AllianceBernstein Holding L.P. (
Q3 2011 Earnings Call
October 26, 2011 8:00 AM ET
Andrea Prochniak – Director, Investor Relations
Peter Kraus – Chairman and CEO
David Steyn – Chief Operating Officer
Edward Farrell – Controller and Interim CFO
Michael Kim – Sandler O’Neill
Cynthia Mayer – Bank of America/Merrill Lynch
Craig Siegenthaler – Credit Suisse
Robert Lee – KBW
Ashley Hartigan – Citi
Marc Irizarry – Goldman Sachs
Jeff Hopson – Stifel Nicolaus
Previous Statements by AB
» AllianceBernstein CEO Discusses Q2 2011 Results - Earnings Call Transcript
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» AllianceBernstein CEO Discusses Q4 2010 Results - Earnings Call Transcript
» AllianceBernstein CEO Discusses Q3 2010 Results – Earnings Call Transcript
Good morning and thank you for standing by. Welcome to the AllianceBernstein Third Quarter 2011 Earnings Review. At this time, all participants are in a listen-only mode. After the remarks, there will be a question-and-answer session. That will give you instructions on how to ask questions at that time. As a reminder, this conference is being recorded and will be replayed for one week.
I would now like to turn the conference over to the host for this call, the Director of Investor Relations for AllianceBernstein, Ms. Andrea Prochniak. Please go ahead.
Thank you, Matthew. Good morning, everyone. And welcome to our third quarter 2011 earnings review. As a reminder, this conference call is being webcast and accompanied by a slide presentation that can be found in the Investor Relations section of our website.
On the call today we have our Chairman and CEO, Peter Kraus; our Chief Operating Officer, David Steyn; and our Controller and Interim CFO, Edward Farrell.
Now I’d like to draw your attention to the cautions regarding forward-looking statements on slide two of our presentation. Some of the information we present today is 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 2010 Form 10-K and 2011 Form 10-Q filings. We filed our third quarter 2011 10-Q this morning.
I’d also like to remind you that under Regulation FD, management may only address questions of the material nature from the investment community in a public forum. So, please ask all such questions during this call.
Now, I’d like to turn it over to Peter.
Thank you, Andrea. Welcome to our third quarter earnings call. Today, I’m going to take you through our third quarter challenges and accomplishments. David will elaborate on performance in close. Ed will review the financials and as always we look forward to taking your questions at the end.
So let’s start with slide three. In the third quarter the series of events deeply and settled the global markets. Between the escalation of the European sovereign debt crisis, the U.S. debt ceiling debate and resulting S&P down rate and the weakling U.S. economy. Equity market performance was the worse we’ve seen since the 2008 financial crisis.
Just looking that little deeper, the S&P’s 14% third quarter decline compares with a 23% decline in the fourth quarter of ‘08 when Lehman’s bankruptcy accelerated a crisis that was already underway. And the MSCI is 21% third quarter decline exceeded the fourth quarter 20% drop.
In both the U.S. and Europe, market performance was worse and the market decline in the first quarter of 2009, which many considered the height of the crisis. Results were more severe than when concerns spread over Europe sovereign debt stress last year.
Under these conditions equity investors radically derisk and fixed income investors play credit and fled high yield, all for the safety of U.S. treasuries. The yield hit a low of 1.7%. The environment had a profound impact on the performance of our long duration equity and corporate and high yield debt portfolios when client activity and on our financial results.
Turning to slide four, these conditions intensified it difficult to have as witnessed in the market all year long. It has in particular effective the investment performance of our large cap equity portfolios. But simply the fundamental rules prudent long-term investing aren’t working.
We’ve constructed our high conviction long duration equity portfolio and core research principals and growth investing like above average long-term growth potential and on the value side targeting low price to earnings and price to book companies that we expect will arise to average of better over time.
But rather than rewarding long-term earnings growth, this market tends to reward current earnings and dividend yield. And rather than seeing opportunity in cheap stocks, this market is risk. The cheaper companies get the riskier they get. That’s clear from how the year-to-date trends in these measures stack up against the long-term.
So where does that leave us? Let’s look at slide five. This slide shows some of our investment portfolios at the short duration and at the high conviction and long duration end.
As you can see the portfolios to capitalize on what’s working now, high dividend payout current earnings and in certain funds low Beta are all performing well. Equity income and U.S. and global market neutral, newer strategies of ours are outperforming for the year-to-date. As our select equity strategies and procurement brought over to the firm. So investment strategies that are working now are working for us.
When you look at the other end of spectrum, however, where we invest in high conviction long duration ideas, you can see that our year-to-date performance in these strategies trail the benchmarks.
We recognized that the underperformers on the right side of the slide represent a much larger share of our equities AUM that the outperformers on the left. Most of our equity assets are concentrated in long duration strategy.