Peter Kraus - Chairman of the Board and CEO John Weisenseel - CFO Jim Gingrich - COO Andrea Prochniak - Director, IR

Adam Beatty - Bank of America Merrill Lynch Alex Blostein - Goldman Sachs Ryan Sullivan - Credit Suisse Jack Keeler - Citigroup Michael Kim - Sandler O'Neill Robert Lee - Keefe, Bruyette & Woods, Inc. Surinder Thind - Jefferies & Company Greggory Warren - Morningstar

Thank you, Chris. Welcome to our third quarter 2015 earnings review.

This conference call is being webcast and accompanied by a slide presentation that's posted in the Investor Relations section of our Web site, www.abglobal.com. Peter Kraus, our Chairman and CEO; John Weisenseel, our CFO; and Jim Gingrich, our COO, will present our financial results and take questions after our prepared remarks.

Some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. So I'd like to point out the Safe Harbor language on Slide 1 of our presentation.

You can also find our Safe Harbor language in the MD&A of our third quarter 2015 Form 10-Q, which we filed this morning. Under Regulation FD, management may only address questions of a material nature from the investment community in a public forum.

So please ask all such questions during this call. We're also live tweeting today's earnings call.

You can follow us on Twitter using our handle @AB_insights. Now, I'll turn the call over to Peter.

Thanks, Andrea. Good morning everyone, and thanks for joining the call.

I’m going to start with a firm-wide overview on Slide 3. Investors were side lined during the third quarter by declining equity markets and uncertainty over everything in U.S interest rates, to Chinese economic growth, to commodity prices.

As a result, our gross sales of $12.9 billion were well below the trend. That compares with $18.8 billion in last year’s third quarter and $24.8 billion in the second quarter of this year.

Which as you will recall included the funding of a $10 billion customized retirement strategies or CRS mandate. Net flows reversed to negative $2.4 billion from positive $2.8 billion in last year’s third quarter and positive $2.2 billion in the second quarter of this year.

Quarter end AUM of $463 billion was down 2% versus the third quarter of 2014 and nearly 5% sequentially with market depreciation by far the greatest contributor. Average AUM of $476 billion was down nearly $3 billion year-on-year and down $16.4 billion or 3% sequentially.

Slide 4, shows our quarterly flow trends across channels. Good news is that our gross redemptions improved overall and across all three of our client channels.

The tougher news is that gross sales were well below historical trends and that drove overall net outflows. Now we will look at investment performance, beginning with fixed income on Slide 5.

The risk off environment challenged the third quarter performance of many of our fixed income strategies. Yet our long-term track records remain strong.

For the one year our percentage of assets in outperforming services actually improved, moving to 88%. We were down slightly for the three and five year at 87% and 93% respectively.

We held our own in equities as well despite third quarter’s market decline. Now I’m on Slide 6.

At quarter-end, 79% of our qualifying active equity assets were in outperforming services for the one year period, 81% for the three year and 62% for the five year. That’s important.

We were able to demonstrate the benefits of investing in our high conviction strategies including concentrated portfolios. Concentrated U.S growth and service that holds around 20 stocks ranked top quartile for the one and three year period through September and top decile for the five year.

U.S Thematic ranked top decile for the one and three year. In our growth portfolios we show the importance of stock picking acumen in an environment where it really did matter.

U.S Large Cap Growth ranked top decile for the one, three, and five year periods and emerging market gross for the one and three year period. In value our global strategic value strategy retain its top decile ranking for the three year despite giving back some performance in the third quarter strong value headwinds.

In many of our services, we’re able to provide downside protection in volatile markets. Of the services on the table, 75% had higher upside capture than downside capture in the third quarter.

And almost two thirds had downside capture less than one, so they outperformed during down days. This outperformance is most clear when you look at our strategic core equity services, which is specifically designed to limit downside risk.

All four of them, U.S, Global, International, and Emerging markets ranked top decile for the quarter and one year U.S Global and EM were all top decile for the three year or international ranked in the 12 percentile. I’m proud of the breadth of outperformance we’ve been able to deliver for equity clients in this market and in others.

As equity performances improved, we’ve added new and relevant offerings. And they’ve come to represent a larger share of our institutional business.

You can see that on Slide 7, in our institutional channel highlights. The top left pie shows the composition of our institutional gross sales by asset class for the third quarter.

While fixed income continues to represent more than half of our gross sales, active equities comprised nearly one-third of the total in the quarter. That compares with 14% in the third quarter of 2014 and represents our best equity sales quarter since the fourth quarter of 2011.

We also garnered more sales in EMEA and Japan, that’s the pie at the bottom left. These two regions together account for more than two thirds of our gross sales in the third quarter compared to 42% in the year-ago quarter.

Our $5.9 billion pipeline at quarter-end was diverse as well. We added significant new mandates in every asset class.

And while overall activity with institutions has been muted, we continue to make good progress with consultants. During the quarter, we secured four new or upgraded buy ratings for four separate global fixed income strategies across the top three global institutional consultancies.

Regionally, we’re making terrific strides with consultants in the U.S., the U.K., Australia, and Japan. So we feel well positioned today from both a product and performance standpoint.

Moving to retail on Slide 8, you can see how steep the decline in investor activity was in the third quarter, particularly, in the regions in categories where we have the largest funds. We don’t yet have September 2015 data.

The chart at the top left shows that July and August combined, global high yield gross sales in the Asia ex Japan region plunged 75% from the same period last year. Other bonds by 37% and mixed asset and other funds by 41%, even equity fund sales which have been strong in the region, fell by 4%.

Given our historically dominant position there in high yield fixed income, we felt this decline in sales activity. The bottom of the slide look to grow sales trends in the U.S mutual fund industry, highlighting year-on-year exchanges in the fixed-income categories where we have our largest 40-act funds.

Again, September data’s lagged, but sales for July and August combined plummeted compared to the same period last year. Global bond sales in the U.S fell by 52%, Multisector Bond by 36%, High Yield by 39%, High Yield Muni by 45% and other Muni’s by 24%.

In every instance save High Yield Muni, there was nothing in the gross sales trend for the first and second quarter to indicate such a precipitous third quarter drop was coming. Clearly, the challenge we and many in the industry have today is with sales, not with redemptions.

Even with these large out flowing categories, our gross redemptions were down by $2.5 billion across the complex year-to-date. And our annualized redemption rate is our lowest since 2007.

And looking beyond fixed-income, we are pleased that we are able to generate positive net flows to our U.S retail active equity funds during the quarter. We are also encouraged by our overall diversity of sales by product and by region.

Active equity represented more than one third of total gross sales and sales of the newer products we’ve introduced over the past three years increased by 9%. Gross sales increased sequentially in the U.S., EMEA, and Japan in the third quarter.

So when retail fixed income mutual fund sales pick up in the U.S and Asia retail investors resumed their search for yield, which we believe they will, we think our flow picture will improve as well. Now let's turn to our private wealth management business, which is on Slide 9.

In any market environment, we remain focused on delivering for our private clients by producing competitive investment performance and providing a suite of relevant and innovative offerings that appeal to that broad client base. We believe we came through for them in the third quarter.

Top left chart illustrates the adjustments we’ve made to our strategic equities offerings to create a more high conviction portfolio and they continue to pay off. We have outperformed by about 3% through September, putting us 15th amongst peers.

For the one year, we’re even stronger at 13th and for -- we’re 20th for the three year. Our targeted services represent another way we're catering to the evolving needs of our private clients.

As the timeline at the bottom of this slide shows, the early stage managers fund to funds offering we just launched was the latest in a series of the innovative and relevant, new one-off services that we’ve been introducing to clients for the past several years. This new offering raised nearly $120 million, bringing our total assets raised from targeted services to date to more than $3 billion.

Between the strength and relevance of our offerings and the commitment to high-touch client service, we’ve been able to keep current clients happy and attract new ones. Our new client relationships have increased 17% versus year-to-date 2014 and our asset retention levels are near record highs.

We are delivering for clients like never before in this business and it’s really great to see. Moving to the sell side on Slide 10, we benefited in the third quarter from the spike in volatility.

Revenues were up 13% year-on-year and 4% sequentially. That's the chart at the top left.

The bottom left chart shows the trend in volatility in the U.S market since January 2014 and gives us a sense of just how dramatic these past few months have been. VIX was up 48% in this year's third quarter versus last year.

The dynamic has not been the same in the regional markets. Europe is rebounding a bit, but Asia volumes remain low.

We are finding that our clients still want our research, but are not as interested in trading in Asia stocks. That's the beauty of having a global business.

We can trade leadership around regions. Last year Europe and Asia were greater growth drivers for the U.S., for us and this year it's the U.S.

and trading is making an overall greater contribution to result than it did last year. We continue to be differentiated in both our research insights and our trading capabilities.

In research, more than half of our analysts ranked one or two in the 2015 U.S institutional investor survey, and our 12th consecutive annual European Strategic Decisions Conference just drew record attendance. In trading, the industry-leading access to liquidity and unconflicted business model that Bernstein offers continue to win us new clients and more business from existing clients.

Our clients are also trading with us more electronically and across multiple geographies. So we feel good about what we have to offer global clients in the evolving market landscape for institutional research and change.

Finally, I'll wrap up with a brief recap of the progress we continue to make in our long-term strategy to deliver for our clients across cycles. I'm on Slide 11.

Despite the third quarter’s difficult market conditions we were able to maintain strong long-term track records across many of our fixed-income and equity strategies and attract new assets from diverse services, channels, and regions. We have broadened our business in institutional by making ongoing progress with consultants and clients and increasing our pipeline by 11%.

In retail, we achieved significant gross sales increases in the U.S., EMEA, and Japan. We reached important milestones with innovative new offerings like customized retirement strategies which was just ranked number one by assets by Pensions & Investments.

Multi-manager alternatives which just hit three years with $1.8 billion in private client assets, and a successful roll out of our new early stage managers fund of funds. Finally, we kept non-comp expenses in check during the quarter.

So progress on every front in an operating environment that became increasingly difficult throughout the quarter. I'm proud of what the talented people here at AB have been able to accomplish in this quickly evolving market.

They amaze me everyday with their relentless ingenuity and commitment to keeping our clients ahead of tomorrow with our service and offerings. It's always difficult to predict when the uncertainty that's undermining investors’ confidence in the global markets will actually begin to abate.

I'm confident we are on the right path with our people, business, and strategy. Now I'm going to turn it over to John, for some comments on the financials.

Thank you, Peter. As always my remarks today will focus primarily on our adjusted results.

You can find our standard GAAP reporting, and a reconciliation of GAAP to adjusted results in our presentation appendix, press release and 10-Q. Let's start with the highlights on Slide 13.

Third quarter revenues of $626 million were unchanged from the same prior year period. Operating income of $147 million and our margin of 23.5% declined slightly as a result of higher compensation expense.

We earned and will distribute to our unitholders $0.43 per unit compared to the last year’s third quarter adjusted EPU of $0.45. Compared to this year's second quarter, our revenue and operating income decreased 5% and 7% respectively due to -- primarily to lower base and performance fees.

We delve into these items in more detail on our adjusted income statement on Slide 14. Beginning with revenues, total net revenues of $626 million were flat year-on-year and down 5% sequentially.

Base fees decreased 2% year-on-year and 3% sequentially as a result of lower average retail and institutional AUM. Performance fees of $2 million were slightly lower than the third quarter of 2014 and were down from $14 million in the second quarter of this year as expected.

The second quarter included performance fees earned on our Select Absolute Alpha fund and Asia ex Japan investment strategies. We have only a few key services with performance fee calculation periods that end in the third quarter.

Bernstein Research services benefited from the volatility driven increase in trading volumes during the third quarter. Revenues were up 13% versus 2014s third quarter as a result of higher client trading activity in the U.S., Europe, and Asia and 4% sequentially due to higher activity in the U.S and Europe which offset lower activity in Asia.

We recorded investment losses of $2 million versus none in the third quarter of 2014 and $5 million in gains in the second quarter of this year. These numbers include minimal seed capital losses in the current quarter compared to gains in both last year’s third quarter and this year’s second quarter.

At quarter end, we had $476 million in seed capital investments, the majority of which is hedged. Seed investments decreased $22 million sequentially, primarily due to lower market valuations.

Moving to adjusted expenses, all-in our total operating expenses to $479 million, increased slightly year-on-year, but decreased 4% sequentially. I'll begin with total compensation and benefits expense, which increased year-on-year due to a higher comp ratio, but decreased sequentially in line with a decrease in our net revenues.

As you know, we accrued total compensation excluding other employment costs such as recruitment and training as a percentage of adjusted revenues. We accrued compensation at a 50% ratio in the third quarter higher than the 49.5% in the same prior year quarter, but in line with the second quarter of this year.

Third quarter promotion and servicing expenses decreased slightly year-on-year. The 14% sequential decrease is due to lower seasonal T&E and marketing costs versus the second quarter when we held more client conferences and launched new Asia marketing campaigns.

G&A expenses decreased 2% versus the third quarter of 2014, as a result of lower trading hours and occupancy expenses which offset higher professional fees. G&A was essentially flat for the second quarter.

Operating income of $147 million for the quarter was down 1% from the prior year, primarily as a result of higher compensation expense and decreased 7% from the second quarter as revenue declines outpaced expense reductions. Our operating margin of 23.5% for the quarter was down 30 basis points from the third quarter of 2014 and our year-to-date incremental margin is 48%.

In addition, we recorded a $1.7 million debit within our GAAP G&A expenses in the third quarter to true up our real estate sublease assumptions which we excluded from our adjusted results. We repurchased 3 million AB Holding units for $82.1 million on the open market during the third quarter, thereby reducing the weighted average units outstanding on a diluted basis to a 100.6 million units for the quarter.

Finally, the third quarter effective tax rate of 7.1% for AllianceBernstein L.P. compares with 6.5% in the third quarter of 2014 and 5.6% in the second quarter this year, and reflects the adjustment of our year-to-date tax provision for our anticipated current full-year 2015 effective tax rate range.

Our year-to-date effective tax rate is 6.5%. We highlight these points on the next slide of this presentation as well.

And with that Peter, Jim, and I are pleased to answer your questions.

Thank you and good morning. This is Adam Beatty in for Mike.

Just a question on equity, the performance has gotten better; it looks like its showing up in the flows. Just wanted to get your thoughts on any important sort of milestones coming up in terms of gaining critical mass in certain channels, with certain products or maybe performance milestone on some of the newer products?

Thank you.

Thanks, Adam. Well, during the course of this year, we have accelerated the acceptance of many of our active equity services on platforms around the world.

So it's not only in the United States, but also in Europe and Asia where large distributors have heretofore not had our services on their platforms, they now do. And in -- also during the course of the year, we have also had a number of those services not just to get on the platforms and be on the research list, but move up to the focus list.

So most of that is new this year and so anywhere from one month old to five or six months old is the kind of ageing of that opportunity. We think that with the strong performance that we’ve had and potentially with markets becoming a little less uncertain that should allow us to gather an increasing amount of assets in equities and you can begin to see that a little bit this quarter.

That's great. Thank you.

And then turning a little bit to expenses, it looks like despite some headwinds expense control came in pretty well. Wanted to get your thoughts kind of the mentality around 4Q, it looks like the market is bouncing back, but if volatility continues; would you dial back on things like promotion, things like marketing T&E, or just continue that effort and maybe let the margin take a little bit of a dent?

Thanks.

I think it's fair to say that we are running the business with a long haul as opposed to quarter-to-quarter. That said, I think we’ve indicated that we expect to deliver operating leverage assuming we can grow revenues and that implies as we have all year carefully managing our expense base, particularly, the non-compensation expense.

Yes, this is John. I would just add on that, we have been kind of bouncing in a range here on both the T&E -- on both the promotion servicing and G&A expenses.

And some of these things are seasonal. So for example, in the third quarter T&E is typically seasonally low and then it pumps back up again in the fourth quarter.

The same thing with marketing. So you may see something swing from quarter-to-quarter, but back to Jim's point we're really managing the business for the longer haul and I think if you look back over the past year these expenses have been pretty stable and should be going forward.

Okay. That makes sense.

Thank you for taking our questions.

Thanks. Hi.

Good morning, everybody. Peter question for you on retail trends and high yield.

Obviously, you guys highlighted that gross sales have been slowing down, probably not surprising given what’s been sort of happening over the course of the summer on the macro front. But curious to hear, I guess, with macro conditions maybe getting slightly better if you guys seen any improvement in sales on the retail high yield channel given how important its been for you guys as a source of new flows?

In a word, not much. I think through the quarter we saw a relatively low level of sales.

We were surprised and we try to point that out in the presentation at the precipitous decline in sales in that space, in particular, in Asia ex Japan. And the other side of that is that we’re actually sort of optimistic because we just don’t expect that sales will stay that low for extended period of time.

I think that you might ask a follow-up question why? It’s not actually easy to determine why sales fell so much.

It’s more than likely a combination of the volatility in the equity markets in China and the currency changes in China, as well as the uncertainty around the Fed’s behavior. And as those things resolve themselves, we would expect gross sales in that market to move up to a more normal level.

We have a high market share in that space. I was actually quite happy to see that the decline in sales did not reflect itself an increase in redemption activity.

Redemption activity has been reasonably muted. So we have reason to feel confident that when sales come back, we'll get our market share and then some and that will be a positive element for the Company.

Thanks. Helpful color.

And then on the buyback, nice pick up this quarter. Anything we need to think about, I guess, from a -- just a capital management perspective on the pace from here?

I would just say -- it's John. The longer term objective of the buyback program is to buy back the units that we issue to employees for incentive based comp.

And I think if you look at it from year-to-year it varies. If you go back to 2011 and ’12 we bought a lot of shares much more than we issued less so in 2013 and ’14 as we did the WPS and the CPH acquisitions.

But even if you look at that four-year period, we bought back much more than we actually issued to our employees than when you add in the 3 million that we bought here in this quarter and close to 4 million year-to-date. I think we are in good shape as far as this year in terms of what we expect to issue to employees.

But again we are managing this over the longer haul and I think you will continue to see us in the market on an opportunistic basis. Some quarters like the one that we just passed, we bought back more than we did in other quarters, but you will continue to see us in the market.

Got you. Thank you.

Good morning. Thanks a lot for taking the question.

Peter, I believe you hit on this a little bit in your prepared remarks, but maybe just a little more detail around the alternative investment services team and the product innovation in general. So first off, are there any new products in the pipeline or any other areas you’re exploring that you currently see pockets of opportunity?

And secondly more broadly, how you see the growth of this team, the trajectory of this part of the business in general? Thanks.

Yes. So we are very focused in the alternative space, in the liquid alternative world.

We have multiple opportunities there, in multiple regions around the world. The performance in the industry has not been particularly strong this year as you all know.

But the interest in interjecting these services into target date structures and retirement opportunities which heretofore have not had the chance to actually invest in alternatives, we think it's a long-term trend and it's where there are significant growth opportunity. In addition to that, we also are recently approved on a number of platforms.

Again, recommended list or focus list, which we hadn't had up until the middle of this year. And so that also makes us feel somewhat optimistic about what our chances are to raise assets in that space.

In terms of new product flow, we have a couple of products that we are building or innovating, I guess, I would say. And so I think I have said in the past we increased our product innovation quite substantially in the ’11, ’12 -- 2011, 2012 time period.

And then we sort of reached a reasonable plateau for that 7innovation a couple of years after that. And I don't think our innovations are going to decline, but I don't think our -- the speed at which we will bring our products will increase either.

I think we’re going to try to maintain where we’re and try to exploit what we’ve developed and what things don’t work will discontinue. But the pace of innovation, I don’t expect to pick up, but I also don't expect it to decline much.

I would just add to that, the other important leg to what we're doing in the alternative space is in the private credit arena where again if you look at our institutional pipeline or what Peter called out in our private wealth channel, we have been -- I think very successful and very pleased with our asset raising success in areas like real estate debt or middle market lending. And performance in areas like real estate equity on our first fund has led to larger raises as we move to the second fund and we’ve seen the same thing in real estate debt.

So there is a reasonably large chunk of our pipeline that is committed assets in these types of services and we are pleased with how that is continuing to evolve.

And I think Jim makes a good point. We don’t talk about this that much, but we built that from zero that was literally zero three or four years ago.

And today that is as I mentioned in the comments $3 billion and it’s continuing to grow and the performance of virtually all of those services that we’ve had over time has been exemplary. They have really produced returns for clients and that is created obviously interested investors who are interested in investing in the new things we’re doing.

And that just will continue to build. We build hyperbolically, but it will build a very consistent -- in a very consistent way to a sizeable business over time.

That's great. Thanks.

And just one quick follow-up, the concentrated growth mandate in the institutional segment that is the new addition for this quarter. Was that put in at the beginning of the quarter before the volatility started or towards the end of the quarter after -- in the midst of the volatility?

I don't know the answer to that, but I think the right way to thing about it is that it was more than likely something that was the decision was made earlier in the year -- probably in the second quarter or maybe the beginning of the third quarter. But I don't think that the volatility of the market would affect.

If you’re thinking well that’s going to change the way that people are going to allocate equities, I don’t think that’s going to have an impact. These are the long-term investors.

They're making decisions to allocate capital. The down 10%, up 6% volatile is not changing their capital allocation regimes.

Great. Thanks a lot.

Hi guys. This is Jack Keeler stepping in for Bill here.

My first question is around sovereign wealth fund. I think some of your peers have talked about the impact they had from sovereign wealth funds in the quarter in terms of redemptions.

I was just wondering if you could talk a bit about your exposure to sovereign wealth fund and the impact they might be having on flows.

Sure. We have a balanced exposure to sovereign wealth funds and a number of them are our clients.

We’ve stable relationships with them and I don’t think there is any out of the ordinary.

I’m curios about some color on what kind of impact that had in the third quarter in terms of flows?

Well, I don’t think anything material in. There is nothing really to -- that’s what I meant by we’ve very balanced relationship with them and nothing out of the ordinary.

Okay. Thanks.

Then as a follow-up, I just wonder if you’re getting any more traction in your target date funds? I know they’ve some embedded volatility management.

I think that might have been a boon given the August step down. Have you seen any more traction in that space?

I’m sorry, say it again.

Your target date funds with the volatility management built in, I just wonder if you had anymore traction in that lets say a quarter given the volatility?

Yes, now we’ve continued to see growth in that space, and as I’ve mentioned a few times about the target date business, it will be slow to build, this is a long-term business. It’s not going to jump off the page.

But we continue to have an increasing pipeline in clients that are interested and/or have actually mandated us. It takes process.

It takes time to go through the investment committees and the approval process. But there is a significant amount of continuing and growing interest in a target date fund that is powered by Morning Star and AB.

It offers the market something that market doesn’t have, and it offers investors and investment committees an opportunity to actually discharge some of their fiduciary responsibilities which heretofore they’ve not been able to in being able to pick managers beyond just one provider. And that as I think become more important not less important as people focus on the implications of what the DOL may propose in the future.

I would just add, there was a question earlier on milestones. We do at the end of this year run up against our one year milestone on our multi-manager target date fund, which is a critical milestone for many potential buyers.

And as Peter said, they’re looking at performance, and performance in 3Q, I think will help us in these discussions.

Great. Thank you.

Hi, guys. Good morning.

First, just focusing on the institutional channel, if we sort of exclude the CRS mandate that funded in the second quarter, it looks like net flows have been modestly negative for the last couple of quarters. So, does it sound like there were any sort of lumpy redemption that skewed the number this quarter?

But just curious to get your take on some of the outlook for organic growth in that channel given what seems to be some pretty persistent headwinds around sort of rebalancing and de-risking?

Yes. Michael, it’s -- I thought about perhaps calling out some of those things, but there are plus -- there are large pluses and minuses in both categories.

And if you start picking up well, exclude this redemption and then you have to exclude that sale or if you exclude that sale and then you have to exclude the redemption. I think we sort of look at it on a balance basis.

The CRS mandate was large, but there were some other large redemptions as well, but not of that size and they’re lumpy. And sometimes organizations are redeeming -- large organizations are redeeming, but reallocating.

And that reallocation could -- might be to you the manager not necessarily to some other manager. So look, I think we tend to look at this stuff in its totality as opposed to try to peel back the onion, because if you don’t get all the layers you may not get the right answer.

So having said that, let me just sort of comment on the overall problem. I think the overall problem still is a low level of sales.

I think the redemption activity is quite manageable if not very well. And I think the true headwind that at least we have and I think its not -- we’re not alone in this is actually growing -- grow sales to a higher level.

And the reasons for that are challenging. It’s hard to understand.

It may in fact be allocation regimes. It may in fact be the use of money by institutions.

It may in fact be active to passive, it may in fact just be right now, people are reasonably comfortable with what they have and they’re looking at what happened to them after the third quarter volatility and they may begin reallocating in a different way coming out of that, it’s hard to tell. But I do think it’s pretty clear that the gross sales levels are low.

Okay, fair enough. And then, maybe sort of a similar question, but more focused on the retail business.

Again it just seems like some pretty meaningful or powerful headwinds across the industry. So, when I think about you guys specifically, I think we can understand or we can see that the competitive advantages that you’ve build up over time around performance and your differentiated products ad and broad distribution capabilities.

But just looking ahead, do you feel like those are enough to really to be able to generate strong organic growth versus what continues to be a pretty difficult environment for the industry?

Well, there are two problems in the retail world. There is a much slower level of gross sales.

So lets just talk about Asia for a second, because there we really -- the two problems can part or conflate where they come together. So what are the two problems?

There is the level of sales, and then your percentage participation of the sales. In Asia we have a very high market share, and so its’ hard for us to increase our market share materially although we have in the past.

I mean, in prior years we’ve actually been able to take the market share up, but not counting on that for a minute. If market share is constant then what happens to gross sales has a direct affect on us, and that tends to be the experience in that product set in Asia.

And with the very significant declines that obviously had an impact on us. On the other had as they said, low level of redemption, so significant client interest and comfort with what they have currently invested in and the question is what will they do with their cash going forward and there’s just no history to suggest that these level of sales will stay at the depressed level for an extended period of time, that’s just not how the Asian investor has behaved.

So we do expect that those gross sales will rise and we expect that we get our fair share of that if not more. In Asia in addition to that there is an equity participation, and there the performance that we’ve had and the expansion of the platform, that’s a big benefit to us.

So there not only could we pick up market share, but if gross sales also retract from a minus to a plus we’ll get both an increase in the gross sales and an increase in the market share. In United States it’s -- and in Asia or Europe it’s much more of both a market share question and a gross sales question.

So, I don’t want to have any crystal ball on what gross sales in the U.S. will do.

We’ve currently -- we’ve certainly seen over the last few years trends against active, at some point I suspect that will moderate and perhaps even change. And I and the firm have been specific about why we think that’s a challenge for passive investors and that’s another story.

But that aside, the important thing that the performance gives us is the ability to increase our market share, and that’s where we think the real opportunity is, and that’s something we can actually control better, because you sort of can't control the industry flows but you definitely can control your performance and therefore you can control your penetration in those platforms and you should expect that investors will allocate money to top performing managers of which we have a lot today in equities and in fixed income. So I think in the U.S.

and Europe world we’re more constructive on our opportunities, and you’d say, okay that’s all great, why isn’t that happening? And the questions asked at the beginning of the Q&A relate to that because what's the time period on which they have been on those platforms?

Where they’ve been on research list or in focus list and actually out in the market place where we can actually sell and that has been a short period of time.

Got it. Okay.

That’s helpful. Thanks for taking my questions.

Thank you. Good morning.

I guess, the first question I have is on the wealth management business, I mean you highlighted the significant year-over-year increase in the number of clients, I guess 17%. I’m just kind of curious how should we think of that in terms of maybe a leading indicator for future sales?

I mean is it your experience that you have signed on a new client that bring over assets and that’s largely the amount of assets you manage or is it really or do you kind of sing on the client that bring over some, but then typically the assets start to kind of come in over time. Just trying to get a sense of that?

Yes. Now, Robert you’ve been appropriately focused on the changes in the private clients business over the last couple of years, multiple quarters.

And I think this is just another indication of the conversation we’ve been having on this. This is a business that takes again time to change.

There are interesting indicators here as we’ve said; low level of redemptions, very positive performance. As you recall in 2009, ’10 and ’11 we didn’t have such positive performance, much more challenging to actually keep clients.

We had a service that was not anywhere near as diversified as it is today, not as well balanced, not as many new products, no targeted services. Now we have targeted service, we have new products, we have better performance, we have new clients, we have low level of redemptions.

All those things are happening, and we need more advisors that have experience. You can't, as I’ve said many times, you can't create a three year track record faster than three years.

You can't get a financial advisor with more experience unless they go through time with the experience. So this is a process.

You’re witnessing the growth of the momentum in the business, and I think that we’re on track. It won't happen asymptotically, but it will be sticky when it occurs.

Great. And then I had maybe a follow-up question on, how you think of capacity?

I mean I think in the past you’ve talked about in active equities, strategies with I guess high active share, more concentrated portfolios is being a place where, you see any -- and you hope to see a greater demand, but I guess the flipside of that is to run those strategies you kind of have to limit capacity. So, how do you -- I would think -- so how do you -- as you roll those out, I mean how do you think about how you market those?

I mean do you save capacity for retail products which maybe have higher fees? Do you -- I mean, I’m just kind of curious how you go about kind of managing that as demand or assuming demand does pick up?

Sure. First of all we don’t save capacity for one channel versus another.

We treat all our clients similarly and we don’t think that, that would be a fair way to treat our institutional clients versus other client set. So we don’t do that.

Secondly, capacity is constraint in these high conviction services and the high conviction services have a number of different types to them, some are more concentrated than others, but they all will have capacity constraints and we’ve hit some of our capacity constraints and closed products. So what do we do about that if we want to grow?

And the answer is actually quite simple. We don’t have just one.

We have a diverse set of high conviction equity strategies many more than we had in the past. And many or plenty put it that way, six, seven, eight, ten that could easily increase in the billions of dollars -- multiple billions of dollars which if we hit the capacity in all those services you’d be really happy and so would we.

So as a company, as a firm, as a platform we don’t feel capacity constrain in the perspective of growing and growing yet at a very attractive rate. From the specific service point of view, there are capacity constraints and a few of them we’ve hit and closed.

So we’re going to stick to that strategy. We think we’ve got plenty of growth as a firm, as an equity platform.

Continue to develop new services which create more growth, but we’re going to stick to the high conviction capacity construction because we believe in the future if in fact we’re going to outperform active or passive management which we have done and believe we will continue to do, its going to be because we execute on that strategy.

Great. Thank you for taking my questions.

Good morning. A question on the Bernstein research services, you spoke about kind of growth in 2014 coming from Europe and Asia, and then this year it’s been more the U.S.

and then part of Europe. Can you talk a little bit about the divergence in those regions in terms of why maybe Asia is liking this year and if there’s just a different behavior there in terms of when the markets get volatile and stuff?

I think what -- we’re serving a global investor set. So they, you naturally have movement as global portfolio managers see opportunity.

And the pullback that you had and the volatility you had in China this year I think has just been reflected in volumes versus prior years. So, it’s a natural part of the business.

We service those clients on a global basis and that’s the nature of the relationship. So, we’re in different as to where people trade because those are in fact global relationships and as Peter mentioned, this year you’ve seen more growth in the U.S.

than you’ve seen in other regions. I think the other thing is that, that has impacted Europe of course is currency.

So, measured in local currency that business looks a lot better than measured in U.S. dollars.

That’s helpful. And then related to an earlier question about the expenses and operating margins, you guys have actually been enjoying pretty good incremental operating margins.

If the markets were to remain lets say volatile or even trend downwards, how should we think about the other direction? Is there a little bit of wiggle room that you would have to maybe keep bringing in things just a little bit more to protect?

I think that we’ve said that we’ve got operating leverage, but it goes in both directions. So if we have operating leverage for revenues growing we’ve got negative operating for revenues declining.

Now when revenues decline, we have one lever that is always painful but we’ve certainly done in the past and that’s headcount. And so as revenues decline we can remove people from the firm and probably will.

But I think that you’d have to believe in doing that you’re still going to have a challenge in keeping your marginal margin revenues decline because your fixed expenses aren’t going anywhere.

Fair enough. Thank you.

Good morning, guys. I’m having a few difficult technological problems this morning.

I just wanted to follow-up on the question that was asked kind of about high yield and more so about a broader picture issue. Some of the charts that we’re seeing at least on the retail side, you had flows into core bond funds really sort of decelerate midway through 2013 to 2014 and a lot of money going into non-core bond funds of which high yield is one of the category.

But pretty much since the start of this year it’s been almost the reverse trend. And I’m just kind of curious if you’ve had any insight to talk with institutional clients or grow some of the retail platforms as to what the thinking is there.

I mean, you would expect with the expectation being that rates were going to go up in September coming through the first couple of quarters earlier this year that it would be the opposite. But I’m just kind of curious if you’ve got any additional color there?

Look, if you’re talking about global trends, I think actually the single most significant event and Doug Peebles who runs our fixed income business has actually been talking about this. When the Fed -- U.S.

Fed in the middle of 2014 started growing its balance sheet and therefore the incremental change in the provision of liquidity in the markets shifted from a easing to a tightening. That had a commentary impact on credit spreads around the world from investment grade all the way through non-investment grade.

It had a bigger impact on non-investment grade. And so forth literally that time then till now, we’ve seen spreads widen in that space.

So it didn’t widen dramatically every day but every day they widened. And that had a compounding impact on people performance and the way they felt about risk around the higher yielding part of the fixed income market, add to that volatility around China and the opacity with which people view the Feds decisions as currently and I think you’ve got what we saw which was a movement of cash out of the higher yielding part of the fixed income market and to some extent into the core bond market, but perhaps mostly on the sidelines.

Okay. So kind of like what the equity market more of a flight to quality in some sense.

I guess, the other thing -- I may have missed this in your opening remarks. But just thinking about performance fees as we go into the fourth quarter here, do you feel like year-over-year that we’ll probably see a decline similar to what we saw on the third quarter or are you guys feeling a little bit more positive on the fees?

Well performance fees as you know will be largely connected to whether or not there are positive returns in markets. And it is possible to have a negative beta market and have such out performance that you still actually create performance fees, but that’s probably less likely than not.

And so, to the extent that the market is -- the global markets are negative in beta, I wouldn’t expect to see much of the way in performance fees.

Okay. Well, thanks for that.

Have a good day.

Thank you.

Thanks everyone for joining our call. I know you’ve got a busy earnings today, but IR is here for you if you have any questions.

Thanks so much and have a good day.