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AllianceBernstein Holding L.P. (AB)Stock (Asset Management Industry, Financial Services Industry)
 The world's second largest insurance company AXA (headquartered in France) owns over 60% stake of AB.[1] The company's foreign ownership lets it avoid the 35% federal corporate tax, and instead pay minimal dues of 7.5% for an unincorpated business.[2] However, AB's partnership status also means that it must distribute nearly all of its earnings to its fund holders, limiting the growth potential of the firm. More than half of AB's AUM is invested abroad, and the international focus of the company helped to shield the company from the 2007 credit crunch. Without the global assets under management increase of 27% over FY2007[3] AB's balance books would have have looked a lot grimmer with the more than $60 billion in investment losses.[1]
[edit] Corporate Overview 2007 AB AUM by Distribution Channel ($ in billions)[4]  2007 AB Revenue by Sector ($ in millions)[4] AllianceBernstein's revenue, operating income, margins, and AUM reached all-time highs in 2007. AUM grew by 12% over FY2007[5] through new investments and market appreciation. However, AB's results from the 1Q2008 interrupted the firm's recent (2003-2007) momentum. Assets under management dropped to $735 billion--an 8% skid--largely due to $64 billion in investment losses mainly in its equity investments.[6] Also, AB outflows in the private client services negated institutional inflows[7] as AllianceBernstein bore the full blow from its investment losses. Moreover, annualized total revenue tumbled about 9% and AB's operating margin slipped by nearly 4% to 26.5% as compared to F2008.[8] AllianceBernstein's AUM investment channels include:
Also, AB's AUM and revenue fall under the following categories:
In the longer-term, AB's AUM, revenues, and operating incomes have all increased every year since 2003. In fact, AllianceBernstein's assets under management have grown annually by 10% on average since 2000.[11]. However, over that same period, revenues were a bit more volatile. Bull markets one year and an investing scandal another generated revenue swings of up to 41% between years.[11] The 2003 AB market scandal involved allegations of illegal market-timing, which refers to trading securities based on future price predictions. Though market-timing is not illegal, AB allowed priority investors many more trades per day than the average client, thereby using a double-standard. In the end, AB conceded $250 million in legal fees in order to settle the lawsuit.[12]  AB Revenues and Operating Profits[13] [edit] Key Trends and Forces[edit] Corporate tax code restructuring adds to AB expensesAs a foreign-owned partnership, AllianceBernstein is in a unique tax situation. As of FY2007, AB pays no federal or state corporate taxes. Instead, the company is subject to 3.5% federal tax on gross earnings as well as a 4.0% unincorporated business tax.[2] The fact that AB is a partnership means that the firm must distribute nearly all its income to its fund investors.[14] Though a corporation can keep some of its income as corporate profits, this money is also taxable. Should AllianceBernstein decide to incorporate the firm, it would then be subject to corporate taxes that amount to 35% for its income bracket.[15] Though the firm is shielded from substantial U.S. taxes, as AB expands with subsidiaries around the world, effective taxes expand along with revenues. [edit] Strong international exposure boosts AB businessAllianceBernstein is still largely an American firm, as 60% of its clients live in the U.S.[3] However, both individual and institutional business are becoming more and more international. In fact, the company invested 40% ($320 billion)[16] of their AUM overseas and 61% of their investment services ($489 billion)[3] were for clients (mainly institutional) outside the US. International markets are providing key business for AB, especially as the firm pushes through the 2007 credit crunch. Without the global assets under management increase of 27% over FY2007[3] AB's balance books would have have looked a lot grimmer with the more than $60 billion in investment losses. [edit] CompetitionAllianceBernstein competes with many firms throughout the greater financial services industry. Below is a table of relevant operating metrics of AB and its major competitors within the asset management industry. Note that for having the third largest AUM, AB has the second largest net income, which may be the result of its unique tax scenario. Moreover, AllianceBernstein has the largest average returns on equity within the trailing twelve months (TTM).
*5 yr. returns
 AllianceBernstein Holding L.P.2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] References
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