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DATE

April 28, 2026, 8:30 a.m. ET

CALL PARTICIPANTS

  • President & Chief Executive Officer — Seth Bernstein
  • Chief Financial Officer — Thomas Simeone
  • Head of Global Client Group and Private Wealth — Onur Erzan
  • Head of Investor Relations — Ioanis Jorgali

TAKEAWAYS

  • Equitable Corebridge Merger Prospects -- Management expects to manage at least $100 billion of additional general and separate account assets from Corebridge (NYSE: CRBG) following completion of the merger between Equitable (NYSE: EQH) and Corebridge, with the combined general account asset base exceeding $350 billion.
  • Firm-wide Flows -- Active net outflows totaled approximately $6 billion, concentrated in active equity strategies with outflows of about $11 billion, and taxable fixed income outflows nearing $2 billion, while tax-exempt fixed income and alternatives multi-asset strategies each achieved over $3 billion in organic inflows.
  • Private Markets AUM -- Private markets platform AUM reached $85 billion, representing a 13% increase year over year.
  • SMAs and Active ETFs Growth -- The SMA business grew organically at a 15% annualized rate to $63 billion in AUM, and the active ETF lineup expanded to 25 strategies with more than $16 billion in AUM, up over 150% year over year.
  • Institutional Pipeline -- The institutional channel pipeline hit a record $27.5 billion in AUM, supported by $9 billion in new commitments, with a pipeline fee rate of 19 basis points and active AUM at 23 basis points excluding $5 billion in passive mandates.
  • Private Wealth -- Bernstein Private Wealth ended the quarter with $155 billion in assets under management, contributing over one-third of firm-wide revenues, with net new client assets growing at a 5% annualized rate.
  • Adjusted Earnings Per Unit (EPU) -- Adjusted EPU was $0.83, a 4% increase year over year, with distributions matching 100% of adjusted earnings.
  • Net Revenues -- Net revenues were $871 million, marking a 4% year-over-year increase; base fees rose 5% on 8% higher average AUM, offset by a lower firm-wide fee rate.
  • Performance Fees Outlook -- Management raised the full-year performance fee outlook to $95 million to $115 million, reflecting an increase in public market strategy contributions; private markets performance fee outlook remains $70 million to $80 million.
  • Operating Expenses -- Total operating expenses reached $580 million, rising 4% year over year, with compensation expense up 4% and non-compensation expense up 5%.
  • Operating Margin -- Adjusted operating margin was 33.4%, down 30 basis points year over year, attributed to investments in technology, onboarding new investment teams, and increasing adviser headcount.
  • Firm-wide Fee Rate -- Fee rate decreased to 38.1 basis points due to negative AUM mix shift, with retail active equity declining to 18.7% of firm-wide AUM and inflows in lower-fee municipal SMAs outpacing outflows from higher-fee taxable fixed income strategies.
  • Effective Tax Rate -- ABLP’s effective tax rate was 5.6%, with full-year guidance updated to a 6%-7% range.

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RISKS

  • Active net outflows of $6 billion, driven primarily by $11 billion in active equity redemptions and nearly $2 billion in taxable fixed income, reflect client allocation shifts and performance challenges, especially in Asia Pacific and marquee U.S. strategies.
  • Adjusted operating margin declined 30 basis points year over year due to ongoing investments, indicating margin pressure from increased spending on technology, new investment teams, and adviser headcount.
  • Performance fees from private markets fell by $16 million year over year in the first quarter, with management citing "prudent proactive markdowns concentrated in software and tech services exposures," though management notes these were not driven by credit events.
  • Management highlighted risks of continued macro volatility, potential geopolitical escalation, and M&A slowdown, which could impact high net worth and ultra-high net worth client activity and liquidity events.

SUMMARY

AllianceBernstein (AB +0.95%) reported higher adjusted earnings per unit and revenues, supported by increased average AUM and strengthened public and private markets fee outlooks. Notable growth occurred in private markets AUM, SMAs, and active ETFs, while record sales momentum in Private Wealth contributed significant revenue. The pipeline for institutional business reached $27.5 billion in AUM, driven by strategic insurance partnerships and new mandates. The proposed Equitable (NYSE: EQH) Corebridge (NYSE: CRBG) merger may significantly increase AllianceBernstein's scale, with management expecting at least $100 billion in additional general and separate account assets to be managed post-merger. Though base fees rose, lower AUM mix and declining performance fees from private markets presented offsetting headwinds. Firm-wide operating expenses rose in line with management guidance as investments continued in technology and adviser headcount growth.

  • The effective tax rate guidance for 2026 shifted to 6%-7%, reflecting a favorable mix of earnings in the first quarter.
  • Fee rate dynamics remain highly dependent on AUM mix, with ongoing shifts toward lower-fee SMAs and pressures from outflows in higher-fee active equity and taxable fixed income strategies.
  • Private markets strategy includes a $20 billion permanent capital commitment from Equitable now fully deployed, aiding AllianceBernstein's expansion in credit-oriented strategies and real estate debt.
  • Management confirmed that fee rate guidance is not provided, instead emphasizing sustainable organic growth and long-term profitability as strategic priorities.
  • "Again, our attrition rate remains very low depending on the year. It tends to be low single digits."
  • Ongoing AI and technology investments aim to drive efficiency and improve client servicing, particularly in Private Wealth, while the financial impact has yet to be quantifiable.
  • Pipeline deployment is projected at a nine-month run rate, with notable new opportunities outside the insurance channel anticipated in Asia Pacific and systematic equity strategies.
  • Retail active equities' share of firm-wide AUM decreased to 18.7%, with market appreciation offset by outflows, and regulatory approval to reopen Global High Yield strategy in Taiwan was recently obtained.
  • The adviser headcount rose approximately 5% in the first quarter, exceeding the firm's annual growth target and reflecting ongoing investment in talent acquisition and productivity initiatives.

INDUSTRY GLOSSARY

  • SMA (Separately Managed Account): An individual investment account managed on behalf of a single client, allowing for customization of securities and tax management.
  • BDC (Business Development Company): A closed-end fund structure primarily investing in small- and mid-sized private companies, often providing private credit exposure to investors.
  • ABPCI: AllianceBernstein Private Credit Investors; the firm's dedicated private credit investment unit.
  • Alpha-generating: Investment strategies or products that produce returns exceeding their respective benchmarks or market indices.
  • CLO (Collateralized Loan Obligation): A security backed by a pool of loans, typically leveraged loans to businesses, where cash flows are structured into tranches for investors.
  • RILA (Registered Index-Linked Annuity): An annuity product with returns tied to a specified market index, offering limited downside protection and potential for higher upside than fixed annuities.
  • UCITS ETF: Exchange-traded funds domiciled in the European Union packaged under the Undertakings for the Collective Investment in Transferable Securities directive, allowing pan-European distribution.
  • General Account (GA) Assets: Assets held by an insurance company that support obligations to policyholders, managed for long-term stability and regulatory requirements.

Full Conference Call Transcript

Seth Bernstein: Good morning, and thank you for joining us today. While the first quarter was marked by geopolitical tensions and elevated volatility, AB's results underscore the resilience of our platform and our diversified business mix. I want to start by highlighting the key themes that shaped this quarter listed on Slide 3. First, the proposed Equitable Corebridge merger will provide a step-function acceleration of our flywheel and meaningfully enhance AB's scale and growth outlook. The combined company will have over $350 billion of general account assets and generate $70 billion to $80 billion of new liabilities annually, positioning AB among the most strategically important players in the insurance asset management channel.

Over time, we expect to manage at least $100 billion of general and separate account assets from Corebridge. We look forward to supporting our new partner in delivering better outcomes for their policyholders while we benefit from enhanced scale, improved earnings durability and increased capacity to invest for growth. We believe this announcement will further accelerate the momentum already evident across our insurance franchise. Today, we serve more than 90 third-party insurance clients with $58 billion of AUM, including $32 billion of general account assets. Deployments from recently announced strategic insurance partnerships are progressing ahead of schedule and are expanding beyond the initial mandates. We are well positioned to benefit as these partnerships continue to grow.

Second, while we continue to drive inflows from secular growth engines like insurance, private markets and active ETFs, we had firm-wide active net outflows of approximately $6 billion in the first quarter, concentrated within a subset of active equity strategies. Active equity outflows of roughly $11 billion spanned across channels and reflect recent performance challenges as well as client allocation decisions. We also had taxable fixed income outflows of nearly $2 billion as positive institutional engagement was offset by retail redemptions concentrated in the Asia Pacific region. Turning to the positives. We generated over $3 billion of organic inflows in tax-exempt fixed income and alternatives multi-asset strategies, respectively.

Our private market platform reached $85 billion in AUM, up 13% year-over-year, reflecting strong institutional momentum. At the same time, our SMA business stands at $63 billion, growing organically at 15% annualized rate in the first quarter. We continue to build on our technological edge and efficiency benefits for financial advisers, extending from a predominantly municipal-focused SMA offering to a broader multi-asset toolkit. We're seeing real traction in taxable fixed income SMAs highlighted by a recently funded $300 million mandate. AB has long been a market leader in tax-optimized fixed income SMAs, an area made increasingly scalable by recent advances in data science.

Our active ETF lineup now encompasses 25 strategies with more than $16 billion in AUM, up over 150% year-over-year, with 8 of our ETFs surpassing $1 billion in AUM, including our 5-star rated disruptors ETF, ticker FWD. Our security of the future thematic portfolio has surpassed $4 billion in assets, nearly tripling from a year ago with $1.7 billion of inflows in the first quarter alone. While these offerings are currently smaller than some of our larger marquee services, they represent emerging durable growth engines that will reshape the composition of our AUM over time.

Looking forward, our institutional channel is positioned for accelerating net flows in the second half of 2026, supported by the largest pipeline on record, surpassing $27 billion in AUM. Third, our distribution platform provides direct access to secularly growing channels, including ultra-high net worth, insurance asset management and defined contribution. Together, these account for more than 45% of firm-wide AUM and provide relative stability across market cycles. Bernstein Private Wealth ended the quarter with $155 billion in assets under management, and it contributes more than 1/3 of firm-wide revenues. Our insurance asset management business now manages approximately $120 billion of insurance general account assets across a growing roster of global partners.

Our customized retirement business exceeds $100 billion in defined contribution assets, and we continue to innovate by incorporating a broader set of asset classes, including private markets and insurance solutions that provide guaranteed lifetime income. Overall, while this quarter's results reflect mixed dynamics and pressure from the challenging macro backdrop, we believe our broad product capabilities and differentiated distribution position AB well to generate organic growth over time. Slide 4 provides an overview of our financial results, and Tom will walk through these in greater detail later. Turning to Slide 5. I'll review our investment performance, starting with fixed income.

Global bond markets posted modestly negative returns in the first quarter as heightened geopolitical tension, rising energy prices and shifting policy expectations pushed yields higher across most developed markets. Credit markets were mixed. Investment-grade and high-yield corporates posted modest declines overall with U.S. corporates outperforming Eurozone peers, while securitized assets proved resilient. The Bloomberg U.S. Aggregate Index was roughly flat, outperforming the global aggregate, which returned negative 1.1% in the quarter. Our American Income and Global High Yield products both underperformed their respective benchmarks in the first quarter. Yield curve positioning and allocation to emerging markets detracted from AIP's relative returns, while GHY was similarly affected by European high-yield exposure and EM corporates.

Notwithstanding near-term headwinds, our fixed income platform continues to perform well over longer measurement periods. More than half of our assets outperformed over the 1-year period, while 80% outperformed over 3 years and 64% over 5 years. Turning to equities. U.S. equity markets were hurt in the first quarter of 2026 with the S&P 500 returning negative 4.3%. The quarter began constructively but reversed with the emergence of credit concerns, AI-related disintermediation risks and escalating geopolitical tensions. Despite some early signs of improvement in year-to-date relative performance, our track records remain pressured and below our expectations. 23% of assets under management outperformed over the 1 year, 24% over 3 years and 44% over 5 years.

This primarily reflects the outsized impact of our larger U.S.-oriented growth strategies that have underperformed this quality growth derated in recent quarters. However, our equity platform is intentionally diversified across styles and geographies, avoiding overreliance on any single market regime. International and emerging market strategies with a smaller AUM base continue to perform well. In fact, we have more than 25 strategies with nearly $40 billion of AUM that are outperforming their respective benchmarks or composites over both the 3- and 5-year periods with 8 out of the 10 largest among them being international or global strategies. As market breadth began to improve entering 2026, a growing share of our growth, value, core and thematic strategies delivered stronger relative results.

Looking ahead, we believe a more balanced earnings environment and continued economic stability could favor international and value-oriented strategies, while lower tracking error portfolios may provide clients with more consistent participation across shifting market leadership. Turning to Slide 6, I'll discuss our retail highlights. Retail gross sales rose sequentially and surpassed $23 billion for the first time in 4 quarters. However, the channel recorded net outflows of nearly $6 billion in the first quarter, reflecting elevated redemptions. Active equity and taxable fixed income each exceeded $4 billion in outflows, driven primarily by redemptions from select marquee U.S. services in Asia Pacific as relative value and capital flows have shifted toward neighboring and domestic markets.

Passive equities and passive fixed income also posted outflows. These headwinds were partially offset by more than $3 billion of tax-exempt inflows and nearly $1 billion of alternatives and multi-asset inflows, continuing their durable organic growth trajectories. Our retail muni SMA platform has consecutively positive quarterly inflows for more than 3 years, a testament to the compounding strength of our market-leading capabilities. We are well positioned as the bond reallocation trend continues to unfold, particularly as we extend our success into tax-aware SMAs. Moving to Slide 7, I'll cover our institutional channel. Institutional gross sales also increased both sequentially and year-over-year.

However, the channel had roughly $2 billion of net outflows, primarily driven by more than $5 billion in active equity outflows. Despite some short-term headwinds from insurance hedging activity, the channel recorded over $2 billion of inflows in taxable fixed income, reflecting broadly improved institutional appetite. Alternatives multi-asset also saw positive inflows for the fifth consecutive quarter, supported by deployments in private markets and fundings of defined contribution plans. Institutional engagement across private credit has persisted with nearly $1 billion of deployments on the back of improved terms and widening spreads. This includes direct lending, where ABPCI recently secured a $0.5 billion third-party institutional mandate reflected on our pipeline.

Furthermore, our pipeline has reached a record high $27.5 billion in assets under management, supported by $9 billion in new commitments. This growth reflects expansion of our recently announced insurance partnerships to include additional mandates. It also includes an increase in Equitable's commercial mortgage loan commitments to $12 billion, up from the previously announced $10 billion. The pipeline fee rate declined slightly to 19 basis points, primarily due to the addition of sizable fixed income and passive equity mandates. Excluding roughly $5 billion in passive mandates included in the pipeline, the fee rate for active AUM stands at 23 basis points. Next on Slide 8, I'll cover Private Wealth.

Quarterly gross sales continue to set new records at Bernstein Private Wealth with the channel registering its third consecutive quarter of organic growth. Inflows grew nearly 2% annualized, while net new client assets rose 5% annualized in the first quarter. Redemption requests for private credit products that offer periodic liquidity stayed well below our 2.5% quarterly cap. This is a testament to the combined strength of our highly specialized adviser sales force, coupled with ABPCI's strong investment track record built on a decade-long partnership since Bernstein was among the pioneers that distributed direct lending as an asset class.

I'm particularly proud of the differentiated client service we offer in alternatives, reinforced by the seamless collaboration between our homegrown distribution and investment teams, a defining advantage for AllianceBernstein. Adviser headcount is tracking ahead of our 5% annual growth target. We believe our platform offers exceptional support and training that drives industry-leading adviser productivity, tracking both experienced and emerging talent. As we continue to invest in adviser headcount growth and productivity, including integrating Generative AI capabilities into daily adviser workflows, we anticipate continuous client experience improvement along with more targeted and effective prospecting. Adviser headcount remains a key area of focused investment and a critical lever for long-term growth within the channel.

I will close with Slides 9 and 10, which highlight the momentum of our private markets platform and the opportunities from the Equitable Corebridge merger. In partnership with Equitable, we have scaled our private markets platform to $85 billion in fee-paying and fee-eligible AUM, anchored primarily in credit-oriented strategies, including direct lending, asset-based finance, commercial real estate debt and investment-grade and corporate structured private placements. Equitable's $20 billion permanent capital commitment now fully deployed and exceeding the original commitment has been a critical catalyst, accelerating our expansion in private markets while strengthening our ability to seed and scale higher fee strategies.

Our collaboration continues to deepen and evolve, progressing across residential mortgage solutions, structured private placements and most recently, commercial mortgage loans. Each initiative builds incremental scale while broadening the applicability of our capabilities across third-party insurance and other institutional client channel. Our goal is to serve a diverse base of retail, institutional and insurance clients across a wide range of risk return objectives. The proposed Equitable Corebridge merger amplifies this flywheel. With a combined general account asset base exceeding $350 billion and a broader liability profile, the merged company will be one of the largest players in the industry, creating significant opportunities for AB. Importantly, the strategies developed for Equitable are not bespoke or stand-alone solutions.

They form the commercial foundation from which we serve a growing universe of third-party insurance and institutional clients worldwide. Amplifying the flywheel with the inclusion of Corebridge is a defining moment in AB's evolution, not simply additive to our existing asset base, but potentially transformative in its impact on scale, earnings, durability and long-term strategic positioning. With a proven operating model, a powerful strategic partner and a focused growth strategy, we're well positioned to achieve our $90 billion to $100 billion private markets AUM target by 2027 and extend our growth trajectory beyond that milestone. With that, I will pass it on to Tom to discuss our financial results.

Thomas Simeone: Thank you, Seth. Good morning, everyone, and thank you for joining our call. Adjusted earnings for the first quarter of 2026 were $0.83 per unit, representing a 4% increase year-over-year. Distributions grew uniformly with EPU as we distribute 100% of our adjusted earnings to unitholders. On Slide 11, we present our adjusted results, which exclude certain items not considered part of our core operating business. For a detailed reconciliation of GAAP and adjusted financials, please refer to our presentation appendix or our 10-Q. In the first quarter, net revenues reached $871 million, representing a 4% increase year-over-year. Base fees grew 5% year-over-year, reflecting 8% higher average AUM, partially offset by a lower firm-wide fee rate due to the mix shift.

Performance fees totaled approximately $23 million, down $16 million year-over-year, reflecting lower realizations from private market strategies. Our full year private markets performance fee outlook remains unchanged at $70 million to $80 million. Importantly, we are increasing our full year combined performance fee outlook to $95 million to $115 million, reflecting stronger-than-expected contributions from public market strategies. I will cover this in more detail shortly. Dividend and interest revenue, along with broker-dealer-related interest expense declined year-over-year, reflecting lower cash and margin balances within private wealth. Investment losses totaled $5 million, largely attributable to hedging costs associated with seed-like investments.

Other revenues totaled $20 million, up $6 million versus prior year's quarter, driven primarily by higher shareholder servicing fees and mutual fund reimbursements. Turning to expenses. First quarter total operating expenses were $580 million, up 4% year-over-year, driven by a 4% increase in compensation expense and a 5% increase in noncompensation expenses. Total compensation and benefits rose 4% year-over-year with a compensation ratio of 48.5% of adjusted net revenues, consistent with last year's accrual rate. We expect to continue accruing at 40.5% compensation to net revenue ratio in the second quarter while remaining mindful of market volatility and potential adjustments in the second half of the year as conditions evolve.

Promotion and servicing expenses increased by $1 million, while G&A expenses increased by $6 million or 5% year-over-year, reflecting normalization from relatively depressed levels in the first quarter of last year. For full year 2026, we continue to expect non-compensation expenses to range between $625 million and $650 million. This outlook reflects normalization in promotion and G&A expenses, along with discretionary investments in technology and the operational build-out for new strategies. Promotion and servicing expenses are expected to represent 20% to 30% of non-compensation expense, while G&A comprising the remaining 70% to 80%. We are making steady progress integrating the new commercial mortgage loans platform.

Importantly, Equitable has increased its long-duration general account mandate to $12 billion from $10 billion with onboarding in the second half of the year and the assets producing a high single-digit fee rate. Interest expense on borrowings was flat compared with the prior year. ABLP's effective tax rate was 5.6% in the first quarter of 2026, which reflects a favorable mix of earnings. We continue to forecast ABLP's effective tax rate in 2026 to be between 6% and 7%. Our operating income of $291 million is up 3% versus the prior year, slightly below the growth in revenues and operating expenses.

Our adjusted operating margin was 33.4% in the first quarter, down 30 basis points year-over-year due to investments in the business. These investments include technology initiatives, the onboarding of new investment teams and increasing financial adviser headcount. Importantly, margins remain at the high end of our Investor Day target range of 30% to 35%, which we had expected to achieve by 2027. As markets normalize, we expect improved operating leverage to support stronger flow-through from existing services, reinforcing our ability to balance reinvestment with profitability. In the first quarter, our firm-wide fee rate was 38.1 basis points, reflecting a negative mix shift in AUM.

As we've noted previously, the fee rate remains highly mix dependent and several factors weighed on the rate relative to the prior year. In retail active equities, average AUM declined to 18.7% of firm-wide AUM from 20% a year ago as market appreciation was largely offset by outflows. In fixed income, elevated rates and FX volatility pressured taxable fixed income AUM with outflows concentrated in higher fee strategies such as American Income and Global High Yield, while inflows were primarily driven by lower fee municipal SMAs. Finally, turning to Slide 12 and our outlook.

We now expect total performance fees for fiscal year 2026 of $95 million to $115 million, up from our prior range of $80 million to $100 million with additional potential upside dependent on market conditions. This reflects an increase in our public markets performance fee outlook to $25 million to $35 million, driven by first quarter realizations from our alpha-generating international small-cap strategy. Our private markets performance fee outlook remains unchanged at $70 million to $80 million despite a light first quarter driven by prudent proactive markdowns concentrated in software and tech services exposures. Note that these markdowns were not driven by credit events. And even if realized, they would be within our assumed annual loss framework.

As a long-term buy-and-hold investor, ABPCI fully expects to realize value recovery across all creditworthy borrowers over time. It is important to note that the rate outlook and wider spread environment is supportive of forward-looking returns. All other guided items remain unchanged from last quarter. Looking ahead, we are encouraged by our institutional outlook, supported by a record pipeline of $27.5 billion, including public market mandates expected to fund next quarter and private markets mandates expected to fund by year-end, most notably the increased $12 billion commercial mortgage loan mandate from Equitable. We expect continued inflows across secular growth areas, including private wealth, SMAs, ETFs and private alternatives.

Taken together, we have meaningfully strengthened our business mix and positioned the firm for the future by leaning into areas of structural growth while addressing areas of pressure with discipline. We look ahead with optimism, confident in what we believe to be a position of strength. With that, operator, please open the line for questions.

Operator: [Operator Instructions] We'll take our first question from Craig Siegenthaler at Bank of America.

Craig Siegenthaler: My question is on the Equitable Corebridge merger and your expectation to manage $100 billion of incremental AUM over time. So in terms of general account assets for the NewCo, what percent of total GA assets do you assume you're going to manage? And is the current GA level at Equitable in the $70 billion range now, plus I think there's $17 billion on the side of private market initiatives still. I just want to kind of refresher on all the numbers.

Onur Erzan: Craig, Onur, let me take that question. Obviously, the Corebridge Equitable merger is a very exciting development for us. As it was announced at the March 26 call, we expect at least $100 billion over time from both GA and separate account assets. Obviously, it's very early days since that announcement, and that deal is most likely going to take another 9 months or so to close roughly by year-end or fourth quarter. And hence, it will take us time to really do the bottom-up buildup of that $100 billion between GA and separate accounts.

And in terms of funding of the assets, given the deal will likely close end of '26, it's going to be more '27 and beyond in terms of the new AUM coming to AB. So on one hand, we are super excited. On the other hand, we recognize it's going to take a few quarters to materialize those opportunities given the deal time line. In terms of the GA buildup, we're not dependent on only Equitable or Corebridge. As you have seen in our slides, our GA assets from third-party clients grew by 28%. If you look at our pipeline, we had significant momentum in the pipeline.

So for instance, we added a $3.5 billion CLO opportunity to our pipeline as an example. And we have a lot of other pipeline opportunities, which makes up 8% of our pipeline fees coming primarily from insurance clients. So overall, we are very excited about the trajectory in GA, both for proprietary as well as third-party clients.

Craig Siegenthaler: Just as a follow-up, as you look at that $100 billion, what is the expected mix of public corporate or government debt that has CUSIPs versus private assets that are originated by your proprietary private markets businesses?

Onur Erzan: Again, we don't have an exact bottom-up buildup yet that is in works. Our estimate is, given this includes the separate account business, which tends to be more publics. And given some of the assets from the GA will be coming from the fixed income book, I think it's going to skew heavily towards the publics versus private in terms of day 1 opportunity, if you will. But over time, if you think about this balance sheet, it's going to be one of the largest U.S. retirement companies and it will originate annuities across RILAs, fixed annuities, variable annuities, et cetera. That means your general account assets will grow materially.

And a portion of that new flow, if you will, will make its way to private, and we're going to be a strong beneficiary of that growth. So you shouldn't only look at it in terms of what is mappable on day 1. You should look at it as what is the expectation on a go-forward basis given the new Equitable will be double the size of the origination and the assets at the minimum.

Craig Siegenthaler: And congrats on the $100 billion of future wins.

Onur Erzan: Thank you.

Operator: We'll move next to Alex Blostein at Goldman Sachs.

Alexander Blostein: I was hoping you guys could expand on what you're seeing in the institutional private credit market. Obviously, lots of volatility on the retail side. You guys don't have a ton of exposure there. But as you think about both opportunities and risks that are in the market today, how are you approaching that channel?

Onur Erzan: Thanks, Alex. Let me take that question as well. We continue to see strong momentum in our institutional business for private credits. To underline your comment, yes, you're right. We don't have a significant exposure on the retail side, but we're also very pleased with what we have seen on the retail and private wealth side of private credits. If you look at our BDC, our redemption rate has been less than 2%. So that's much lower than what we have seen from our competitors. That speaks to the strength of our integrated asset and wealth management franchise. Proximity to the client helps us maintain lower redemption rates in these retail vehicles, partly in our private wealth channel.

If you look at our private alts cap raise in private wealth, actually, it grew from [ '25 ]. Our first quarter fund raise in the '26 versus '25 for private wealth was more than 30% higher. So definitely, we also continue to see momentum across private equity and private credit in our private wealth business, which admittedly skews more high net worth and ultra-high net worth. And on the institutional side, to get to your core question, as I mentioned, we continue to add significant mandates to our pipeline.

As Seth also mentioned in his opening remarks, we are seeing more accelerated and expanded benefits from some of the strategic partnerships we announced around the third-party insurance, and that remains the largest driver of our new pipeline. It's broad-based. It includes both asset-backed ABF-type of mandate as well as fund financing like NAV finance and real estate debt. And furthermore, we had several new mandates outside the insurance in core institution as well. So net-net, broad-based momentum skews heavier towards insurance, but seeing strength in noninsurance institutional as well. The implication is we're going to be comfortably hitting and exceeding our private markets AUM goal of $90 billion to $100 billion.

Alexander Blostein: Great. And a follow-up for me. I was hoping to touch on the fee rate dynamics, both in the quarter, but really more importantly, looking further out. A couple of dynamics at play. Obviously, you mentioned that the active equity performance has been challenged, and we've seen that show up in retail flows, which are obviously higher fee rate, a bit mixed on the retail fixed income for now as well, but some wins on the institutional side of things, you mentioned private credit. So when you put it together, how does the evolution of the fee rate likely to look over the next couple of quarters?

Thomas Simeone: Alex, it's Tom. We generally don't provide fee rate guidance, but we do prioritize sustainable organic growth and long-term profitability over focusing solely on the fee rate. Looking forward, we expect the fee rate trajectory to continue to reflect the mix of organic growth and market movements, which have been supportive in early 2Q.

Operator: Next, we'll move to Bill Katz at TD Cowen.

William Katz: Just coming back to the expense outlook for a moment. It was in fact how do you interpret the slide with the initial take this morning. So you're keeping your expense non-op growth relatively stable. If I look at the first quarter, I think you're run rating well below the low end of the guide. How do we think about maybe the pacing to the spend as the year unfolds? And what kind of flexibility do you have if the markets remain volatile?

Thomas Simeone: There's some seasonality in there. This happens from time to time. I would continue to stick with our guide at $625 million to $650 million. And then maybe just divide it up less what we have in there for 1Q so far. And as far as some flex, you may recall last year, we did have a lot of flex. We actually flexed down quite a bit because our business decelerated due to all the market volatility. So we do have flexibility that we can pull on this year if needed, but we did want to let the advisers get in front of some clients and attend some firm meetings that were withheld last year.

William Katz: Okay. That's helpful. This is a follow-up. Maybe stepping back, talk about wealth management, very durable asset for you guys. A lot of cross currents in the industry at large. I wonder if you could talk a little bit about maybe -- and I appreciate you're also at the upper end of the market, so maybe not quite as intense as some of the key players that I think you're comped up against. That being said, I wonder if you could talk a little bit about maybe the competition for financial advisers, what the market dynamic has been in terms of industry churn? And then sort of curious, there's a lot of sort of anxiety around Agentic AI.

I was wondering if you could maybe click down a layer and sort of talk about where you're leveraging that and where some of the risks might be prospectively?

Onur Erzan: Thanks. Let me break that into 2 questions. One, talent market dynamics, how are you feeling about that? And second, come back to Agentic AI and impact on the business. On the talent side, we feel pretty good. We are well immune from the high churn that some of our competitors are facing. Ultimately, our retention rate for our senior advisers, which drive a majority of our flows and the ones that helped us achieve the record productivity this quarter have remained loyal. Again, our attrition rate remains very low depending on the year. It tends to be low single digits.

And if you look at our recruiting, as you have seen, we added -- we added roughly 14 advisers, and that means our adviser headcount is up roughly by 5% in the first quarter. So we remain on track in terms of our ability to add talent. So feeling good about that. I mean, ultimately, we are not complacent. We'll continue to pay competitively for talent. And we'll continue to make our platform a preferred platform for existing and new talent based on our investment expertise, the tools that we provide like tax management as well as investments in technology.

In terms of the segue to Agentic AI, given we are more on the high net worth plus side of things, we tend to deal with more complex client situations. Our highest growth part of our business, our ultra-high net worth business grows at 4x as fast as the rest of the business. So that creates, in my opinion, some moats in terms of the technology disruption because we deal with a lot of complex tax issues. We deal with a lot of complex global family issues. Some of the value add is also in value-added services, not the standard asset allocation and/or basic tax mitigation strategies. So that is the bigger picture.

In terms of how we are taking advantage of AI, it's in several different areas. We are definitely using it much more for client meeting preparation, like using our CRM system to be better prepared for client engagements and hopefully using that to drive more growth from those conversations, driving share of wallet. We are definitely using it to create efficiencies in the way we manage our business, particularly the client servicing side. Actually, if you look at our client service associates onshore, that has been relatively flat, although we have been adding advisers, new clients as well as growing organically. So some of that servicing efficiencies are driven by the usage of technology and client servicing.

One example would be how we deal with RFPs. We use technology and AI heavily in that. And then finally, in more client acquisition, we are using much more advanced lead generation technologies, and we are getting into much more AI-driven marketing to drive new growth. So all in all, it cuts across servicing and efficiencies, effectiveness in client conversations as well as new client acquisition. That said, I cannot put a number on it yet. Probably, I'm in the same ZIP code with my colleagues in wealth management. I mean, again, there are a lot of good things happening, but still the early innings of AI.

Although we see the benefits, it has not translated into very concrete financial impact yet, but that's yet to come.

Operator: We'll move next to John Dunn at Evercore ISI.

John Dunn: Maybe just staying on private wealth for a second. I know there's seasonality in the second quarter and then you mentioned private wealth demand. But could you remind us about maybe seasonality for the rest of the year, maybe shifting product demand and then the temperature of like the channel's appetite to put money to work?

Onur Erzan: Yes, sure. Yes, seasonality, John, definitely is something to be mindful of. Obviously, April is a tax month. So we tend to have a soft April in general in terms of flows because a lot of our clients pay taxes. And it happens every year. In terms of the client demand, even though obviously, there are heightened risks in terms of macro, the war in the Middle East, oil prices, this and that, our high net worth and ultra-high net worth clients remain very engaged. Actually, it has been relatively robust in terms of risk taking. We have not seen them go to the sidelines. As a result, we remain excited about the fundraising and growth.

Again, as you have seen in Q1, we had very high sales relative to the previous 8 quarters. So we've definitely seen a momentum in sales, and we are not seeing a major slowdown yet. The 2 words of caution would be: number one, obviously, if the Middle East situation gets worse, if the conflict gets longer, et cetera, et cetera, I mean those all have impact on consumer sentiment and high net worth and ultra-high net worth clients will not be immune to that. So that can -- that's definitely a risk that we are monitoring.

And then secondly, given some of the volatility and some of the software headlines, et cetera, some of the M&A activity has slowed down. When M&A slows down, it also slows down exits for entrepreneurs and the liquidity events of business sales, IPOs, et cetera. And that has an impact on our business. So if that slowdown again, extends because of the macro environment, that might slow our business down. But we're not going to be alone in that. We're not going to be an outlier. It's a little bit of a market beta, if you will.

Seth Bernstein: John, I would just add that the resilience in the private client group is echoed I think, more broadly in the business. And given the volatility we've seen, it's kind of amazing markets are where they are, and we continue to see people exploring committing money to longer-term opportunities. So look, there are a lot of potential drawdowns arising given the volatility in the macro market, but we're pretty pleased with progress to date.

John Dunn: Got it. And then maybe could you just walk through some of the factors like outside of investment performance that could get high-yield fixed income funds distributed in Asia back to being less of a headwind?

Seth Bernstein: Yes. We are -- reopening our Global High Yield strategy in Taiwan. We've gotten regulatory approval, which is what stopped us. And so we're optimistic that we'll see incremental flows from there. We continue to see appetite for fixed income, but it's been more competitive and the alternative opportunities, particularly locally have been stronger. However, the dollar remains fairly strong. I'm hopeful we'll see some recovery along with performance. I don't know, Onur, if you have anything more to add.

Onur Erzan: Yes. I think those are the main points. I mean the only other minor I would add to that is our ETF platform continues to build momentum as well. If you look at the monthly run rate, domestically, we are basically getting close to $0.5 billion net flows per month. So definitely a very healthy growth rate for our ETFs, which are across asset classes, including fixed income. And then we are expanding that momentum into international. We launched 2 ETFs, fixed income ETFs in Taiwan. We launched several UCITS ETFs in Europe this week in fixed income. So as a result, you will see us tapping into new markets outside our traditional intermediary channel using the ETFs.

So it's going to take, again, a few quarters to build momentum in those new products, but we are seeding the ground for future growth in new products as well.

Operator: Next we'll go to Dan Fannon at Jefferies.

Daniel Fannon: So one more just on the private wealth side and tracking above the 5% adviser growth target. And so I was curious if you could just give a little bit of a framework or profile of the adviser that's joining your platform? I know you generally aren't paying the same levels of transition assistance or other things, but curious about the profile? And then how you anticipate those to ramp as they integrate into your platform over time?

Onur Erzan: Sure. Great question. Yes, you're absolutely right. We typically have a bias towards more new to industry internal promotes as well as mid-career switches from other careers as our historical recruiting model. We have not done major recruiting in book takeovers, if you will. And as a result, our cost of talent acquisition seems to be much lower than what we see from some of the competitors. That being said, as we look at the talent mix, we are open to adding some experienced advisers, some of which might have books.

So as we think about the rest of the year and the broader pie, I mean, I would say probably 75% would fit into the more traditional profile and then roughly 1/4 would be more on the experience side, some of which might have existing transferable assets. So that's how I think about the adviser mix.

And in terms of the year-end adviser kind of numbers that we are targeting, probably given we have been intentionally fast in terms of adding new advisers early in the year, it's going to be slower in the rest of the year by our recruiting plan, but we probably would end a couple of percentage points higher than what we exited this quarter on a net basis. So that would be a rough number that we are targeting. Again, we are -- these are, I would say, directional targets. Ultimately, we flex up and down based on the talent we are seeing.

Finally, in terms of how much time does it take for a new adviser to ramp up, et cetera. We have specific initiatives to get the advisers to full productivity over a shorter period of time. We have dedicated teams that are focused on it. But typically, it takes 4 years or so for an adviser to be breakeven if it's a completely new-to-industry kind of adviser. And then you see that adviser to peak probably within 5 to 10 years. So that's sort of a typical profile for new-to-industry kind of fresh talent, if you will.

Daniel Fannon: Great. And then just a follow-up on the pipeline. obviously, record levels, and I think you gave some context around the funding of that. But could you talk more broadly about momentum as you think about the institutional channel and kind of sales activity and kind of product mix in context of that outside of what is actually in the pipeline today?

Onur Erzan: Yes, sure. And if you think about our average deployment for the pipeline, we are currently running at 9 months. So the good news is the record pipeline will be deployed relatively quickly. So that's good news because that pipeline runs through fee-generating sales based on that. In terms of new opportunities, we touched on Corebridge Equitable, the $100 billion. So that definitely is quite a sizable opportunity ahead of us in '27 and beyond. In terms of other areas, a couple of things I would highlight. One, again, the broadening of the third-party insurance franchise. So we really have good momentum there.

We continue to add new relationships, and I expect more there, both on the general account side with private credit and fixed income, but also on the separate account side with equities and multi-assets. And then in terms of the other broader institutional markets, we are definitely seeing some momentum in Asia Pacific. Some of our more quantitatively oriented strategies have found good demand there and definitely expecting more opportunities materializing across our systematic platform globally, but also specifically in Asia, given they are pretty big buyers of systematic strategies, particularly equities.

Operator: And next, we'll move to Benjamin Budish at Barclays.

Mason Fleming: This is Mason on for Ben. I just wanted to ask more about your ETF business. Can you talk more about the current distribution footprint outside of your wealth platform? And if possible, can you share any color about the current economic arrangements with distributors? And how they may be changing at all?

Onur Erzan: Yes, for sure. In terms of our ETF franchise, you're absolutely right. It cut across our proprietary wealth channel as well as our third-party distribution. The third-party side has been growing at a faster rate, but from a smaller base. As you would expect, as we launched the ETF business starting back in 2022, we first leaned into our private wealth channel and then use that original foundation to scale into third party domestically and then overseas. On the third-party side of things, we are definitely seeing momentum. We onboarded our ETFs to multiple new platforms, wirehouses, regional broker-dealers, independents, et cetera.

In terms of the total sales mix, we tend to have a very small, immaterial almost distribution through the direct platform. So think about the Fidelity, the Schwabs of the world, the direct-to-consumer part of those businesses. So as a result, our dependence on those funds, supermarkets, et cetera, is much lower than some of the other ETF providers that has large ETF franchises, particularly in passive. So I would say our third-party distribution cost is not materially impacted by what's happening with some of those platforms.

Operator: And we'll take a follow-up question from Bill Katz at TD Cowen.

William Katz: Just coming back to performance fees, thank you for the updated guidance. Can we unpack the incremental pickup in the public side? How much of that is just due to maybe market positioning versus anything going on the hedge fund side and anything related to maybe the shuttering of a relatively sizable hedge fund you announced? And then on the operating expense side, just coming back to that for a moment, it looks like it's up about 6% on the midpoint year-on-year. As we look out into 2027, would you anticipate any kind of deceleration of the core expense growth? Or would that likely stay the same just given the myriad of different growth vectors out there?

Thomas Simeone: I mean, generally, it would stay the same, speaking from the operating expense side first. We generally haven't offered any next year's information this early on. But it would generally be flat. There's nothing on the horizon that I'm aware of to offer any additional color on the expenses. As far as the performance fees, no, the changes in performance fees [ aren't ] impacted by the closure of Arya that we announced recently. And then what's driving the publics is our international SMID product in 1Q versus last year.

Operator: And there are no further questions at this time. Mr. Jorgali, I'll turn the call back over to you.

Ioanis Jorgali: Thank you very much, Audra, and thank you, everyone, for joining our call. I hope you have a great day, and please reach out if you have any questions.

Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.