AllianceBernstein Holding (AB) Q2 2012 Earnings Call August 2, 2012, 8:00 a.m. ET Executives Andrea Prochniak - Director, IR Peter Kraus - Chairman and CEO John C. Weisenseel – CFO Jim Gingrich - COO Analysts Michael Kim - Sandler O'Neill Cynthia Mayer - Bank of America Merrill Lynch Matt Kelly – Morgan Stanley Steve Fullerton – Citigroup Marc Irizarry - Goldman Sachs Presentation Operator Operator Thank you for standing by, and welcome to the AllianceBernstein second quarter 2012 earnings review. (Operator Instructions)
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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. Peter Kraus 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.Read the rest of this transcript for free on seekingalpha.com