EUR 850.00 For Business Accounts Only

Morningstar | Fixed-income outflows do little to dampen improvements in AllianceBernstein's equity offerings.

We continue to believe the key to a sustained turnaround at AllianceBernstein hinges on the firm's ability to get its active equity platform on track. While we've been impressed by the changes that have been made, such as tearing down the walls between the Alliance and Bernstein sides of the business (which improved the firm's ability to launch new and enhanced products) and expanding the firm's reach with retail and fixed-income investors, it did not initially lead to a meaningful improvement in equity AUM levels, with the company relying more heavily on its fixed-income operations to keep its managed assets range bound between $400 billion and $500 billion during 2009-16. We have, however, been encouraged by the spate of positive organic growth and AUM gains that we've seen over the past year, as both of AB's fixed-income and equity operations have been generating solid long-term performance and positive flows, with the company coming into 2018 solidly above the $500 billion level in managed assets. With AB generating some of its best active equity and fixed-income fund performance in years, we think it is set up to finally start generating consistent positive flows, especially with investors showing a greater willingness to kick the tires on actively managed funds with records of solid performance and reasonable fees. That said, we expect most of the capital that investors dedicate to equities in the near term to continue to go to passive offerings--index funds and exchange-traded funds--limiting the benefit for AB's managed assets. We also expect the prospect of rising interest rates in the near to medium term to affect investors' appetite for bond funds, which could hinder the amount of growth AB can generate with its fixed-income platform--its best organic growth generator the past several years. Even so, we continue to believe the firm can post low- to mid-single-digit AUM and low-single-digit revenue growth over the long run, as the ever-improving performance of many of AB's funds makes its product offerings more competitive.