.5
Total $ 587,017 $ 512,914 $ 480,144 14.4 6.8
Affiliated - EQH 105,415 90,101 82,413 17.0 9.3
Non-affiliated (4)
481,602 422,813 397,731 13.9 6.3
Total $ 587,017 $ 512,914 $ 480,144 14.4 6.8
(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) As of 12/31/2021, AXA is no longer considered an affiliated party, as such, AXA-related AUM has been reclassified to non-affiliated in 2020 and 2019.
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Retail
We provide investment management and related services to a wide variety of individual retail investors globally 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% of our retail AUM as of December 31, 2021, 2020 and 2019 and approximately 1%, 1% and 2% of our retail net revenues for the years ended December 31, 2021, 2020 and 2019, respectively.
HSBC was responsible for approximately 4%, 6% and 14% of our open-end mutual fund sales in 2021, 2020 and 2019, 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. 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, 2021, retail U.S. Fund AUM were approximately $73 billion, or 23% of retail AUM, as compared to $62 billion, or 23%, as of December 31, 2020, and $55 billion, or 23%, as of December 31, 2019. Non-U.S. Fund AUM, as of December 31, 2021, totaled $130 billion, or 41% of retail AUM, as compared to $110 billion, or 41%, as of December 31, 2020, and $103 billion, or 43%, as of December 31, 2019.
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Our Retail Services represented approximately 41%, 39% and 39% of our AUM as of December 31, 2021, 2020 and 2019, respectively, and the fees we earned from providing these services represented approximately 50%, 49% and 46% of our net revenues for the years ended December 31, 2021, 2020 and 2019, respectively. Our AUM and revenues are as follows:
Retail Services Assets Under Management
(by Investment Service)
Years Ended December 31 % Change
2021 2020 2019 2021-20 2020-19
(in millions)
Equity:
Equity Actively Managed $ 154,200 $ 106,866 $ 81,622 44.3 % 30.9 %
Equity Passively Managed (1)
40,821 35,995 34,683 13.4 3.8
Total Equity 195,021 142,861 116,305 36.5 22.8
U.S. 152,106 108,506 84,278 40.2 28.7
Global & Non-US 42,915 34,355 32,027 24.9 7.3
Total Equity 195,021 142,861 116,305 36.5 22.8
Fixed Income:
Fixed Income Taxable 75,813 84,654 88,408 (10.4) (4.2)
Fixed Income Tax-Exempt 29,009 23,202 20,750 25.0 11.8
Fixed Income Passively Managed (1)
12,762 8,231 8,825 55.0 (6.7)
Total Fixed Income 117,584 116,087 117,983 1.3 (1.6)
U.S. 46,361 36,137 34,830 28.3 3.8
Global & Non-US 71,223 79,950 83,153 (10.9) (3.9)
Total Fixed Income 117,584 116,087 117,983 1.3 (1.6)
Alternatives/Multi-Asset Solutions (2) :
U.S. 3,595 3,071 2,470 17.1 24.3
Global & Non-US 3,718 3,321 2,408 12.0 37.9
Total Alternatives/Multi-Asset Solutions 7,313 6,392 4,878 14.4 31.0
Total:
U.S. 202,062 147,714 121,578 36.8 21.5
Global & Non-US 117,856 117,626 117,588 0.2 —
Total $ 319,918 $ 265,340 $ 239,166 20.6 10.9
Affiliated - EQH 44,417 36,765 34,448 20.8 6.7
Non-affiliated (3)
275,501 228,575 204,718 20.5 11.7
Total $ 319,918 $ 265,340 $ 239,166 20.6 10.9
(1) Includes index and enhanced index services.
(2) Includes certain multi-asset solutions and services not included in equity or fixed income services.
(3) As of 12/31/2021, AXA is no longer considered an affiliated party, as such, AXA-related AUM has been reclassified to non-affiliated in 2020 and 2019.
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Revenues from Retail Services
(by Investment Service)
Years Ended December 31 % Change
2021 2020 2019 2021-20 2020-19
(in thousands)
Equity:
Equity Actively Managed $ 766,578 $ 508,973 $ 436,617 50.6 % 16.6 %
Equity Passively Managed (1)
14,773 14,347 16,173 3.0 (11.3)
Total Equity 781,351 523,320 452,790 49.3 15.6
U.S. 556,398 355,542 292,640 56.5 21.5
Global & Non-US 224,953 167,778 160,150 34.1 4.8
Total Equity 781,351 523,320 452,790 49.3 15.6
Fixed Income:
Fixed Income Taxable 517,327 534,164 506,849 (3.2) 5.4
Fixed Income Tax-Exempt 84,945 70,734 65,474 20.1 8.0
Fixed Income Passively Managed (1)
12,994 12,229 12,105 6.3 1.0
Total Fixed Income 615,266 617,127 584,428 (0.3) 5.6
U.S. 115,248 101,825 98,310 13.2 3.6
Global & Non-US 500,018 515,302 486,118 (3.0) 6.0
Total Fixed Income 615,266 617,127 584,428 (0.3) 5.6
Alternatives/Multi-Asset Solutions (2) :
U.S. 81,872 57,069 51,958 43.5 9.8
Global & Non-US 13,117 12,723 8,946 3.1 42.2
Total Alternatives/Multi-Asset Solutions 94,989 69,792 60,904 36.1 14.6
Total Investment Advisory and Services Fees:
U.S. 753,518 514,436 442,908 46.5 16.1
Global & Non-US 738,086 695,803 655,214 6.1 6.2
Consolidated company-sponsored investment funds 1,243 733 883 69.6 (17.0)
Total 1,492,847 1,210,972 1,099,005 23.3 10.2
Distribution Revenues 644,125 522,056 447,050 23.4 16.8
Shareholder Servicing Fees 86,857 78,920 73,777 10.1 7.0
Total $ 2,223,829 $ 1,811,948 $ 1,619,832 22.7 11.9
Affiliated - EQH 28,334 27,130 27,737 4.4 (2.2)
Non-affiliated (3)
2,195,495 1,784,818 1,592,095 23.0 12.1
Total $ 2,223,829 $ 1,811,948 $ 1,619,832 22.7 11.9
(1) Includes index and enhanced index services.
(2) Includes certain multi-asset solutions and services not included in equity or fixed income services.
(3) As of 12/31/2021, AXA is no longer considered an affiliated party, as such, AXA-related AUM has been reclassified to non-affiliated in 2020 and 2019.
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Private Wealth Management
We partner with our clients, embracing innovation and independent research to address increasingly complex challenges. Our clients include high-net-worth individuals and families who have created generational wealth as successful business owners, athletes, entertainers, corporate executives and private practice owners. We also provide investment and wealth advice to foundations and endowments, family offices and other entities. Our flexible and extensive investment platform offers a range of solutions, including separately-managed accounts, hedge funds, mutual funds and other investment vehicles, tailored to meet each distinct client's needs. Our investment platform is complimented with a wealth platform that includes complex tax and estate planning, pre-IPO and pre-transaction planning, multi-generational family engagement, and philanthropic advice in addition to tailored approaches to meeting the unique needs of emerging wealth and multi-cultural demographics (" Private Wealth Services ").
We manage accounts pursuant to written investment advisory agreements, which generally are terminable at any time or upon relatively short notice by any authorized 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 16%, 15% and 16% of our AUM as of December 31, 2021, 2020 and 2019, respectively. The fees we earned from providing these services represented approximately 25%, 24% and 26% of our net revenues for 2021, 2020 and 2019, respectively. Our AUM and revenues are as follows:
Private Wealth Services Assets Under Management
(by Investment Service)
Years Ended December 31 % Change
2021 2020 2019 2021-20 2020-19
(in millions)
Equity:
Equity Actively Managed $ 59,709 $ 50,854 $ 50,934 17.4 % (0.2) %
Equity Passively Managed (1)
1,764 666 174 164.9 % n/m
Total Equity 61,473 51,520 51,108 19.3 0.8
U.S. 35,014 28,776 26,982 21.7 6.6
Global & Non-US 26,459 22,744 24,126 16.3 (5.7)
Total Equity 61,473 51,520 51,108 19.3 0.8
Fixed Income:
Fixed Income Taxable 14,567 14,515 12,170 0.4 19.3
Fixed Income Tax-Exempt 26,929 25,764 25,117 4.5 2.6
Fixed Income Passively Managed (1)
230 195 372 17.9 (47.6)
Total Fixed Income 41,726 40,474 37,659 3.1 7.5
U.S. 36,166 35,042 32,685 3.2 7.2
Global & Non-US 5,561 5,432 4,974 2.4 9.2
Total Fixed Income 41,727 40,474 37,659 3.1 7.5
Alternatives/Multi-Asset Solutions (2) :
U.S. 6,926 5,927 6,808 16.9 (12.9)
Global & Non-US 11,446 7,064 5,484 62.0 28.8
Total Alternatives/Multi-Asset Solutions 18,372 12,991 12,292 41.4 5.7
Total:
U.S. 78,106 69,745 66,475 12.0 4.9
Global & Non-US 43,466 35,240 34,584 23.3 1.9
Total $ 121,572 $ 104,985 $ 101,059 15.8 3.9
(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
2021 2020 2019 2021-20 2020-19
(in thousands)
Equity:
Equity Actively Managed $ 584,455 $ 487,899 $ 510,911 19.8 % (4.5) %
Equity Passively Managed (1)
4,780 1,113 334 n/m n/m
Total Equity 589,235 489,012 511,245 20.5 (4.3)
U.S. 325,154 263,938 267,815 23.2 (1.4)
Global & Non-US 264,081 225,074 243,430 17.3 (7.5)
Total Equity 589,235 489,012 511,245 20.5 (4.3)
Fixed Income:
Fixed Income Taxable 72,404 71,575 63,964 1.2 11.9
Fixed Income Tax-Exempt 130,391 123,952 122,447 5.2 1.2
Fixed Income Passively Managed (1)
2,634 2,891 4,475 (8.9) (35.4)
Total Fixed Income 205,429 198,418 190,886 3.5 3.9
U.S. 167,402 160,666 156,909 4.2 2.4
Global & Non-US 38,027 37,752 33,977 0.7 11.1
Total Fixed Income 205,429 198,418 190,886 3.5 3.9
Alternatives/Multi-Asset Solutions (2) :
U.S. 249,432 109,169 123,216 128.5 (11.4)
Global & Non-US 71,524 76,065 68,728 (6.0) 10.7
Total Alternatives/Multi-Asset Solutions 320,956 185,234 191,944 73.3 (3.5)
Total Investment Advisory and Services Fees:
U.S. 741,987 533,773 547,940 39.0 (2.6)
Global & Non-US 373,632 338,891 346,135 10.3 (2.1)
Total 1,115,619 872,664 894,075 27.8 (2.4)
Distribution Revenues 7,641 7,137 7,289 7.1 (2.1)
Shareholder Servicing Fees 2,882 2,871 3,141 0.4 (8.6)
Total $ 1,126,142 $ 882,672 $ 904,505 27.6 (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.
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Bernstein Research Services
We offer high-quality fundamental and quantitative research and trade execution services in equities and listed options to institutional investors, such as mutual fund and hedge fund managers, pension funds 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 research analysts, who provide fundamental company and industry research along with quantitative research into securities valuation and factors affecting stock-price movements.
Additionally, we provide equity capital markets services to issuers of publicly-traded securities, primarily in initial public offerings and follow-on offerings, generally acting as co-manager in such offerings.
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 10%, 12% and 12% of our net revenues for the years ended December 31, 2021, 2020 and 2019, 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
2021 2020 2019 2021-20 2020-19
(in thousands)
Bernstein Research Services $ 452,017 $ 459,744 $ 407,911 (1.7 %) 12.7 %
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 keenly 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 act in our clients' best interests and help them reach their financial goals.
Also, our Board of Directors (the " Board ") 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.
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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 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, and 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, whereby employees receive two additional weeks off for every five years of service. 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
We continue to believe that diverse and inclusive teams generate better ideas and best serve the needs of our clients. The events of the last two years have provided an unforeseen yet unique opportunity to reflect, adapt and broaden our Diversity & Inclusion (“ D&I ”) strategy. D&I continues to be a key strategic priority for AB and our ongoing commitment to embed it across all facets of the firm has further reinforced our company values. It has also allowed for a more purposeful approach to engagement with our people, our clients and the communities in which we operate.
Also, our firm's community engagement efforts have been further integrated under the D&I umbrella. Under the new structure, we are better able to streamline and formalize the process for assessing corporate partnerships and philanthropic giving through the lens of D&I, allowing for a more cohesive overall strategy.
We have enhanced our talent attraction and retention approach to position ourselves as an employer of choice and invest in the development of our people. We have developed a diverse talent strategy with a goal of developing a deeper understanding of the needs of diverse talent and also equipping managers with the necessary tools to effectively manage an increasingly diverse workforce. The strategy includes incorporating the concept of inclusive leadership into the firm-wide leadership development curriculum and enhancing our exit interview process for diverse talent by conducting in-person interviews, which will better enable us to detect trends and mitigate attrition.
Our people remain our top priority, especially during these times of uncertainty. Over the course of the last year, there has been a continued focus on education and deepening engagement across all pillars of our strategy to include Employee Resource Groups (" ERGs "), corporate partnerships, and the overall experience at AB. ERGs have been a major proponent of these efforts by cultivating spaces for courageous conversations, encouraging professional development and personal wellness, and raising awareness for various underrepresented communities.
As we continue to seek opportunities to further our commitment to diversity, equity and inclusion, we are leveraging best practices from industry peers. Our D&I journey continues to evolve; addressing racial and gender equity, increasing access to diverse talent and monitoring client trends remain top priorities.
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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 $300,000 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 AUM and improved financial performance for the firm. Furthermore, we offer to all eligible employees health and welfare, 401(k) profit-sharing and other benefits programs, including a flexible in-office work schedule that permits working remotely two days weekly. 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 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 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
Our ongoing response to the COVID-19 global pandemic demonstrates how highly we value the health and safety of our employees. 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 lasted through the second quarter of 2021. Since then, working in the office generally has been voluntary, with mandatory in-office participation occurring only at certain times when COVID-19 has ebbed significantly in the communities in which we operate. Throughout the pandemic, we have conscientiously ensured 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 of 2020, 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, and in the third quarter of 2021 engaged an epidemiologist on a consulting basis, to ensure we have current and accurate information. We have also instituted various other protocols in response to the COVID-19 pandemic, such as increased cleaning protocols, masking requirements where permitted by local law and testing protocols for large gatherings.
Employees
As of December 31, 2021, our firm had 4,118 full-time employees, compared to 3,929 full-time employees as of December 31, 2020, representing a 4.8% increase.
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As of December 31, 2021, our employees reflected the following characteristics and locations:
Region: Female % Female Male % Male Grand Total % of Total
Americas 1,124 37 % 1,943 63 % 3,067 75 %
Asia ex Japan 225 51 % 214 49 % 439 11 %
EMEA 183 35 % 333 65 % 516 13 %
Japan 46 55 % 38 45 % 84 2 %
Grand Total (1)
1,578 38 % 2,528 62 % 4,106 100 %
(1) The table above only reflects employees who have self-reported as male or female and as such may not reconcile to our total of 4,118 full-time employees.
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, 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 .
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.
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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 Ltd.) 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.
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.
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As of December 31, 2021, 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 64.5% economic interest in AB as of December 31, 2021.
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.
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 .
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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.