AllianceBernstein Holding LP (AB) 2007 Q2 法說會逐字稿

Thank you for standing by and welcome to the AllianceBernstein second-quarter 2007 earnings review. At this time, all participants are in a listen-only mode. After the formal remarks, there will be a question and answer session and I 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, Mr. Philip Talamo. Please go ahead.

Thank you, Barbara. Good afternoon, everyone, and welcome to our second-quarter 2007 earnings review. As a reminder, this conference call is being webcast and is supported by a slide presentation that can be found in the Investor Relations section of our website at www.AllianceBernstein.com/investor relations. Presenting our results today is our President and Chief Operating Officer, Gerry Lieberman; Lew Sanders, our Chairman and Chief Executive Officer, and Bob Joseph, our CFO, will also be available to answer questions at the end of our formal remarks.

I would like to take this opportunity to note that some of the information we present today is forward-looking in nature, and as such, is subject to certain SEC rules and regulations regarding disclosure. Our disclosure regarding forward-looking statements can be found on page 2 of our slide presentation as well as in the Risk Factors section of our 2006 10-K. In light of the SEC's regulation FD, management is limited to responding to inquiries from investors and analysts in a nonpublic forum. Therefore, we encourage you to ask all questions of a material nature on this call. At this time, I would like to turn the call over to Gerry Lieberman.

Thank you, Phil, and good afternoon to everyone on the call. In an effort to streamline our conference call and allow more time for Q&A, I will forego my usual summary of quarterly highlights and we will jump right into the details of the first quarter for our clients and unit holders alike. I'll start my review with a recap of how our capital markets performed during the quarter.

As shown on display 3 after a somewhat tepid first quarter, U.S. equity benchmarks posted strong gains in the second quarter. Of particular significance is the fact that this quarter marks the first time since the first quarter of 2005 when the Russell 1000 growth index outperformed both the Russell value index and the S&P. With the growth index beating the value index by approximately 200 basis points. Historically, relative performance of our growth services have been very strong during periods where growth equities outperform value equities. Accordingly, this could be a harbinger of improved returns for clients of our growth services. Meanwhile, the Lieberman aggregate stumbled a bit with a slightly negative return due to higher global interest rates, but still returned greater than 6% over the last 12 months.

On display 4, you will see a similar story for non-U.S. capital markets, as all three indices posted stronger returns than they did in the first quarter, led by the MSCI emerging markets, which returned an astounding 15% for the quarter. Interestingly, you will notice that the MSCI World and MSCI Ether indices performed roughly in line with the S&P in the second quarter. In fact, you'd have to go back over five years to find a quarter when the S&P generated returns this comparable to these two MSCI indices.

Investment results for clients during the second quarter were generally quite good and slide 5 provides commentary on some of our services. Value equity services rebounded from a rough patch in the first quarter and generally outperformed both their benchmarks and Lipper averages with noteworthy strength in our non U.S. services. And while the relative performance of our growth services was weak, especially in retail, we have achieved a strong start in the second quarter -- in the current quarter. Continuing a recently developing trend, most fixed income services posted solid relative returns for the third consecutive quarter with exceptional strength in certain retail services.

Finally, our global and international [blend] strategy services had a particularly strong quarter. Additional detail on the relative performance of many of our services can be found in the appendix on slides 27 to 36.

The next set of slides provides some detail and insight to the nearly $793 billion of AUM that we manage on behalf of clients. As you can see on display 6, while lower than in the first quarter, gross and net inflows for the second quarter of 2007 showed continued strength at $32.6 billion and $9.5 billion, respectively, with all three channels contributing to both metrics.

Our retail channel achieved the strongest organic growth rate in the quarter, while growth in the private client channel decelerated versus last quarter's robust rate and institutional net inflows also slowed.

Display 7 shows changes in Assets Under Management by channel for the 12 months ended June 30th, 2007 as total AUM increased just under 27% or $168 billion. Net inflows posed 41.7 billion for an organic growth rate of 6.7% and investment performance added $126 billion or just over 20%.

Institutional investments generated 22.5 billion of net inflows or 54% of the total. Our retail channel contributed $11 billion in assets and our private client channel had double-digit organic growth for the trailing 12-month period.

Display 8 summarized the changes in AUM by investment services for the three months ended June 30th, 2007. Our value equity services once again led the way with net inflows of $6.8 billion and fixed income generated strong net inflows of $5.2 billion, the best quarter for these services in nearly three years. On the other hand, growth equity services included moderate net outflows for the second consecutive quarter.

Changes in AUM by investment service for the 12 months ended June 30th, 2007 are shown on display 9. Value equities accounted for 82% of total net inflows while our growth equity services experienced modest net outflows. Our fixed income services had their best trailing 12-month period ever with record gross sales of more than $32 billion, leading to record net inflows of $13.2 billion, an organic growth rate of 8%.

As we turn to display 10, I will start our discussion of distribution channel highlights with our largest distribution channel -- institutional investments. Institutional assets rose 6.9% sequentially crossing the $0.5 trillion mark at $501 billion, even as solid gross inflows were partially offset by net U.S. service cash outflows.

Overall, net inflows were $4 billion in the quarter with well over 100 institutional mandates funded. Fixed income services were the largest contributor to new institutional assets for the quarter at 40% while value equity and growth strategies each contributed over 20%. Additionally, global and international services comprised approximately 90% of new assets, continuing our trend. And lastly, our pipeline of won but unfunded institutional mandates remains substantial.

Turning to display 11, you will see that our retail channel had a solid quarter with Assets Under Management up $12 billion or 7.2%. Although market appreciation contributed approximately two-thirds of the increase or $8 billion, net inflows of about $3.8 billion were 11% higher for the first quarter of 2007. In fact, for the first time in many years, retail posted the strongest quarterly organic growth rate among all of our distribution channels. Momentum and sales of U.S. funds continued to build and non-U.S. sales have rebounded from a weak first quarter, most notably in our fixed income services.

After reaching the $10 billion milestone last quarter, our wealth strategy services continued their impressive growth with AUM up 20% sequentially to nearly $13 billion. However, newly established higher investment minimums for some of our separately managed account services may result in slower future growth.

Highlights of our Private Client channel are shown on display 12. Our high net worth client grew, AUM grew by a 6.6% during the quarter despite a deceleration in net flows due largely to seasonal issues, as many of our clients source liquidity from their Bernstein accounts to pay income taxes. Assets grew by 29% over the last 12 months, driven by record gross inflows of $16.6 billion. Our global [FA] staff now has 317 advisers, a 13.2% increase versus the end of June 2006.

Highlights for the institutional research services are shown on display 13. Double-digit growth in our European office was the primary force behind the increase in revenues for the quarter as U.S. revenues were soft. On the client service and research front, we received strong marks during the quarter in two leading European research client surveys and we've launched a sell-side coverage of three industries in the U.S., namely household and personal products, machinery, and capital goods and the Internet.

In summary, we believe that the second quarter of 2007 was another fine quarter for the firm. Assets under management increased at a solid rate across all channels and services. Most of our value in fixed income services provides strong relative investment returns for our clients, yet we did see continued weakness in our growth equity services. However, riding the second quarter's tailwind of strong absolute performance, our growth equity services have started the third quarter with strong relative performance, giving us reason to be cautiously optimistic with respect to a prospective strengthening of investment premiums in these services.

We remain unwaveringly committed to placing the interest of our clients first and providing them with world-class performance and service, which should lead to growth of our firm and consequently, strong financial returns for our unit holders.

Before I review our financial results, I would like to provide an update on the continuing and exciting transformation of our AUM in regards to the mix.

Display 14 looks at our AUM from a geographic perspective, if you will. The pie charts on the left showed that 38% of our AUM which currently managed on behalf of clients who reside outside the U.S. compared to 33% just a year ago. During the last 12 months, assets from these clients grew by 45% to $300 billion and accounted for nearly 55% of the growth in total AUM for the firm. And, at the quarter's close, global and international investment services as reflected by the pie charts to the right of the display, accounted for 58% of total assets, up from 49% at the end of the second quarter '06 and up from just 24% four years ago.

Assets in these services grew by 50% during the last 12 months, over double the firm's overall 27% AUM growth rate for the period and greater than 300% over the last four years, while total assets grew 85%. The charts on this display clearly illustrate our success and continued growth of Assets Under Management in the highly important arena of global assets. This success has resulted in AUM mix shift from U.S. domiciled clients, focused on U.S.-centric investment services to our global client base increasingly focused on global and international services. This mix shift has driven an increase in revenue yields of approximately 200 basis points during the past 12 months, which has significantly contributed to the growth in base fee revenues.

Display 15 highlights our blend strategy services, which account for approximately 20% of total Assets Under Management. Our blend services, which are offered in U.S., global, and international constructions, totaled $160 billion at quarter end and they are up 50% versus June 30th of 2006. We chart their growth in our hedge fund AUM on display 60. A combination of recent [bail] success and strong performance we've had in this arena adds approximately $1.6 billion in new hedge fund assets during the quarter, bringing the total to $10.5 billion. For the channel perspective, the growth came primarily from our Private Client channel, although some small institutional mandates were funded in the quarter. Note that our hedge fund assets increased by 36% more during the first six months of 2007 than for all of 2006.

Now, I will begin my discussion of financial results beginning with revenues on display 17.

Net revenues for the quarter were approximately $1.2 billion, a 24% increase versus the second quarter of 2006 and our third consecutive quarter with net revenues of more than $1 billion. Advisory fees grew by 22.5% and accounted for nearly 73% of this growth. The variability of the "Other" revenue line item, which I highlighted during my remarks last quarter, is in evidence once again, as this line item is 275% higher than the second quarter of 2006 and is also up 76% sequentially. As is generally the case, this increase was driven largely by marked-to-market of investments associated with our employee deferred compensation plans. As I have noted previously, the financial impact of these gains is significantly offset by higher current compensation accruals with the balance sheet offset by the additional amortization of these gains over the remaining vesting periods.

Display 18 provides an additional layer of detail on revenues. Here you can see that the aforementioned growth in advisory fees was entirely driven by an increase in base fees, as performance fees decreased versus the prior year and a few of our long holding mandates. Base fees grew as a result of higher average AUM in all three channels, as well as the higher average fee utilization rates I mentioned earlier, which are due to the mix shift in AUM created primarily by the growth of global and international investment services in our institutional channel.

On last quarter's call, I noted that the effect of this shift improves the firm's organic growth rate when measured by revenue. In this context, the firm's trailing 12-month organic growth rate of 6.7% trails right into an 8 to 9% increase in fee revenue as a result of the additional 200 basis point mix improvement.

Moving to the lower half of the display, you will see that all three of our channels experienced revenue growth greater than 20% versus the second quarter of 2006.

On display 19, you will note that operating expenses grew by just 19%. Employee compensation and benefits grew by $102 million to $476 million or 27.3% and represents approximately 80% of the increase in total operating expenses versus the second quarter of 2006. This increase was comprised primarily of higher base compensation, incentive compensation, and commission expense, which I will discuss in more detail shortly.

The 10% increase in promotion and service expense, in line with last year's year-over-year growth, was due to higher distribution payments resulting from higher retail AUM, as well as higher trailing expenses which we incurred as we serve our increasingly global client base.

General and administrative expenses increased by a modest $10 million or 8.4%, far lower than the 24% increase in net revenues as we continue to invest in office space and technology to support our growth.

Display 20 provides additional detail on employee compensation and benefits. Base compensation is up 18.6% versus last year, driven primarily by a 13% increase in headcount and our annual merit increases. At the end of June 2007, our firm employed nearly 5200 employees around the world.

Incentive compensation increased 37.8% year-over-year. Similar to the first quarter of 2007, this increase is primarily attributed to increased cash bonus estimates based principally on higher earnings, but it also includes the marked-to-market appreciation and our deferred compensation plan discussed earlier, as well as higher deferred compensation amortization. However, as we noted last quarter, the ratio of incentive compensation to operating income without the debt expense decreased sequentially as our earnings rose.

As a reminder, the 21% growth in commission expense, which is driven by new business across all channels, should be viewed as a positive leading indicator for future revenue and earnings, as sales are up in all four distribution channels, the full effect of which is not reflected in the current quarter's revenues.

On display 21, we present a summarized income statement for the operating partnership. Income statement with a bottom line of $335 million, or 28.3% better than in 2006. The higher effective tax rate for the quarter is largely the result of greater earnings in the UK and Japan versus the second quarter of 2006. You will recall that our effective income tax rate increases when our non-U.S. business grows faster than our U.S.-based business. And most importantly, net revenues increased over 24% or 490 basis points more than the increase in expenses, expanding operating margins by 280 basis points to 31% for the quarter.

Beginning with the operating partnership's first-quarter net income of $335 million, we show AllianceBernstein Holding's financial results on display 22. Holding's share of AllianceBernstein earnings were $110 million for the second quarter versus $85 million in the same quarter last year, resulting in net income after taxes of $101 million or more than 32% greater than in June of 2006.

AllianceBernstein Holding unit holders will receive a cash distribution of $1.16 per unit, which is over 30% higher than the $0.89 per unit distribution that they received for the same quarter last year. A rising effective tax rate, lower non operating income, and an increase in fully diluted units outstanding due primarily to employee stock option exercises, held the year-over-year growth in net income per unit for the quarter to a still robust 30.3%.

I'll summarize my review of our second-quarter 2007 results on display 23. Many of our investment services, and especially our global value equity services and certain retail fixed income services had a stellar quarter with respect to relative performance. While our growth equity services continued to struggle, we've seen recent signs of relative performance improvements. Organic growth in all channels, together with solid absolute, and relative performance contributed to a significant sequential increase in our Assets Under Management. Our global reach, both in terms of client domicile and geographic scope of our services, continued to increase, as assets associated with global and international services and non-U.S. clients, once again, grew at faster rates than total AUM.

Finally, as a result of strong financial results and increased AUM for the quarter, we have updated our full-year 2000 earnings guidance to $4.90 to $5.25 per unit versus our previous guidance of $4.65 to $5 per unit. This estimate is based on asset inflows continually occurring at levels similar to recent rates that assumes equity and fixed income market returns as annual rates of 8% and 5% respectively for the balance of the year. Also, we continue to expect that the fourth quarter will account for a disproportionate share of our full-year earnings. Let me remind you once again that our earnings are increasingly sensitive to investment performance as the base of assets subject to performance fee arrangements continues to increase.

Before I wrap up my comments and open the call to Q&A, I'd like to briefly discuss two noteworthy items, namely the sub prime mortgage market and CDOs as well as the recently proposed tax legislation.

As I'm sure you are all aware, the sub prime mortgage market has been experiencing turbulent conditions, which are expected to continue. AllianceBernstein's claim exposure to this market, however, is quite small. For example, our fixed income core and core plus accounts have modest exposure to AAA CDOs of less than 1% of the total assets and hold no single position greater than 40 basis points. In addition, our fixed income hedge funds have minimal exposure to this asset class and we have virtually no exposure to this market in our diversified hedge funds, which constitute the overwhelming majority of our hedge funds' AUM.

And finally, we do manage approximately $1.5 billion of mezzanine asset-backed CDOs on behalf of institutional clients, which are collateralized by sub prime mortgage debt and by objective, target an average quality rating of BBB. To date, the collateral on these CDOs has experienced a few downgrades and there may be additional downgrades in the future. These are, however, cash flow CDOs, and thus, performance of these portfolios will not be established for several years.

Turning to tax legislation, Congress has recently proposed tax legislation that requires certain publicly traded partnerships to be taxed as corporations, thus subjecting their income to a higher level of income tax. As our SEC filings made clear, becoming subject to corporate income tax would materially reduce Holding's net income and its quarterly distributions to Holding's unit holders. However, our analysis of the legislation as proposed confirms that Holding's tax status would not be affected. Further, we have recently received indications from a number of individuals involved in the legislative process that the proposed legislation was not intended to change our tax status and they do not expect to change that approach. We are, of course, encouraged by these indications, but they do not provide definitive assurance that Holding's status will not be changed. Ultimately, it will rest with Congress and the President.

In closing, I wish to reiterate that having our clients view AllianceBernstein as the most admired investment firm remains our aspiration. All 5000 plus employees know that the only way to achieve this goal is to always put the clients' interests first by striving to provide them with superior investment performance and world-class service. Accomplishing these tasks insures our financial success and will generate rewards for all stakeholders. And now, Lew and I are available for your questions.

Management has a request that you please limit your initial questions to two in order to provide all callers an opportunity to ask questions. We welcome you to return to the queue to ask follow-up questions. (OPERATOR INSTRUCTIONS). Bill Katz, Buckingham Research.

Thank you. Good afternoon and thanks for that good update. I'm sort of wondering if you could start with on the hedge fund slide, this was a very impressive slide, how much of your either year-to-date preferably or second-quarter change in assets reflects new business versus performance?

We would rather not get into that granularity yet, Bill, if that's okay with you. It's not public and this isn't really the forum to make it so.

Okay. Second question is you referenced in the institutional discussion for flows that you had some outflows in the U.S. service side. I was just sort of wondering is that specific to the growth on the performance and how you overlay that with your discussion of a substantial pipeline looking at the second half of the year.

Bill, it's Lew answering the question. No, it isn't related to growth performance. And, in fact, it isn't accounted for by terminations, but it is instead, cash flow out of existing relationships, which, in this quarter, happen to be at a rate above recent trends.

And let me add just a bit. Several of these cash flow apps were actually compensated, however, by new services that we were providing, including lend services and global international services.

Okay, thank you.

Cynthia Mayer, Merrill Lynch.

Thanks a lot. I just wanted to circle back to something you mentioned about raising minimums in private client. Can you tell us how large a hike it is and what your thinking is behind that? And does this preclude you from continuing your double-digit organic growth in that channel?

No, actually, Cynthia, the reference wasn't to private client; it was to separately managed accounts in the retail channel.

Oh, okay.

Where we raised minimums on one particular service to $1 million from a meaningfully lower figure, in an explicit attempt to slow flows into that service. And we anticipate that it will continue to grow but at a meaningfully reduced rate.

Which service is that?

International value.

Okay. So what impact are you expecting that will have?

It will have the effect of slowing the growth we believe in separately managed accounts, which, as you may recall, is an approximately $20 billion or so in Assets Under Management component of our retail asset overall.

Okay.

Remember, however, that while that effect is not highly likely, there could be offsetting improvement in other services which will receive additional support as a result of a change in emphasis in how we deploy our sales and marketing effort in that channel.

And in particular, our fixed income services, Cynthia.

Okay. I guess for my second question, I wanted to ask a little bit about the index structure. It seems like you had great flows except there. It looks like you have pretty consistent outflows there. I'm wondering, when that money leaves, where does it tend to go and is there anything you can do to hold onto that?

There isn't any pattern in those terminations. This, of course, as you know, has not been an area of strategic interest for the firm. Though I must tell you if you look at the performance we've delivered for those clients, indexed products as they may be, that's quite competitive. So we think we are serving that client base well, but we are not -- we haven't been attempting to grow it. And as a result, the terminations that naturally occur in this business prompted by any number of factors have had the effect that you describe, a fairly consistent net attrition in this category.

And I would anticipate a similar pattern in the period going forward, with the possible exception, however, of the development of new indexed based assets in the defined contribution arena, where, as you may recall, we offer a platform that includes quite a lot of flexibility in selecting the character of the assets that compose the overall target date solution, some of which can include index-level products. Indeed, some might be composed exclusively of such products. And so, it's possible that should that platform gain traction and the index solution loom large in client selection, it might have a positive effect and turn around the total index structured part of our Assets Under Management. That's not clear as yet.

Okay, thanks.

Chris Spahr, Deutsche Bank.

That's Chris Spahr from Deutsche Bank. I'm just wondering about the realization of revenues from the international services, if you think that is sustainable over time.

We think it is and we think it is in the best interests of our clients, both domestically here in the U.S. and around the world. Our global international services are picking the best securities whether they be fixed income or equities around the world. So we will expect that to continue to increase. We invest for that to be the case and we think it's the best answer for our clients.

And Chris, on that score, it's worth emphasizing the amount of resources necessary to be a competent competitor in the global space as compared to, let's say, a single country mandate. It's very considerable, including conventional research on industries and companies, portfolio optimization tools, currency management capabilities, a distribution infrastructure that has to be global in character. All of those elements naturally lead to a more concentrated structure in terms of number of competent competitors and, therefore, stronger pricing.

In that context, should we also see an acceleration of the promotion and servicing expense line item, given the growth in your non-U.S. clients?

I'm not sure if you will see an increase, but you will see -- I'm sorry, an increase as far as the pace, but you'll see a continued increase in the investment of these services.

Thank you.

Marc Irizarry, Goldman Sachs.

Oh, great. Thanks. Question on the hedge fund business and the growth in the assets. I guess a lot of those assets are, I guess effectively all of them are Private Client assets. Where do you stand in terms of rolling out the hedge fund product? Because it looks like your flows in private client are pretty good, but if you just back out the flows from the asset growth, your performance seems pretty impressive, so where do you stand in terms of rolling out the hedge fund to institutions? Thanks.

We're right on that, Marc. And it's just starting to happen in a pretty serious way. We went back. We trained our sales force. We actually had some courses just last week on additional investment and the knowledgebase of our advisors in this space. They are out there now. They're talking to clients. And, just FYI, one of the largest managed that we have on our Private Client channel actually is almost quasi institutional like. It was a very, very large client that is serviced by a Private Client advisor. So we're getting into that space now and we expect to be successful there.

And is that something that could help augment or would that be incremental to kind of your flow guidance? And then just as an add on to that question, the guidance seems a bit more robust. Has anything else changed in terms of your thinking on the environment; maybe the question is for you, Lou to be more comfortable with that large of an increase in guidance? Thanks.

No, Marc, I don't think that on your first point, you should interpret our remarks about hedge funds as incremental to our flow guidance; it comprehends our flow guidance. And as to the uplift in full-year earnings expectations, they are reflective of Assets Under Management, which grew quite strongly in the second quarter. And the implications of that for full-year earnings are, I'm sure, obvious to you and others. If you work that through, I think you will see that there's a proportional relationship between the initial guidance and what we are now providing as a function of additional AUM.

With that said, Marc, we obviously are making a forecast on how we're going to do in our hedge funds as far as performance and that is [for your current data].

It doesn't anticipate incremental performance. It anticipates trend-like returns as we described in our press release and will describe in the 10-Q.

Thanks.

Bill Katz, Buckingham Research.

Thank you. And Gerry, I may have misheard you. Did you -- I think you answered a question about revenue yield perspective. But do you expect the pace of non-U.S. services and/or client growth to exceed that of the United States? And then the second question I have is, can you quantify what the marked-to-market adjustment was related to deferred compensation this quarter?

On the first thing, we do expect this mix shift to continue. We expect more of our clients to be non-U.S. clients as far as an increase in AUM going forward -- you know, the incremental. And we expect more of our service to be global and international in nature. So we do expect that trend to continue. And as far as the deferred comp, I -- Bob, is there any reason not to give the number?

Actually, you can, Bill, if you look through the P&L statement, you can I think assess this pretty accurately on your own.

Thank you.

Bill, let me give you and, of course, everyone else on the call, time with that, what's happening here, and we've mentioned this in the past, when we mark this to market, a significant part of the marked-to-market actually gets offset in the current quarter. And that's due to the fact that there are assets in deferred comp plans where the employees are fully vested, so their benefited immediately in that quarter for that to pass through. So you have the increase in other income and an immediate offset in compensation. And then, the remaining part of that is what we're amortizing over the next few years. So it's not as distorted as it may first appear. Although it is on a line by line basis, not to the bottom line.

Yes, again, Bill, on that score, just reflect on Gerry's remarks when he described incentive compensation in the second quarter. Part of the large gain there was reflective of a current mark-to-market for the compensation effects of gains on these assets.

Yes, which we actually pointed out on the display this quarter for the first time as a bullet point.

Right. I assumed so. I was trying to get the exact number. Thank you.

Niamh Alexander, CIBC.

Thanks for taking my question. Good evening. If I could just move back to the flows from a different angle, for fixed income actually made up a good chunk of the new assets on this particular quarter. I'm just wondering if you are beginning to see -- and I guess with so many of the assets coming in internationally as well, is there some kind of a trend or a shift you're seeing over there? Is it related to kind of more liability driven investment or is there something you can help me better understand for going forward?

No, I don't think this is a market-driven development. I think it is market share. I think the competitive position of our global fixed income services continued to improve, and that's true both in the retail domain and in institutional and it has begun to influence our success in winning mandates.

You may recall -- I can't remember how long you've been following us, but we've been actually predicting this for a while, as our performance continues to gain traction and our performance in are fixed income services, we felt quite confident that we would see an increase in inflows in these services and that, in fact, is what's coming to bear here.

Okay, thanks. That's helpful. And then if I could just move back on this quarter I suppose as well, particularly in the institutional, were there a few large institutional mandates and the growth redemptions that might have driven it?

There were very few cash outflows in the institutional space that drove it, and I think the number, it was like 3. It was a short number of cash outflows. And as Lew mentioned earlier, we didn't lose the account. We didn't even lose the mandates. There was some rebalancing going on, some of which we recaptured in other services in our net sales.

Okay, that's helpful. Thanks. I'll get back in the line.

Robert Lee, KBW Asset Management.

It's just KBW, but good afternoon, everyone. I'm just curious, maybe it's a question for you, Lew. I'm trying to drill a little bit deeper into the flows. You've talked in the past and a lot of your competitors have, about the evolution of the institutional business towards I guess I will call it a solutions based type of business. Are you seeing or is it starting to drive your flows what I would call sort of more mixed mandates? And I don't mean just the blend services, but structured solutions where you are including, maybe fixed income, maybe equities, maybe even currency mandates? Are you starting to actually see that -- those type of mandate at all or take hold and drive flows?

The answer is yes, but I don't think you should from my observation draw on that. They, as yet, are important flows. They are an increasing part of the conversation, if you will, with the consulting community and with clients. And I think it's a safe prediction that in time, solutions oriented mandates will gain in traction, I mean meaningful attraction and influence flows in the institutional arena. Perhaps the earliest version of that will be in large defined contribution plans, where if you look at our custom retirement solutions offering, it meets all of the criteria that you just laid out. And maybe, if we are successful, the first solutions oriented sale that actually is meaningful in terms of generating flow. But I think ultimately, it will reach beyond that and will be global in character and will perhaps even be the basis of competition in the institutional space, heretofore dominated by if you will, [suite] based competition.

With that in mind, as you look out ahead, are there capabilities that you currently don't have that you see a need to develop to position yourself for that or do you think you pretty much have most of the suite of products that you need?

There is always an interest in this firm in investing in research initiatives that expand our skill set. But if you were to analyze our competitive profile on these matters today, I think we would look quite competitive. And we do to continue to invest in this area and I actually believe that as I noted, it will become an increasingly important set of capabilities that differentiate us from the competition.

And if I can, Rob, just to add to Lew's commentary, if we find that we were short on something, the way we most likely would resolve this is through our internal intellectual capital. It will not be through an acquisition or a lift-out. That's just not where we look first.

[We'll] reinforce that observation.

Great. Thank you very much.

Chris Spahr, Deutsche Bank.

It's Chris Spahr from Deutsche Bank again. Regarding your institutional research revenues, it was soft in the U.S. you said. Was that due to volumes, commissions, or market share?

It's share. All right? Just a little bit. Not a lot, but no gain like we're seeing in Europe. We don't see anything -- part of it, Chris, is, we actually had -- it's a tough compare. We had a great year last year and part of it is a compare. But there is a little bit of slippage in share here. Nothing that we can point at or identify that troubles us right now, but it's not the growth that we would have liked.

Thank you.

There appears to be no questions at this time.

Okay. If we have no further questions, I would like to thank everyone for participating in our call. Please feel free to contact Investor Relations with any further questions and enjoy the rest of your evening.

Thank you. This concludes today's AllianceBernstein conference call. You may now all disconnect.