August, 2020 The AB Investment Opportunity Presentation for the Investment Community
The AB Investment Opportunity Sustained Growth Differentiated investment performance and distribution capabilities driving sustained best-in-class organic growth and accelerating inorganic growth opportunities Expanding Demonstrated expansion in higher-fee, persistent-AUM alternatives platforms Alternatives Committed Capital Strategic partner, Equitable (EQH), seeding new strategies and supporting M&A (EQH) Strong Incremental 45-50% incremental margin targets from scalable platform, headquarters relocation, and consistent Margins cost-savings Tax Advantaged Low ~10% effective tax rate, given partnership structure, an attractive attribute should tax rates rise Structure in the future High Distribution ~9% distribution yield in a low rate environment Yield Brand Strength AB, Bernstein brands renowned among institutional investors Private Wealth differentiated among peers; stable client assets, advisory fees adding significant long- term value Second Quarter 2020 Review 1 |
Sustained Growth SUSTAINED AND DIFFERENTIATED INVESTMENT PERFORMANCE… Percentage of Assets Outperforming at Quarter- End Trailing 5-Year Period Equities Fixed Income 91 92 91 90 89 88 84 83 70 64 64 53 2015 2016 2017 2018 2019 2Q20 2015 2016 2017 2018 20192Q20 Note: Percentage of active fixed income and equity assets in institutional services that outperformed their benchmark gross of fees, and percentage active fixed income and equity assets in retail Advisor and I share class funds ranked in the top half of their The AB Investment Opportunity | 2 Morningstar category. Where no Advisor class exists, A share class used.
…HAS DRIVEN SCALE AND NET FLOWS Sustained Growth ACROSS OUR PLATFORM… AUM Growth of Key Products Select Growth Equities Products 1 High Yield $ Billions $ Billions $70 70 $65 $60 $59 60 $50 50 $40 40 $30 $32 30 $20 20 $16 $10 10 $0 0 2015 2016 2017 2018 2019 2Q20 2015 2016 2017 2018 2019 2Q20 Cumulative Net Flows Since 2015 Cumulative Net Flows Since 2015 Select Growth Equities Products AUM AB High Income Products AUM 1 Includes: Concentrated Equities, Global Core Equities, Global Strategic Core, U.S. Large Cap Growth The AB Investment Opportunity | 3
Sustained Growth AND SUSTAINED ORGANIC GROWTH… Active Net Inflows Average Annualized Growth, 2015-1H2020 4% 3% 2% 1.5% 1.5% 1.2% 1% 0.4% 0% -1% AB -2% Peer Average -3% -3.4% -4% -5% -4.8% -6% Total Active AUM Active Fixed Active Equities Income 1H20 organic growth excludes AXA redemptions of $8.9B. Including these redemptions, AB’s total active AUM average organic growth rate was 1.1% and active fixed income average organic growth rate was 0.5%. Peer Average includes: Affiliated Managers Group, Franklin Resources, Blackrock, Invesco, Janus Henderson, Legg Mason, T. The AB Investment Opportunity | 4 Rowe Price, Waddell and Reed
Sustained Growth RESULTING IN SOLID AUM GROWTH 5.7% Compound Annual Growth 2015 - Present $ Billions $622 $600 $554 $480 $516 $468 2015 2016 2017 2018 2019 Jun-20 Equities Fixed Income Other The AB Investment Opportunity | 5
Expanding Alternatives WE HAVE A GROWING ALTERNATIVES PLATFORM… 11% Compound Annual Growth Rate Y/Y AUM 2015 - 2019 Annlz’d Fee Base Growth Rate ($ Millions) * 18% $200 $180 16% $160 14% $140 12% $120 10% $100 8% $80 6% $60 4% $40 2% $20 0% $ ‐ 2016 2017 2018 2019 % AUM Growth Annualized Fee Base Alternatives includes: Real Estate Lending, Private Credit, Arya Partners, Select Equity Long/Short, US Real Estate, Option Advantage, Custom Alternatives, Securitized Assets, Financial Services Opportunities, Global Energy Exploration, Drawdown Managed, All Market Total Return, Asturias, and other alternative strategies. Annualized Fee Base represents the estimated 12-month management fee run- rate, excluding performance fees, based on assets at a specific point in time. The AB Investment Opportunity | 6
Committed Capital …ACCELERATED BY A STRATEGIC PARTNER IN (EQH) EQUITABLE HOLDINGS (EQH) Founded in 1859, Equitable (Rated A+/A2 by S&P/Moody’s) provides advice, protection and retirement strategies with more than 5,000 client relationships globally Has owned AB for over 25 years, including prior AXA ownership 65% economic interest in AB EQH’s low cost of capital and high cash generation benefits AB Represents AB’s largest client totaling ~20% of AUM Lead investor in seeding new liquid and illiquid alternative strategies, having committed >$1B to past funds Significant client for Fixed Income Provides low-cost $900M Line of Credit to AB Matching long-term liabilities with long-term invested assets Over time, low global interest rate environment may drive asset rotation into higher return, diversifying products Example: investment grade corporate and sovereign debt into yield enhancing and diversifying private credit and alternatives AB a key contributor to EQH portfolio Hedging trading expertise; investment portfolio insights driving better risk-adjusted outcomes; delivers stable and unregulated cash distributions; diversifying, low-capital business The AB Investment Opportunity | 7
Strong Incremental A CONTINUED MIX SHIFT TO HIGHER FEE ACTIVE Margins EQUITIES AND ALTERNATIVES… % of Annualized Fee Base, % of Assets under Management Active Equities and Alternatives Active Equities and Alternatives + 20 + 200 33.0% 60.0% bps bps 55.1% + 170 54.8% 31.0% 55.0% 53.6% bps 50.0% 29.0% 50.0% 27.0% 45.0% 25.0% 40.0% 23.0% 35.0% 21.0% 30.0% 19.0% 25.0% 17.0% 15.0% 20.0% 2017 2018 2019 June 2020 2017 2018 2019 June 2020 Active Equities Alternatives Active Equities Alternatives The AB Investment Opportunity | 8
Strong Incremental …COMBINED WITH FOCUSED EXECUTION Margins ON COST REDUCTION… Nashville Relocation Annual Cost Savings Adjusted Comp Expense as % of Revenues ($ Millions) 51.0% $75-$80M 50.4% $80 50.0% $60 49.0% $40 48.0% 48.0% $20 $0 47.0% -$20 46.0% -$40 45.0% 2019 2020E 2021E 2025E Average 2015 2016 2017 2018 2019 1H 2020 2H 20 2011 ‐ 2014 Guidance The AB Investment Opportunity | 9
…SUPPORTS STRONG INCREMENTAL MARGINS Strong Incremental Margins Average Incremental Margin % 5 Years, 2015 ‐ 2019 60% 54% 50% 40% 31% 30% 20% 10% 0% Peer Group Average (ex AB) AB AB Adjusted Operating Margin % 30.0% 29.0% 28.0% 27.6% 27.0% 26.0% 25.0% 24.4% 24.0% 23.0% 22.0% 2015 2016 2017 2018 2019 1H 2020 Peer Average includes: Affiliated Managers Group, Franklin Resources, Blackrock, Invesco, Janus Henderson, Legg Mason, T. Rowe Price, Waddell and Reed The AB Investment Opportunity | 10
Tax Advantaged PARTNERSHIP STRUCTURE HEDGES US AGAINST Structure RISK OF A HIGHER TAX WORLD 40% 30% ?? 21.0% 20% 10.5% 10% 0% 1 2015 2016 2017 2018 2019 2020 2021 and 1 Beyond AB Holding Effective Tax Rate U.S. Federal Corporate Tax Rate 1) 2020 & 2021 AB ETR represents 2020 YTD AB ETR Note: AB Holding is a grandfathered publicly-traded partnership “PTP” for federal tax purposes and, accordingly, is not subject to federal or state corporate income taxes. However, AB Holdings is subject to a 3.5% federal tax and a 1.0% California state tax on partnership gross income from active conduct of a trade or business, derived from its interest in AB, The AB Investment Opportunity | 11
High Distribution Yield HIGH DISTRIBUTION YIELD IN A LOW-RATE ENVIRONMENT AB Pays out 100% of Adjusted Earnings Distribution and Yield 2015-2019 Current Yield vs. Peer Group $3.00 12% 10.0% 8.8% $2.68 9.0% $2.75 $2.53 10% 8.0% $2.50 $2.30 7.0% $2.25 8% 6.0% $1.92 $2.00 $1.86 5.0% 4.1% 6% $1.75 4.0% $1.50 3.0% 4% $1.25 2.0% 1.0% $1.00 2% 2015 2016 2017 2018 2019 0.0% Current Distribution Yield Annual Distribution per Unit AB Peer Average * Annual Distribution Yield Peer Average includes: Affiliated Managers Group, Franklin Resources, Blackrock, Invesco, Janus Henderson, Legg Mason, T. Rowe The AB Investment Opportunity | 12 Price, Waddell and Reed. Source: Bloomberg
High Distribution Yield TOTAL SHAREHOLDER RETURN AB TSR has exceeded both S&P 500 and Peers Distributions represent >90% of TSR since 2015 Total Shareholder Return CAGR, 2015 – June 30, 2020 80% 70% 68% 60% 40% 20% 0% AB Peer S&P -20% (23%) -40% Dividend Return Price Return Assumes distributions are reinvested Peer Average includes: Affiliated Managers Group, Franklin Resources, Blackrock, Invesco, Janus Henderson, Legg Mason, T. Rowe The AB Investment Opportunity | 13 Price, Waddell and Reed. Source: Bloomberg
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