ALLIANCEBERNSTEIN L.P. Annual Report: A Comprehensive Investor Overview

AllianceBernstein (AB) delivered a strong financial performance in 2025, marked by significant revenue growth, expanding assets under management, and strategic moves into high-growth alternative investments. This report offers retail investors a clear and concise summary of AB's performance and strategic direction for the fiscal year ending December 31, 2025.

Business Overview

AllianceBernstein (AB) is a leading global asset manager. We provide a wide array of investment management and research services to institutional clients, high-net-worth individuals, and retail investors worldwide. Our offerings include both active and passive investment strategies across various asset classes, such as equities, fixed income, and alternative investments.

The asset management industry is currently undergoing rapid transformation. Several key trends are shaping AB's strategy:

• Shift to Alternatives: Investors increasingly seek alternative assets like private equity, private credit, and real estate for diversification and potentially higher returns. AB actively addresses this demand through strategic acquisitions in this space.
• ESG Integration: A growing focus on Environmental, Social, and Governance (ESG) factors in investment decisions drives demand for sustainable investment products.
• Fee Compression: Persistent pressure on management fees, particularly in traditional active and passive strategies, requires AB to prioritize cost efficiency and differentiate its value proposition.
• Technological Disruption: Rapid advancements in AI, data analytics, and digital platforms are reshaping how AB engages with clients, manages investments, and operates its business.
• Regulatory Scrutiny: Increased global regulatory oversight, especially concerning investor protection, transparency, and systemic risk, may lead to higher compliance costs and operational adjustments.

AB actively adapts to these trends by investing in technology, expanding its alternative and ESG offerings, and consistently delivering differentiated investment performance.

Financial Performance

AB reported robust financial results for 2025. Total revenues reached approximately $4.2 billion, an 8% increase over 2024. This growth primarily stemmed from higher base management fees due to increased Assets Under Management (AUM), a 15% rise in performance-based fees from strong investment performance in certain strategies, and contributions from new joint ventures.

Net income attributable to AllianceBernstein L.P. partners was $650 million, resulting in diluted earnings per unit (EPU) of $6.20, up 10% year-over-year. The operating margin improved to 25%, reflecting effective cost management alongside revenue growth. AB's diversified revenue streams, including base management fees, performance-based fees, 12b-1 fees, other distribution revenues, and shareholder servicing fees, provide resilience across varying market conditions.

Risk Factors

Investors should understand several key risks:

• Market Risk: Fluctuations in global financial markets can significantly impact AB's AUM, revenue (especially performance-based fees), and investment portfolio values.
• Regulatory Risk: The asset management industry faces extensive and evolving global regulations. Changes in rules, such as those related to fees, client protection, or capital requirements, could increase compliance costs or restrict business activities.
• Operational Risk: This includes risks from cybersecurity breaches, technology failures, and the loss of key personnel, all of which could disrupt operations and harm AB's reputation.
• Integration Risk: While acquisitions offer growth opportunities, failing to successfully integrate acquired businesses or realize anticipated synergies could lead to financial losses or operational inefficiencies.
• Contingent Payment Obligations: Future payments for acquisitions like Autonomous LLC depend on performance, creating potential liabilities that could impact future profitability if performance targets are met.
• Nondesignated Derivatives: AB uses nondesignated derivatives, which can offer investment opportunities but expose the company to market fluctuations without the accounting benefits of formal hedging, potentially leading to earnings volatility.

Management Discussion and Analysis (MD&A) Highlights

In fiscal year 2025, AB continued its strategic expansion and operational focus. Assets Under Management (AUM) grew to approximately $750 billion, a 5% increase from the prior year. This growth resulted from positive net inflows of $15 billion and favorable market performance, reflecting the success of AB's diversified product offerings and global distribution capabilities.

Key strategic initiatives included the ongoing integration and expansion of acquired businesses. The joint venture with Societe Generale, established in April 2024, significantly expanded AB's reach in structured products and alternative investments across North America and international markets, contributing an estimated $50 million in revenue in 2025. Acquisitions like CarVal Investors L.P. (acquired 2022) continued to bolster AB's alternative investment capabilities, while Anchorpath (acquired 2024) enhanced its digital client engagement platforms.

Key Achievements:

• Strategic Expansion: Successfully integrated and grew acquired entities like CarVal Investors and Anchorpath, broadening AB's product suite and client reach.
• Joint Venture Success: The Societe Generale joint venture exceeded initial revenue targets, establishing a strong foothold in new market segments.
• AUM Growth: Achieved significant AUM growth and positive net inflows, demonstrating strong client confidence and effective distribution.
• Operational Efficiency: Improved operating margin through disciplined expense management and technology leverage.

Challenges:

• Market Volatility: While performance fees boosted revenue, overall market volatility presented challenges in certain investment strategies, impacting AUM growth potential.
• Integration Complexities: Integrating acquired businesses, particularly Autonomous LLC (acquired 2023), involved managing complex contingent payment arrangements totaling $75 million tied to future performance milestones. These could impact future earnings if targets are met or missed.
• Competitive Pressures: The asset management industry remains highly competitive, with ongoing pressure on fees and the continuous need for innovation to attract and retain clients.

A significant development in 2025 was the Amended Exchange Agreement with Equitable Holdings (EQH) in July. This agreement streamlined the ownership structure and reinforced the long-term strategic alignment between AB and EQH, providing greater clarity and stability for future growth initiatives. The executive leadership team remained stable, ensuring continuity in strategic execution.

Financial Health

AB maintains a robust financial position. As of December 31, 2025, the company held approximately $500 million in cash and cash equivalents. Total debt stood at $1.5 billion, primarily comprising long-term notes. AB has access to a $1.0 billion revolving credit facility, with $200 million drawn at year-end, providing ample liquidity for operations and strategic initiatives. The debt-to-equity ratio was 0.8x, indicating a healthy leverage profile.

AB uses various investments, including equity securities and limited partnership hedge funds. Some of these serve as seed capital for new funds or relate to long-term incentive compensation plans. The company also uses derivatives, such as foreign exchange futures and interest rate swaps, primarily for hedging. However, a portion of these derivatives are "nondesignated," meaning they do not formally hedge specific risks, which could introduce additional market exposure and volatility to earnings.

Future Outlook

Looking ahead to 2026, AllianceBernstein will continue focusing on strategic growth areas. These include further expansion in private alternatives, enhancing its ESG-integrated offerings, and deepening client relationships globally. Management expects to capitalize on market opportunities by innovating its product suite and optimizing distribution channels. Subsequent events in early 2026 included an amendment agreement related to the Societe Generale joint venture, indicating ongoing refinement and expansion of this key partnership. AB remains committed to delivering long-term value to its unitholders through disciplined growth and operational excellence, while navigating evolving market and regulatory landscapes.

Competitive Position

AllianceBernstein operates in a highly competitive global asset management market. Its competitive advantages include a diversified product suite, strong investment performance in key strategies, a global distribution network spanning over 50 countries, and a robust research platform. Strategic acquisitions and joint ventures, such as with Societe Generale, aim to expand AB into high-growth areas like private markets and structured solutions. This further differentiates AB from competitors and enhances its market share. AB's focus on active management and specialized alternative investments positions it to capture demand for sophisticated investment solutions.