AllianceBernstein Holding CEO Discusses Q2 2012 Results - Earnings Call Transcript
August 2, 2012 11:11 AM ET
AllianceBernstein Holding (AB)
Q2 2012 Earnings Call
August 2, 2012, 8:00 a.m. ET
Andrea Prochniak - Director, IR
Peter Kraus - Chairman and CEO
John C. Weisenseel – CFO
Jim Gingrich - COO
Michael Kim - Sandler O'Neill
Cynthia Mayer - Bank of America Merrill Lynch
Matt Kelly – Morgan Stanley
Steve Fullerton – Citigroup
Marc Irizarry - Goldman Sachs
Thank you for standing by, and welcome to the AllianceBernstein second quarter 2012 earnings review. (Operator Instructions)
I would now like to turn the conference over to the host for this call, the Director of Investor Relations for AllianceBernstein, Miss Andrea Prochniak. Please go ahead.
Thank you, Tracey. Good morning everyone and welcome to our second quarter 2012 earnings review.
As a reminder, this conference call is being webcast in company by a spy presentation that can found in the investor relations section of our website.
Our Chairman and CEO, Peter Kraus, and our new CFO, John Weisenseel will present our financial results today. Our Chief Operating Officer, Jim Gingrich is with us as well and will participate in the question and answer portion of this call.
Now I'd like to point out the cautions regarding forward-looking statements on slide two of our presentation. Some of the information we present today as forward-looking and subject to certain SEC rules and regulations regarding disclosure. You can also find our cautions regarding forward-looking statements in the MD&A of our 2011 form 10-K and 2012 form 10-Q filings. We filed our second quarter 2012 10-Q this morning.
I'd also like to remind you that under regulation FD, management may only address questions of a material nature from the investment community in a public forum. So please ask all such questions during this call.
Now, I will turn the call over to Peter.
Thanks, Andrea and thank all of you for joining us for our second quarter earnings call.
As Andrea noted, I'm joined today with our new CFO, John Weisenseel to review the results with you and of course, Jim Gingrich, our CO is here as well who will join us in addressing any questions you may have at the end.
So let's start today with slide three. Strong sales momentum continued in the second quarter. Gross sales of $18 billion, up slightly from the first quarter and up 34% year-on-year. As gross redemptions were down as well, net outflows were about $3 billion, our best flow quarter since the first quarter of 2008.
However, after a very strong first quarter, markets were tough. And they worked against us in the second. Hit my macro-economic concerns, nearly every major global equity market fell sharply. And our investment performance suffered. Investment performance drove $9 billion of the quarter's $12 billion AUM decline, with three-quarters of the performance driven decline coming from U.S. value and growth. As a result, we finished this second quarter of AUM of $407 billion, down 3% sequentially. Average AUM was down a little over 1% at $411 billion.
In slide four, we give you a little more detail on our flows by channel. Once again, retail was a standout in the quarter. Gross sales were nearly $12 billion. Gross redemptions were $2.2 billion lower, down 21% sequentially. The net flows of $3.5 billion were not only positive for a second consecutive quarter. They were $1.2 billion higher than the first quarter.
In institutions, gross redemptions were down $7.4 billion sequentially. Of that decline, $5.2 billion is due to the absence of AXA related outflows that we saw in the prior quarter.
Gross sales were up 50% both sequentially and year-on-year. And net outflows of $3.7 billion were about $9 billion lower than the first quarter.
It's also worth noting, the Vanguard lease, we terminated our equity services. This will reduce our July AUM, but the financial effect will be immaterial.
In private client, a $2.6 billion, we saw a sequential pickup in net flows. Gross sales were down particularly in June in the wake of very weak equity markets in April and May. Redemptions were also higher due in part to the spike we see each April associated with tax seasons.
Expensive times drilling down to specific channels beginning with institutions on slide five. Clearly, strong year-to-date sales growth coupled with lower redemptions has helped our net outflows in 2012. They are down about 40% versus the first half of 2011. We also added nearly $5 billion to our pipeline during the quarter to finish at $11.3 billion. That is the highest it's been in the time that I've been here.
Most but not all of that growth has been driven by strength in fixed income. As you can see from the pie at the bottom left that fixed income accounts for about 2/3 of our pipeline.
The list at the bottom right gives you a sense of diversity of our new fixed income additions including global, regional, emerging market, U.S. debt, levered loans, and short duration high yield. In fact, we're seeing increased RFP activity across both fixed income equities. RFP activity is up 40% on an annualized basis year-to-date.
Beyond fixed income, the greatest demand is for emerging market and multi-asset services, U.S. small, and SMID cap end select equity.
Things indeed feel different here than they did even six months ago. We're getting more at best than we have had in a long time. Clients want to talk to us about the services we offer that meet their needs and are performing well.
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