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Rating:Kraus Sees More Deal Opps For AB Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, February 23, 2015

Kraus Sees More Deal Opps For AB

Reported by Neil Anderson, Managing Editor

Peter Kraus sees more deal opportunities for his freshly-rebranded asset manager.

On Thursday New York City-based AllianceBernstein [profile] (now using the AB brand) reported its fourth quarter 2014 results. AB earned adjusted diluted net income per share of $0.57, beating estimates by $0.06. And AB brought in $787 million in Q4 2014 revenue, ahead of estimates by $38.79 million.

AB ended 2014 with $474.0 billion of assets under management, after suffering $1.6 billion in net outflows in Q4 but netting $5.1 billion in inflows for the full year. On the retail side, AB had $161.5 billion in AUM on December 31, 2014, after net outflows of $1.2 billion.

That morning Kraus (AB's chairman and CEO), John Weisenseel (AB's chief financial officer), and Jim Gingrich (AB's chief operating officer) spoke with anaylsts on an earnings call, transcribed by SeekingAlpha.

Tom Whitehead, an analyst with Morgan Stanley, asked Kraus what he sees "in terms of opportunity and pricing" for mergers and acquisitions. Kraus replied:

I think that when we see opportunities, we're going to continue to act. I would anticipate that whatever we do would be consistent with these six or seven things we've done over the last few years, where we've either bought teams in or bought businesses that we think we can scale over time attractively, economically and accretively to the unitholders.

And also teams that work well within the firm and that have a lot of synergies for research point of view and all the kinds of services that our clients want, so expect us to continue to do that. I think in terms of the opportunity set, I wouldn't say that it's really changed much. The opportunity set seems to be consistent over the last few years. There is lots of reasons why firms want to change their ownership or to become part of a large organization.


Kraus also talked up AB's liquid alternatives efforts, noting the 2014 launch of three new U.S. liquid alts mutual funds. He described retail liquid alternatives as comprising "about one-third" of AB's total alternatives AUM. Later on the call, Citi analyst Bill Katz asked Kraus about where AB's liquid alts effort is "in terms of distribution penetration and what that might infer from incremental growth." Kraus said that AB is "in the earlier innings in distribution penetration":

I think we're on some of the large platforms, meaning that both the wire houses and the large IRA platforms. We're not on all. There is discussion at some of the larger distributors around how to actually sell these products, what the right processes are, how to disclose them, how to train their FAs. I think that is going on for the industry that's a net good thing. It may slow the distribution right now, but it will accelerate it overtime.

I mean there are highly attractive attributes to the long/short world for the investor. If the manager is able to select long/short managers that produced appropriate returns, given that you can generally get returns that are attractive from a sharp ratio point of view at less volatility than the equity market and effectively capture more of that equity risk premium I was just talking about, with a little less risk than having it all on the equities.

There is real value to that and I think that that's something that distributors are trying to understand and wealth advisors to trying to figure out how to talk to their clients about it. So I'd say, we're in early innings of the general distribution system, figuring that out. And as it relates to us specifically, I'm pretty happy with where we are and we've got a lot of momentum and being able to expand that.


To dig deeper into AB's results, read its Q4 2014 earnings report and Seeking Alpha's transcript of the subsequent earnings call. 

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