Tags: Alliance | Bernstein | skids | AB

Alliance Bernstein Hits the Skids

By    |   Monday, 20 February 2012 01:13 PM

Alliance Bernstein (AB), a major money management firm, has hit the skids. The basic problem is that Alliance Bernstein’s clients are pulling money out of its equity funds. Indeed, institutional investors have yanked more than $150 billion since the beginning of 2009, according to Morningstar.

That amounts to more than a third of the firm’s Jan. 31 asset total of $421 billion. The performance of Alliance Bernstein’s stock investments has begun to improve, but it remains below the market’s three- and five-year averages. That’s not a good formula for retaining institutional investors.

With almost all of the redemptions from the firm coming on the equity side, bonds now total 54 percent of its assets, compared to 31 percent for equities, Morningstar notes. Fortunately for Alliance Bernstein, its performance on the fixed-income side has been solid.

Still, assets under management dropped 15 percent to $406 billion last year. Assets under management represent a key metric for money management firms because they earn a fee on every dollar they manage, in addition to performance-based fees.

Alliance Bernstein CEO Peter Kraus acknowledged the company’s problems in a recent conference call with investors and analysts. "Performance in our largest equity services disappointed, and we ended up with greater net outflows in 2011 than in 2010," he said.

Numbing numbers

Alliance Bernstein already was struggling when Kraus took over in December 2008. Since then, assets under management and the stock price have dropped 12 percent and 14 percent, respectively, according to reports.

Standard & Poor’s analyst Sonia Parechanian has a strong sell rating on Alliance Bernstein shares. She recently slashed her 2012 earnings per share estimate by 26 percent. “We expect lower revenues in 2012 and little relief on costs,” Parechanian writes.

The company registered an operating loss of $540 million in the fourth quarter, reversing a $154 million operating profit from a year earlier. Revenue plunged 20 percent to $625 million.

Alliance Bernstein next reports on May 10.

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Monday, 20 February 2012 01:13 PM
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