Philip Talamo – Director of IR Gerry Lieberman – President and COO Lew Sanders – Chairman and CEO

William Katz – Buckingham Research Group Craig Siegenthaler – Credit Suisse Marc Irizarry – Goldman Sachs Cynthia Mayer – Merrill Lynch Robert Lee – Keefe, Bruyette & Woods Chris Bahr [ph]

Thank you, Shirley. Good afternoon everyone and welcome to our third quarter 2008 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 web site at www.alliancebernstein.com/inverstorrelations. Presenting our results today is our President and Chief Operating Officer, Gerry Lieberman.

Following Gerry’s remarks, our Chairman and CEO, Lew Sanders will briefly address the audience. Our CFO, Bob Joseph, will also be available to answer questions after 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 two of our presentation, as well as in the Risk Factor Section of our 2007 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.

And now I’ll turn the call over to Gerry.

Thank you, Phil, and good afternoon to everyone on the call. It’s obvious to all that we are going through terribly turbulent capital markets, and at this condition would have a sharply negative impact on our absolute performance for our client and indeed on our financial results for our unit holders.

For the second quarter in a row, assets under management, revenues, net income and distributions, as well as expenses are all down versus the corresponding quarter of 2007. Transit must be and are being address.

Additionally, our relative performances suffered significantly, impacted by our exposure to sectors and individual stock selection most adversely affected by the global financial crisis, as well as our significant non-US exposure during a period of a strengthening US dollar. As far as the capital markets are concerned, US equity indices shown on display three were down 8.4% to 12.3% for the quarter and 20.9% to 23.6% for the 12 months ended September.

Non-US market indices shown on display four declined dramatically from 15.3% to 27% for the quarter and from 26% to over 33% over the last 12 months. Displays five through eight reflect our assets under management roll forwards by channel and by major asset class for both the quarter and the trailing 12 months.

These displays show that our assets have declined by $127 billion and $224 billion for the quarter and trailing 12 months respectively, overwhelmingly due to the market depreciation in both value and growth equities. Now, let’s turn to display nine; I’ll begin my discussion on channel highlights.

The institutional investments and distribution channel, AUM declined by 18% in the quarter, almost entirely due to market depreciation. It is important to note that although our net outflows accelerated versus the previous quarter to $5.2 billion, these outflows are more a function of fewer new mandates rather than a significant loss of client accounts or cash flow withdraws.

Aside from the fine contribution plan mandate wins, we are seeing institutional investors but new mandates on hold while the market turmoil plays itself out. Accordingly, our pipeline of one with unfunded institutional mandates declined slightly to $4 billion with over 40% in Defined Contribution AUM, a key switch initiative for our firm.

On display 10, you can see that our retail channel assets decreased by 20% for the quarter, due primarily to market depreciation of 14%. However, net outflows in this channel were substantial.

As sales have virtually collapsed and redemptions have indeed increased. This is a phenomenon that began in Asia but has now spread to the US.

Net outflows accounted for over 29% of the decline and were most notable in equity services for US clients and fixed income services for non-US clients. Turning to display 11, you will see that our private client channel AUM fell by 14% during the quarter, a smaller decline than our other channels, incurring modest net outflow that reacted slightly lower than the second quarter of 2008, even more so than our institutional client channel, let alone our retail channel.

Our private client group’s assets are our stickiest; that is our most persistent. We attribute private client loyalty to constant high quality client servicing and the penetration of our asset allocation services to serve our clients well in this tumultuous times.

However, we have seen a slowing of new account opening. The slide 12 shows that during the third quarter of 2008, the total AUM associated with our suite of alternative investment services fell by 20% sequentially to $8.1 billion.

This decline in assets was predominantly due to market depreciation in hedge funds services. On a more positive note, as cited on display 13, institutional research services established a new record for quarterly revenue at $125 billion with increased market volumes and increase market share, each contributing to these robust results.

The 21% in year-to-year growth was mostly driven by our US operations. Also our sell-side analysts posted excellent results and institutional investors just released All-America poll; in fact, the best ever for our firm.

The firm, as a whole, placed in the top ten for the fifth consecutive year at number six and every single analyst that began 2008 as a publishing analyst was recognized in the survey, with 85% in the top three in their sector, including ten number ones. Moving to the income statement, I’ll begin with the discussion of revenues as shown on display 14.

Net revenues fell by 27% to $841 million, the first time in two years that quarterly net revenues were below $1 billion. Over 50% of the $312 million year-over-year revenue decline was due to an 18% decrease in advisory fees, as AUM fell substantially in all three buy-side distribution channels.

About 46% of decline in net revenues was due to $142 million swing in investment gains and losses, principally the result of mark-to-market losses on investments related to deferred compensation of $123 million compared to $2 million in gains for the third quarter of 2007. As a reminder, these mark-to-market gains and losses have a corresponding offset in current and future incentive compensation expense.

The sharp percentage decline in distribution revenues was due to a lower retail AUM. Largely offsetting this decline was the strong increase in institutional research services revenue that I noted earlier.

The substantial percentage decrease in dividend and interest income, as well as the offsetting decrease in interest expense below, reflect the late 2007 outsourcing of our prime brokerage services, as well as lower interest rates. Display 15 provides additional analysis of advisory fees.

Lower base fees represent 90% of the $157 million decline in advisory fees, with the lack of performance fees making up the remainder. You will know that the decrease in base fees was 1,200 basis points lower than the decrease in period-ending AUM, yet equal to the decrease at average AUM.

This was due to the fact that much of the third quarter’s market depreciation occurred in September, so the impact on average AUM for the quarter was less severe than the impact on period-ending AUM. All three buy-side distribution channels incurred a double-digit decline in revenue with retail and institutional investments down around 20% and our private client channel down about 13% which were in line with their respective decreases in AUM.

Operating expenses as shown on display 16 declined by $181 million or 24% yearoveryear. About two-thirds of the decrease came in in employee compensation and benefits which fell by $118 million or 26% and will be discussed in greater detail on the next display.

Promotion and Servicing expenses decreased by 19% or $31 million in the quarter. Lower distribution plan payments accounted for approximately half of this decline and controllable expenses such as travel, printing, and mailing expenses accounted over approximately one-third, with the balance due to lower amortization of deferred sales commissions.

General and administrative expenses were down 19% as a $35 million insurance recovery related to the fourth quarter 2006 charge for class action claims processing error was partially offset by higher data processing cost resulting from increased trading volumes and foreign exchange losses versus gains in the prior quarter. Display 17 details employee compensation and benefits which fell 26% versus the third quarter of 2007 to $329 million.

Base compensation was up 15% versus last year due to slightly higher headcount, merit increases, and base compensation adjustments. Headcount increased versus the second quarter of 2008 by only 25 employees to 5,660; a topic that Lew will address in more depth later on in this call.

Third quarter incentive compensation expense was down 62% year-over-year due to $63 million in lower accruals for cash bonuses, in addition the mark-to-market losses on investments related to employee deferred compensation. The mark-to-market losses decreased incentive compensation by $51 million versus $11 million increase in the third quarter of 2007.

Investments related to employee deferred compensation stood at $519 million at the end of the third quarter of '08, down almost 20% sequentially. Commissions fell by 18% as declines in our three asset management channels were partially offset by an increase in institutional research services.

Fringes and other expenses fell by 16% predominantly due to lower payroll taxes, a function of lower year-end bonus accruals, as well as lower recruitment expenses. In display 18, you will find a summarized income statement for the operating partnership.

Despite aggressive management of controllable expenses, there is a severe decline in AUM and consequently revenues led to a 37% drop in net income and a 410-basis point decline in operating margin. Display 19 details the impact on the Holding Company.

Here you will note that while net income from the Holding Company fell 39%, it is in-line with the decline for the operating partnership. Our distribution per unit actually fell by 50%.

This was due to excluding a $35 billion insurance recovery from distributions in the quarter. You will recall that when we took a $56 million charge against earnings in the fourth quarter of 2006 for a class action claims processing error, we did not reduce the distribution for that quarter.

Fourth quarter '06 distribution per unit was (inaudible) greater than EPU. This $35 billion was a part of the resolution of our insurance and claims, a portion of which we are still hopeful will be realized in the future.

Before I wrap up, I would like to briefly address the overall health of AllianceBernstein. Our firm is one of the largest organizations focused exclusively on investment research and management for our clients.

We are not a commercial bank and we neither originate mortgages nor whole proprietary positions in mortgage-backed securities, the epicenter of the recent credit problems, nor are we an investment bank or an insurance company that engages in investment banking activities, thereby having direct exposure to troubled assets.

Thanks, Gerry. As Gerry has highlighted extremely adverse capital market conditions are placing serious pressure on the firm.

While we don’t face the capital adequacy issues or the funding problems that had become problematic for some on the industry, we do face the challenges of a different kind. The collapse in the equity markets throughout the world coupled with weak relative returns has resulted in a dramatic decline in assets under management.

The strength of the US dollars exacerbated this effect, given the global character of our product array. In addition, as Gerry has outlined in his remark, widespread client anxiety has curtailed the flow of new business and increased redemption especially among retail investors.

The assets under management being the key driver of our revenue, there is now a clear need to align the cost structure of the firm with a meaningfully lower revenue runway. In the past, we’ve been reluctant to react to short-run fluctuations in revenue, but these are not normal times.

As you all know, a substantial portion of our operating expense structure is variable in nature and that will be helpful in reducing costs. For example, incentive compensation both cash and deferred will falling sharply, especially in the upper ranks of the firm, but we have to do more.

We have to right-size of the company to reflect its reduced asset base. Now as we proceed down this path, we will be mindful, however, of three equally important objectives.

First and foremost, that we don’t do anything that could in any way interfere with our ability to deliver on the firm’s mission, the long-term investment success of our clients and their peace of mind. Formidable task to say the least, given the current market turmoil, but to which we are steadfastly dedicated.

Second, we need to ensure that despite the current pressures, we position the firm to grow when the turmoil subsides, thus we must continue to fund those initiatives that we see as critical to our long-term growth and let me assure you that that’s our plan. And third, we have to remain a merit topper.

Now, that is a worthy objective at all times, but it is even more important in difficult times. Consistent with these objectives, we will not be pursuing formulated headcount reductions.

Rather, we have asked the leadership of each business unit to consider carefully and thoughtfully the number of employees they need in their areas, given our reduced scale and of course those numbers are going to be lower than we now have. This process will be implemented in large part in this year’s fourth quarter and we require a charge against that [ph], size of that charge has not been determined but the payback in reduced cost will far more than offset it in 2009.

Now letting people go whom you have respect and affection for is really hard. Perhaps, the hardest thing is doing this, but we simply have no choice.

Fortunately, we believe, we have the depth and breadth of talent to do so without damaging the firm’s future. Now, there is one benefit to age, and frankly it’s the only one I can think off, is that you’ve seen tough times before and I have.

I have lived through many bear markets. When I first entered the business in 1956, and then in 1970, 1982, and 1987, bear markets which produced price declines of 15% to 30%.

I have lived through a devastating bear market in 1973 and 1974 where the cumulative decline reached 43% and of course, more recently the bursting of the Internet bubble which, before it came to a close in late 2002, produced a decline of 45%. Let me assure you that all of these episodes felt just as terrible as this one does.

At the trough, it felt as if there was no hope. But the problems that created all the trouble were intractable and will take years to resolve, but in all of those cases, countervailing forces surfaced some of the function of government actions, others from market-based adjustments and the tide turned.

Investment performance was restored and growth resumed. I remain highly confident that the actions we are taking will position us to take advantage of that recovery for our clients and for the firm.

And if history is a guide, it will arrive sooner and be stronger than generally expected, and now for your questions.

Yes, thank you and good afternoon. I think my first questions is probably on everyone’s mind, just trying to think about trying to quantify maybe the potential cost reductions in light of the decline in revenues and what I'm guess I’m struggling with a little bit is your three initiatives would certainly seem to reduce– obviously, it has some reductions, so how should we think about that and I just saw them, so I’m still looking at your earnings over the last several years and your assets are now back to where they were in the first quarter of 2006 round numbers and yet your compensation is relatively flattish, so I guess I’m struggling to see where the expense saves would come from.

As Lew mentioned, we are still questioning [ph] the other plan but one that we will be executing through the fourth quarter. This will be a very draconian, but actually a reduction in force is unprecedented in the 40-year history of our firm.

This is going to be meaningful. We are talking about severance in the tens of millions of dollars.

All of which, we hope to have a payback on, I expect to have a payback on in 2009.

Okay. Second question I have is around the hedge fund and alternative businesses.

If I would look back at that slide, I think it was down about 20% sequentially. Is it fair to assume that the bulk of that decline is performance related?

It’s all performance related. All right, there is – typically, our hedge funds give our clients twice a year opportunity to get out of the hedge funds and the next period we are coming up would be the end of the year.

It’s still early for those decisions to be made but I can tell you that as of now, it is going to be meaningful, but they have a month to really make that decision though, so – but everything you see here is performance related.

Just so I understand, any redemption in that would then be in the January quarter?

That’s right.

Can you give us an update related to that? Could you give us an update on that percentage of hedge funds that have high watermarks and how much of those are now greater than 10% consistent with your Q disclosure?

I actually – I don’t have that with me.

I think you can assume that the high watermarks are a meaningful impediment to the re-emergence of incentive fees for the foreseeable future.

Okay, thank you. Thank you.

Thanks, thanks for taking my call. First question, I just had a – I want a little clarification on the general, administration expenses because you had, I guess, about $36 million of insurance recoveries, if anything, on that line, but on top of that, you said there was some other kind of one-time negative against that.

So, I’m just wondering, where can we think about the true run rate for that item?

I’m not sure if it were one-time negative, that means that the…

Where the data processing cost…

Those aren't one-time at all. Those are data processing costs that are used to – are related to transactions in the trading of the business.

So, to the extent that the volume of trading increases in the business, those are going to go up. If trade decreases, those will go down.

Those are volume-related expenses. Right, if you can look at foreign exchange, it is one time and it depends on how the dollar strengthens or weakens from quarter to quarter.

So, the bottom line here is if you add back the insurance adjustments, that represents a reasonably good estimate of the run rate. And of course, we will be working hard to do what we can to contain those costs in the period ahead, but there are substantial traction of those costs are fixed [ph].

Got it, and then on that flows, when I think about your institutional business, a lot of growth, I believe, came from outside the US with large institutions over the last one to two years. Those clients are newer and I am looking at terminations on that business and they are also kind of holding in pretty well institutions.

In previous cycles, when you had relative performance and absolute performance being very well – where did terminations roll today and flow here?

Today, as I mentioned in the call, except for our retail, our mutual funds, the clients have been staying with us and pretty steadily to date. Obviously, you are looking at both absolute and relative performance.

We are looking at how we are servicing them and so far, they have been holding up pretty strongly. Did that answer your question, Craig?

Yes, thank you.

Great, Lew, maybe you can take this one. If you just think about sort of returns over time, active versus passive.

Do you expect given sort of where this three to five-year numbers are relative to the benchmark, now that institutions may take sort of another look at their allocation between passive and active managers? And then I have a follow-up, thanks.

They may well, Marc, but if history is a guide, in the subsequent recovery which once again based on history will be shorter and stronger than might now appear likely. Active return tends to actually be quite strong.

So looking right now with end-point sensitivity focused on an extremely adverse moment in time, it might appear as if there’s quite a lot of vulnerability but that could well change in a subsequent recovery and mute the issue about allocations between passive and active that you’re suggesting might apply.

And then Gerry, one for you, can you give us a sense – obviously it is a tough business to judge what sort of run rate of revenue is going be heading out and clearly you don’t want to cut into muscle, but what’s the target – what's sort of the target operating margin? How should we think about what the target operating margin for this business should be on a longer-term basis?

Marc, we’ve never had a margin target, even in the good times and the bad times and we don’t have one now. There is a lot of leverage in this business, so it is hard to forecast.

What I can assure you and assure the unit holders is, if we continue to see the turmoil that we’ve seen and if we see markets continue to go down and our revenues go down, we will address this in an appropriate manner.

Great. I'll get back in the queue.

Okay, thanks.

Hi. Good afternoon.

Just circling back to the cost cutting, if you are not thinking about in terms of an operating margin, I am wondering what will you be using to gauge how much is enough AUM decline or revenues decline? How will you know when the business has come back to with their numbers whether that looks good enough for you?

I think what we do here is it's revenue. It is not AUM, we’ve never had a margin target so we never had AUM targets, but we are consistently and very, very frequently re-forecasting our revenues.

We can do this daily because of the systems that we have placed, what we think should be happening in the next 12 months. So, we are looking forward what is going to happen to our P&L going forward and do we have the right structure against what that P&L is.

Clearly, what we have built up in the last few years or about the last three years, we have built the firm to be a larger firm. Now, we had $817 billion a year ago and we built ourselves up to accommodate client needs for a firm that size.

We – again, we are taking in here a downsizing which is unprecedented in the history of either Alliance and Bernstein in a serious way, so we’re – I think that’s how we think about it and that’s how we manage it.

And Cynthia, let me just add, that the objective here is to ensure that we successfully negotiate through what is already a deep trough. That’s the objective.

Not only, by the way we form portfolios for clients, but by the way we manage the firm, so when we are thinking about cost structure targets with that in mind.

Okay, I just looking back at what happened in 2001, it looked like you cut operating expenses by 11%. Are you using that at all, as an example of how you were able to cut that much at that time or is it (inaudible)?

Cynthia, it’s already obvious that we are well above the contraction in expense that was necessary then and we are, as we described, embarking on a substantial additional reduction in expense in the period ahead.

Okay, great, and just a very quick mechanics question. The charge against earnings in the fourth quarter, would that lower the cash distribution or not affect it?

It will, Cynthia. That is a cash charge; it will affect the distribution.

Although, as we have said, we are looking at a quick payback. I mean the payback is a ‘09 situation.

We will have to take that charge.

Great, thank you.

Let me just say that, this is both for Cynthia and Marc, probably for Bill who has been asking this question about G&A since I joined the firm. When you look at this G&A, between technology related which is – a lot of which is infrastructure, a significant part is indeed variable cost and officer related.

It is about $120 million, none of them [ph] for the quarter, so a lot of these costs are indeed fixed unless there’s a turn in a business because there are some buying related expenses in there. And then in the past, we’ve done a pretty good job at rationalizing space but you can only do that so far if indeed space (inaudible) in the firm.

Thanks, good afternoon. I just have one question at this point, maybe you could highlight for us some of the – where you do see some of the continuing ongoing areas for – that is obviously I'm assuming the DC business would be one clear example, but you may be playing out a couple of others?

By far and way, DC is the most important and although the crust of this call is about all of the pressure that the firm is now under because of capital market conditions. We are actually very hopeful about our prospect in the DC market and have continued to do well in the competitions that we’ve entered, both in medium and especially in very large plans.

We really think we have a compelling value proposition and that opportunity is really, really large. As I have described, as we and the firm have described repeatedly, it is by far and way the largest institutional opportunity that is available to us anywhere in the world.

So yes, it is perhaps the prime example of an initiative that we will fully fund during this period of pressure. Other thing that comes to mind has to do with initiatives around new product development which holds promise for innovative services downstream.

They are not all that expensive to fund but potentially meaningful contributors to the firm's revenue and profitability and perhaps more importantly to the base of its intellectual capital as it might actually assist in managing some of the mainstream services. So the R&D efforts there too will continue unaffected by this staff cut.

Okay and maybe just one follow up-question. I mean I know that so far your institutional client base has been pretty sticky and you have not really seen much too much in the way of tightened redemptions there but can you give us a little bit about, in light of some of the performance and challenges of the past year, how you kind of do your consultant relationships, how you now have – for lack of a better way of putting it, are you finding that some of them are maybe kind of pigging on in the penalty box for a while, that may somehow impact your ability to kind of accelerate growth once the your turn comes or anything like that?

Well, that may come, it hasn’t just yet. As I think, as well as you know, the investment performance is not about trailing 12 months or for that matter trailing two years, it is about much more longer term records and in some of the services where we have put up in the last 12 months relatively weak returns, we have extremely competitive long-term returns.

This is not lost on the consulting community who know us well for a really long time and know us thoroughly and understand our decision-making processes and actually you can find in our history, other such periods of adverse return. Actually, in intervals, it looks something like the character of the capital markets in the last 12 months.

And so, I think that a thoughtful review of our results will show them to be actually well within the character of a long-term record which is a really good one, not withstanding the last 12 months. We are pretty confident that once recovery commences, certainly, once it has a degree of maturity, that our competitive profile will service relatively well on the assumption of course that in that recovery, we perform as we anticipate.

And of course, time will tell as to whether we achieve those objectives.

Okay, thank you.

Just a couple of a follow-ups; I just want to pick up on that last question. Just saw the Quarter, as you look at both the institutional channel and also the private client channel, to me to a lesser extent retail was a bit more new in terms of focus.

You’ve always dubbed yourself as risk-adjusted return model and yet when I look at – I appreciate what you’re saying about your five and ten-year track record, but when you look at your rolling one, three and five-year track records, I think about where AllianceBernstein has been big, particularly in financial services area, how do you sort of answer the question about the disciplined sell rule in your portfolio and could this time be a little different as it relates to flow activity on the other side of this?

It might, but let me ask you a question about risk management, value investors see price depreciation as an opportunity, not a threat. It’s a threat if it turns out that the company in question isn’t up to the task of getting through the trough and one or two typically don’t, which is the point of portfolio diversification.

And on the other side of the trough, those that do often benefits, sometimes quite substantially, from the failures of those who didn’t. I mean there are so many obvious examples of that in the current setting.

Companies that effectuated for instance accretive acquisitions on extremely favorable terms. Markets that are now consolidating, especially in the banking space, that will have a return profile because of a change in the character of competition that will probably be impressive on the other side of this trough.

If you go back for instance to the last credit cycle in 1990 where there was a similar kind of intense profit pressure on financial service companies, by the early 90s (‘92, ‘93, ‘94), the winners from that downturn were impressive in the results they produced and we owned most of them. And I look forward to a similar outcome here.

You really can’t measure these things until you see the cycle in its completion, and I’m sure we all look forward to that point and our assumptions are, our research points to a similar pattern from those that we’ve seen in the past.

Okay. Thank you, that is helpful.

And then my second question is actually a two-part question. Just wondering on the defied contribution, the target of the [ph] retirement fund side.

Can you give us a sense of how flows looked this quarter versus last quarter and whether you have seen any kind of reversal of inflow to outflow? And then on the overall retail sales in particular, any kind of detail between outflow US versus non-US?

Look on DC, I mean what we’re seeing actually is new business and inflows. We’re not seeing any deterioration.

And remember too, our approach in DC is actually an open architecture. It is actually a platform that enables to plan sponsor to build target date solutions that are custom made and populated with asset managers whether passive or active, that they know well, perhaps they port it from their DB side or – are now actually synthesizing for this new application.

It is a very, very flexible platform. And it is very low cost and positions plan sponsors to take a position now and alter it without disruption later.

It is also amenable as we have stressed to, to guarantee withdraw of assets becoming part of the package. I’m going on because I see this as really a transforming kind of offering and one where we really do expect to do quite well and already have even in this very troubled time.

So, it is still an immature business. There is no doubt.

And against the scale of the company, it will take quite a while before it really matters; but it promises too. And we are not seeing anything in the near term to disrupt any of our expectations though.

So, I wanted just to go back to that first question you asked because it’s important. This has come up a number of times on this call.

Trailing one or two or three-year performance or even five influenced dominantly by the last 12 months. It is a very end-point sensitive computation.

If you go back and you study the history of our profits especially in the value domain, you will find any number of episodes like this. It is the character of active management, especially in value.

It's not unusual. And essentially, what it sets up is an opportunity for very strong relative return in the recovery which never appears obvious during the trough.

If it appeared obvious, all of these depressed prices would never have developed. But that is the essence of value investment.

That’s why it produces strong returns over time and why there can be a year or two when the opposite is true. So, I would suggest that when you think about us, you consider those factors now, because none of us is assured, right.

We are anticipating recovery and we are anticipating that it will take a form that resembles history. We have every reason to believe that our research points to it.

But of course, that is not a certainty.

To be fair, I mean, leverage is coming in the system more broadly and you are bigger and some your products are proven the test of time. So, I think it is a little bit more of an open question.

I think that is why investors are more focused on maybe (inaudible).

Well I’m not suggesting you shouldn’t be. Don’t misunderstand.

I think you clearly should. This is by way of explanation.

It is by a way of providing some perspective.

And that is very helpful, I appreciate it.

Let me just add something on the new relation within the DC space. If you remember, we go back for – I mentioned the pipeline there being slightly down from the previous quarter.

I think the last report was around $15 billion. This quarter, it is $14 billion and the reason it is slightly down is because there are increasing business in DC.

I mean that is why it was mentioned in the firm just right now. And the potential here as Lew mentioned is, it is huge for the firm, but it is even more than that because we could start with perhaps even a very plain-vanilla services but we are in there, so that when the market does turn and the client has an opportunity to move from perhaps passive services to active services, we have change our relationship with the client by being – by having them on our platform.

So this could be game changing for us over time.

Great, thanks. Can you hear me?

Yes.

Okay, thanks. Lew, obviously, retail investors have – they’re under tremendous amount of cyclical pressure for sure, but also secular [ph] pressure in terms of the aging population, etc.

And when the money does come out of hiding in money market funds, do you think it is going to take a new set of retail products that maybe you don’t have today to capture share?

Again Mark, if history is a guide, no, I mean think about it this way Mark. The return to equity beta promises to be extraordinary in recovery and by the way, if you study recoveries from extremely steep equity market declines, I think you will be reassured of that assertion.

They tend to be much shorter in duration than you imagine and extremely steep in magnitude. And retail investors, unfortunately, are impressed with that which is why they consistently transform [ph] and now are redeeming and later observing those recoveries will likely come back in to mainstream equity product.

Again, if you take, I know you guys have done this, but if you take time to study the speed with which equity markets recover, you will be stunned by how short it is. I mean the last number of bear markets in the US starting in the early '60s.

I will just give you a couple of numbers – '62, a 22% decline; it is completely recovered in 10 months; '66, six months; '70, a 30% decline, completely recovered in nine months; '73 for a devastating bear market, I lived through that one everyday, completely recovered in 18 months; the '82 decline, five months; the '87 crash at 17 months. The point is that as bad as things feel during these kind of settings, the risk premium gets so high, the price is so disconnected to the underlying cash flows of the companies in question that you get these really sharp recoveries and then these products have a very different look and feel.

It is an end-point sensitivity in the opposite direction.

Understood. And I wonder if there is data on the 1932 to '33 as well?

There is; I will tell what it is. The trough is June '32, down a cool 85% from the peak of August in 1929, 80% of which is recovered by December, 1936.

Okay. Thanks, Lew.

Hi, just a couple of follow-ups. I was just wondering what you’re seeing or thinking in terms of after this period, how pension funds and other institutional clients are going to feel about alternatives and if you think that they are still going to want half the allocations to alternatives given your, it seems – sounds like much of your strategies are down, substantially, are you prepared with other products to be able to offer those clients?

I think it is pretty clear that, as your question I think elucidates that our alternative position in the institutional space has been hurt by the developments in 2008, not withstanding its pretty good track record prior there to. It will be a while before we become a competitive force in that set of products.

But remembering my answer to an earlier question about sustaining an appropriate level of R&D, we do have development efforts and other alternatives that could prove promising if the research holds up. Speaking about the industry more broadly, our assumptions are that alternatives will continue to be a share gainer in the recovery period because I think they will have looked as if they were “capital preserving” against the damage of long only equity beta during the trauma, because as you know, most alternatives ex-private equity really have a small amount of equity beta.

Even if they are involved in the equity asset class, they tend to be a long-short strategy, many of which try to be fairly close to market neutral, so a few of course don’t deliver on their promise, but many do and even if the returns are disappointing, they look good relative to the extremely negative results of equity market declines that have been compiled in the last 18 months. And so on that ground, I would think the migration to alternatives will continue.

The private equity world, I think, is still benefiting from a mark-to-market accounting set of principles which provide not complete insulation of course, but some insulation from what’s underway in securities market, and they too are benefiting, at least so far from that perception.

Okay. And then just finally, given where the stock price is, I know you don’t typically buy back shares, but I wonder if you would be interested in that or alternately would you consider – are you considering changing the mix in comp more towards shares, conserve cash, take advantage of the low stock price?

As you know, our mandate actually is to deliver our free cash flow to you, on the presumption here that you are a unit holder, Cynthia. Well, certainly, those who you advise as opposed to we dedicating the use of that cash flow to share repurchase for instance.

So, we will continue on that mode. As to the shares be coming a candidate for the deferred compensation plans, well, they actually have been, but we as you know – we are trying to promote as our primary goal, alignment of the professional staff with the clients and so we require that at least half of anyone’s deferred comp be put into the firm's services and the other half could go to the units, then in many cases, people have elected that way and with the stock this depressed, they might actually see it the way you describe.

Okay, thank you.

Good evening. I was just wondering if you could differentiate with the expense initiative, structural versus cyclical, and if this is strictly a cyclical downturn that we’re in, wouldn’t this be the time to kind of be expanding your share?

Trying to hire talents rather than trying to cut back too much? Case in point would be your institutional services, which I’m sure is benefiting from a lot of disruption of some of your major competitors in the third quarter.

I think what’s happened here and I tried to mention this in an earlier question, is again we built this firm at a size to be $800 billion to quite frankly $1 trillion, that’s what we thought we were headed, that’s where we were at $800 billion, and that’s where the trends show we were going to. So, there is a lot of room between where we are today to get back to $800 billion to $1 trillion.

So I think to your point, if there is talent out there, that wouldn't stop us from trying to take out some outstanding talent but it will be during a mode where our headcount is going down. So, we will have to find a way to finance getting great talent that’s out there and whether it’s on the buy side or the sell side.

We are going to bring the fixed cost of the firm down and the largest fixed cost we have is ours in the headcount.

And in that context, whenever they do, the markets do rebound and value comes in fashion, for the retailer investor, I guess that means that your expenses will be more leverageable? I mean, I’m trying to get a sense of –.

Yes, of course.

Absolutely.

Of course, it will, as it was in the last upcycle.

Absolutely, and in fact to that point, if you go back to the history of firm, it was a – when we went into the last correction, we did some attrition. We didn’t do the rip [ph] that we are doing here.

We did some – we did have some attrition and we did some consolidation and then when the markets turned, our performance got strong, revenues took off. There was a significant delay between that period of when the revenues were taking off in the period to where we started to do the hiring, actually a few years.

And that would probably be the case when and if this happens also.

I think it's worth adding, although, I think it's obvious that in this staff reduction mode that we are in, we are going to be really careful about sustaining the intellectual capital of the company and taking advantage to the extent that it actually manifests itself or present itself to us. That’s an opportunity to add to staff which will be substitution to our existing staff to the extent that upgrade appears compelling.

Okay, thank you.

Great, thanks everyone for participating in our call. Any time feel free to contact Investor Relations if you have any further questions and enjoy the rest of your evening.