UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~2021



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from �� to

Commission File No. 000-29961

ALLIANCEBERNSTEIN L.P.

(Exact name of registrant as specified in its charter)



Delaware						13-4064930
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1345 Avenue of the Americas,, New York,, NY10105

(Address of principal executive offices)

(Zip Code)

(~~212~~) (212) 969-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes

☐

☒

Index

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

None

The number of units of limited partnership interest outstanding as of March 31, ~~2020~~2021 was ~~269,981,431.~~272,675,165.

Index

~~Index~~

ALLIANCEBERNSTEIN L.P.

Index to Form 10-Q



		Page

	Part I

	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Statements of Financial Condition	1

	Condensed Consolidated Statements of Income	3

	Condensed Consolidated Statements of Comprehensive Income	4

	Condensed Consolidated Statements of Changes in Partners' Capital	5

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3128

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5250

Item 4.	Controls and Procedures	5250

	Part II

	OTHER INFORMATION

Item 1.	Legal Proceedings	5351

Item 1A.	Risk Factors	5351

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5351

Item 3.	Defaults Upon Senior Securities	5351

Item 4.	Mine Safety Disclosures	5351

Item 5.	Other Information	5351

Item 6.	Exhibits	5452

SIGNATURE		5553

Index

~~Index~~

Part I

FINANCIAL INFORMATION

Item 1. Financial Statements

ALLIANCEBERNSTEIN L.P.

AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition

(in thousands, except unit amounts)

(unaudited)


	March 31, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	960,452	$	1,037,400
Cash and securities segregated, at fair value (cost: $1,412,296 and $1,752,483)	1,412,873		1,753,478
Receivables, net:
Brokers and dealers	197,444		92,638
Brokerage clients	1,814,044		1,713,377
AB funds fees	260,598		325,407
Other fees	143,819		148,746
Investments:
Long-term incentive compensation-related	58,730		60,114
Other	140,928		193,261
Assets of consolidated company-sponsored investment funds:
Cash and cash equivalents	38,561		36,506
Investments	308,043		302,582
Other assets	20,474		12,244
Furniture, equipment and leasehold improvements, net	153,326		147,874
Goodwill	3,095,093		3,082,778
Intangible assets, net	42,843		44,496
Deferred sales commissions, net	67,119		64,066
Right-of-use assets	412,839		418,455
Other assets	327,680		264,418
Total assets	$	9,454,866	$	9,697,840

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND CAPITAL
Liabilities:
Payables:
Brokers and dealers	$	278,936	$	216,403
Securities sold not yet purchased	8,307		17,791
Brokerage clients	3,176,132		3,440,266
AB mutual funds	86,002		65,550
Accounts payable and accrued expenses	202,366		197,657
Lease liabilities	495,356		505,549
Liabilities of consolidated company-sponsored investment funds	42,531		30,620
Accrued compensation and benefits	402,507		335,122

Debt	625,000		675,000

Total liabilities	5,317,137		5,483,958

Index

March 31,
2020 December 31,
2019
ASSETS
Cash and cash equivalents $ 975,263
$ 679,738
Cash and securities segregated, at fair value (cost: $2,005,514 and $1,090,443) 2,012,562
1,094,866
Receivables, net:

Brokers and dealers 358,028
97,966
Brokerage clients 1,814,889
1,536,674
AB funds fees 214,672
261,588
Other fees 122,300
148,744
Investments:

Long-term incentive compensation-related 37,316
50,902
Other 225,192
215,892
Assets of consolidated company-sponsored investment funds:
   Cash and cash equivalents 87,277
11,433
   Investments 443,472
581,004
   Other assets 39,538
19,810
Furniture, equipment and leasehold improvements, net 138,286
145,251
Goodwill 3,088,038
3,076,926
Intangible assets, net 49,004
55,366
Deferred sales commissions, net 49,280
36,296
Right-of-use assets 341,660
362,693
Other assets 446,460
330,943
Total assets $ 10,443,237
$ 8,706,092

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND CAPITAL
Liabilities:

Payables:

Brokers and dealers $ 382,632
$ 201,778
Securities sold not yet purchased 27,629
30,157
Brokerage clients 3,653,789
2,531,946
AB mutual funds 118,618
71,142
Accounts payable and accrued expenses 281,094
192,110
Lease liabilities 442,590
468,451
Liabilities of consolidated company-sponsored investment funds 104,875
31,017
Accrued compensation and benefits 346,445
276,829
Debt:

EQH Facility 830,000
560,000
Other 104,814
—
Total liabilities 6,292,486
4,363,430


	March 31, 2021		December 31, 2020
Commitments and contingencies (See Note 12)	0		0

Redeemable non-controlling interest	88,567		102,359

Capital:
General Partner	42,022		41,776
Limited partners: 272,675,165 and 270,509,658 units issued and outstanding	4,253,904		4,229,485
Receivables from affiliates	(1,725)		(8,316)
AB Holding Units held for long-term incentive compensation plans	(143,807)		(57,219)
Accumulated other comprehensive loss	(101,232)		(94,203)
Partners’ capital attributable to AB Unitholders	4,049,162		4,111,523


Total liabilities, redeemable non-controlling interest and capital	$	9,454,866	$	9,697,840

~~Index~~

March 31,
2020 December 31,
2019

Commitments and contingencies (See Note 12)

Redeemable non-controlling interest 224,900
325,561
Capital:

General Partner 40,571
41,225
Limited partners: 269,981,431 and 270,380,314 units issued and outstanding 4,109,946
4,174,201
Receivables from affiliates (9,279 ) (9,011 )
AB Holding Units held for long-term incentive compensation plans (81,314 ) (76,310 )
Accumulated other comprehensive loss (134,073 ) (113,004 )
Partners’ capital attributable to AB Unitholders 3,925,851
4,017,101
Total liabilities, redeemable non-controlling interest and capital $ 10,443,237
$ 8,706,092

See Accompanying Notes to Condensed Consolidated Financial Statements.

~~Index~~2

Index

ALLIANCEBERNSTEIN L.P.

AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(in thousands, except per unit amounts)

(unaudited)


	Three Months Ended March 31,
		2021		2020
Revenues:
Investment advisory and services fees		$	703,466	$	621,725
Bernstein research services		119,021		129,223
Distribution revenues		147,600		130,857
Dividend and interest income		8,684		20,465
Investment gains (losses)		1,928		(44,306)
Other revenues		27,711		25,511
Total revenues		1,008,410		883,475
Less: Interest expense		1,144		9,319
Net revenues		1,007,266		874,156

Expenses:
Employee compensation and benefits		406,059		362,272
Promotion and servicing:
Distribution-related payments		162,254		140,145
Amortization of deferred sales commissions		7,899		5,526
Trade execution, marketing, T&E and other		46,678		55,610

General and administrative		120,223		122,267

Contingent payment arrangements		796		793
Interest on borrowings		1,294		2,834
Amortization of intangible assets		1,479		6,486
Total expenses		746,682		695,933

Operating income		260,584		178,223

Income taxes		16,745		9,474

Net income		243,839		168,749

Net (loss) of consolidated entities attributable to non-controlling interests		(292)		(25,571)

Net income attributable to AB Unitholders		$	244,131	$	194,320

Net income per AB Unit:
Basic		$	0.89	$	0.71
Diluted		$	0.89	$	0.71

Three Months Ended March 31,
2020 2019
Revenues:
Investment advisory and services fees $ 621,725
$ 556,594
Bernstein research services 129,223
90,235
Distribution revenues 130,857
100,509
Dividend and interest income 20,465
27,346
Investment (losses) gains (44,306 ) 15,735
Other revenues 25,511
22,206
Total revenues 883,475
812,625
Less: Interest expense 9,319
17,163
Net revenues 874,156
795,462

Expenses:

Employee compensation and benefits 362,272
339,309
Promotion and servicing:

Distribution-related payments 140,145
105,993
Amortization of deferred sales commissions 5,526
3,502
Trade execution, marketing, T&E and other 55,610
49,648
General and administrative 122,267
117,848
Contingent payment arrangements 793
54
Interest on borrowings 2,834
3,983
Amortization of intangible assets 6,486
6,974
Total expenses 695,933
627,311

Operating income 178,223
168,151

Income taxes 9,474
8,921

Net income 168,749
159,230

Net (loss) income of consolidated entities attributable to non-controlling interests (25,571 ) 10,116

Net income attributable to AB Unitholders $ 194,320
$ 149,114

Net income per AB Unit:

Basic $ 0.71
$ 0.55
Diluted $ 0.71
$ 0.55

See Accompanying Notes to Condensed Consolidated Financial Statements.

~~Index~~3

Index

ALLIANCEBERNSTEIN L.P.

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)


								Three Months Ended March 31,
									2021		2020

Net income							Net income		$	243,839	$	168,749
Other comprehensive (loss):							Other comprehensive (loss):

Foreign currency translation adjustments, before tax							Foreign currency translation adjustments, before tax		(7,138)		(21,396)
Income tax benefit							Income tax benefit		22		73
Foreign currency translation adjustments, net of tax							Foreign currency translation adjustments, net of tax		(7,116)		(21,323)

	Three Months Ended March 31,
	2020			2019

Net income	$	168,749		$	159,230
Other comprehensive income (loss):
Foreign currency translation adjustments, before tax	(21,396		)	2,630
Income tax benefit (expense)	73			(77		)
Foreign currency translation adjustments, net of tax	(21,323		)	2,553

Changes in employee benefit related items:							Changes in employee benefit related items:
Amortization of prior service cost	6			6			Amortization of prior service cost		6		6
Recognized actuarial gain	325			267			Recognized actuarial gain		81		325
Changes in employee benefit related items	331			273			Changes in employee benefit related items		87		331
Income tax (expense) benefit	(77		)	10
Income tax (expense)							Income tax (expense)		0		(77)
Employee benefit related items, net of tax	254			283			Employee benefit related items, net of tax		87		254
Other comprehensive (loss) income	(21,069		)	2,836
Less: Comprehensive (loss) income in consolidated entities attributable to non-controlling interests	(25,571		)	10,096

Other comprehensive (loss)							Other comprehensive (loss)		(7,029)		(21,069)
Less: Comprehensive (loss) in consolidated entities attributable to non-controlling interests							Less: Comprehensive (loss) in consolidated entities attributable to non-controlling interests		(292)		(25,571)
Comprehensive income attributable to AB Unitholders	$	173,251		$	151,970		Comprehensive income attributable to AB Unitholders		$	237,102	$	173,251

See Accompanying Notes to Condensed Consolidated Financial Statements.

~~Index~~

Index

ALLIANCEBERNSTEIN L.P.

AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Partners' Capital

(in thousands)

(unaudited)


	Three Months Ended March 31,							Three Months Ended March 31,
	2020			2019					2021		2020
General Partner’s Capital							General Partner’s Capital
Balance, beginning of period	$	41,225		$	40,240		Balance, beginning of period		$	41,776	$	41,225
Net income	1,943			1,491			Net income		2,441		1,943
Cash distributions to General Partner	(2,542		)	(1,917		)	Cash distributions to General Partner		(2,898)		(2,542)
Long-term incentive compensation plans activity	2			173			Long-term incentive compensation plans activity		(7)		2
(Retirement) of AB Units, net	(57		)	(584		)
Issuance (retirement) of AB Units, net							Issuance (retirement) of AB Units, net		710		(57)

Balance, end of period	40,571			39,403			Balance, end of period		42,022		40,571
Limited Partners' Capital							Limited Partners' Capital
Balance, beginning of period	4,174,201			4,075,306			Balance, beginning of period		4,229,485		4,174,201
Net income	192,377			147,623			Net income		241,690		192,377
Cash distributions to Unitholders	(251,261		)	(189,568		)	Cash distributions to Unitholders		(286,813)		(251,261)
Long-term incentive compensation plans activity	335			16,985			Long-term incentive compensation plans activity		(708)		335
(Retirement) of AB Units, net	(5,706		)	(57,756		)
Issuance (retirement) of AB Units, net							Issuance (retirement) of AB Units, net		70,250		(5,706)

Balance, end of period	4,109,946			3,992,590			Balance, end of period		4,253,904		4,109,946
Receivables from Affiliates							Receivables from Affiliates
Balance, beginning of period	(9,011		)	(11,430		)	Balance, beginning of period		(8,316)		(9,011)

Long-term incentive compensation awards expense	184			465			Long-term incentive compensation awards expense		142		184
Capital contributions from AB Holding	(452		)	(701		)	Capital contributions from AB Holding		6,449		(452)
Balance, end of period	(9,279		)	(11,666		)	Balance, end of period		(1,725)		(9,279)
AB Holding Units held for Long-term Incentive Compensation Plans							AB Holding Units held for Long-term Incentive Compensation Plans
Balance, beginning of period	(76,310		)	(77,990		)	Balance, beginning of period		(57,219)		(76,310)
Purchases of AB Holding Units to fund long-term compensation plans, net	(17,750		)	(58,452		)	Purchases of AB Holding Units to fund long-term compensation plans, net		(35,854)		(17,750)
Retirement of AB Units, net	5,763			58,340
(Issuance) retirement of AB Units, net							(Issuance) retirement of AB Units, net		(71,013)		5,763
Long-term incentive compensation awards expense	7,407			18,604			Long-term incentive compensation awards expense		18,002		7,407
Re-valuation of AB Holding Units held in rabbi trust	(436		)	(10,005		)	Re-valuation of AB Holding Units held in rabbi trust		2,277		(436)
Other	12			—			Other		0		12
Balance, end of period	(81,314		)	(69,503		)	Balance, end of period		(143,807)		(81,314)
Accumulated Other Comprehensive Income (Loss)							Accumulated Other Comprehensive Income (Loss)
Balance, beginning of period	(113,004		)	(110,866		)	Balance, beginning of period		(94,203)		(113,004)

Foreign currency translation adjustment, net of tax	(21,323		)	2,571			Foreign currency translation adjustment, net of tax		(7,116)		(21,323)
Changes in employee benefit related items, net of tax	254			283			Changes in employee benefit related items, net of tax		87		254

Balance, end of period	(134,073		)	(108,012		)	Balance, end of period		(101,232)		(134,073)
Total Partners' Capital attributable to AB Unitholders	3,925,851			3,842,812			Total Partners' Capital attributable to AB Unitholders		4,049,162		3,925,851
Non-redeemable Non-controlling Interests in Consolidated Entities
Balance, beginning of period	—			949
Net income	—			16
Foreign currency translation adjustment	—			(20		)
Balance, end of period	—			945
Total Capital	$	3,925,851		$	3,843,757

See Accompanying Notes to Condensed Consolidated Financial Statements.

ALLIANCEBERNSTEIN L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows


	Three Months Ended March 31,
	2021		2020

Cash flows from operating activities:
Net income	$	243,839	$	168,749

Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred sales commissions	7,899		5,526
Non-cash long-term incentive compensation expense	18,144		7,591
Depreciation and other amortization	32,009		36,156
Unrealized (gains) losses on investments	(175)		20,585
Unrealized losses on investments of consolidated company-sponsored investment funds	6,941		52,115
Other, net	10,181		(1,324)
Changes in assets and liabilities:
Decrease (increase) in securities, segregated	340,605		(917,696)
(Increase) in receivables	(117,622)		(615,055)
Decrease (increase) in investments	53,493		(17,557)
(Increase) decrease in investments of consolidated company-sponsored investment funds	(12,401)		85,418
(Increase) in deferred sales commissions	(10,952)		(18,510)
(Increase) decrease in right-of-use assets	(15,979)		134
(Increase) in other assets	(68,957)		(118,038)
Increase in other assets and liabilities of consolidated company-sponsored investment funds, net	3,681		54,129
(Decrease) increase in payables	(218,887)		1,492,200
(Decrease) in lease liabilities	(9,163)		(23,968)
(Decrease) increase in accounts payable and accrued expenses	(1,566)		4,663
Increase in accrued compensation and benefits	66,909		70,792
Net cash provided by operating activities	327,999		285,910

Cash flows from investing activities:


Purchases of furniture, equipment and leasehold improvements	(15,584)		(3,321)

Acquisition of business, net of cash acquired	(3,795)		(11,473)
Net cash used in investing activities	(19,379)		(14,794)

Three Months Ended March 31,
2020 2019

Cash flows from operating activities:
Net income $ 168,749
$ 159,230

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of deferred sales commissions 5,526
3,502
Non-cash long-term incentive compensation expense 7,591
19,070
Depreciation and other amortization 36,156
41,892
Unrealized losses (gains) on investments 20,585
(10,543 )
Unrealized losses (gains) on investments of consolidated company-sponsored investment funds 52,115
(21,930 )
Other, net (1,324 ) 6,246
Changes in assets and liabilities:

(Increase) in securities, segregated (917,696 ) (92,624 )
(Increase) decrease in receivables (615,055 ) 97,411
(Increase) decrease in investments (17,557 ) 449,556
Decrease (increase) in investments of consolidated company-sponsored investment funds 85,418
(11,683 )
(Increase) in deferred sales commissions (18,510 ) (3,175 )
Decrease (increase) in right-of-use assets 134
(1,000 )
(Increase) decrease in other assets (118,038 ) 38,685
Increase in other assets and liabilities of consolidated company-sponsored investment funds, net 54,129
3,688
Increase (decrease) in payables 1,492,200
(222,472 )
(Decrease) in lease liabilities (23,968 ) (34,914 )
Increase (decrease) in accounts payable and accrued expenses 5,456
(29,114 )
Increase in accrued compensation and benefits 70,792
40,644
Net cash provided by operating activities 286,703
432,469

Cash flows from investing activities:

Purchases of furniture, equipment and leasehold improvements (3,321 ) (5,567 )
Acquisition of business, net of cash acquired (11,473 ) —
Net cash used in investing activities (14,794 ) (5,567 )


	Three Months Ended March 31,
	2021		2020
Cash flows from financing activities:
(Repayment) borrowings of debt, net	(50,000)		374,814

(Decrease) increase in overdrafts payable	(1,190)		85,395
Distributions to General Partner and Unitholders	(289,711)		(253,803)
(Redemptions) of non-controlling interest in consolidated company-sponsored investment funds, net	(13,500)		(75,091)


Capital contributions from (to) affiliates	6,096		(699)

Interest accretion, net of (payments) on contingent payment arrangements	796		793
Additional investments by AB Holding with proceeds from exercise of compensatory options to buy AB Holding Units	1,914		147
Purchases of AB Holding Units to fund long-term incentive compensation plan awards, net	(35,854)		(17,750)


Other	(475)		(504)
Net cash (used in) provided by financing activities	(381,924)		113,302

Effect of exchange rate changes on cash and cash equivalents	(1,589)		(13,049)


Net (decrease) increase in cash and cash equivalents	(74,893)		371,369
Cash and cash equivalents as of beginning of the period	1,073,906		691,171
Cash and cash equivalents as of end of the period	$	999,013	$	1,062,540

Non-cash investing activities:
Fair value of assets acquired (less cash acquired of $2.8 million and $0.6 million, respectively)	$	12,962	$	11,908
Fair value of liabilities assumed	$	1,642	$	435

Non-cash financing activities:
Payables recorded under contingent payment arrangements	$	7,525	$	0

Three Months Ended March 31,
2020 2019
Cash flows from financing activities:

Issuance of commercial paper, net 104,814
15,459
Proceeds of EQH Facility 270,000
—
(Repayment) of bank loans —
(25,000 )
Increase (decrease) in overdrafts payable 85,395
(65,352 )
Distributions to General Partner and Unitholders (253,803 ) (191,485 )
(Redemptions) of non-controlling interest in consolidated company-sponsored investment funds, net (75,091 ) (36 )
Capital contributions (to) affiliates (699 ) (932 )
Additional investments by AB Holding with proceeds from exercise of compensatory options to buy AB Holding Units 147
7,382
Purchases of AB Holding Units to fund long-term incentive compensation plan awards, net (17,750 ) (58,452 )
Other (504 ) (228 )
Net cash provided by (used in) financing activities 112,509
(318,644 )
Effect of exchange rate changes on cash and cash equivalents (13,049 ) 640
Net increase (decrease) in cash and cash equivalents 371,369
108,898
Cash and cash equivalents as of beginning of the period 691,171
653,324
Cash and cash equivalents as of end of the period $ 1,062,540
$ 762,222

See Accompanying Notes to Condensed Consolidated Financial Statements.

ALLIANCEBERNSTEIN L.P.

Notes to Condensed Consolidated Financial Statements

March 31, ~~2020~~2021

The words “we” and “our” refer collectively to AllianceBernstein L.P. and its subsidiaries (“AB”), or to their officers and employees. Similarly, the word “company” refers to AB. These statements should be read in conjunction with AB’s audited consolidated financial statements included in AB’s Form 10-K for the year ended December 31, ~~2019.~~2020.

1. Business Description Organization and Basis of Presentation

Business Description

We provide ~~research,~~ diversified investment management, research and related services globally to a broad range of clients. Our principal services include:

• Institutional Services – servicing our institutional clients, including private and public pension plans, foundations and endowments, insurance companies, central banks and governments worldwide, and affiliates such as Equitable Holdings, Inc. ("EQH") and its ~~respective~~ subsidiaries, by means of separately-managed accounts, sub-advisory relationships, structured products, collective investment trusts, mutual funds, hedge funds and other investment vehicles.

• Retail Services – servicing our retail clients, primarily by means of retail mutual funds sponsored by AB or an affiliated company, sub-advisory relationships with mutual funds sponsored by third parties, separately-managed account programs sponsored by financial intermediaries worldwide and other investment vehicles.

• Private Wealth Management Services – servicing our private clients, including high-net-worth individuals and families, trusts and estates, charitable foundations, partnerships, private and family corporations, and other entities, by means of separately-managed accounts, hedge funds, mutual funds and other investment vehicles.

•Bernstein Research Services – servicing institutional investors, such as pension fund, hedge fund and mutual fund managers, seeking high-quality fundamental research, quantitative services and brokerage-related services in equities and listed options.

We also provide distribution, shareholder servicing, transfer agency services and administrative services to the mutual funds we sponsor.

Our high-quality, in-depth research is the foundation of our business. Our research disciplines include economic, fundamental equity, fixed income and quantitative research. In addition, we have ~~experts focused on~~expertise in multi-asset strategies, wealth management, environmental, social and corporate governance ("ESG"), and alternative investments.

We provide a broad range of investment services with expertise in:

•Actively-managed equity strategies, with global and regional portfolios across capitalization ranges, concentration ranges and investment strategies, including value, growth and core equities;

•Actively-managed traditional and unconstrained fixed income strategies, including taxable and tax-exempt strategies;

•~~Passive management, including index and enhanced index strategies;~~

•Multi-asset solutions and services, including dynamic asset allocation, customized target-date funds and target-risk ~~funds.~~funds; and

~~Our services span various investment disciplines,~~•Some passive management, including ~~market capitalization (e.g., large-, mid-~~index and ~~small-cap equities), term (~~enhanced index strategies.

~~, long-, intermediate- and short-duration debt securities), and geographic location (~~

~~, U.S., international, global, emerging markets, regional and local), in major markets around the world.~~

Index

Organization

During the second quarter of 2018, AXA S.A. ("AXA") completed the sale of a minority stake in EQH through an initial public offering ("IPO"). Since then, AXA has completed additional offerings and taken other steps, most recently during the fourth quarter of 2019. As a result, AXA owned less than 10% of the outstanding common stock of EQH as of March 31, 2020.

As of March 31, ~~2020,~~2021, EQH owned approximately ~~4.1%~~4.0% of the issued and outstanding units representing assignments of beneficial ownership of limited partnership interests in AllianceBernstein Holding L.P. (“AB Holding Units”). AllianceBernstein Corporation (an indirect wholly-owned subsidiary of EQH, “General Partner”) is the general partner of both AllianceBernstein Holding L.P. (“AB Holding”) and AB. AllianceBernstein Corporation owns 100,000 general partnership units in AB Holding and a 1% general partnership interest in AB.

As of March 31, ~~2020,~~2021, the ownership structure of AB, including limited partnership units outstanding as well as the general partner's 1% interest, was as follows:



EQH and its subsidiaries	~~63.4~~62.8	%
AB Holding	~~35.9~~36.5
Unaffiliated holders	0.7
	100.0	%

Including both the general partnership and limited partnership interests in AB Holding and AB, EQH and its subsidiaries had an approximate ~~64.9%~~64.3% economic interest in AB as of March 31, ~~2020.~~2021.

Basis of Presentation

The interim condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the interim results, have been made. The preparation of the condensed consolidated financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the interim reporting periods. Actual results could differ from those estimates. The condensed consolidated statement of financial condition as of December 31, ~~2019~~2020 was derived from audited financial statements. Certain disclosures included in the annual financial statements ~~but it does~~have been condensed or omitted from these financial statements as they are not ~~include all disclosures~~ required ~~by accounting~~for interim financial statements under principles generally accepted in the United States of America ~~(“GAAP”~~("GAAP"). and the rules of the Securities and Exchange Commission.

Principles of Consolidation

The condensed consolidated financial statements include AB and its majority-owned and/or controlled subsidiaries, and the consolidated entities that are considered to be variable interest entities (“VIEs”) and voting interest entities (“VOEs”) in which AB has a controlling financial interest. Non-controlling interests on the condensed consolidated statements of financial condition include the portion of consolidated company-sponsored investment funds in which we do not have direct equity ownership. All significant inter-company transactions and balances among the consolidated entities have been eliminated.

Reclassifications

During ~~2020,~~2021, prior period amounts ~~for the changes in right-of-use assets and lease liabilities~~ previously presented ~~with amounts related to the adoption~~as net issuance (repayment) of ~~ASC 842 in our Condensed Consolidated Statement~~commercial paper, proceeds (repayment) of ~~Cash Flows,~~EQH facility and proceeds (repayment) of bank loans are now combined and presented as net repayments (borrowings) of debt in the ~~adoption impact~~condensed consolidated statements of ~~ASU 842~~cash flows to conform to the current period's presentation.

~~Index~~

Index


2. Significant Accounting Policies	~~Significant Accounting Policies~~

Recently Adopted Accounting Pronouncements

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326)~~. This new guidance relates to the accounting for credit losses on financial instruments and introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. We adopted this standard prospectively on January 1, 2020. The adoption of this standard did not have a material impact on our financial condition or results of operations.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Simplifying the Test for Goodwill Impairment~~. The guidance removes Step 2 of the goodwill impairment test, which had required a hypothetical purchase price allocation. As a result of the revised guidance, a goodwill impairment will be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We adopted this standard prospectively on January 1, 2020. The adoption of this standard did not have a material impact on our financial condition or results of operations.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework-Changes to theDisclosure Requirements for Fair Value Measurement~~. The amendment modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. We adopted this standard prospectively on January 1, 2020. The adoption of this standard did not have a material impact on our financial condition or results of operations.

~~In August 2018, the FASB issued ASU 2018-15,~~ ~~Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.~~ The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements that currently exist in GAAP for capitalizing implementation costs incurred to develop or obtain internal-use software. Implementation costs would either be capitalized or expensed as incurred depending on the project stage. All costs in the preliminary and post-implementation project stages are expensed as incurred, while certain costs within the application development stage are capitalized. We adopted this standard prospectively on January 1, 2020. The adoption of this standard did not have a material impact on our financial condition or results of operations.

~~Accounting Pronouncements Not Yet Adopted in 2020~~

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20). The amendment modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. We adopted this standard prospectively on January 1, 2021. The ~~revised guidance is effective for financial statements issued for fiscal years beginning after December 15, 2020, with early~~ adoption ~~permitted. The revised guidance will~~of this standard did not have a material impact on our financial condition or results of operations.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify US GAAP for other areas of Topic 740 by clarifying and amending the existing guidance. We adopted this standard prospectively on January 1, 2021. The ~~revised guidance is effective for financial statements issued for fiscal years beginning after December 15, 2020, with early~~ adoption ~~permitted. The revised guidance will~~of this standard did not have a material impact on our financial condition or results of operations.

~~Goodwill~~

Goodwill is tested annually, as of September 30, for impairment. Throughout the year, the carrying value of goodwill is also reviewed for impairment if certain events or changes in circumstances occur, and trigger whether an interim impairment test may be required. Such changes in circumstances may be, but not limited to, sustained decrease in AB Holding Unit price or declines in market capitalization that would suggest that the fair value of the reporting unit is less than the carrying amount; significant and unanticipated declines in assets under management, revenues, or lower than expected earnings in the current quarter, next quarter or year. Any of these changes in circumstances could suggest the possibility that goodwill is impaired, however, none of these events or circumstances by itself would indicate that it is more likely than not that goodwill is impaired, they are merely recognized as triggering events for the consideration of impairment and must be viewed in combination with any mitigating or positive factors. A holistic evaluation of all events since the most recent quantitative impairment test must be done to determine whether it is more likely than not that the reporting unit is impaired.

~~Index~~

~~As of January 1, 2020, we adopted ASU 2017-04,~~
~~Simplifying the Test for Goodwill Impairment~~. The guidance removes Step 2 of the goodwill impairment test, which had required a hypothetical purchase price allocation. As a result of the revised guidance, a goodwill impairment will be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Under this guidance, the goodwill impairment test no longer includes a determination by management of whether a decline in fair value is temporary; however, it is important to consider how the severity and anticipated duration of the current market conditions is reflected in management's determination of fair value. We have determined that AB has only one reporting segment and reporting unit.

As of March 31, 2020, there was $3.1 billion of goodwill recorded on the consolidated statement of financial condition. During the first quarter of 2020, the unit price per AB Holding Unit declined significantly in response to the precipitous decline in the financial markets. As such, we performed an interim impairment evaluation of goodwill utilizing the Market Approach where the fair value of the reporting unit is based on its unadjusted market valuation (AB Holding Units outstanding multiplied by AB Holding’s Unit price). We have considered the results of the market approach analysis performed along with a number of other factors (including current market conditions) and determined that the fair value of the reporting unit exceeded its carrying value as of March 31, 2020. As such, no goodwill impairment existed. We will continue to monitor and evaluate any events that may trigger an impairment of goodwill.

3. Revenue Recognition

Revenues for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 consisted of the following:


	Three Months Ended March 31,
		2021		2020
		(in thousands)
Subject to contracts with customers:
Investment advisory and services fees
Base fees		$	687,691	$	613,587
Performance-based fees		15,775		8,138
Bernstein research services		119,021		129,223
Distribution revenues
All-in-management fees		85,182		86,357
12b-1 fees		20,034		19,453
Other		42,384		25,047
Other revenues
Shareholder servicing fees		21,695		20,843
Other		5,683		4,672
		997,465		907,320
Not subject to contracts with customers:
Dividend and interest income, net of interest expense		7,540		11,146
Investment gains (losses)		1,928		(44,306)
Other revenues		333		(4)
		9,801		(33,164)
Total net revenues		$	1,007,266	$	874,156

Three Months Ended March 31,
2020 2019
(in thousands)
Subject to contracts with customers:
    Investment advisory and services fees
        Base fees $ 613,587
$ 552,230
        Performance-based fees 8,138
4,364
    Bernstein research services 129,223
90,235
    Distribution revenues
        All-in-management fees 86,357
61,773
        12b-1 fees 19,453
19,586
        Other 25,047
19,150
    Other revenues
        Shareholder servicing fees 20,843
17,830
        Other 4,672
4,018
907,320
769,186
Not subject to contracts with customers:
    Dividend and interest income, net of interest expense 11,146
10,183
    Investment (losses) gains (44,306 ) 15,735
    Other revenues (4 ) 358
(33,164 ) 26,276

Total net revenues $ 874,156
$ 795,462

4. Long-term Incentive Compensation Plans


4.	~~Long-term Incentive Compensation Plans~~

We maintain several unfunded, non-qualified long-term incentive compensation plans, under which we grant annual awards to employees, generally in the fourth quarter, and to members of the Board of Directors of the General Partner, who are not employed by our company or by any of our affiliates (“Eligible Directors”).

We fund our restricted AB Holding Unit awards either by purchasing AB Holding Units on the open market or purchasing newly-issued AB Holding Units from AB Holding, and then keeping these AB Holding Units in a consolidated rabbi trust until delivering them or retiring them. In accordance with the Amended and Restated Agreement of Limited Partnership of AB (“AB Partnership Agreement”), when AB purchases newly-issued AB Holding Units from AB Holding, AB Holding is

Index

required to use the proceeds it receives from AB to purchase the equivalent number of newly-issued AB Units, thus increasing

~~Index~~

its percentage ownership interest in AB. AB Holding Units held in the consolidated rabbi trust are corporate assets in the name of the trust and are available to the general creditors of AB.

Repurchases of AB Holding Units for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 consisted of the following:


	Three Months Ended March 31,
		2021		2020
		(in millions)
Total amount of AB Holding Units Purchased (1)		1.0		0.9
Total Cash Paid for AB Holding Units Purchased (1)		$	37.4	$	19.8
Open Market Purchases of AB Holding Units Purchased (2)		0.6		0.8
Total Cash Paid for Open Market Purchases of AB Holding Units (2)		$	24.2	$	17.3

Three Months Ended
March 31,
2020 2019
(in millions)
Total amount of AB Holding Units Purchased ⁽¹⁾
0.9
2.0
Total Cash Paid for AB Holding Units Purchased ⁽¹⁾
$ 19.8
$ 58.6
Open Market Purchases of AB Holding Units Purchased ⁽²⁾
0.8
1.9
Total Cash Paid for Open Market Purchases of AB Holding Units ⁽²⁾
$ 17.3
$ 55.2

^{(1) Purchased on a trade date basis.}

^{(2) The remainder related to purchases of AB Holding Units from employees to all them to fulfill statutory tax withholding requirements at the time of delivery of long-term incentive compensation award}award.

Purchases of AB Holding Units reflected on the condensed consolidated statements of cash flows are net of AB Holding Unit purchases by employees as part of a distribution reinvestment election.

Each quarter, we consider whether to implement a plan to repurchase AB Holding Units pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended ("Exchange Act"). A plan of this type allows a company to repurchase its shares at times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods or because it possesses material non-public information. Each broker we select has the authority under the terms and limitations specified in the plan to repurchase AB Holding Units on our ~~behalf in accordance with the terms of the plan.~~behalf. Repurchases are subject to regulations promulgated by the SEC as well as certain price, market volume and timing constraints specified in the plan. The plan adopted during the first quarter of ~~2020~~2021 expired at the close of business on April ~~27, 2020.~~28, 2021. We may adopt additional plans in the future to engage in open-market purchases of AB Holding Units to help fund anticipated obligations under our incentive compensation award program and for other corporate purposes.

During the first three months of ~~both~~2021 and 2020, ~~and 2019,~~ we ~~granted~~awarded to employees and Eligible Directors 3.4 million and 0.1 million restricted AB Holding Unit ~~awards.~~awards, respectively. We used AB Holding Units repurchased during the applicable period and newly-issued AB Holding Units to fund these awards.

During the first three months of ~~2020~~2021 and ~~2019,~~2020, AB Holding issued ~~5,182~~0.1 million and ~~0.3 million~~5,182 AB Holding Units, respectively, upon exercise of options to buy AB Holding Units. AB Holding used the proceeds of ~~$0.1~~$1.9 million and ~~$7.4~~$0.1 million, respectively, received from award recipients as payment in cash for the exercise price to purchase the equivalent number of newly-issued AB Units.

~~Index~~

5. Net Income per Unit


5.	~~Net Income per Unit~~

Basic net income per unit is derived by reducing net income for the 1% general partnership interest and dividing the remaining 99% by the basic weighted average number of limited partnership units outstanding for each period. Diluted net income per unit is derived by reducing net income for the 1% general partnership interest and dividing the remaining 99% by the total of the diluted weighted average number of limited partnership units outstanding for each period.


	Three Months Ended March 31,
		2021		2020
		(in thousands, except per unit amounts)
Net income attributable to AB Unitholders		$	244,131	$	194,320

Weighted average limited partnership units outstanding – basic		272,332		270,498
Dilutive effect of compensatory options to buy AB Holding Units		32		32
Weighted average limited partnership units outstanding – diluted		272,364		270,530
Basic net income per AB Unit		$	0.89	$	0.71
Diluted net income per AB Unit		$	0.89	$	0.71

Three Months Ended March 31,
2020 2019
(in thousands, except per unit amounts)
Net income attributable to AB Unitholders $ 194,320
$ 149,114

Weighted average limited partnership units outstanding – basic 270,498
267,336
Dilutive effect of compensatory options to buy AB Holding Units 32
72
Weighted average limited partnership units outstanding – diluted 270,530
267,408
Basic net income per AB Unit $ 0.71
$ 0.55
Diluted net income per AB Unit $ 0.71
$ 0.55

Index


	Three Months Ended March 31,
			2021	2020
		(amounts as shown)
Anti-dilutive options excluded from diluted net income			0	29,056

Three Months Ended March 31,
2020 2019
(amounts as shown)
Anti-dilutive options excluded from diluted net income 29,056
29,056

6. Cash Distributions

AB is required to distribute all of its Available Cash Flow, as defined in the AB Partnership Agreement, to its Unitholders and to the General Partner. Available Cash Flow can be summarized as the cash flow received by AB from operations minus such amounts as the General Partner determines, in its sole discretion, should be retained by AB for use in its business, or plus such amounts as the General Partner determines, in its sole discretion, should be released from previously retained cash flow.

Typically, Available Cash Flow has been the adjusted diluted net income per unit for the quarter multiplied by the number of general and limited partnership interests at the end of the quarter. In future periods, management anticipates that Available Cash Flow will be based on adjusted diluted net income per unit, unless management determines, with the concurrence of the Board of Directors, that one or more adjustments that are made for adjusted net income should not be made with respect to the Available Cash Flow calculation.

On April ~~28, 2020~~,29, 2021, the General Partner declared a distribution of ~~$0.71~~$0.88 per AB Unit, representing a distribution of Available Cash Flow for the three months ended March 31, ~~2020.~~2021. The General Partner, as a result of its 1% general partnership interest, is entitled to receive 1% of each distribution. The distribution is payable on May ~~28, 2020~~27, 2021 to holders of record on May ~~11, 2020~~10, 2021.

7. Cash and Securities Segregated Under Federal Regulations and Other Requirements


7.	~~Cash and Securities Segregated Under Federal Regulations and Other Requirements~~

As of March 31, ~~2020~~2021 and December 31, ~~2019, $2.0~~2020, $1.4 billion and ~~$1.1~~$1.8 billion, respectively, of U.S. Treasury Bills were segregated in a special reserve bank custody account for the exclusive benefit of our brokerage customers under Rule 15c3-3 of the Exchange Act.

~~Index~~

8. Investments


8.	~~Investments~~

Investments consist of:


	March 31, 2021		December 31, 2020
	(in thousands)

Equity securities:
Long-term incentive compensation-related	$	28,645	$	34,351
Seed capital	74,241		75,766
Other	11,469		55,439
Exchange-traded options	4,156		7,527
Investments in limited partnership hedge funds:
Long-term incentive compensation-related	30,085		25,762
Seed capital	17,363		16,646
Time deposits	18,233		18,602
Other	15,466		19,282
Total investments	$	199,658	$	253,375

March 31,
2020 December 31,
2019
(in thousands)
Equity securities:
    Long-term incentive compensation-related $ 25,655
$ 36,665
    Seed capital 70,361
70,464
    Other 58,423
73,202
Exchange-traded options 36,783
6,931
Investments in limited partnership hedge funds:

Long-term incentive compensation-related 11,661
14,237
Seed capital 30,732
33,124
Time deposits 17,303
18,281
Other 11,590
13,890
Total investments $ 262,508
$ 266,794

Total investments related to long-term incentive compensation obligations of ~~$37.3~~$58.7 million and ~~$50.9~~$60.1 million as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, consist of company-sponsored mutual funds and hedge funds. For long-term incentive compensation awards granted before 2009, we typically made investments in company-sponsored mutual funds and hedge funds that were notionally elected by plan participants and maintained them (and continue to maintain them) in a consolidated rabbi trust or separate custodial account. The rabbi trust and custodial account enable us

Index

to hold such investments separate from our other assets for the purpose of settling our obligations to participants. The investments held in the rabbi trust and custodial account remain available to the general creditors of AB.

The underlying investments of ~~the~~ hedge funds in which we invest include long and short positions in equity securities, fixed income securities (including various agency and non-agency asset-based securities), currencies, commodities and derivatives (including various swaps and forward contracts). These investments are valued at quoted market prices or, where quoted market prices are not available, are fair valued based on the pricing policies and procedures of the underlying funds.

We allocate seed capital to our investment teams to help develop new products and services for our clients. A portion of our seed capital trading investments are equity and fixed income products, primarily in the form of separately-managed account portfolios, U.S. mutual funds, Luxembourg funds, Japanese investment trust management funds or Delaware business trusts. We also may allocate seed capital to investments in private equity funds. In regard to our seed capital investments, the amounts above reflect those funds in which we are not the primary beneficiary of a VIE or hold a controlling financial interest in a VOE. See Note 14, Consolidated Company-Sponsored Investment Funds, for a description of the seed capital investments that we consolidate. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, our total seed capital investments were ~~$340.8~~$327.1 million and ~~$358.1~~$310.3 million, respectively. Seed capital investments in unconsolidated company-sponsored investment funds are valued using published net asset values or non-published net asset values if they are not listed on an active exchange but have net asset values that are comparable to funds with published net asset values and have no redemption restrictions.

In addition, we also have long positions in corporate equities and long exchange-traded options traded through our options desk.

~~Index~~

The portion of unrealized gains (losses) related to equity securities, as defined by ASC 321-10, held as of March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


	Three Months Ended March 31,
		2021		2020
		(in thousands)
Net gains (losses) recognized during the period		$	4,887	$	(21,986)
Less: net gains (losses) recognized during the period on equity securities sold during the period		4,565		(1,395)
Unrealized gains (losses) recognized during the period on equity securities held		$	322	$	(20,591)

Three Months Ended March 31,
2020 2019
(in thousands)
Net (losses) gains recognized during the period $ (21,986 ) $ 13,994
Less: net (losses) gains recognized during the period on equity securities sold during the period (1,395 ) 3,132
Unrealized (losses) gains recognized during the period on equity securities held $ (20,591 ) $ 10,862

9. Derivative Instruments


9.	~~Derivative Instruments~~

See Note 14, Consolidated Company-Sponsored Investment Funds, for disclosure of derivative instruments held by our consolidated company-sponsored investment funds.

We enter into various futures, forwards, options and swaps to economically hedge certain seed capital investments. Also, we have currency forwards that help us to economically hedge certain balance sheet exposures. In addition, our options desk trades long and short exchange-traded equity options. We do not hold any derivatives designated in a formal hedge relationship under ASC 815-10, Derivatives and Hedging.

Index

The notional value and fair value as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 for derivative instruments (excluding derivative instruments relating to our options desk trading activities discussed below) not designated as hedging instruments were as follows:


			Fair Value
	Notional Value		Derivative Assets		Derivative Liabilities
	(in thousands)
March 31, 2021:
Exchange-traded futures	$	146,700	$	1,962	$	678
Currency forwards	51,703		8,548		8,042
Interest rate swaps	60,997		1,670		2,425
Credit default swaps	178,035		11,369		9,430
Total return swaps	53,817		31		800
Option swaps	50,000		0		329
Total derivatives	$	541,252	$	23,580	$	21,704

December 31, 2020:
Exchange-traded futures	$	142,886	$	118	$	1,834
Currency forwards	63,906		8,576		8,451
Interest rate swaps	60,997		2,043		2,955
Credit default swaps	167,649		10,910		13,304
Total return swaps	52,061		94		1,847
Option swaps	2,486		0		2,146
Total derivatives	$	489,985	$	21,741	$	30,537

Fair Value
Notional Value Derivative Assets Derivative Liabilities
(in thousands)
March 31, 2020:
Exchange-traded futures $ 175,080
$ 1,505
$ 4,895
Currency forwards 85,003
8,414
7,943
Interest rate swaps 82,780
2,886
3,641
Credit default swaps 275,733
16,238
15,294
Total return swaps 90,608
2,351
8,283
Option swaps 354
1,172
—
Total derivatives $ 709,558
$ 32,566
$ 40,056

December 31, 2019:
Exchange-traded futures $ 171,112
$ 939
$ 871
Currency forwards 60,809
8,545
8,633
Interest rate swaps 92,756
1,746
2,254
Credit default swaps 168,303
2,151
5,611
Total return swaps 91,201
110
1,764
Option swaps 354
—
126
Total derivatives $ 584,535
$ 13,491
$ 19,259

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the derivative assets and liabilities are included in both receivables and payables to brokers and dealers on our condensed consolidated statements of financial condition.

~~Index~~

The gains and losses for derivative instruments (excluding our options desk trading activities discussed below) for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 recognized in investment gains (losses) in the condensed consolidated statements of income were as follows:


	Three Months Ended March 31,
		2021		2020

Exchange-traded futures		$	1,135	$	1,006
Currency forwards		1,181		658
Interest rate swaps		88		(612)
Credit default swaps		(522)		12,101
Total return swaps		(907)		15,115
Option swaps		1,361		1,298
Net gains on derivative instruments		$	2,336	$	29,566

Three Months Ended March 31,
2020 2019

Exchange-traded futures $ 1,006
$ (5,115 )
Currency forwards 658
(40 )
Interest rate swaps (612 ) (314 )
Credit default swaps 12,101
(2,340 )
Total return swaps 15,115
(11,956 )
Option swaps 1,298
—
Net gains (losses) on derivative instruments $ 29,566
$ (19,765 )

We may be exposed to credit-related losses in the event of ~~nonperformance~~non-performance by counterparties to derivative financial instruments. We minimize our counterparty exposure through a credit review and approval process. In addition, we have executed various collateral arrangements with counterparties to the over-the-counter derivative transactions that require both pledging and accepting collateral in the form of cash. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, we held ~~$8.5~~$3.9 million and ~~$0.3~~$0.4 million, respectively, of cash collateral payable to trade counterparties. This obligation to return cash is reported in payables to brokers and dealers in our condensed consolidated statements of financial condition.

Although notional amount is the most commonly used measure of volume in the ~~derivative~~derivatives market, it is not used as a measure of credit risk. Generally, the current credit exposure of our derivative contracts is limited to the net positive estimated fair value of derivative contracts at the reporting date after taking into consideration the existence of netting

Index

agreements and any collateral received. A derivative with positive value (a derivative asset) indicates existence of credit risk because the counterparty would owe us if the contract were closed. Alternatively, a derivative contract with negative value (a derivative liability) indicates we would owe money to the counterparty if the contract were closed. Generally, if there is more than one derivative transaction with a single counterparty, a master netting arrangement exists with respect to derivative transactions with that counterparty to provide for aggregate net settlement.

Certain of our standardized contracts for over-the-counter derivative transactions (“ISDA Master Agreements”) contain credit risk related contingent provisions pertaining to each counterparty’s credit rating. In some ISDA Master Agreements, if the counterparty’s credit rating, or in some agreements, our assets under management (“AUM”), falls below a specified threshold, either a default or a termination event permitting us or the counterparty to terminate the ISDA Master Agreement would be triggered. In all agreements that provide for collateralization, various levels of collateralization of net liability positions are applicable, depending on the credit rating of the counterparty. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, we delivered ~~$9.6~~$3.3 million and ~~$4.3~~$6.4 million, respectively, of cash collateral into brokerage accounts. We report this cash collateral in cash and cash equivalents in our condensed consolidated statements of financial condition.

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, we held ~~$36.8~~$4.2 million and ~~$6.9~~$7.5 million, respectively, of long exchange-traded equity options, which are included in other investments on our condensed consolidated statements of financial condition. In addition, as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, we held ~~$15.9~~$1.3 million and ~~$12.3~~$12.5 million, respectively, of short exchange-traded equity options, which are included in securities sold not yet purchased on our condensed consolidated statements of financial condition. Our options desk provides our clients with equity derivative strategies and execution for exchange-traded options on single stocks, exchange-traded funds and indices. While predominately agency-based, the options desk may commit capital to facilitate a client’s transaction. Our options desk hedges the risks associated with this activity by taking offsetting positions in equities. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, we recognized ~~a gain~~gains of ~~$18.4~~$4.8 million and ~~a loss of $7.6~~$18.4 million, respectively, on equity ~~option~~options activity. These gains and losses are recognized in investment gains (losses) in the condensed consolidated statements of income.


10. Offsetting Assets and Liabilities	~~Offsetting Assets and Liabilities~~

See Note 14, Consolidated Company-Sponsored Investment Funds, for disclosure of offsetting assets and liabilities of our consolidated company-sponsored investment funds.

~~Index~~

Offsetting of assets as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 was as follows:


	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments Collateral		Cash Collateral Received		Net Amount
	(in thousands)
March 31, 2021:
Securities borrowed	$	24,294	$	0	$	24,294	$	(19,526)	$	0	$	4,768
Derivatives	$	23,580	$	0	$	23,580	$	0	$	(3,890)	$	19,690
Long exchange-traded options	$	4,156	$	0	$	4,156	$	0	$	0	$	4,156
December 31, 2020:
Securities borrowed	$	7,808	$	0	$	7,808	$	(7,344)	$	0	$	464
Derivatives	$	21,741	$	0	$	21,741	$	0	$	(380)	$	21,361
Long exchange-traded options	$	7,527	$	0	$	7,527	$	0	$	0	$	7,527

Gross Amounts of Recognized Assets Gross Amounts Offset in the Statement of Financial Condition Net Amounts of Assets Presented in the Statement of Financial Condition
Financial
Instruments

Cash Collateral
Received

Net
Amount
(in thousands)
March 31, 2020:
Securities borrowed $ 45,470
$ —
$ 45,470
$ (37,959 ) $ —
$ 7,511
Derivatives $ 32,566
$ —
$ 32,566
$ —
$ (8,479 ) $ 24,087
Long exchange-traded options $ 36,783
$ —
$ 36,783
$ —
$ —
$ 36,783
December 31, 2019:

Securities borrowed $ 38,993
$ —
$ 38,993
$ (38,993 ) $ —
$ —
Derivatives $ 13,491
$ —
$ 13,491
$ —
$ (251 ) $ 13,240
Long exchange-traded options $ 6,931
$ —
$ 6,931
$ —
$ —
$ 6,931

Index

Offsetting of liabilities as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 was as follows:


	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Liabilities Presented in the Statement of Financial Condition		Financial Instruments Collateral		Cash Collateral Pledged		Net Amount
	(in thousands)
March 31, 2021:

Derivatives	$	21,704	$	0	$	21,704	$	0	$	(3,338)	$	18,366
Short exchange-traded options	$	1,270	$	0	$	1,270	$	0	$	0	$	1,270
December 31, 2020:

Derivatives	$	30,537	$	0	$	30,537	$	0	$	(6,374)	$	24,163
Short exchange-traded options	$	12,486	$	0	$	12,486	$	0	$	0	$	12,486

Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statement of Financial Condition Net Amounts of Liabilities Presented in the Statement of Financial Condition
Financial
Instruments

Cash Collateral
Pledged
Net Amount
(in thousands)
March 31, 2020:
Derivatives $ 40,056
$ —
$ 40,056
$ —
$ (9,644 ) $ 30,412
Short exchange-traded options $ 15,884
$ —
$ 15,884
$ —
$ —
$ 15,884
December 31, 2019:

Derivatives $ 19,259
$ —
$ 19,259
$ —
$ (4,276 ) $ 14,983
Short exchange-traded options $ 12,348
$ —
$ 12,348
$ —
$ —
$ 12,348

Cash collateral, whether pledged or received on derivative instruments, is not considered material and, accordingly, is not disclosed by counterparty.

~~Index~~16

See Note 14, Consolidated Company-Sponsored Investment Funds, for disclosure of fair value of our consolidated company-sponsored investment funds.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The three broad levels of fair value hierarchy are as follows:

• Level 1 – Quoted prices in active markets are available for identical assets or liabilities as of the reported date.

• Level 2 – Quoted prices in markets that are not active or other pricing inputs that are either directly or indirectly observable as of the reported date.

• Level 3 – Prices or valuation techniques that are both significant to the fair value measurement and unobservable as of the reported date. These financial instruments do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Valuation of our financial instruments by pricing observability levels as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 was as follows (in thousands):


	Level 1		Level 2		Level 3		NAV Expedient(1)		Other		Total
March 31, 2021:
Money markets	$	163,018	$	0	$	0	$	—	$	—	$	163,018
Securities segregated (U.S. Treasury Bills)	0		1,412,873		0		—		—		1,412,873
Derivatives	1,962		21,618		0		—		—		23,580
Investments:

Equity securities	96,524		17,548		124		159		—		114,355
Long exchange-traded options	4,156		0		0		—		—		4,156
Limited partnership hedge funds(2)	—		—		—		—		47,448		47,448

Time deposits(3)	—		—		—		—		18,233		18,233
Other investments	7,443		—		—		—		8,023		15,466
Total investments	108,123		17,548		124		159		73,704		199,658
Total assets measured at fair value	$	273,103	$	1,452,039	$	124	$	159	$	73,704	$	1,799,129

Securities sold not yet purchased:
Short equities – corporate	$	7,037	$	—	$	0	$	—	$	—	$	7,037
Short exchange-traded options	1,270		0		0		—		—		1,270
Derivatives	678		21,026		0		—		—		21,704
Contingent payment arrangements	0		0		36,073		—		—		36,073
Total liabilities measured at fair value	$	8,985	$	21,026	$	36,073	$	—	$	—	$	66,084

Level 1 Level 2 Level 3
NAV Expedient⁽¹⁾
Other Total
March 31, 2020:
Money markets $ 123,767
$ —
$ —
$ —
$ —
$ 123,767
Securities segregated (U.S. Treasury Bills) —
2,012,198
—
—
—
2,012,198
Derivatives 1,505
31,061
—
—
—
32,566
Investments
  Equity securities 136,573
17,589
118
159
—
154,439
Long exchange-traded options 36,783
—
—
—
—
36,783
   Limited partnership hedge funds⁽²⁾
—
—
—
—
42,393
42,393
   Time deposits⁽³⁾
—
—
—
—
17,303
17,303
   Other investments 4,637
—
—
—
6,953
11,590
Total investments 177,993
17,589
118
159
66,649
262,508
Total assets measured at fair value $ 303,265
$ 2,060,848
$ 118
$ 159
$ 66,649
$ 2,431,039

Securities sold not yet purchased

Short equities – corporate $ 11,745
$ —
$ —
$ —
$ —
$ 11,745
Short exchange-traded options 15,884
—
—
—
—
15,884
Derivatives 4,895
35,161
—
—
—
40,056
Contingent payment arrangements —
—
23,704
—
—
23,704
Total liabilities measured at fair value $ 32,524
$ 35,161
$ 23,704
$ —
$ —
$ 91,389


	Level 1		Level 2		Level 3		NAV Expedient(1)		Other		Total
December 31, 2020:
Money markets	$	130,675	$	0	$	0	$	—	$	—	$	130,675
Securities segregated (U.S. Treasury Bills)	0		1,752,906		0		—		—		1,752,906
Derivatives	118		21,623		0		—		—		21,741
Investments:
Equity securities	147,705		17,565		125		161		—		165,556
Long exchange-traded options	7,527		0		0		—		—		7,527
Limited partnership hedge funds(2)	—		—		—		—		42,408		42,408

Time deposits(3)	—		—		—		—		18,602		18,602
Other investments	7,011		—		—		—		12,271		19,282
Total investments	162,243		17,565		125		161		73,281		253,375
Total assets measured at fair value	$	293,036	$	1,792,094	$	125	$	161	$	73,281	$	2,158,697

Securities sold not yet purchased:
Short equities – corporate	$	5,305	$	0	$	0	$	—	$	—	$	5,305
Short exchange-traded options	12,486		0		0		—		—		12,486
Derivatives	1,834		28,703		0		—		—		30,537
Contingent payment arrangements	0		0		27,750		—		—		27,750
Total liabilities measured at fair value	$	19,625	$	28,703	$	27,750	$	—	$	—	$	76,078

Level 1 Level 2 Level 3
NAV Expedient⁽¹⁾
Other Total
December 31, 2019:
Money markets $ 126,401
$ —
$ —
$ —
$ —
$ 126,401
Securities segregated (U.S. Treasury Bills) —
1,094,866
—
—
—
1,094,866
Derivatives 939
12,552
—
—
—
13,491
Investments
  Equity securities 170,946
8,952
119
314
—
180,331
  Long exchange-traded options 6,931
—
—
—
—
6,931
    Limited partnership hedge funds⁽²⁾
—
—
—
—
47,361
47,361
    Time deposits⁽³⁾
—
—
—
—
18,281
18,281
    Other investments 5,883
—
—
—
8,007
13,890
Total investments 183,760
8,952
119
314
73,649
266,794
Total assets measured at fair value $ 311,100
$ 1,116,370
$ 119
$ 314
$ 73,649
$ 1,501,552

Securities sold not yet purchased

Short equities – corporate $ 17,809
$ —
$ —
$ —
$ —
$ 17,809
Short exchange-traded options 12,348
—
—
—
—
12,348
Derivatives 871
18,388
—
—
—
19,259
Contingent payment arrangements —
—
22,911
—
—
22,911
Total liabilities measured at fair value $ 31,028

$ 18,388

$ 22,911

$ —
$ —
$ 72,327

⁽¹⁾Investments measured at fair value using NAV (or its equivalent) as a practical expedient.

⁽²⁾ Investments in equity method investees that are not measured at fair value in accordance with GAAP.

⁽³⁾ Investments carried at amortized cost that are not measured at fair value in accordance with GAAP.

Other investments include (i) an investment in a software publishing company that does not have a readily available fair value ($~~1.0~~2.2 million and $2.1 million as of ~~both~~ March 31, ~~2020~~2021 and December 31, ~~2019)~~2020, respectively), (ii) an investment in a start-up company that does not have a readily available fair value (this investment was ~~written down to zero as of March 31, 2020 and was $0.9~~$0.3 million as of both March 31, 2021 and December 31, ~~2019)~~2020), (iii) ~~an investment~~investments in an equity method ~~investee~~investees that isare not measured at fair value in accordance with GAAP ($~~2.7~~2.3 million and $6.5 million as of March 31, ~~2020~~2021 and ~~$2.9 million as of~~ December 31, ~~2019)~~2020, respectively), and (iv) broker dealer exchange memberships that are not measured at fair value in accordance with GAAP ($~~3.2~~3.3 million as of both March 31, ~~2020~~2021 and December 31, ~~2019)~~2020).

We provide below a description of the fair value methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

• Money markets: We invest excess cash in various money market funds that are valued based on quoted prices in active markets; these are included in Level 1 of the valuation hierarchy.

• Treasury Bills: We hold U.S. Treasury Bills, which are primarily segregated in a special reserve bank custody account as required by Rule 15c3-3 of the Exchange Act. These securities are valued based on quoted yields in secondary markets and are included in Level 2 of the valuation hierarchy.

• Equity securities: Our equity securities consist principally of company-sponsored mutual funds with NAVs and various separately-managed portfolios consisting primarily of equity and fixed income mutual funds with quoted prices in active markets, which are included in Level 1 of the valuation hierarchy. In addition, some securities are valued based on observable inputs from recognized pricing vendors, which are included in Level 2 of the valuation hierarchy.

• Derivatives: We hold exchange-traded futures with counterparties that are included in Level 1 of the valuation hierarchy. In addition, we also hold currency forward contracts, interest rate swaps, credit default swaps, option swaps

~~Treasury Bills~~: We hold U.S. Treasury Bills, which are primarily segregated in a special reserve bank custody account as required by Rule 15c3-3 of the Exchange Act. These securities are valued based on quoted yields in secondary markets and are included in Level 2 of the valuation hierarchy.

~~Equity securities~~: Our equity securities consist principally of company-sponsored mutual funds with NAVs and various separately-managed portfolios consisting primarily of equity and fixed income mutual funds with quoted prices in active markets, which are included in Level 1 of the valuation hierarchy. In addition, some securities are valued based on observable inputs from recognized pricing vendors, which are included in Level 2 of the valuation hierarchy.

~~Derivatives~~: We hold exchange-traded futures with counterparties that are included in Level 1 of the valuation hierarchy. In addition, we also hold currency forward contracts, interest rate swaps, credit default swaps, option swaps and total return swaps with counterparties that are valued based on observable inputs from recognized pricing vendors, which are included in Level 2 of the valuation hierarchy.

and total return swaps with counterparties that are valued based on observable inputs from recognized pricing vendors, which are included in Level 2 of the valuation hierarchy.

• Options: We hold long exchange-traded options that are included in Level 1 of the valuation hierarchy.

• Securities sold not yet purchased: Securities sold not yet purchased, primarily reflecting short positions in equities and exchange-traded options, are included in Level 1 of the valuation hierarchy.

• ~~: Securities sold not yet purchased, primarily reflecting short positions in equities and exchange-traded options, are included in Level 1 of the valuation hierarchy.~~

Contingent payment arrangements: Contingent payment arrangements relate to contingent payment liabilities associated with various acquisitions. At each reporting date, we estimate the fair values of the contingent consideration expected to be paid based upon probability-weighted AUM and revenue projections, using unobservable market data inputs, which are included in Level 3 of the valuation hierarchy.

During the three months ended March 31, ~~2020~~2021 there were 0 transfers between Level 2 and Level 3 securities.

The change in carrying value associated with Level 3 financial instruments carried at fair value, classified as ~~private equity and~~ equity securities, is as follows:


	Three Months Ended March 31,
		2021		2020
		(in thousands)
Balance as of beginning of period		$	125	$	119
Purchases		0		0
Sales		0		0
Realized gains (losses), net		0		0
Unrealized gains (losses), net		(1)		(1)
Balance as of end of period		$	124	$	118

Three Months Ended March 31,
2020 2019
(in thousands)
Balance as of beginning of period $ 119
$ 142
Purchases —
—
Sales —
—
Realized gains (losses), net —
—
Unrealized gains (losses), net (1 ) (27 )
Balance as of end of period $ 118
$ 115

Realized and unrealized gains and losses on Level 3 financial instruments are recorded in investment gains and losses in the condensed consolidated statements of income.

~~We acquired Autonomous Research LLP ("Autonomous") in 2019 and Ramius Alternative Solutions LLC in 2016, both~~As part of ~~which included~~acquisitions made by the Company, we may enter into contingent consideration arrangements as part of the purchase price. The change in carrying value associated with Level 3 financial instruments carried at fair value, classified as contingent payment arrangements, is as follows:


	Three Months Ended March 31,
		2021		2020
		(in thousands)
Balance as of beginning of period		$	27,750	$	22,911
Addition		7,526		0
Accretion		797		793

Payments		0		0
Balance as of end of period		$	36,073	$	23,704

Three Months Ended March 31,
2020 2019
(in thousands)
Balance as of beginning of period $ 22,911
$ 7,336
Addition —
—
Accretion 793
54
Payments —
—
Balance as of end of period $ 23,704
$ 7,390

~~During 2019, we recorded a $17.4 million contingent consideration payable for our 2019 acquisition based on projected fee revenues over a five-year measurement period.~~ The ~~liability was~~liabilities were valued using expected revenue growth rates ~~ranging from 0.7% to 2.5%~~ and a discount ~~rate~~rates. As of ~~10.4%, reflecting a 3.5% risk-free rate, based on our cost of debt, and a 6.9% market price of risk adjustment rate. Additionally, we recorded a $3.1 million change in estimate for~~March 31, 2021 the ~~contingent consideration payable related to our 2016 acquisition. The liability relating to our 2016 acquisition was valued using a revised~~expected revenue growth ~~rate~~rates range from 2.0% to 135.6%, with a weighted average of ~~50% over the remaining measurement periods~~9.0%, calculated using cumulative revenues and range of revenue growth rates (excluding revenue growth from additional AUM contributed from existing clients). The discount rates ranged from 1.9% to 20.0%, with a ~~3.0%~~weighted average of 10.8%, calculated using total contingent liabilities and range of discount ~~rate.~~

rates. As of March 31, 2020 the expected revenue growth rates ranged from 0.7% to 50.0%, with a weighted average of 4.9%, calculated using cumulative revenues and ~~December 31, 2019, acquisition-related~~a range of revenue growth rates. The discount rates ranged from 3.0% to 10.0%, with a weighted average of 9.3%, calculated using total contingent liabilities ~~with a fair value~~and range of ~~$23.7 million and $22.9 million, respectively, remain relating to our 2019 and 2016 acquisitions.~~

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We did not have any material assets or liabilities that were measured at fair value for impairment on a nonrecurring basis during the three months ended March 31, ~~2020~~2021 or during the year ended December 31, ~~2019.~~2020.

12. Commitments and Contingencies

~~Commitments and Contingencies~~

With respect to all significant litigation matters, we consider the likelihood of a negative outcome. If we determine the likelihood of a negative outcome is probable and the amount of the loss can be reasonably estimated, we record an estimated loss for the expected outcome of the litigation. If the likelihood of a negative outcome is reasonably possible and we ~~are able to~~can determine an estimate of the possible loss or range of loss in excess of amounts already accrued, if any, we disclose that fact together with the estimate of the possible loss or range of loss. However, it is often difficult to predict the outcome or estimate a possible loss or range of loss because litigation is subject to inherent uncertainties, particularly when plaintiffs allege substantial or indeterminate damages. Such is also the case when the litigation is in its early stages or when the litigation is highly complex or broad in scope. In these cases, we disclose that we are unable to predict the outcome or estimate a possible loss or range of loss.

AB may be involved in various matters, including regulatory inquiries, administrative proceedings and litigation, some of which may allege significant damages. It is reasonably possible that we could incur losses pertaining to these matters, but we cannot currently estimate any such losses.

Management, after consultation with legal counsel, currently believes that the outcome of any individual matter that is pending or threatened, or all of them combined, will not have a material adverse effect on our results of operations, financial condition or liquidity. However, any inquiry, proceeding or litigation has an element of uncertainty; management cannot determine whether further developments relating to any individual matter that is pending or threatened, or all of them combined, will have a material adverse effect on our results of operation, financial condition or liquidity in any future reporting period.

~~Index~~

13. Leases

We lease office space, furniture and office equipment under various operating and financing leases. Our current leases have remaining lease terms of one year to 1115 years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year.

Since 2010, we have sub-leased over 1000000 square feet of office space. ~~On January 1, 2019, the previously recorded liability relating to our global space consolidation initiatives of $85.8 million was offset as a reduction to our operating right-of-use assets.~~

Leases included in the condensed consolidated statement of financial condition as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows:


	Classification	March 31, 2021		December 31, 2020
		(in thousands)
Operating Leases
Operating lease right-of-use assets	Right-of-use assets	$	407,608	$	416,007
Operating lease liabilities	Lease liabilities	490,121		503,174

Finance Leases
Property and equipment, gross	Right-of-use assets	7,329		5,167
Amortization of right-of-use assets	Right-of-use assets	(2,098)		(2,719)
Property and equipment, net		5,231		2,448
Finance lease liabilities	Lease liabilities	5,235		2,375

Classification March 31, 2020 December 31, 2019
(in thousands)
Operating Leases
Operating lease right-of-use assets Right-of-use assets $ 337,933
$ 360,185
Operating lease liabilities Lease liabilities 438,854
465,907

Finance Leases
Property and equipment, gross Right-of-use assets 5,167
3,825
Amortization of right-of-use assets Right-of-use assets (1,440 ) (1,317 )
Property and equipment, net 3,727
2,508
Finance lease liabilities Lease liabilities 3,736
2,544

The components of lease expense included in the condensed consolidated statement of income as of March 31, ~~2020~~2021 and March 31, ~~2019~~2020 were as follows:

Variable lease cost ⁽¹⁾

Variable lease cost (1)

⁽¹⁾ Variable lease expense includes operating expenses, real estate taxes and employee parking.

The sub-lease income represents all revenues received from sub-tenants. It is primarily fixed base rental payments combined with variable reimbursements such as operating expenses, real estate taxes and employee parking. ~~The vast majority~~We derive most of our sub-tenant income ~~is derived~~ from our New York metro sub-tenant agreements. Sub-tenant income related to base rent is recorded on a straight-line basis.

Maturities of lease liabilities were as follows:


	Operating Leases		Financing Leases		Total
Year ending December 31,	(in thousands)
2021 (excluding the three months ended March 31, 2021)	$	82,594	$	1,363	$	83,957
2022	100,370		1,551		101,921
2023	93,299		1,289		94,588
2024	90,283		722		91,005
2025	25,430		426		25,856
Thereafter	149,885		24		149,909
Total lease payments	541,861		5,375		547,236
Less interest	(51,740)		(140)
Present value of lease liabilities	$	490,121	$	5,235

Operating Leases Financing Leases Total
Year ending December 31, (in thousands)
2020 (excluding the three months ended March 31, 2020) $ 81,317
$ 1,420
$ 82,737
2021 103,630
1,142
104,772
2022 89,572
757
90,329
2023 82,505
526
83,031
2024 79,600
23
79,623
Thereafter 42,974
—
42,974
Total lease payments 479,598
3,868
483,466
Less interest (40,744 ) (132 )
Present value of lease liabilities $ 438,854
$ 3,736

During October 2018, we signed a lease, which commences in mid-2020, relating to 218,976 square feet of space at our new Nashville headquarters. Our estimated total base rent obligation (excluding taxes, operating expenses and utilities) over the 15-year initial lease term is $134 million. During April 2019, weWe have signed a lease which commences in 2024, relating to approximately ~~190,000~~166,000 square feet of space in New York City. Our estimated total base rent obligation (excluding taxes, operating expenses and utilities) over the 20-year lease term is approximately ~~$448~~$393.0 million.



Lease term and discount rate:
Weighted average remaining lease term (years):
Operating leases	~~5.04~~		7.23
Finance leases	~~2.87~~		3.52
Weighted average discount ~~rate~~rate:
Operating leases	~~3.52~~3.07	%
Finance leases	~~2.71~~1.75	%

Index

Supplemental cash flow information related to leases was as follows:

Three Months Ended March 31,
2020 2019
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 29,698
$ 35,728
Operating cash flows from financing leases 26
17
Financing cash flows from finance leases 504
282
Right-of-use assets obtained in exchange for lease obligations⁽¹⁾:

Operating leases —
2,289
Finance leases 1,695
—


	Three Months Ended March 31,
	2021		2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	27,970	$	29,698
Operating cash flows used for financing leases	22		26
Financing cash flows from finance leases	424		504
Right-of-use assets obtained in exchange for lease obligations(1):
Operating leases (2)	12,161		0
Finance leases	3,283		1,695

⁽¹⁾Represents non-cash activity and, accordingly, is not reflected in the ~~condensed~~ consolidated statements of cash flows.

(2) Represents net non-cash activity of new lease obligations, extensions and reductions of existing lease obligations.

14. Consolidated Company-Sponsored Investment Funds

We regularly provide seed capital to new company-sponsored investment funds. As such, we may consolidate or de-consolidate a variety of company-sponsored investment funds each quarter. Due to the similarity of risks related to our involvement with each company-sponsored investment fund, disclosures required under the VIE model are aggregated, such as disclosures regarding the carrying amount and classification of assets.

~~Index~~

We are not required to provide financial support to company-sponsored investment funds, and only the assets of such funds are available to settle each fund's own liabilities. Our exposure to loss ~~in regard to~~regarding consolidated company-sponsored investment funds is limited to our investment in, and our management fee earned from, such funds. Equity and debt holders of such funds have no recourse to AB’s assets or to the general credit of AB.

The balances of consolidated VIEs and VOEs included in our condensed consolidated statements of financial condition were as follows:


	March 31, 2021						December 31, 2020
	(in thousands)
	VIEs		VOEs		Total		VIEs		VOEs		Total
Cash and cash equivalents	$	35,084	$	3,477	$	38,561	$	36,370	$	136	$	36,506
Investments	247,581		60,462		308,043		242,541		60,041		302,582
Other assets	6,869		13,605		20,474		4,859		7,385		12,244
Total assets	$	289,534	$	77,544	$	367,078	$	283,770	$	67,562	$	351,332

Liabilities	$	13,922	$	28,609	$	42,531	$	7,741	$	22,879	$	30,620
Redeemable non-controlling interest	64,313		24,254		88,567		82,753		19,606		102,359
Partners' capital attributable to AB Unitholders	211,299		24,681		235,980		193,276		25,077		218,353
Total liabilities, redeemable non-controlling interest and partners' capital	$	289,534	$	77,544	$	367,078	$	283,770	$	67,562	$	351,332

March 31, 2020 December 31, 2019
(in thousands)
VIEs VOEs Total VIEs VOEs Total
Cash and cash equivalents $ 83,067
$ 4,210
$ 87,277
$ 9,623
$ 1,810
$ 11,433
Investments 273,445
170,027
443,472
404,624
176,380
581,004
Other assets 20,444
19,094
39,538
9,618
10,192
19,810
Total assets $ 376,956
$ 193,331
$ 570,287
$ 423,865
$ 188,382
$ 612,247

Liabilities $ 73,325
$ 31,550
$ 104,875
$ 12,147
$ 18,870
$ 31,017
Redeemable non-controlling interest 179,090
45,810
224,900
273,219
52,342
325,561
Partners' capital attributable to AB Unitholders 124,541
115,971
240,512
138,499
117,170
255,669
Total liabilities, redeemable non-controlling interest and partners' capital $ 376,956
$ 193,331
$ 570,287
$ 423,865
$ 188,382
$ 612,247

During the first quarter of 2021, we deconsolidated one fund in which we had a seed investment of approximately $4.1 million due to no longer having a controlling financial interest.

Index

Fair Value

Cash and cash equivalents include cash on hand, demand deposits, overnight commercial paper and highly liquid investments with original maturities of three months or less. Due to the short-term nature of these instruments, the recorded value has been determined to approximate fair value.

~~Index~~

Valuation of consolidated company-sponsored investment funds' financial instruments by pricing observability levels as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 was as follows (in thousands):


	Level 1		Level 2		Level 3		Total
March 31, 2021:
Investments - VIEs	$	51,869	$	195,206	$	506	$	247,581
Investments - VOEs	301		59,950		211		60,462
Derivatives - VIEs	515		2,389		0		2,904
Derivatives - VOEs	0		2,395		0		2,395
Total assets measured at fair value	$	52,685	$	259,940	$	717	$	313,342

Derivatives - VIEs	7,362		4,822		0		12,184
Derivatives - VOEs	7,071		686		0		7,757
Total liabilities measured at fair value	$	14,433	$	5,508	$	0	$	19,941

December 31, 2020:
Investments - VIEs	$	73,909	$	168,114	$	518	$	242,541
Investments - VOEs	0		59,940		101		60,041
Derivatives - VIEs	442		2,782		0		3,224
Derivatives - VOEs	0		464		0		464
Total assets measured at fair value	$	74,351	$	231,300	$	619	$	306,270


Derivatives - VIEs	$	1,649	$	5,244	$	0	$	6,893
Derivatives - VOEs	0		664		0		664
Total liabilities measured at fair value	$	1,649	$	5,908	$	0	$	7,557

Level 1 Level 2 Level 3 Total
March 31, 2020:
  Investments - VIEs $ 19,040
$ 254,011
$ 394
$ 273,445
  Investments - VOEs 77,460
92,427
140
170,027
  Derivatives - VIEs 2,421
5,471
—
7,892
  Derivatives - VOEs 187
13,154
—
13,341
Total assets measured at fair value $ 99,108
$ 365,063
$ 534
$ 464,705

Derivatives - VIEs 469
6,134
—
6,603
  Derivatives - VOEs 252
12,461
—
12,713
Total liabilities measured at fair value $ 721
$ 18,595
$ —
$ 19,316

December 31, 2019:
  Investments - VIEs $ 28,270
$ 375,559
$ 795
$ 404,624
  Investments - VOEs 104,069
72,252
59
176,380
  Derivatives - VIEs 139
4,694
—
4,833
  Derivatives - VOEs 76
4,263
—
4,339
Total assets measured at fair value $ 132,554
$ 456,768
$ 854
$ 590,176

Derivatives - VIEs $ 835
$ 3,724
$ —
$ 4,559
  Derivatives - VOEs 101
4,982
—
5,083
Total liabilities measured at fair value $ 936
$ 8,706
$ —
$ 9,642

See Note 11 for a description of the fair value methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

The change in carrying value associated with Level 3 financial instruments carried at fair value within consolidated company-sponsored investment funds was as follows:


	Three Months Ended March 31,
		2021		2020
		(in thousands)

Balance as of beginning of period		$	619	$	854

Transfers (out) in		(10)		231
Purchases		119		33
Sales		(3)		(362)
Realized gains (losses), net		3		0
Unrealized gains (losses), net		(11)		(224)
Accrued discounts		0		2
Balance as of end of period		$	717	$	534

Three Months Ended March 31,
2020 2019
(in thousands)
Balance as of beginning of period $ 854
$ 8,373
Transfers (out) in 231
(97 )
Purchases 33
2,111
Sales (362 ) (284 )
Realized gains (losses), net —
2
Unrealized gains (losses), net (224 ) 149
Accrued discounts 2
7
Balance as of end of period $ 534
$ 10,261

The Level 3 securities primarily consist of corporate bonds that are vendor priced with no ratings available, bank loans, non-agency collateralized mortgage obligations and asset-backed securities.

Transfers into and out of all levels of the fair value hierarchy are reflected at end-of-period fair values. Realized and unrealized gains and losses on Level 3 financial instruments are recorded in investment gains and losses in the condensed consolidated statements of income.

Derivative Instruments

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the VIEs held ~~$1.3~~$9.3 million and ~~$0.3~~$3.7 million (net), respectively, of futures, forwards and swaps within their portfolios, respectively. For the three months ended March 31, 2020 and 2019, we recognized $1.7 million of losses and $1.1 million of gains, respectively, on these derivatives. These losses and gains are recognized in investment gains (losses) in the condensed consolidated statements of income.

As of March 31, 2020 and December 31, 2019, the VIEs held $33.1 million and $1.6 million, respectively, of cash collateral payable to trade counterparties. This obligation to return cash is reported in the liabilities of consolidated company-sponsored investment funds in our condensed consolidated statements of financial condition.

As of March 31, 2020 and December 31, 2019, the VIEs delivered $59.0 million and $3.2 million, respectively, of cash collateral into brokerage accounts. The VIEs report this cash collateral in the consolidated company-sponsored investment funds cash and cash equivalents in our condensed consolidated statements of financial condition.

~~As of March 31, 2020 and December 31, 2019, the VOEs held $0.6 million and $0.7 million, respectively, (net) of futures, forwards, options~~ and swaps within their portfolios. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, we recognized ~~$0.1~~$1.1 million and $1.7 million of losses, ~~and $0.1 million of gains,~~ respectively, on these derivatives. These gains and losses are recognized in investment gains (losses) in the condensed consolidated statements of income.

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the ~~VOEs~~VIEs held $0.6 million and $0.5 million, respectively, of cash collateral payable to trade counterparties. This obligation to return cash is reported in the liabilities of consolidated company-sponsored investment funds in our condensed consolidated statements of financial condition.

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the VIEs delivered $4.9 million and $4.2 million, respectively, of cash collateral into brokerage accounts. The VIEs report this cash collateral in the consolidated company-sponsored investment funds cash and cash equivalents in our condensed consolidated statements of financial condition.

As of March 31, 2021 and December 31, 2020, the VOEs held $5.4 million and $0.2 million (net), respectively, of futures, forwards, options and swaps within their portfolios. For the three months ended March 31, 2021 and 2020, we recognized $0.9 million and $0.1 million of gains, respectively, on these derivatives. These gains and losses are recognized in investment gains (losses) in the condensed consolidated statements of income.

As of both March 31, 2021 and December 31, 2020, the VOEs held 0 cash collateral payable to trade counterparties. This obligation to return cash is reported in the liabilities of consolidated company-sponsored investment funds in our condensed consolidated statements of financial condition.

As of March 31, 2021 and December 31, 2020, the VOEs delivered ~~$2.8 million~~0 and ~~$1.2~~$0.1 million, respectively, of cash collateral in brokerage accounts. The VOEs report this cash collateral in the consolidated company-sponsored investment funds cash and cash equivalents in our condensed consolidated statements of financial condition.

Offsetting Assets and Liabilities

Offsetting of derivative assets of consolidated company-sponsored investment funds as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 was as follows:


	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments Collateral		Cash Collateral Received		Net Amount
	(in thousands)
March 31, 2021:
Derivatives - VIEs	$	2,904	$	0	$	2,904	$	0	$	(551)	$	2,353
Derivatives - VOEs	$	2,395	$	0	$	2,395	$	0	$	0	$	2,395
December 31, 2020:
Derivatives - VIEs	$	3,224	$	0	$	3,224	$	0	$	(513)	$	2,711
Derivatives - VOEs	$	464	$	0	$	464	$	0	$	0	$	464

Gross Amounts of Recognized Assets Gross Amounts Offset in the Statement of Financial Condition Net Amounts of Assets Presented in the Statement of Financial Condition
Financial
Instruments

Cash Collateral
Received

Net
Amount
(in thousands)
March 31, 2020:
Derivatives - VIEs $ 7,892
$ —
$ 7,892
$ —
$ (7,892 ) $ —
Derivatives - VOEs $ 13,341
$ —
$ 13,341
$ —
$ (580 ) $ 12,761
December 31, 2019:

Derivatives - VIEs $ 4,833
$ —
$ 4,833
$ —
$ (1,631 ) $ 3,202
Derivatives - VOEs $ 4,339
$ —
$ 4,339
$ —
$ (534 ) $ 3,805

Offsetting of derivative liabilities of consolidated company-sponsored investment funds as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 was as follows:


	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Liabilities Presented in the Statement of Financial Condition		Financial Instruments Collateral		Cash Collateral Pledged		Net Amount
	(in thousands)
March 31, 2021:
Derivatives - VIEs	$	12,184	$	0	$	12,184	$	0	$	(4,929)	$	7,255
Derivatives - VOEs	$	7,757	$	0	$	7,757	$	0	$	0	$	7,757
December 31, 2020:
Derivatives - VIEs	$	6,893	$	0	$	6,893	$	0	$	(4,201)	$	2,692
Derivatives - VOEs	$	664	$	0	$	664	$	0	$	(138)	$	526

Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statement of Financial Condition Net Amounts of Liabilities Presented in the Statement of Financial Condition
Financial
Instruments

Cash Collateral
Pledged
Net Amount
(in thousands)
March 31, 2020:
Derivatives - VIEs $ 6,603
$ —
$ 6,603
$ —
$ (6,603 ) $ —
Derivatives - VOEs $ 12,713
$ —
$ 12,713
$ —
$ (2,797 ) $ 9,916
December 31, 2019:

Derivatives - VIEs $ 4,559
$ —
$ 4,559
$ —
$ (3,155 ) $ 1,404
Derivatives - VOEs $ 5,083
$ —
$ 5,083
$ —
$ (1,201 ) $ 3,882

Cash collateral, whether pledged or received on derivative instruments, is not considered material and, accordingly, is not disclosed by counterparty.

Non-Consolidated VIEs

As of March 31, ~~2020,~~2021, the net assets of company-sponsored investment products that are non-consolidated VIEs are approximately ~~$80.5~~$70.9 billion, and our maximum risk of loss is our investment of ~~$6.7~~$7.2 million in these VIEs and our advisory fee receivables from these VIEs ~~which are not material.~~is $76.1 million.

15. Units Outstanding

~~Units Outstanding~~

Changes in AB Units outstanding during the three-month period ended March 31, ~~2020~~2021 were as follows:




Outstanding as of December 31, ~~2019~~2020	~~270,380,314~~270,509,658
Options exercised		~~5,182~~79,108
Units issued		~~344,698~~2,847,552
Units retired(1)		~~(748,763~~(761,153)	)
Outstanding as of March 31, ~~2020~~2021		~~269,981,431~~272,675,165

(1) During the three-months ended March 31, 2021, we purchased 1,400 AB Units in private transactions and retired them.

16. Debt


~~16.~~	~~Debt~~

AB has an $800.0 million committed, unsecured senior revolving credit facility (the “Credit Facility”) with a group of commercial banks and other lenders, which matures on September 27, 2023. The Credit Facility provides for possible increases in the principal amount by up to an aggregate incremental amount of $200.0 million; any such increase is subject to the consent of the affected lenders. The Credit Facility is available for AB and Sanford C. Bernstein & Co., LLC ("SCB LLC") business purposes, including the support of AB’s commercial paper program. Both AB and SCB LLC can draw directly under the Credit Facility, and management may draw on the Credit Facility from time to time. AB has agreed to guarantee the obligations of SCB LLC under the Credit Facility.

The Credit Facility contains affirmative, negative and financial covenants, which are customary for facilities of this type, including restrictions on dispositions of assets, restrictions on liens, a minimum interest coverage ratio and a maximum leverage ratio. As of March 31, ~~2020,~~2021, we were in compliance with these covenants. The Credit Facility also includes customary events of default (with customary grace periods, as applicable), including provisions under which, upon the occurrence of an event of default, all outstanding loans may be accelerated and/or lender’s commitments may be terminated. Also, under such provisions, upon the occurrence of certain insolvency- or bankruptcy-related events of default, all amounts payable under the Credit Facility would automatically become immediately due and payable, and the lender’s commitments automatically would terminate.

Index

Amounts under the Credit Facility may be borrowed, repaid and re-borrowed by us from time to time until the maturity of the facility. Voluntary prepayments and commitment reductions requested by us are permitted at any time without a fee (other than customary breakage costs relating to the prepayment of any drawn loans) upon proper notice and subject to a minimum dollar requirement. Borrowings under the Credit Facility bear interest at a rate per annum, which will be, at our option, a rate equal to an applicable margin, which is subject to adjustment based on the credit ratings of AB, plus one of the following indices: London Interbank Offered Rate; a floating base rate; or the Federal Funds rate.

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, we had 0 amounts outstanding under the Credit Facility. During the first three months of ~~2020~~2021 and the full year ~~2019,~~2020, we did not draw upon the Credit Facility.

~~In addition to the Credit Facility,~~ AB also has a $900.0 million committed, unsecured senior credit facility (“EQH Facility”) with EQH. The EQH Facility matures on November 4, 2024 and is available for AB's general business purposes. Borrowings under the EQH Facility generally bear interest at a rate per annum based on prevailing overnight commercial paper rates.

The EQH Facility contains affirmative, negative and financial covenants which are substantially similar to those in AB’s committed bank facilities. The EQH Facility also includes customary events of default substantially similar to those in AB’s committed bank facilities, including provisions under which, upon the occurrence of an event of default, all outstanding loans may be accelerated and/or the lender’s commitment may be terminated.

Amounts under the EQH Facility may be borrowed, repaid and re-borrowed by us from time to time until the maturity of the facility. AB or EQH may reduce or terminate the commitment at any time without penalty upon proper notice. EQH also may terminate the facility immediately upon a change of control of our general partner.

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, AB had ~~$830.0~~$625.0 million and ~~$560.0~~$675.0 million outstanding under the EQH Facility, in each case with an interest ~~rates~~rate of approximately 0.2% ~~and 1.6%, respectively.~~. Average daily borrowings on the EQH Facility for the first three months of 2021 and the full year 2020 ~~and for the 57 days it was available in 2019~~ were ~~$592.1~~$622.3 million and ~~$358.6~~$470.8 million, respectively, with weighted average interest rates of approximately ~~1.3%~~0.2% and ~~1.6%~~0.5%, respectively.

In addition to the EQH Facility, on September 1, 2020, AB established a new $300.0 million uncommitted, unsecured senior credit facility (“EQH Uncommitted Facility”) with EQH. The EQH Uncommitted Facility matures on September 1, 2024 and is available for AB's general business purposes. Borrowings under the EQH Unsecured Facility generally bear interest at a rate per annum based on prevailing overnight commercial paper rates. The EQH Uncommitted Facility contains affirmative, negative and financial covenants which are substantially similar to those in the EQH Facility. As of March 31, 2021 and December 31, 2020, we had 0 amounts outstanding on the EQH Uncommitted Facility. During the first three months of 2021 and the full year 2020, we did not draw upon the EQH Uncommitted Facility.

As of March 31, ~~2020, we had $104.8 million in commercial paper outstanding with a weighted average interest rate of approximately 2.1%. As of~~2021 and December 31, ~~2019,~~2020, we had 0 commercial paper outstanding. The commercial paper is short term in nature, and as such, recorded value is estimated to approximate fair value (and considered a Level 2 security in the fair value hierarchy). Average daily borrowings of commercial paper during the first three months of 2021 and full year 2020 ~~and the 317 days commercial paper was outstanding in 2019~~ were ~~$44.7~~$120.3 million and ~~$438.6~~$83.2 million, respectively, with weighted average interest rates of approximately ~~1.9%~~0.2% and ~~2.6%~~0.4%, respectively.

AB has a $200.0 million committed, unsecured senior revolving credit facility (the "Revolver") with a leading international bank, which matures on November 16, 2021. The Revolver is available for AB's and SCB LLC's business purposes, including the provision of additional liquidity to meet funding requirements primarily related to SCB LLC's operations. Both AB and SCB LLC can draw directly under the Revolver and management expects to draw on the Revolver from time to time. AB has agreed to guarantee the obligations of SCB LLC under the Revolver. The Revolver contains affirmative, negative and financial covenants that are identical to those of the Credit Facility. Borrowings under the Revolver bear interest at a rate per annum, which will be, at our option, a rate equal to an applicable margin, which is subject to adjustment based on the credit ratings of AB, plus one of the following indices: London Interbank Offered Rate; a floating base rate; or the Federal Funds rate. As of both March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, we had 0 amounts outstanding under the Revolver. Average daily borrowings under the Revolver during the first three months of ~~2020~~2021 and full year ~~2019~~2020 were ~~$23.9~~$26.1 million and ~~$23.5~~$16.5 million, respectively, with weighted average interest rates of approximately ~~2.3%~~1.1% and ~~3.2%~~1.6%, respectively.

In addition, SCB LLC currently has 3 uncommitted lines of credit with 3 financial institutions. NaN of these lines of credit permit us to borrow up to an aggregate of approximately ~~$175.0~~$165.0 million, with AB named as an additional borrower, while the other line has no stated limit. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, SCB LLC had 0 outstanding

Index

balance on these lines of credit. ~~Average daily borrowings~~We did not draw on ~~the~~these lines of credit during the first three months of ~~2020 and~~2021. Average daily borrowings during the full year ~~2019~~2020 were ~~$3.3~~$0.9 million ~~and $1.9 million, respectively,~~ with a weighted average interest ~~rates~~rate of approximately ~~2.0% and 1.9%, respectively.~~1.6%.

~~Index~~

17. Non-controlling Interests


~~17.~~	~~Non-controlling Interests~~

Non-controlling interest in net income for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 consisted of the following:


	Three Months Ended March 31,
			2021		2020
		(in thousands)




Redeemable non-controlling interests:
Consolidated company-sponsored investment funds			$	(292)	$	(25,571)
Total non-controlling interest in net income			$	(292)	$	(25,571)

Three Months Ended March 31,
2020 2019
(in thousands)
Non-redeemable non-controlling interests:
    Consolidated company-sponsored investment funds $ —
$ —
    Other —
16
Total non-redeemable non-controlling interests —
16
Redeemable non-controlling interests:
    Consolidated company-sponsored investment funds (25,571 ) 10,100
Total non-controlling interest in net income $ (25,571 ) $ 10,116

Redeemable non-controlling interest as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 consisted of the following:

March 31, 2020 December 31, 2019
(in thousands)
Consolidated company-sponsored investment funds $ 224,900
$ 325,561
Total redeemable non-controlling interest $ 224,900
$ 325,561


	March 31, 2021		December 31, 2020
	(in thousands)
Consolidated company-sponsored investment funds	$	88,567	$	102,359

Total redeemable non-controlling interest	$	88,567	$	102,359

During March 2020, we acquired a 100% interest in Asturias Capital LLC, an alternative strategy investment management firm focused on the technology, media and telecommunication sectors, with $211 million of assets under management for $12.1 million. The excess of the purchase price over the fair value of identifiable net assets acquired of $1.0 million resulted in the recognition of $11.1 million of goodwill. The purchase price allocation to fair value two investment management contracts will be finalized during the second quarter of 2020; once the valuation is complete, an adjustment will be recorded between goodwill and intangible assets. This acquisition will not have a material impact on our financial condition or results of operations. As a result, we will not provide supplemental pro forma information.

~~19. Subsequent Event~~

During April 2020, we provided a $125 million credit facility, through a Master Repurchase Agreement (“MRA”), to one of our sponsored private investment funds, of which $30 million has been drawn upon as of April 28, 2020. The amounts drawn upon the MRA, which are payable on demand, are collateralized by assets of the fund, can be repaid at any time prior to maturity and bear interest based upon the interest rate established at the time of each borrowing. The amounts outstanding under the MRA are not expected to have a material impact on our financial condition or results of operations.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

General Economic Conditions

During the first quarter of 2020, ~~the novel coronavirus global pandemic ("COVID-19")~~COVID-19 significantly impacted the global economy. The impact has been profound, has continued ~~in April 2020~~through the first quarter of 2021 and ~~is likely to~~may persist for months to come. ~~The~~While many businesses have re-opened, vaccinations are underway (particularly in the U.S., the U.K. and Israel) and leading economic indicators are showing signs of improvement, the overall extent and duration of ~~COVID-19~~COVID-19's impact on businesses and economic activity generally remains ~~unclear, but a severe recession is expected. Economic effects from COVID-19, which have impacted virtually all countries and industries, have included:~~

Significant declines and volatility in global financial markets, including approximate 23.2% and 20.0% declines in the Dow Jones Industrial Average and S&P 500 Index, respectively, during the first quarter (~~please see "Market Environment" below~~ ~~for additional details).~~

Governments around the world have responded to COVID-19 with economic stimulus measures, including a $2 trillion emergency relief bill passed in the U.S. during the first quarter of 2020, an additional $900 billion in aid passed during the fourth quarter of 2020, and the most recent $1.9 trillion COVID-19 relief package passed in the first quarter of 2021. Similar fiscal stimulus was passed by many governments around the world. These measures and possible additional stimulus and aid measures are intended to steady businesses and consumers until economic activity ~~and financial markets~~ meaningfully ~~recover.~~recovers. The timing and magnitude of any such recovery, however, remains uncertain.

Various countries around the world, and certain areas in the U.S., have continued to experience surges in the rates of COVID-19 infections, which have resulted from the emergence and spread of mutated strains of the virus, greatly increased social interactions, including at colleges and universities, after re-opening of economies, and decreased usage of mitigation techniques, such as mask wearing and social distancing, in some areas. These ongoing circumstances surrounding the virus may adversely affect consumer sentiment and the pace of business re-openings, and they also may delay or slow economic recovery and cause additional market volatility.

~~We quickly responded as~~At the onset of COVID-19 ~~evolved~~ during the first quarter of 2020, we quickly responded in the various jurisdictions where we operate, including the U.S., the U.K., Hong Kong, Shanghai, Singapore and Taiwan. We implemented business continuity measures, including travel restrictions and a work-from-home requirement for almost all personnel (other than a relatively small number of employees whose physical presence in our offices was considered critical), which has remained in place (except in our Asia-Pacific offices, most of which have reopened) throughout 2020 and the first quarter of 2021 to ensure operating continuity for all critical functions. We also instituted a notification process, which persists today, for any employee who tests positive for COVID-19 or has been exposed to someone else who has tested positive. ~~Certain~~As the COVID-19 crisis has continued to evolve since the lockdown in the first quarter of 2020, certain key functions of the business, such as Risk Management, Business Continuity, Finance and Human Capital, have ~~been in~~maintained constant communication and monitored the evolution of the pandemic to keep our employees safe and ~~advised of~~disseminate information regarding key developments. Additionally, we ~~have continued~~continue to ~~communicate with~~monitor communications from the World Health Organization and the U.S. Centers for Disease Control and Prevention to ensure we have current information. ~~Technology enhancements~~

We have ~~been made~~continued to ~~support~~enhance our technology, which has increased the effectiveness of our remote work ~~including rolling out~~force. We have also continued to enhance our virtual programs to support business functions, such as ~~well as~~training on cybersecurity and enhancements to our existing technology platforms. There has been a heightened focus on the ~~physical and~~ emotional well-being of our ~~employees.~~employees, and we have provided regular touch points with employees through virtual town halls and management communications. Additionally, ~~daily~~we have maintained regular communications and updates on the virus and the Company's response, which are posted inon the ~~company's~~Company's internal website, to ensure transparent communication with our employees. ~~If any~~

We continue to consider, and in some cases methodically implement, return to office programs for our U.S. and European offices. (As noted above, most of our Asia-Pacific offices re-opened in 2020.) In fact, we hope and expect to gradually bring our workforce back into the office, across each of our locations, early in the third quarter of 2021. However, we continue to monitor the daily evolution of the pandemic in order to ensure the health and safety of our employees ~~test positive for COVID-19 or come in contact with someone who has~~remains our top priority. We will modify our return to office plans, as needed, to ensure the ~~virus, they~~safety of our employees and to ensure that the highest safety and cleanliness protocols are ~~required to contact AB immediately for support.~~followed. We believe that our business continuity plan and technology ~~enhancements appropriately~~platform will continue to support the ~~continued~~ effectiveness of our employees working remotely.

Asset managers, such as AB, rely heavily on the performance of the financial markets to largely determine assets under management (“AUM”) and revenues. While our results for the first quarter of 2020 remained strong, these results reflected financial market conditions during January and February, which were not adversely affected by COVID-19. Market conditions deteriorated dramatically during March. The ~~ongoing~~ economic impact of COVID-19 and any ~~continued~~additional declines in the financial markets could have a significant adverse effect on our AUM and revenues, particularly if economic activity ~~and financial markets do~~does not ~~recover or recover slowly.~~continue to recover. Although countries throughout the world ~~are beginning the process of planning for opening or actually opening,~~continue to grapple with re-opening their economies, this will continue to be a gradual process, and there is a significant risk that the opening process ~~will have to~~may be further interrupted if infection rates ~~begin to increase again.~~increase. Also, ~~there is the prospect that~~although unemployment rates have declined, they are still considered high ~~levels of unemployment~~ and any reluctance of consumers to resume spending ~~will~~could do long-term damage to the

global economy, which would have an adverse effect on our business. Additionally, as most of our workforce ~~is now~~continues working remotely, we are mindful of increased risk related to ~~cyber attacks,~~cybersecurity, which could significantly disrupt our business functions.

~~Given~~Ultimately, the ~~significant volatility~~return to normal business and economic activity will likely require the broad application of effective vaccines. The distribution of multiple safe, effective vaccines was initiated towards the end of the ~~financial markets and the steep decline in the price of an AB Holding Unit during the first~~fourth quarter of 2020 and the ~~relevance~~distribution of ~~these factors to our analysis~~such vaccines has increased through the first quarter of whether our goodwill or intangible assets may be impaired, we performed interim impairment tests to determine if it is more likely than not that an impairment exists. We have determined that the fair value of our reporting unit exceeded carrying value as of March 31, 2020 and, accordingly, no goodwill impairment existed. We also determined that the fair value of our intangible assets exceeded their carrying values as of March 31, 2020 and, accordingly, no intangible asset impairment existed. ~~Please see note 2~~2021, particularly in the ~~interim financial statements for further discussion~~U.S., the U.K. and Israel. Furthermore, while issues persist around the speed, selective nature of ~~goodwill impairment.~~those who are eligible to receive the vaccination, as well as logistical challenges regarding availability and distribution of the vaccines, most people in the U.S. who are at least 16 years of age and want to be vaccinated likely will be vaccinated by the end of the second quarter of 2021.

Our total assets under management (“AUM”) as of March 31, ~~2020~~2021 were ~~$541.8~~$697.2 billion, ~~down $81.1~~up $11.3 billion, or ~~13.0%~~1.6%, compared to December 31, ~~2019,~~2020, and ~~down $12.9~~up $155.4 billion, or ~~2.3%~~28.7%, compared to March 31, ~~2019.~~2020. During the first quarter of ~~2020,~~2021, AUM ~~decreased~~increased as a result of market ~~depreciation~~appreciation of ~~$75.7~~$6.1 billion and net ~~outflows~~inflows of ~~$5.6~~$5.2 billion ~~(primarily due to Retail~~(Retail net ~~outflows~~inflows of ~~$5.4~~$2.7 billion, Private Wealth Management net inflows of $1.7 billion and Institutional net inflows of $0.8 billion). During the twelve months ended March 31, ~~2020,~~2021, AUM ~~decreased~~increased as a result of market appreciation of $147.2 billion and net inflows of $8.2 billion (Retail net inflows of $6.5 billion, Institutional net inflows of $1.4 billion and Private Wealth Management net inflows of $0.3 billion). Excluding AXA's redemption of low-fee fixed income mandates of $10.8 billion (see discussion below), the firm generated net inflows of $19.0 billion during the twelve months ended March 31, 2021. There were no outflows resulting from AXA's ongoing redemption during the three months ended March 31, 2021.

Institutional AUM decreased $0.9 billion, or 0.3%, to $314.7 billion during the first quarter of 2021, primarily due to market depreciation of ~~$30.8~~$1.5 billion, driven by fixed income markets which declined in the quarter, partially offset by net inflows of ~~$18.6~~$0.8 billion. Gross sales decreased sequentially from $9.9 billion ~~(Retail net inflows~~during the fourth quarter of ~~$13.1 billion and Institutional net inflows of $7.6 billion, partially offset by net outflows of $2.1 billion for Private Wealth Management).~~

~~Institutional AUM decreased $26.0 billion, or 9.2%,~~2020 to ~~$256.7~~$4.9 billion during the first quarter of ~~2020,~~2021. Redemptions and terminations increased sequentially from $2.0 billion to $2.8 billion.

Retail AUM increased $7.0 billion, or 2.6%, to $272.3 billion during the first quarter of 2021, primarily due to market ~~depreciation~~appreciation of ~~$26.5~~$4.1 billion ~~partially offset by~~and net inflows of ~~$0.4~~$2.7 billion. Gross sales ~~decreased~~increased sequentially from ~~$5.4~~$17.7 billion during the fourth quarter of ~~2019~~2020 to ~~$3.9~~$23.0 billion during the first quarter of ~~2020.~~2021. Redemptions and terminations increased sequentially from ~~$1.3~~$15.2 billion to ~~$2.9~~$17.7 billion.

~~Retail~~Private Wealth Management AUM ~~decreased $40.6~~increased $5.2 billion, or ~~17.0%~~5.0%, to ~~$198.6~~$110.2 billion during the first quarter of ~~2020,~~2021, due to market ~~depreciation~~appreciation of ~~$35.3~~$3.5 billion and net ~~outflows~~inflows of ~~$5.4~~$1.7 billion. Gross sales increased sequentially from ~~$18.9~~$3.7 billion during the fourth quarter of ~~2019~~2020 to ~~$24.2~~$5.4 billion during the first quarter of ~~2020.~~2021. Redemptions and terminations ~~increased~~decreased sequentially from ~~$11.6~~$4.8 billion to ~~$25.6~~$3.7 billion.

Private Wealth Management AUM decreased $14.5 billion, or 14.4%, to $86.5 billion during the first quarter of 2020, due to market depreciation of $13.9 billion and net outflows of $0.6 billion. Gross sales increased sequentially from $2.7 billion during the fourth quarter of 2019 to $3.5 billion during the first quarter of 2020. Redemptions and terminations increased sequentially from $2.7 billion to $4.2 billion.

Bernstein Research Services revenue for the first quarter of ~~2020~~2021 was ~~$129.2~~$119.0 million, ~~up $39.0~~down $10.2 million, or ~~43.2%~~7.9%, compared to the first quarter of ~~2019~~2020 due to ~~increased~~reduced customer trading activity ~~attributed to greater global~~driven by fewer trading days and decreased market volatility, as ~~well as~~compared to the ~~inclusion of revenues from our acquisition of Autonomous (which closed on April 1, 2019).~~COVID-related significant surge in trading volume experienced during the three months ended March 31, 2020.

Net revenues for the first quarter of ~~2020~~2021 increased ~~$78.7~~$133.1 million, or ~~9.9%~~15.2%, to ~~$874.2 million~~$1.0 billion from ~~$795.5~~$874.2 million in the first quarter of ~~2019.~~2020. The increase was primarily due to higher investment advisory base fees of ~~$61.4~~$74.1 million, higher ~~Bernstein Research Services revenue~~investment gains of ~~$39.0~~$46.2 million, higher distribution revenues of ~~$30.3~~$16.7 million and higher performance-based fees of ~~$3.8~~$7.6 million, partially offset by ~~higher investment losses~~lower Bernstein Research Services revenue of ~~$60.0~~$10.2 million. Operating expenses for the first quarter of ~~2020~~2021 increased ~~$68.6~~$50.7 million, or ~~10.9%~~7.3%, to ~~$695.9~~$746.7 million from ~~$627.3~~$695.9 million in the first quarter of ~~2019.~~2020. The increase was primarily due to higher ~~promotion and servicing expenses of $42.1 million, higher~~ employee compensation and benefits expenses of ~~$23.0~~$43.8 million and higher promotion and servicing expense of $15.6 million, partially offset by lower amortization of intangible assets of $5.0 million, lower general and administrative expenses of ~~$4.4~~$2.0 million and lower interest on borrowings of $1.5 million. Our operating income increased ~~$10.1~~$82.4 million, or ~~6.0%~~46.2%, to ~~$178.2~~$260.6 million from ~~$168.2~~$178.2 million and our operating margin increased to 25.9% in the first quarter of 2021 from 23.3% in the first quarter of ~~2020 from 19.9% in~~2020.

U.S. equity markets remained strong during the first quarter of ~~2019.~~

~~Market Environment~~

~~Although~~2021, with the ~~first quarter started strong, dramatic market declines were prevalent at the end of the quarter, as global markets reacted to the impact of COVID-19. The~~ S&P 500, Dow Jones Industrial Average and Nasdaq each ~~finished~~finishing the quarter in ~~negative~~positive territory. ~~Specifically,~~The U.S. seeks to continue to emerge from the ~~S&P 500 experienced its biggest quarterly decline since 1938 and the Dow Jones Industrial had its worst quarter since 1987. Central banks, particularly the U.S.~~pandemic by accelerating progress on vaccinations combined with unprecedented levels of fiscal stimulus. The Federal Reserve ~~took swift and far-reaching action~~has pledged to ~~provide liquidity and inject stability into the bond market. The U.S. government released~~maintain its current accommodative monetary policy until inflation has exceeded their target for a ~~$2 trillion emergency relief bill. Stimulus packages are forthcoming from around the globe in an attempt to avoid an economic collapse, while the world seeks medical solutions to the virus.~~sustained time period. In the U.K., the rapid roll-out of the vaccine is expected to facilitate relatively strong growth from the second quarter onwards, with Brexit-related trade frictions expected to ease starting in the second half of this year. Government stimulus should assist in keeping unemployment relatively low, while the Bank of England ~~cut interest~~is likely to keep rates on hold during the recovery phase. In China, the market outlook remains positive, as a broader global re-opening appears to ~~near zero~~be benefiting the Chinese economy. Given the strong recovery from the pandemic, China will likely begin a slow and gradual tightening of their fiscal policy. While political tensions between China and the ~~government announced over 1% of GDP~~U.S. continue to linger, further escalation from the new U.S. administration in ~~stimulus measures. In China, as~~ the number of COVID-19 cases declines, daily economic activity is resuming. Government stimulus in China is being provided, while local provinces have already announced infrastructure projects, and the People’s Bank of China has cut interest rates and the reserve ratio requirement several times.near term seems unlikely.

In Europe, MiFID II, which ~~became~~has been effective ~~on January 3,~~since 2018, has ~~made significant modifications to the manner in which~~significantly modified how European broker-dealers can be compensated for research. These modifications ~~are believed to~~ have significantly reduced the overall research spend by many European buy-side firms, which has decreased the revenues we ~~derive~~earn from these clients. If this trend continues, the revenues we earn from our European ~~clients. Our European~~ clients ~~may continue to reduce their research budgets, which could result in a significant decline in our sell-side revenues.~~would deplete further.

Also, while MiFID II isdoes not ~~applicable to firms operating~~apply outside of Europe, competitive and client pressures may force buy-side firms operating outside of Europe to pay for research from their own resources instead of through bundled trading commissions. If ~~that~~this occurs, ~~we would expect that~~ research budgets from those clients, ~~will decrease further, which could result in an additional significant decline in~~as well as our sell-side ~~revenues.~~revenues, may decrease further. Additionally, these ~~competitive and client~~ pressures ~~may result in~~could force our buy-side operation ~~paying~~to pay for research out of our own ~~resources~~revenues instead of through bundled trading commissions, which could increase our ~~firm's~~firm’s expenses and decrease our operating income.

~~The ultimate~~Lastly, although the impact of MiFID II ~~on payments for research globally, currently~~ is largely known, the ultimate, global impact is still uncertain.

Relationship with Equitable Holdings and AXA

~~During the second quarter of 2018, AXA S.A.~~Prior to an initial public offering ("~~AXA"~~IPO") ~~completed the sale of a minority stake in~~by Equitable Holdings, Inc. (“EQH”) ~~through an initial public offering~~in May of 2018, EQH was a wholly-owned subsidiary of AXA S.A. ("~~IPO"~~AXA"). Since ~~then,~~the IPO, AXA has ~~completed additional offerings and taken other steps, most recently during the fourth quarter of 2019. As a result, AXA owned~~divested its ownership in EQH to less than 10% of the outstanding common stock of EQH as of March 31, ~~2020.~~2021.

While we cannot at this time predict the ~~eventual~~full impact on AB of ~~this transaction,~~these transactions, such impact ~~could include~~has included a reduction in the

support AXA ~~has~~ provided to AB in the past with respect to AB's investment management business, resulting in a modest decrease in our revenues and ability to initiate new investment services. Also, AB relies on AXA, including its subsidiary, AXA Business Services, for a number of significant services and AB has benefited from its affiliation with AXA in certain common vendor relationships. Some of these arrangements are expected to change with possible negative financial implications for AB.

Our ending AUM at March 31, ~~2020~~2021 reflects $1$11.8 billion in outflows resulting from ~~AXA S.A.'s~~AXA's redemption of certain low-fee fixed income ~~mandates.~~mandates during 2020. No redemptions were made during the three months ended March 31, 2021. We ~~expect these redemptions~~currently anticipate AXA to redeem the majority of approximately $2 billion of additional assets during the three months ending June 30, 2021, bringing the total assets redeemed to approximately $14 ~~billion and to be completed in the first half of 2020.~~billion. The revenue we earn from the management of these assets is not significant.

~~On May 2, 2018, we~~We previously announced that we would establish our corporate headquarters in, and relocate approximately ~~1,050~~1,250 jobs located in the New York metro area to, Nashville, TN. Subsequently, on January 14, 2020, we announced our plans to relocate an additional 200 jobs to Nashville thereby increasing the total relocated jobs to 1,250. The decision to add the additional jobs was the result of the growth in our business, select investments we are making, and the insourcing of roles typically performed by consultants. Our Nashville headquarters will house Finance, IT, Operations, Legal, Compliance, Internal Audit, Human Capital, and Sales and Marketing. We have been actively relocating jobs and expect this transition to take several years. We will continue to maintain a principal location in New York City, which will house our Portfolio Management, Sell-Side Research and Trading, and New York-based Private Wealth Management businesses.

We believe relocating our corporate headquarters to Nashville ~~will afford~~affords us the opportunity to provide an improved quality of life alternative for our employees and enable us to attract and recruit new talented employees to a highly desirable location while improving the long-term cost structure of the firm.

During the transition period, which began in 2018 and is expected to continue through 2024, we currently estimate that we will incur transition costs of approximately ~~$155~~$145 million to ~~$165~~$155 million. These costs include employee relocation, severance, recruitment, and overlapping compensation and occupancy costs. Over this same period, we expect to realize total expense savings of approximately ~~$180~~$205 million to ~~$190~~$215 million, an amount greater than the total transition costs. However, we ~~currently are incurring~~did incur

some transition costs ~~which exceed realized~~before we began to realize expense savings. ~~Through~~For the ~~end~~period beginning in 2018 and ending in the fourth quarter of ~~2019,~~2020, we incurred ~~$43~~$70 million of cumulative transition costs compared to ~~$16~~$46 million of cumulative ~~savings, resulting in an overall net cost of $27 million for the 2018 through 2019 periods.~~savings. In addition, we incurred $8$7 million of transition costs for the three months ended March 31, ~~2020~~2021 compared to $6$10 million of expense savings, resulting in an overall net ~~cost~~savings of $2$3 million for the period. We currently anticipate an EPU ~~reduction~~increase in ~~2020~~2021 of approximately ~~$0.06~~$0.02 resulting from our relocation strategy, which ~~would equal~~compares to the $0.01 EPU ~~reduction~~increase that occurred in ~~2019.~~2020. We also expect to ~~achieve breakeven or a slight accretion in EPU in 2021 and then~~ achieve EPU accretion in each year thereafter. Beginning in 2025, once the transition period has been completed, we estimate ongoing annual expense savings towards the upper end of ~~approximately~~the range of $75 million to $80 million, which will result from a combination of occupancy and compensation-related savings. Our estimates for both the transition costs and the corresponding expense savings are based on our current assumptions of employee relocation costs, severance, and overlapping compensation and occupancy costs. In addition, our estimates for both the timing of when we incur transition costs and realize the related expense savings are based on our current relocation implementation plan and the timing for execution of each phase. The actual total charges we eventually record, the related expense savings we realize, and timing ~~and magnitude~~ of EPU impact ~~are expected to~~may differ from our current estimates as we implement each phase of our headquarters relocation.

During October 2018, we signed a lease, which ~~commences~~commenced in ~~mid-2020,~~the fourth quarter of 2020, relating to 218,976 square feet of space at our new Nashville headquarters. Our estimated total base rent obligation (excluding taxes, operating expenses and utilities) over the 15-year initial lease term is $134 million.

Although we have presented our transition costs and annual expense savings with numerical specificity, and we believe these targets to be reasonable as of the date of this report, the uncertainties surrounding the assumptions we discuss above create a significant risk that these targets may not be achieved. Accordingly, the expenses we actually incur and the savings we actually realize may differ from our targets, particularly if actual events adversely differ from one or more of our key assumptions. The transition costs and expense savings, together with their underlying assumptions, are Forward-Looking Statements and can be affected by any of the factors discussed in “Risk Factors” and “Cautions Regarding Forward-Looking Statements” in this 10-Q and our ~~2019~~2020 10-K. We strongly caution investors not to place undue reliance on any of these assumptions or our cost and expense targets. Except as may be required by applicable securities laws, we are not under any obligation, and we expressly disclaim any obligation, to update or alter any assumptions, estimates, financial goals, targets, projections or other related statements that we may make.

~~Adjusted Operating Margin Target~~

We previously adopted a goal of increasing our adjusted operating margin to a target of 30% by 2020 (the “2020 Margin Target”), subject to the assumptions, factors and contingencies described as part of the initial disclosure of this target. Our adjusted operating margin, which was 27.5% during 2019, increased to 27.6% during the first three months of 2020.

Our AUM and, therefore, our investment advisory revenues, including performance-based fee revenues, are heavily dependent on the level and volatility of the financial markets. Based upon our current revenue and expense projections, we do not believe that achieving the 2020 Margin Target is likely. However, we are taking additional actions to better align our expenses with our expected revenues. We remain committed to achieving an adjusted operating margin of 30% in years subsequent to 2020 and will take continued actions in this regard, subject to prevailing market conditions and the evolution of our business mix. Furthermore, our revenues may continue to be affected by the severe economic impact of COVID-19. Please refer to “Risk Factors” below for additional information regarding the effect on our business COVID-19 has had and may continue to have.

Assets Under Management

Assets under management by distribution channel are as follows:


	As of March 31,
	2021		2020		$ Change		% Change
	(in billions)

Institutions	$	314.7	$	256.7	$	58.0	22.6	%
Retail	272.3		198.6		73.7		37.1
Private Wealth Management	110.2		86.5		23.7		27.3
Total	$	697.2	$	541.8	$	155.4	28.7	%

As of March 31,
2020 2019 $ Change % Change
(in billions)

Institutions $ 256.7
$ 256.6
$ 0.1
— %
Retail 198.6
201.9
(3.3 ) (1.6 )
Private Wealth Management 86.5
96.2
(9.7 ) (10.1 )
Total $ 541.8
$ 554.7
$ (12.9 ) (2.3 )

Index

Assets under management by investment service are as follows:

As of March 31,
2020 2019 $ Change % Change
(in billions)
Equity
Actively Managed $ 141.5
$ 155.1
$ (13.6 ) (8.8 )%
Passively Managed⁽¹⁾
47.2
55.8
(8.6 ) (15.5 )
Total Equity 188.7
210.9
(22.2 ) (10.6 )

Fixed Income

Actively Managed

Taxable 236.1
227.2
8.9
3.9
Tax–exempt 45.9
43.8
2.1
5.0
282.0
271.0
11.0
4.1

Passively Managed⁽¹⁾
10.3
9.3
1.0
10.7
Total Fixed Income 292.3
280.3
12.0
4.3

Other⁽²⁾

Actively Managed 59.4
62.4
(3.0 ) 4.8
Passively Managed⁽¹⁾
1.4
1.1
0.3
36.2
Total Other 60.8
63.5
(2.7 ) (4.1 )
Total $ 541.8
$ 554.7
$ (12.9 ) (2.3 )


	As of March 31,
	2021		2020		$ Change		% Change
	(in billions)
Equity
Actively Managed	$	231.8	$	141.5	$	90.3	63.9	%
Passively Managed(1)	66.3		47.2		19.1		40.4
Total Equity	298.1		188.7		109.4		58.0

Fixed Income
Actively Managed
Taxable	252.2		236.1		16.1		6.8
Tax–exempt	51.8		45.9		5.9		12.8
	304.0		282.0		22.0		7.8

Passively Managed(1)	8.3		10.3		(2.0)		(19.5)
Total Fixed Income	312.3		292.3		20.0		6.8

Alternatives/Multi-Asset Solutions(2)
Actively Managed	83.6		59.4		24.2		40.7
Passively Managed(1)	3.2		1.4		1.8		n/m
Total Alternatives/Multi-Asset Solutions	86.8		60.8		26.0		42.7
Total	$	697.2	$	541.8	$	155.4	28.7	%

(1)Includes index and enhanced index services.

(2)Includes certain multi-asset solutions and services not included in equity or fixed income services. Prior to December 31, 2020, this investment service line was disclosed as “Other.” In order to reflect the increasing significance of our Alternatives and ~~certain alternative investments.~~Multi-Asset Solutions services, we updated the investment service line to “Alternatives and Multi-Asset Solutions."

~~Index~~

Index

Changes in assets under management for the three-month and twelve-month periods ended March 31, ~~2020~~2021 are as follows:

Distribution Channel
Institutions Retail
Private
Wealth Management
Total
(in billions)
Balance as of December 31, 2019 $ 282.7
$ 239.2
$ 101.0
$ 622.9
Long-term flows:

Sales/new accounts 3.9
24.2
3.5
31.6
Redemptions/terminations (2.9 ) (25.6 ) (4.2 ) (32.7 )
Cash flow/unreinvested dividends (0.6 ) (4.0 ) 0.1
(4.5 )
Net long-term inflows (outflows) 0.4
(5.4 ) (0.6 ) (5.6 )
Transfers 0.1
(0.1 ) —
—
Acquisition —
0.2
—
0.2
Market depreciation (26.5 ) (35.3 ) (13.9 ) (75.7 )
Net change (26.0 ) (40.6 ) (14.5 ) (81.1 )
Balance as of March 31, 2020 $ 256.7
$ 198.6
$ 86.5
$ 541.8

Balance as of March 31, 2019 $ 256.6
$ 201.9
$ 96.2
$ 554.7
Long-term flows:
Sales/new accounts 17.6
83.2
11.6
112.4
Redemptions/terminations (9.6 ) (59.6 ) (13.8 ) (83.0 )
Cash flow/unreinvested dividends (0.4 ) (10.5 ) 0.1
(10.8 )
Net long-term inflows (outflows) 7.6
13.1
(2.1 ) 18.6
Adjustments⁽³⁾
—
—
(0.9 ) (0.9 )
Transfers 0.1
(0.1 ) —
—
Acquisition —
0.2
—
0.2
Market depreciation (7.6 ) (16.5 ) (6.7 ) (30.8 )
Net change 0.1
(3.3 ) (9.7 ) (12.9 )
Balance as of March 31, 2020 $ 256.7
$ 198.6
$ 86.5
$ 541.8

~~Index~~

Investment Service

Equity
Actively
Managed

Equity
Passively
Managed⁽¹⁾

Fixed
Income
Actively
Managed -
Taxable

Fixed
Income
Actively
Managed -
Tax-
Exempt

Fixed
Income
Passively
Managed⁽¹⁾

Other⁽²⁾
Total
(in billions)
Balance as of December 31, 2019 $ 177.2
$ 60.1
$ 258.3
$ 47.1
$ 9.3
$ 70.9
$ 622.9
Long-term flows:

Sales/new accounts 12.1
0.4
14.7
2.9
—
1.5
31.6
Redemptions/terminations (9.1 ) —
(19.8 ) (2.9 ) (0.1 ) (0.8 ) (32.7 )
Cash flow/unreinvested dividends (1.6 ) (1.7 ) (1.3 ) —
0.8
(0.7 ) (4.5 )
Net long-term inflows (outflows) 1.4
(1.3 ) (6.4 ) —
0.7
—
(5.6 )
Acquisition —
—
—
—
—
0.2
0.2
Market (depreciation) appreciation (37.1 ) (11.6 ) (15.8 ) (1.2 ) 0.3
(10.3 ) (75.7 )
Net change (35.7 ) (12.9 ) (22.2 ) (1.2 ) 1.0
(10.1 ) (81.1 )
Balance as of March 31, 2020 $ 141.5
$ 47.2
$ 236.1
$ 45.9
$ 10.3
$ 60.8
$ 541.8

Balance as of March 31, 2019 $ 155.1
$ 55.8
$ 227.2
$ 43.8
$ 9.3
$ 63.5
$ 554.7
Long-term flows:

Sales/new accounts 38.9
0.9
56.2
10.4
0.1
5.9
112.4
Redemptions/terminations (29.4 ) (0.7 ) (42.1 ) (8.1 ) (0.4 ) (2.3 ) (83.0 )
Cash flow/unreinvested dividends (5.2 ) (4.8 ) (1.1 ) (0.2 ) 0.6
(0.1 ) (10.8 )
Net long-term inflows (outflows) 4.3
(4.6 ) 13.0
2.1
0.3
3.5
18.6
Adjustments⁽³⁾
—
—
(0.4 ) (0.5 ) —
—
(0.9 )
Acquisition —
—
—
—
—
0.2
0.2
Market (depreciation) appreciation (17.9 ) (4.0 ) (3.7 ) 0.5
0.7
(6.4 ) (30.8 )
Net change (13.6 ) (8.6 ) 8.9
2.1
1.0
(2.7 ) (12.9 )
Balance as of March 31, 2020 $ 141.5
$ 47.2
$ 236.1
$ 45.9
$ 10.3
$ 60.8
$ 541.8


	Distribution Channel
	Institutions		Retail		Private Wealth Management		Total
	(in billions)
Balance as of December 31, 2020	$	315.6	$	265.3	$	105.0	$	685.9
Long-term flows:
Sales/new accounts	4.9		23.0		5.4		33.3
Redemptions/terminations	(2.8)		(17.7)		(3.7)		(24.2)
Cash flow/unreinvested dividends	(1.3)		(2.6)		—		(3.9)
Net long-term inflows	0.8		2.7		1.7		5.2
Transfers	(0.2)		0.2		—		—

Market (depreciation) appreciation	(1.5)		4.1		3.5		6.1
Net change	(0.9)		7.0		5.2		11.3
Balance as of March 31, 2021	$	314.7	$	272.3	$	110.2	$	697.2













Balance as of March 31, 2020	$	256.7	$	198.6	$	86.5	$	541.8
Long-term flows:
Sales/new accounts	31.8		77.8		16.1		125.7
Redemptions/terminations	(23.1)		(61.7)		(15.9)		(100.7)
Cash flow/unreinvested dividends	(7.3)		(9.6)		0.1		(16.8)
Net long-term inflows(1)	1.4		6.5		0.3		8.2

Transfers	1.1		(0.3)		(0.8)		—

Market appreciation	55.5		67.5		24.2		147.2
Net change	58.0		73.7		23.7		155.4
Balance as of March 31, 2021	$	314.7	$	272.3	$	110.2	$	697.2

(1)Institutional net flows include $10.8 billion of AXA's redemptions of certain low-fee fixed income mandates for the twelve-month periods ended March 31, 2021.

Index


	Investment Service
	Equity Actively Managed		Equity Passively Managed(1)		Fixed Income Actively Managed - Taxable		Fixed Income Actively Managed - Tax- Exempt		Fixed Income Passively Managed(1)		Alternatives/ Multi-Asset Solutions(2)		Total
	(in billions)
Balance as of December 31, 2020	$	217.8	$	64.5	$	263.2	$	50.3	$	8.5	$	81.6	$	685.9
Long-term flows:
Sales/new accounts	15.6		0.2		12.4		3.4		—		1.7		33.3
Redemptions/terminations	(9.3)		(0.6)		(12.2)		(2.0)		(0.1)		—		(24.2)
Cash flow/unreinvested dividends	(2.6)		(1.6)		(1.0)		0.2		0.3		0.8		(3.9)
Net long-term inflows (outflows)	3.7		(2.0)		(0.8)		1.6		0.2		2.5		5.2

Market appreciation (depreciation)	10.3		3.8		(10.2)		(0.1)		(0.4)		2.7		6.1
Net change	14.0		1.8		(11.0)		1.5		(0.2)		5.2		11.3
Balance as of March 31, 2021	$	231.8	$	66.3	$	252.2	$	51.8	$	8.3	$	86.8	$	697.2












Balance as of March 31, 2020	$	141.5	$	47.2	$	236.1	$	45.9	$	10.3	$	60.8	$	541.8
Long-term flows:
Sales/new accounts	54.9		1.4		52.0		10.8		—		6.6		125.7
Redemptions/terminations	(36.9)		(2.4)		(50.7)		(8.6)		(0.3)		(1.8)		(100.7)
Cash flow/unreinvested dividends	(8.3)		(4.4)		(5.4)		0.4		(1.8)		2.7		(16.8)
Net long-term inflows (outflows)(3)	9.7		(5.4)		(4.1)		2.6		(2.1)		7.5		8.2


Market appreciation	80.6		24.5		20.2		3.3		0.1		18.5		147.2
Net change	90.3		19.1		16.1		5.9		(2.0)		26.0		155.4
Balance as of March 31, 2021	$	231.8	$	66.3	$	252.2	$	51.8	$	8.3	$	86.8	$	697.2

(1)Includes index and enhanced index services.

(3)~~Approximately $900 million~~ Fixed income – taxable investment service net flows include $10.8 billion of ~~non-investment management fee earning taxable and tax-exempt money market assets~~AXA's redemptions of certain low-fee fixed income mandates for the twelve-month periods ended March 31, 2021.

~~were removed from assets under management during the second quarter of 2019.~~

Index

Net long-term inflows (outflows) for actively managed investment services as compared to passively managed investment services for the three-month and twelve-month periods ended March 31, ~~2020~~2021 are as follows:


	Periods Ended March 31, 2021
	Three-months		Twelve-months
	(in billions)
Actively Managed
Equity	$	3.7	$	9.7
Fixed Income	0.8		(1.5)
Alternatives/Multi-Asset Solutions	2.0		6.6
	6.5		14.8
Passively Managed
Equity	(2.0)		(5.4)
Fixed Income	0.2		(2.1)
Alternatives/Multi-Asset Solutions	0.5		0.9
	(1.3)		(6.6)
Total net long-term inflows	$	5.2	$	8.2

Periods Ended March 31, 2020
Three-months Twelve-months
(in billions)
Actively Managed
Equity $ 1.4
$ 4.3
Fixed Income (6.4 ) 15.1
Other (0.2 ) 2.9
(5.2 ) 22.3
Passively Managed

Equity (1.3 ) (4.6 )
Fixed Income 0.7
0.3
Other 0.2
0.6
(0.4 ) (3.7 )
Total net long-term inflows $ (5.6 ) $ 18.6

Average assets under management by distribution channel and investment service are as follows:

Three Months Ended March 31,
2020 2019 $ Change % Change
(in billions)
Distribution Channel:
Institutions $ 276.6
$ 252.2
$ 24.4
9.7 %
Retail 229.0
193.4
35.6
18.4
Private Wealth Management 96.4
93.6
2.8
3.0
Total $ 602.0
$ 539.2
$ 62.8
11.7
Investment Service:
Equity Actively Managed $ 164.8
$ 148.5
$ 16.3
11.0 %
Equity Passively Managed⁽¹⁾
55.4
53.9
1.5
2.9
Fixed Income Actively Managed – Taxable 256.7
223.4
33.3
14.9
Fixed Income Actively Managed – Tax-exempt 47.7
42.6
5.1
12.1
Fixed Income Passively Managed⁽¹⁾
9.7
9.4
0.3
2.6
Other ⁽²⁾
67.7
61.4
6.3
10.1
Total $ 602.0
$ 539.2
$ 62.8
11.7


	Three Months Ended March 31,
	2021		2020		$ Change		% Change
	(in billions)
Distribution Channel:
Institutions	$	313.4	$	276.6	$	36.8	13.3	%
Retail	268.0		229.0		39.0		17.1
Private Wealth Management	107.1		96.4		10.7		11.1
Total	$	688.5	$	602.0	$	86.5	14.4	%
Investment Service:
Equity Actively Managed	$	223.4	$	164.8	$	58.6	35.5	%
Equity Passively Managed(1)	64.6		55.4		9.2		16.6
Fixed Income Actively Managed – Taxable	257.3		256.7		0.6		0.2
Fixed Income Actively Managed – Tax-exempt	51.2		47.7		3.5		7.3
Fixed Income Passively Managed(1)	8.4		9.7		(1.3)		(13.5)
Alternatives/Multi-Asset Solutions(2)	83.6		67.7		15.9		23.5
Total	$	688.5	$	602.0	$	86.5	14.4	%

(1)Includes index and enhanced index services.

(2)Includes certain multi-asset solutions and services not included in equity of fixed income services. Prior to December 31, 2020, this investment service line was disclosed as “Other.” In order to reflect the increasing significance of our Alternatives and ~~certain alternative investments.~~Multi-Asset Solutions services, we updated the investment service line to “Alternatives and Multi-Asset Solutions."

Our Institutional channel first quarter average AUM of ~~$276.6~~$313.4 billion increased ~~$24.4~~$36.8 billion, or ~~9.7%~~13.3%, compared to the first quarter of ~~2019. However, ending Institutional~~2020, primarily due to this AUM ~~of $256.7~~increasing $58.0 billion, ~~were flat~~or 22.6%, to $314.7 billion over the last twelve months. ~~This~~The $58.0 billion increase primarily resulted from market appreciation of $55.5 billion and net inflows of ~~$7.6 billion, offset by market depreciation of $7.6 billion (with $26.5 billion of market depreciation occurring in the first quarter of 2020).~~$1.4 billion.

Our Retail channel first quarter average AUM of ~~$229.0~~$268.0 billion increased ~~$35.6~~$39.0 billion, or ~~18.4%~~17.1%, compared to the first quarter of ~~2019. However, ending Retail~~2020, primarily due to this AUM ~~decreased $3.3~~increasing $73.7 billion, or ~~1.6%~~37.1%, to ~~$198.6~~$272.3 billion over the last twelve months. The ~~$3.3~~$73.7 billion ~~decrease~~increase primarily resulted from market ~~depreciation~~appreciation of ~~$16.5~~$67.5 billion ~~(with $35.3 billion of market depreciation occurring in the first quarter of 2020), partially offset by~~and net inflows of ~~$13.1~~$6.5 billion.

Our Private Wealth Management channel first quarter average AUM of ~~$96.4~~$107.1 billion increased ~~$2.8~~$10.7 billion, or ~~3.0%~~11.1%, compared to the first quarter of ~~2019. However, ending Private Wealth Management~~2020, primarily due to this AUM ~~decreased $9.7~~increasing $23.7 billion, or ~~10.1%~~27.3%, to ~~$86.5~~$110.2 billion over the

Index

last twelve months. The ~~$9.7~~$23.7 billion ~~decrease~~increase primarily resulted from market ~~depreciation~~appreciation of ~~$6.7 billion (with $13.9 billion of market depreciation occurring in the first quarter of 2020), net outflows of $2.1~~$24.2 billion and ~~an adjustment~~net inflows of ~~$0.9 billion in~~$0.3 billion.

Furthermore, regarding each of our three client channels described above, our AUM declined precipitously during March 2020 resulting from the ~~second quarter of 2019 relating~~adverse market reaction to the ~~removal~~onset of ~~non-investment management fee earning assets.~~

~~Index~~

the COVID-19 pandemic.

Absolute investment composite returns, gross of fees, and relative performance as of March 31, ~~2020~~2021 compared to benchmarks for certain representative Institutional equity and fixed income services are as follows:


	1-Year		3-Year(1)		5-Year(1)

Global High Income - Hedged (fixed income)
Absolute return	27.4	%	4.6	%	7.0	%
Relative return (vs. Bloomberg Barclays Global High Yield Index - Hedged)	3.9		(0.8)		(0.1)
Global Plus - Hedged (fixed income)
Absolute return	6.2		4.5		3.9
Relative return (vs. Bloomberg Barclays Global Aggregate Index - Hedged)	4.7		0.1		0.6
Intermediate Municipal Bonds (fixed income)
Absolute return	6.5		4.2		2.9
Relative return (vs. Lipper Short/Int. Blended Muni Fund Avg)	2.2		1.0		0.7
U.S. Strategic Core Plus (fixed income)
Absolute return	4.9		5.1		4.0
Relative return (vs. Bloomberg Barclays U.S. Aggregate Index)	4.2		0.5		0.9
Emerging Market Debt (fixed income)
Absolute return	21.8		3.8		5.8
Relative return (vs. JPM EMBI Global/JPM EMBI)	7.5		(0.1)		1.0
Sustainable Global Thematic (equity)
Absolute return	72.4		20.2		19.6
Relative return (vs. MSCI ACWI Index)	17.8		8.1		6.4
International Strategic Core Equity (equity)
Absolute return	32.3		4.8		8.0
Relative return (vs. MSCI EAFE Index)	(12.2)		(1.2)		(0.8)
U.S. Small & Mid Cap Value (equity)
Absolute return	98.6		10.5		12.6
Relative return (vs. Russell 2500 Value Index)	11.1		(0.4)		0.5
U.S. Strategic Value (equity)
Absolute return	63.1		8.4		9.4
Relative return (vs. Russell 1000 Value Index)	7.0		(2.5)		(2.3)
U.S. Small Cap Growth (equity)
Absolute return	98.1		27.9		28.5
Relative return (vs. Russell 2000 Growth Index)	7.9		10.8		9.9
U.S. Large Cap Growth (equity)
Absolute return	54.1		23.0		21.5
Relative return (vs. Russell 1000 Growth Index)	(8.7)		0.2		0.5

Index

1-Year 3-Year 5-Year

Global High Income - Hedged (fixed income)
Absolute return (11.6 )% (1.8 )% 1.6 %
Relative return (vs. Bloomberg Barclays Global High Yield Index - Hedged) (2.4 ) (1.6 ) (1.0 )
Global Fixed Income - Unhedged (fixed income)
Absolute return 4.2
3.4
2.6
Relative return (vs. Bloomberg Barclays Global Treasury Index) (1.1 ) (0.5 ) (0.3 )
Global Plus - Hedged (fixed income)
Absolute return 2.4
3.3
3.1
Relative return (vs. Bloomberg Barclays Global Aggregate Index - Hedged) (4.2 ) (1.4 ) (0.3 )
Intermediate Municipal Bonds (fixed income)
Absolute return 1.6
2.5
2.2
Relative return (vs. Lipper Short/Int. Blended Muni Fund Avg) (0.3 ) 0.3
0.5
U.S. Strategic Core Plus (fixed income)
Absolute return 5.8
4.2
3.4
Relative return (vs. Bloomberg Barclays U.S. Aggregate Index) (3.2 ) (0.7 ) 0.1
Emerging Market Debt (fixed income)
Absolute return (9.8 ) (1.3 ) 1.9
Relative return (vs. JPM EMBI Global/JPM EMBI) (4.5 ) (1.8 ) (0.9 )
U.S. Relative Value
Absolute return (17.0 ) 0.2
3.4
Relative return (vs. Russell 1000 Value Index) 0.2
2.4
1.5
International Strategic Core Equity
Absolute return (12.4 ) 1.3
2.9
Relative return (vs. MSCI EAFE Index) 2.0
3.2
3.6
U.S. Small & Mid Cap Value
Absolute return (30.9 ) (9.5 ) (2.6 )
Relative return (vs. Russell 2500 Value Index) (2.3 ) (1.1 ) (0.4 )
U.S. Strategic Value
Absolute return (21.3 ) (5.6 ) (2.3 )
Relative return (vs. Russell 1000 Value Index) (4.1 ) (3.5 ) (4.2 )
U.S. Small Cap Growth
Absolute return (8.9 ) 11.3
9.0
Relative return (vs. Russell 2000 Growth Index) 9.7
11.2
7.3
U.S. Large Cap Growth
Absolute return 3.4
14.2
12.4
Relative return (vs. Russell 1000 Growth Index) 2.5
2.9
2.0
U.S. Small & Mid Cap Growth
Absolute return (9.4 ) 9.3
7.3
Relative return (vs. Russell 2500 Growth Index) 5.0
5.9
3.6


	1-Year	3-Year(1)	5-Year(1)
U.S. Small & Mid Cap Growth (equity)
Absolute return	86.3	23.3	24.1
Relative return (vs. Russell 2500 Growth Index)	(1.2)	3.4	4.2
Concentrated U.S. Growth (equity)
Absolute return	61.2	22.2	20.5
Relative return (vs. S&P 500 Index)	4.8	5.4	4.2
Select U.S. Equity (equity)
Absolute return	56.9	16.5	16.7
Relative return (vs. S&P 500 Index)	0.6	(0.3)	0.4
Strategic Equities (equity)
Absolute return	57.3	15.5	14.2
Relative return (vs. Russell 3000 Index)	(5.2)	(1.6)	(2.4)
Global Core Equity (equity)
Absolute return	49.9	13.0	14.7
Relative return (vs. MSCI ACWI Index)	(4.7)	0.9	1.5
U.S. Strategic Core Equity (equity)
Absolute return	39.9	14.1	12.4
Relative return (vs. S&P 500 Index)	(16.4)	(2.7)	(3.9)
Select U.S. Equity Long/Short (alternatives)
Absolute return	31.5	11.8	11.2
Relative return (vs. S&P 500 Index)	(24.8)	(4.9)	(5.1)

(1)Reflects annualized returns.

~~Index~~

Index

1-Year 3-Year 5-Year
Concentrated U.S. Growth
Absolute return (5.0 ) 9.8
9.0
Relative return (vs. S&P 500 Index) 2.0
4.7
2.2
Select U.S. Equity
Absolute return (6.0 ) 6.0
6.6
Relative return (vs. S&P 500 Index) 1.0
0.9
(0.2 )
Strategic Equities
Absolute return (8.9 ) 4.2
5.5
Relative return (vs. Russell 3000 Index) 0.2
0.2
(0.3 )
Global Core Equity
Absolute return (9.4 ) 4.5
5.3
Relative return (vs. MSCI ACWI Index) 1.9
3.0
2.5
U.S. Strategic Core Equity
Absolute return (5.7 ) 5.5
7.0
Relative return (vs. S&P 500 Index) 1.3
0.4
0.2
Select U.S. Equity Long/Short
Absolute return (0.4 ) 5.8
5.2
Relative return (vs. S&P 500 Index) 6.6
0.7
(1.6 )

Our fixed income investment performance lagged in the first quarter of 2020. Most fixed income strategies maintained a strategic overweight to credit sectors, several of which experienced liquidity challenges amplified by deleveraging as market participants sold assets. High yield spreads widened dramatically in a very short time period, impacting our high yield strategies, and both sector and security selection in our funds was suboptimal. As a result, relative performance of many of our funds was poor, negatively impacting our one-, three-, and five-year track records. While we believe that performance will improve over time as liquidity pressures abate, it is possible that we will experience heightened redemptions in some of our fixed income strategies as a result of our lagging performance in the first quarter. Performance may also adversely affect our future sales of these services.

Consolidated Results of Operations

Three Months Ended March 31,
2020 2019 $ Change % Change
(in thousands, except per unit amounts)
Net revenues $ 874,156
$ 795,462
$ 78,694
9.9 %
Expenses 695,933
627,311
68,622
10.9
Operating income 178,223
168,151
10,072
6.0
Income taxes 9,474
8,921
553
6.2
Net income 168,749
159,230
9,519
6.0
Net income of consolidated entities attributable to non-controlling interests (25,571 ) 10,116
(35,687 ) n/m
Net income attributable to AB Unitholders $ 194,320
$ 149,114
$ 45,206
30.3

Diluted net income per AB Unit $ 0.71
$ 0.55
$ 0.16
29.1

Distributions per AB Unit $ 0.71
$ 0.56
$ 0.15
26.8

Operating margin ⁽¹⁾
23.3 % 19.9 %


	Three Months Ended March 31,
	2021			2020			$ Change		% Change
	(in thousands, except per unit amounts)
Net revenues	$	1,007,266		$	874,156		$	133,110	15.2	%
Expenses	746,682			695,933			50,749		7.3
Operating income	260,584			178,223			82,361		46.2
Income taxes	16,745			9,474			7,271		76.7
Net income	243,839			168,749			75,090		44.5
Net (loss) of consolidated entities attributable to non-controlling interests	(292)			(25,571)			25,279		(98.9)
Net income attributable to AB Unitholders	$	244,131		$	194,320		$	49,811	25.6

Diluted net income per AB Unit	$	0.89		$	0.71		$	0.18	25.4

Distributions per AB Unit	$	0.88		$	0.71		$	0.17	23.9

Operating margin (1)	25.9		%	23.3		%

(1)Operating income excluding net income (loss) attributable to non-controlling interests as a percentage of net revenues.

~~Index~~

Net income attributable to AB Unitholders for the three months ended March 31, ~~2020~~2021 increased ~~$45.2~~$49.8 million, or ~~30.3%~~25.6%, from the three months ended March 31, ~~2019.~~2020. The increase primarily is due to (in millions):


Higher base advisory fees	$	74.1
Higher investment gains	46.2
Higher distribution revenues	16.7
Higher performance-based fees	7.6
Lower amortization of intangible assets	5.0
Lower general and administrative expenses	2.0
Higher employee compensation and benefits expense	(43.8)
Higher net income of consolidated entities attributable to non-controlling interest	(25.3)
Higher promotion and servicing expense	(15.6)
Lower Bernstein Research Services revenue	(10.2)
Higher income tax expense	(7.3)
Other	0.4
	$	49.8

Higher base advisory fees $ 61.4
Higher Bernstein Research Services revenue 39.0
Higher net loss of consolidated entities attributable to non-controlling interest 35.7
Higher distribution revenues 30.3
Higher performance-based fees 3.8
Higher investment losses (60.0 )
Higher promotion and servicing expense (42.1 )
Higher employee compensation and benefits expense (23.0 )
Other 0.1
$ 45.2

Units Outstanding

Each quarter, we consider whether to implement a plan to repurchase AB Holding Units pursuant to Rules 10b5-1 and 10b-18 under the Exchange Act. A plan of this type allows a company to repurchase its shares at times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods or because it possesses material non-public information. Each broker we select has the authority under the terms and limitations specified in the plan to repurchase AB Holding Units on our ~~behalf in accordance with the terms of the plan.~~behalf. Repurchases are subject to regulations promulgated by the SEC, as well as certain price, market volume and timing constraints specified in the plan. The plan adopted during the first quarter of ~~2020~~2021 expired at the close of business on April ~~27, 2020.~~28, 2021. We may adopt additional plans in the future to engage in open-market purchases of AB Holding Units to help fund anticipated obligations under our incentive compensation award program and for other corporate purposes.

Index

Cash Distributions

We are required to distribute all of our Available Cash Flow, as defined in the AB Partnership Agreement, to our Unitholders and the General Partner. Available Cash Flow typically is the adjusted diluted net income per unit for the quarter multiplied by the number of general and limited partnership interests at the end of the quarter. In future periods, management anticipates that Available Cash Flow will continue to be based on adjusted diluted net income per unit, unless management determines, with concurrence of the Board of Directors, that one or more adjustments that are made for adjusted net income should not be made with respect to the Available Cash Flow calculation. See Note 6 to our consolidated financial statements contained in Item 1 for a description of Available Cash Flow.

Management Operating Metrics

We are providing the non-GAAP measures “adjusted net revenues,” “adjusted operating income” and “adjusted operating margin” because they are the principal operating metrics management uses in evaluating and comparing period-to-period operating performance. Management principally uses these metrics in evaluating performance because they present a clearer picture of our operating performance and allow management to see long-term trends without the distortion primarily caused by long-term incentive compensation-related mark-to-market adjustments, real estate charges and other adjustment items. Similarly, we believe that these management operating metrics help investors better understand the underlying trends in our results and, accordingly, provide a valuable perspective for investors.

These non-GAAP measures are provided in addition to, and not as substitutes for, net revenues, operating income and operating

margin, and they may not be comparable to non-GAAP measures presented by other companies. Management uses both accounting principles generally accepted in the United States of America ("US GAAP") and non-GAAP measures in evaluating our financial performance. The non-GAAP measures alone may pose limitations because they do not include all of our revenues and expenses.


	Three Months Ended March 31,
	2021		2020
	(in thousands, except per unit amounts)
Net revenues, US GAAP basis	$	1,007,266	$	874,156
Adjustments:
Distribution-related adjustments:
Distribution revenues	(147,600)		(130,857)
Investment advisory services fees	(22,553)		(14,814)
Pass-through adjustments:
Investment advisory services fees	(4,196)		(7,062)
Other revenues	(10,531)		(9,607)
Impact of consolidated company-sponsored funds	(311)		24,135
Long-term incentive compensation-related investment gains and dividend and interest	(2,097)		6,993
Write-down of investment	—		859

Adjusted net revenues	$	819,978	$	743,803

Index


	Three Months Ended March 31,
	2021			2020
	(in thousands, except per unit amounts)
Operating income, US GAAP basis	$	260,584		$	178,223
Adjustments:
Real estate	(985)			(339)
Long-term incentive compensation-related items	6			566
CEO's EQH award compensation	142			184
Write-down of investment	—			859
Acquisition-related expenses	22			526

Sub-total of non-GAAP adjustments	(815)			1,796
Less: Net (loss) of consolidated entities attributable to non-controlling interests	(292)			(25,571)
Adjusted operating income	260,061			205,590
Adjusted income taxes	16,722			10,362
Adjusted net income	$	243,339		$	195,228

Diluted net income per AB Unit, GAAP basis	$	0.89		$	0.71
Impact of non-GAAP adjustments	(0.01)			—
Adjusted diluted net income per AB Unit	$	0.88		$	0.71

Operating margin, GAAP basis	25.9		%	23.3		%
Impact of non-GAAP adjustments	5.8			4.3
Adjusted operating margin	31.7		%	27.6		%

Three Months Ended March 31,
2020 2019
(in thousands, except per unit amounts)
Net revenues, US GAAP basis $ 874,156
$ 795,462
Adjustments:

Distribution-related adjustments:
Distribution revenues (130,857 ) (100,509 )
Investment advisory services fees (14,814 ) (8,986 )
Pass-through adjustments:
Investment advisory services fees (7,062 ) (4,722 )
Other revenues (9,607 ) (7,759 )
Impact of consolidated company-sponsored funds 24,135
(10,959 )
Long-term incentive compensation-related investment gains and dividend and interest 6,993
(4,643 )
Write-down of investment 859
—
Adjusted net revenues $ 743,803
$ 657,884

Operating income, US GAAP basis $ 178,223
$ 168,151
Adjustments:

Real estate (339 ) —
Acquisition-related expenses 526
—
Long-term incentive compensation-related items 566
357
CEO's EQH award compensation 184
465
Write-down of investment 859
—
Sub-total of non-GAAP adjustments 1,796
822
Less: Net (loss) income of consolidated entities attributable to non-controlling interests (25,571 ) 10,116
Adjusted operating income 205,590
158,857
Adjusted income taxes 10,362
8,435
Adjusted net income $ 195,228
$ 150,422

Diluted net income per AB Unit, GAAP basis $ 0.71
$ 0.55
Impact of non-GAAP adjustments —
0.01
Adjusted diluted net income per AB Unit $ 0.71
$ 0.56

Adjusted operating margin 27.6 % 24.1 %

Adjusted operating income for the three months ended March 31, ~~2020~~2021 increased ~~$46.7~~$54.5 million, or ~~29.4%~~26.5%, from the three months ended March 31, ~~2019,~~2020, primarily due to higher investment advisory base fees of ~~$55.5~~$66.5 million, higher ~~Bernstein Research Services revenues~~performance-based fees of ~~$39.0~~$10.3 million, lower promotion and servicing expenses of $9.9 million, higher net investment gains of $9.1 million and lower amortization of intangible assets of $5.0 million, partially offset by higher employee compensation and benefits expense (excluding the impact of long-term incentive compensation-related items) of ~~$34.5~~$35.5 million, lower Bernstein Research Services revenues of $10.2 million and higher ~~net investment losses~~general and administrative expenses of ~~$10.6~~$2.6 million.

Adjusted Net Revenues

Net Revenue, as adjusted, is reduced to exclude all of the company's distribution revenues, which are recorded as a separate line

item on the consolidated statement of income, as well as a portion of investment advisory services fees received that is used to pay distribution and servicing costs. For certain products, based on the distinct arrangements, certain distribution fees are collected by us and ~~passed-through~~passed through to third-party client intermediaries, while for certain other products, we collect investment advisory services fees and a portion is ~~passed-through~~passed through to third-party client intermediaries. In both arrangements, the third-party client intermediary owns the relationship with the client and is responsible for performing services and distributing the product to the client on our behalf. We believe offsetting distribution revenues and certain investment advisory services fees is useful for our investors and other users of our financial statements because such presentation appropriately reflects the nature of these costs as

~~Index~~

pass-through payments to third parties that perform functions on behalf of our sponsored mutual funds and/or shareholders of these funds. Distribution-related adjustments fluctuate each period based on the type of investment products sold, as well as the average AUM over the period. Also, we adjust distribution revenues for the amortization of deferred sales commissions as these costs, over time, will offset such revenues.

~~Lastly, we~~We adjust investment advisory and services fees and other revenues for pass through costs, primarily related to our transfer agent and shareholder servicing fees. These fees do not affect operating income, but they do affect our operating margin. As such, we exclude these fees from adjusted net revenues.

We adjust for the revenue impact of consolidating company-sponsored investment funds by eliminating the consolidated company-sponsored investment funds' revenues and including AB's fees from such consolidated company-sponsored investment funds and AB's investment gains and losses on its investments in such consolidated company-sponsored investment funds that were eliminated in consolidation.

Index

~~Adjusted~~

Also, adjusted net revenues exclude investment gains and losses and dividends and interest on employee long-term incentive compensation-related investments.

~~During~~Lastly, during the first quarter of 2020, we wrote-off an investment ~~which~~that had been received in exchange for the sale of software technology, bringing the balance to zero. Previously, we had been excluding the value of this investment from adjusted net revenues.

Adjusted Operating Income

Adjusted operating income represents operating income on a US GAAP basis excluding (1) real estate charges (credits), (2) ~~acquisition-related expenses, (3)~~ the impact on net revenues and compensation expense of the investment gains and losses (as well as the dividends and interest) associated with employee long-term incentive compensation-related investments, ~~(4)~~(3) our CEO's EQH award compensation, as discussed below, ~~(5)~~(4) the write-down of an investment (discussed immediately above), (5) acquisition-related expenses, and (6) the impact of consolidated company-sponsored investment funds.

Real estate charges (credits) incurred have been excluded because they are not considered part of our core operating results when comparing financial results from period to period and to industry peers. ~~However, beginning in~~Real estate charges (credits) incurred during the fourth quarter of 2019 ~~real estate charges (credits),~~through the fourth quarter of 2020, while excluded in the period in which the charges (credits) ~~are~~were recorded, are included ratably over the remaining applicable lease term.

~~Acquisition-related expenses have been excluded because they are not considered part of our core operating results when comparing financial results from period to period and to industry peers.~~

Prior to 2009, a significant portion of employee compensation was in the form of long-term incentive compensation awards that were notionally invested in AB investment services and generally vested over a period of four years. AB economically hedged the exposure to market movements by purchasing and holding these investments on its balance sheet. All such investments had vested as of year-end 2012 and the investments have been delivered to the participants, except for those investments with respect to which the participant elected a long-term deferral. Fluctuation in the value of these investments, which also impacts compensation expense, is recorded within investment gains and losses on the income ~~statement and also impacts compensation expense.~~statement. Management believes it is useful to reflect the offset achieved from economically hedging the market exposure of these investments in the calculation of adjusted operating income and adjusted operating margin. The non-GAAP measures exclude gains and losses and dividends and interest on employee long-term incentive compensation-related investments included in revenues and compensation expense.

The board of directors of EQH granted to Seth P. Bernstein (“CEO”), our President and Chief Executive Officer, equity awards in connection with EQH's IPO and Mr. Bernstein's membership on the EQH Management Committee. Mr. Bernstein may receive additional equity or cash compensation from EQH in the future related to his service on the Management Committee. Any awards granted to Mr. Bernstein by EQH are recorded as compensation expense in AB’s consolidated statement of income. The compensation expense associated with these awards has been excluded from our non-GAAP measures because they are non-cash and are based upon EQH's, and not AB's, financial performance.

The write-off of the investmentdiscussed above in Adjusted net revenues has been excluded due to its non-recurring nature and because it is ~~are~~ not part of our core operating results.

~~Index~~

Acquisition-related expenses have been excluded because they are not considered part of our core operating results when comparing financial results from period to period and to industry peers.

We adjusted for the operating income impact of consolidating certain company-sponsored investment funds by eliminating the consolidated company-sponsored funds' revenues and expenses and including AB's revenues and expenses that were eliminated in consolidation. We also excluded the limited partner interests we do not own.

Adjusted Net Income and Adjusted Diluted Net Income per AB Unit

As previously discussed, our quarterly distribution is typically our adjusted diluted net income per unit (which is derived from adjusted net income) for the quarter multiplied by the number of general and limited partnership interests at the end of the quarter. Adjusted income taxes, used in calculating adjusted net income, are calculated using the GAAP effective tax rate adjusted for non-GAAP income tax adjustments.

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Adjusted Operating Margin

Adjusted operating margin allows us to monitor our financial performance and efficiency from period to period without the volatility noted above in our discussion of adjusted operating income and to compare our performance to industry peers on a basis that better reflects our performance in our core business. Adjusted operating margin is derived by dividing adjusted operating income by adjusted net revenues.

Net Revenues

The components of net revenues are as follows:


	Three Months Ended March 31,
	2021		2020		$ Change		% Change
	(in thousands)
Investment advisory and services fees:
Institutions:
Base fees	$	129,430	$	110,363	$	19,067	17.3	%
Performance-based fees	4,430		2,290		2,140		93.4
	133,860		112,653		21,207		18.8
Retail:
Base fees	330,397		296,371		34,026		11.5
Performance-based fees	2,965		749		2,216		n/m
	333,362		297,120		36,242		12.2
Private Wealth Management:
Base fees	227,864		206,853		21,011		10.2
Performance-based fees	8,380		5,099		3,281		64.3
	236,244		211,952		24,292		11.5
Total:
Base fees	687,691		613,587		74,104		12.1
Performance-based fees	15,775		8,138		7,637		93.8
	703,466		621,725		81,741		13.1

Bernstein Research Services	119,021		129,223		(10,202)		(7.9)
Distribution revenues	147,600		130,857		16,743		12.8
Dividend and interest income	8,684		20,465		(11,781)		(57.6)
Investment gains (losses)	1,928		(44,306)		46,234		n/m
Other revenues	27,711		25,511		2,200		8.6
Total revenues	1,008,410		883,475		124,935		14.1
Less: Interest expense	1,144		9,319		(8,175)		(87.7)
Net revenues	$	1,007,266	$	874,156	$	133,110	15.2

Three Months Ended March 31,
2020 2019 $ Change % Change
(in thousands)
Investment advisory and services fees:
Institutions:
Base fees $ 110,363
$ 110,080
$ 283
0.3 %
Performance-based fees 2,290
1,197
1,093
91.3
112,653
111,277
1,376
1.2
Retail:

Base fees 296,371
241,985
54,386
22.5
Performance-based fees 749
155
594
n/m
297,120
242,140
54,980
22.7
Private Wealth Management:

Base fees 206,853
200,165
6,688
3.3
Performance-based fees 5,099
3,012
2,087
69.3
211,952
203,177
8,775
4.3
Total:

Base fees 613,587
552,230
61,357
11.1
Performance-based fees 8,138
4,364
3,774
86.5
621,725
556,594
65,131
11.7

Bernstein Research Services 129,223
90,235
38,988
43.2
Distribution revenues 130,857
100,509
30,348
30.2
Dividend and interest income 20,465
27,346
(6,881 ) (25.2 )
Investment (losses) gains (44,306 ) 15,735
(60,041 ) n/m
Other revenues 25,511
22,206
3,305
14.9
Total revenues 883,475
812,625
70,850
8.7
Less: Interest expense 9,319
17,163
(7,844 ) (45.7 )
Net revenues $ 874,156
$ 795,462
$ 78,694
9.9

~~Index~~

Investment Advisory and Services Fees

Investment advisory and services fees are the largest component of our revenues. These fees generally are calculated as a percentage of the value of AUM as of a specified date, or as a percentage of the value of average AUM for the applicable billing period, and vary with the type of investment service, the size of account and the total amount of assets we manage for a particular client. Accordingly, fee income generally increases or decreases as AUM increase or decrease and is affected by market appreciation or depreciation, the addition of new client accounts or client contributions of additional assets to existing accounts, withdrawals of assets from and termination of client accounts, purchases and redemptions of mutual fund shares, shifts of assets between accounts or products with different fee structures, and acquisitions. Our average basis points realized (investment advisory and services fees divided by average AUM) generally approximate 3530 to 110 basis points for actively-managed equity services, 10 to 70 basis points for actively-managed fixed income services and 2 to 20 basis points for

Index

passively-managed services. Average basis points realized for other services could range from 4 basis points for certain Institutional third party managed services to over 100 basis points for certain Retail and Private Wealth Management alternative services. These ranges include all-inclusive fee arrangements (covering investment management, trade execution and other services) for our Private Wealth Management clients.

We calculate AUM using established market-based valuation methods and fair valuation (non-observable market) methods. Market-based valuation methods include: last sale/settle prices from an exchange for actively-traded listed equities, options and futures; evaluated bid prices from recognized pricing vendors for fixed income, asset-backed or mortgage-backed issues; mid prices from recognized pricing vendors and brokers for credit default swaps; and quoted bids or spreads from pricing vendors and brokers for other derivative products. Fair valuation methods include: discounted cash flow models or any other methodology that is validated and approved by our Valuation Committee (see paragraph immediately below for more information regarding our Valuation Committee). Fair valuation methods are used only where AUM cannot be valued using market-based valuation methods, such as in the case of private equity or illiquid securities.

The Valuation Committee, which consists of senior officers and employees, is responsible for overseeing the pricing and valuation of all investments held in client and AB portfolios. The Valuation Committee has adopted a Statement of Pricing Policies describing principles and policies that apply to pricing and valuing investments held in these portfolios. We also have a Pricing Group, which reports to the Valuation Committee and is responsible for overseeing the pricing process for all investments.

We sometimes charge our clients performance-based fees. In these situations, we charge a base advisory fee and are eligible to earn an additional performance-based fee or incentive allocation that is calculated as either a percentage of absolute investment results or a percentage of investment results in excess of a stated benchmark over a specified ~~time period.~~period of time. Some performance-based fees include a high-watermark provision, which generally provides that if a client account underperforms relative to its performance target (whether absolute or relative to a specified benchmark), it must gain back such underperformance before we can collect future performance-based fees. Therefore, if we fail to achieve our performance target for a particular period, we will not earn a performance-based fee for that period and, for accounts with a high-watermark provision, our ability to earn future performance-based fees will be impaired. We are eligible to earn performance-based fees on ~~7.8%~~5.6%, ~~8.4%~~8.8% and ~~0.7%~~0.8% of the assets we manage for institutional clients, private wealth clients and retail clients, respectively (in total, ~~5.3%~~4.2% of our AUM).

For the three months ended March 31, ~~2020,~~2021, our investment advisory and services fees increased by ~~$65.1~~$81.7 million, or ~~11.7%~~13.1%, from the three months ended March 31, ~~2019, primarily~~2020, due to a ~~$61.4~~$74.1 million, or ~~11.1%~~12.1%, increase in base fees ~~which~~and a $7.6 million increase in performance-based fees. The increase in base fees is primarily ~~resulted from~~due to a ~~11.7%~~14.4% increase in average AUM. ~~Additionally, performance-based fees increased $3.8 million.~~

Institutional investment advisory and services fees for the three months ended March 31, ~~2020~~2021 increased by ~~$1.4~~$21.2 million, or ~~1.2%~~18.8%, from the three months ended March 31, ~~2019, primarily~~2020, due to a ~~$1.1~~$19.1 million, or 17.3%, increase in base fees and a $2.1 million increase in performance-based fees. ~~Additionally,~~The increase in base fees ~~increased $0.3 million, or 0.3%.~~is primarily due a 13.3% increase in average AUM, as well as a higher portfolio fee rate.

Retail investment advisory and services fees for the three months ended March 31, ~~2020~~2021 increased by ~~$55.0~~$36.2 million, or ~~22.7%~~12.2%, from the three months ended March 31, ~~2019,~~2020, due to ana $34.0 million, or 11.5% increase in base fees ~~of $54.4~~and a $2.2 million ~~or 22.5%,~~increase in performance-based fees. The increase in base fees is primarily ~~resulting from an 18.4%~~due to a 17.1% increase in average ~~AUM. Additionally, performance-based fees increased $0.6 million.~~AUM, partially offset by a lower portfolio fee rate.

Private Wealth Management investment advisory and services fees for the three months ended March 31, ~~2020~~2021 increased by ~~$8.8~~$24.3 million, or ~~4.3%~~11.5%, from the three months ended March 31, ~~2019, primarily~~2020, due to a ~~$6.7~~$21.0 million, or ~~3.3%~~10.2%, increase in base fees ~~which~~and a $3.3 million increase in performance-based fees. The increase in base fees is primarily ~~resulted from a 3.0%~~due to an 11.1% increase in average AUM. ~~Additionally, performance-based fees increased $2.1 million, or 69.3%.~~

~~Index~~

Index

Bernstein Research Services

We earn revenues for providing investment research to, and executing brokerage transactions for, institutional clients. These clients compensate us principally by directing us to execute brokerage transactions on their behalf, for which we earn commissions, and to a lesser extent, but increasingly, by paying us directly for research through commission sharing agreements or cash payments.

Revenues from Bernstein Research Services for the three months ended March 31, ~~2020 increased $39.0~~2021 decreased $10.2 million, or ~~43.2%~~7.9%, from the three months ended March 31, 2020, due to reduced customer trading activity driven by fewer trading days and decreased market volatility, as compared to the ~~corresponding period~~COVID-related significant surge in ~~2019 due to increased customer~~ trading ~~activity attributed to greater global market volatility, as well as~~volume experienced during the ~~inclusion of revenues from our acquisition of Autonomous (which closed on April 1, 2019).~~three months ended March 31, 2020.

Distribution Revenues

Two of our subsidiaries act as distributors and/or placement agents of company-sponsored mutual funds and receive distribution services fees from certain of those funds as partial reimbursement of the distribution expenses they incur. Period-over-period fluctuations of distribution revenues typically are in line with fluctuations of the corresponding average AUM of these mutual funds.

Distribution revenues for the three months ended March 31, ~~2020~~2021 increased ~~$30.3~~$16.7 million, or ~~30.2%~~12.8%, ~~compared to~~from the ~~corresponding period in 2019,~~three months ended March 31, 2020, primarily due to the corresponding average AUM of these mutual funds increasing ~~31.6%~~12.4%.

Dividend and Interest Income and Interest Expense

Dividend and interest income consists primarily of investment income and interest earned on customer margin balances and U.S. Treasury Bills as well as dividend and interest income in our consolidated company-sponsored investment funds. Interest expense principally reflects interest accrued on cash balances in customers’ brokerage accounts.

Dividend and interest income for the three months ended March 31, ~~2020~~2021 decreased ~~$6.9~~$11.8 million, or ~~25.2%~~57.6%, ~~compared to~~from the ~~corresponding period in 2019,~~three months ended March 31, 2020, primarily due to lower interest earned on customer margin balances and U.S. Treasury Bills ~~offset by higher~~and lower dividend and interest income in our consolidated company-sponsored investment funds. Interest expense for the three months ended March 31, ~~2020~~2021 decreased ~~$7.8~~$8.2 million, or ~~45.7%~~87.7%, ~~compared to~~from the ~~corresponding period in 2019,~~three months ended March 31, 2020, due to lower interest paid on cash balances in customers' brokerage accounts.

Investment Gains (Losses)

Investment gains (losses) consist primarily of realized and unrealized investment gains or losses on: (i) employee long-term incentive compensation-related investments, (ii) U.S. Treasury Bills, (iii) market-making in exchange-traded options and equities, (iv) seed capital investments, (v) derivatives and (vi) investments in our consolidated company-sponsored investment funds. Investment gains (losses) also include equity in earnings of proprietary investments in limited partnership hedge funds that we sponsor and manage.

~~Index~~

Index

Investment gains (losses) ~~gains~~ are as follows:


	Three Months Ended March 31,
	2021		2020
	(in thousands)
Long-term incentive compensation-related investments:
Realized gains	$	2,052	$	1,412
Unrealized (losses)	(40)		(8,511)

Investments held by consolidated company-sponsored investment funds:
Realized gains (losses)	1,342		(3,193)
Unrealized (losses)	(6,941)		(52,115)

Seed capital investments:
Realized gains (losses)
Seed capital and other	2,557		(2,653)
Derivatives	(7,847)		31,183
Unrealized gains (losses)
Seed capital and other	567		(11,926)
Derivatives	10,166		(1,600)

Brokerage-related investments:
Realized gains (losses)	122		(453)
Unrealized (losses) gains	(50)		3,550
	$	1,928	$	(44,306)

Three Months Ended March 31,
2020 2019
(in thousands)
Long-term incentive compensation-related investments
Realized gains $ 1,412
$ 796
Unrealized (losses) gains (8,511 ) 3,700

Investments held by consolidated company-sponsored investment funds
Realized (losses) (3,193 ) (104 )
Unrealized (losses) gains (52,115 ) 21,930

Seed capital investments
Realized (losses) gains
Seed capital and other (2,653 ) 2,630
Derivatives 31,183
(13,794 )
Unrealized (losses) gains
Seed capital and other (11,926 ) 7,042
Derivatives (1,600 ) (5,952 )

Brokerage-related investments
Realized (losses) (453 ) (647 )
Unrealized gains 3,550
134
$ (44,306 ) $ 15,735

Other Revenues

Other revenues consist of fees earned for transfer agency services provided to company-sponsored mutual funds, fees earned for administration and recordkeeping services provided to company-sponsored mutual funds and the general accounts of EQH and its ~~respective~~ subsidiaries, and other miscellaneous revenues. Other revenues for the three months ended March 31, ~~2020~~2021 increased ~~$3.3~~$2.2 million, or ~~14.9%~~8.6%, compared to the corresponding period in ~~2019,~~2020, primarily due to higher shareholder servicing ~~fees.~~fees and higher brokerage income.

~~Index~~

Index

Expenses

The components of expenses are as follows:


	Three Months Ended March 31,
	2021		2020		$ Change		% Change
	(in thousands)
Employee compensation and benefits	$	406,059	$	362,272	$	43,787	12.1	%
Promotion and servicing:
Distribution-related payments	162,254		140,145		22,109		15.8
Amortization of deferred sales commissions	7,899		5,526		2,373		42.9
Trade execution, marketing, T&E and other	46,678		55,610		(8,932)		(16.1)
	216,831		201,281		15,550		7.7

General and administrative	120,223		122,267		(2,044)		(1.7)


Contingent payment arrangements	796		793		3		0.4
Interest on borrowings	1,294		2,834		(1,540)		(54.3)
Amortization of intangible assets	1,479		6,486		(5,007)		(77.2)
Total	$	746,682	$	695,933	$	50,749	7.3

Three Months Ended March 31,
2020 2019 $ Change % Change
(in thousands)
Employee compensation and benefits $ 362,272
$ 339,309
$ 22,963
6.8 %
Promotion and servicing:

Distribution-related payments 140,145
105,993
34,152
32.2
Amortization of deferred sales commissions 5,526
3,502
2,024
57.8
Trade execution, marketing, T&E and other 55,610
49,648
5,962
12.0
201,281
159,143
42,138
26.5
General and administrative 122,267
117,848
4,419
3.7
Contingent payment arrangements 793
54
739
n/m
Interest on borrowings 2,834
3,983
(1,149 ) (28.8 )
Amortization of intangible assets 6,486
6,974
(488 ) (7.0 )
Total $ 695,933
$ 627,311
$ 68,622
10.9

Employee Compensation and Benefits

Employee compensation and benefits consist of base compensation (including salaries and severance), annual short-term incentive compensation awards (cash bonuses), annual long-term incentive compensation awards, commissions, fringe benefits and other employment costs (including recruitment, training, temporary help and meals).

Compensation expense as a percentage of net revenues was ~~41.4%~~40.3% and ~~42.7%~~41.4% for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Compensation expense generally is determined on a discretionary basis and is primarily a function of our firm’s current-year financial performance. The amounts of incentive compensation we award are designed to motivate, reward and retain top talent while aligning our executives' interests with the interests of our Unitholders. Senior management, with the approval of the Compensation ~~and Workplace~~ Committee of the Board of Directors of AllianceBernstein Corporation (“Compensation Committee”), periodically confirms that the appropriate metric to consider in determining the amount of incentive compensation is the ratio of adjusted employee compensation and benefits expense to adjusted net revenues. Adjusted net revenues used in the adjusted compensation ratio are the same as the adjusted net revenues presented as a non-GAAP measure (discussed earlier in this Item 2). Adjusted employee compensation and benefits expense is total employee compensation and benefits expense minus other employment costs such as recruitment, training, temporary help and meals (which were ~~1.0%~~0.7% and ~~1.2%~~1.0%, respectively, of adjusted net revenues for the three months ended March 31, ~~2020 and 2019)~~2021), and excludes the impact of mark-to-market vesting expense, as well as dividends and interest expense, associated with employee long-term incentive compensation-related investments and the amortization expense associated with the awards issued by EQH to our firm's CEO relating to his role as a member of the EQH Management Committee. Senior management, with the approval of the Compensation Committee, has established as an objective that adjusted employee compensation and benefits expense generally should not exceed 50% of our adjusted net revenues, except in unexpected or unusual circumstances. Also, our adjusted compensation ratio reflects a balancing of the need to keep compensation levels competitive with industry peers in order to attract, motivate and retain highly-qualified talent with the need to maintain strong operating leverage in our business. The Compensation Committee works with management to help ensure both needs are sufficiently addressed. Our ~~ratios~~ratio of adjusted compensation expense as a percentage of adjusted net revenues ~~were~~was 48.5% ~~and 49.5%~~ for the three months ended March 31, ~~2020~~2021 and ~~2019, respectively.~~2020.

For the three months ended March 31, ~~2020,~~2021, employee compensation and benefits expense increased ~~$23.0~~$43.8 million, or ~~6.8%~~12.1%, compared to the three months ended March 31, ~~2019,~~2020, primarily due to higher incentive compensation of $39.1 million, higher fringes of $4.2 million and higher base compensation of ~~$10.3 million, higher incentive compensation of $9.8 million and higher commissions of $4.9~~$1.9 million, partially offset by lower ~~fringes~~other employment costs of $1.6 million.

Promotion and Servicing

Promotion and servicing expenses include distribution-related payments to financial intermediaries for distribution of AB mutual funds and amortization of deferred sales commissions paid to financial intermediaries for the sale of back-end load

Index

shares of AB mutual funds. Also included in this expense category are costs related to travel and entertainment, advertising and promotional materials.

~~Index~~

Promotion and servicing expenses increased ~~$42.1~~$15.6 million, or ~~26.5%~~7.7%, during the three months ended March 31, ~~2020~~2021 compared to the three months ended March 31, ~~2019.~~2020. The increase primarily was due to higher distribution-related payments of ~~$34.2 million, higher trade execution expenses of $4.1~~$22.1 million and higher ~~transfer fees~~amortization of deferred sales commissions of $2.4 million, partially offset by lower travel and entertainment expenses of $6.8 million and lower marketing and communication expenses of $3.0 million. The decrease in travel and entertainment and marketing expense is primarily a result of cost savings associated with the COVID-19 pandemic; we expect these costs to continue to increase in 2021 and further normalize in 2022, as the pandemic recedes.

General and Administrative

General and administrative expenses include portfolio services expenses, technology expenses, professional fees and office-related expenses (occupancy, communications and similar expenses). General and administrative expenses as a percentage of net revenues were ~~14.0%~~11.9% and ~~14.8%~~14.0% for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. General and administrative expenses ~~increased $4.4~~decreased $2.0 million, or ~~3.7%~~1.7%, during the three months ended March 31, ~~2020~~2021 compared to the corresponding period in ~~2019,~~2020, primarily due to ~~higher~~lower portfolio ~~service~~servicing fees of ~~$4.8 million, higher technology fees of $2.7 million and higher occupancy costs of $1.9 million, partially offset by lower professional fees of $4.6~~$2.1 million.

Contingent Payment Arrangements

Contingent payment arrangements reflect changes in estimates of contingent payment liabilities associated with acquisitions in previous periods, as well as accretion expense of these liabilities. There were no changes in ~~the~~our estimates during the first three months of ~~2020~~2021 or ~~2019.~~2020.

Income Taxes

AB, a private limited partnership, is not subject to federal or state corporate income taxes. However, AB is subject to a 4.0% New York City unincorporated business tax (“UBT”). Our domestic corporate subsidiaries are subject to federal, state and local income taxes and generally are included in the filing of a consolidated federal income tax return. Separate state and local income tax returns also are filed. Foreign corporate subsidiaries generally are subject to taxes in the jurisdictions where they are located.

Income tax expense for the three months ended March 31, ~~2020~~2021 increased ~~$0.6~~$7.3 million, or ~~6.2%~~76.7%, compared to the three months ended March 31, ~~2019 as~~2020. The increase was primarily due to a ~~result~~higher effective tax rate for the three months ended March 31, 2021 of ~~higher pre-tax income.~~6.4% compared to 5.3% for the corresponding period in 2020, driven by an increase in one-time discrete items. There were no material changes to uncertain tax positions (FIN 48 reserves) or valuation allowances against deferred tax assets ~~during~~for the ~~quarter.~~three months ended March 31, 2021.

Net Income (Loss) of Consolidated Entities Attributable to Non-Controlling Interests

Net income (loss) of consolidated entities attributable to non-controlling interests primarily consists of limited partner interests owned by other investors in our consolidated company-sponsored investment funds. ~~During~~For the ~~first~~ three months ~~of 2020,~~ended March 31, 2021, we had ~~$25.6~~$0.3 million of net losses of consolidated entities attributable to non-controlling interests compared to net ~~gains~~losses of ~~$10.1~~$25.6 million ~~during~~for the ~~first~~ three months ~~of 2019.~~ended March 31, 2020. Fluctuations period-to-period result primarily from the number of consolidated company-sponsored investment funds and their respective market performance.

CAPITAL RESOURCES AND LIQUIDITY

Cash flows from operating activities primarily include the receipt of investment advisory and services fees and other revenues offset by the payment of operating expenses incurred in the normal course of business. Our cash flows from operating activities have historically been positive and sufficient in supporting our operations. We do not anticipate this to change in the foreseeable future. Cash flows from investing activities generally consist of small capital expenditures and, when applicable, business acquisitions. Cash flows from financing activities primarily consist of issuance and repayment of debt and the repurchase of AB Holding units to fund our long-term deferred compensation plans. We are required to distribute all of our Available Cash Flow to our Unitholders and the General Partner.

During the first three months of ~~2020,~~2021, net cash provided by operating activities was ~~$286.7~~$328.0 million, compared to ~~$432.5~~$285.9 million during the corresponding ~~2019~~2020 period. The change reflects ~~higher~~lower net purchases of broker-dealer investments of ~~$467.1~~$71.1 million, ~~partially offset by net activity~~a

Index

decrease in other assets of ~~our consolidated funds of $147.5~~$49.1 million and an increase in broker-dealer related payables (net of receivables and segregated U.S. Treasury bills activity) of ~~$113.5~~$47.1 million, partially offset by net activity of our consolidated funds of $148.3 million.

During the first three months of ~~2020,~~2021, net cash used in investing activities was ~~$14.8~~$19.4 million, compared to ~~$5.6~~$14.8 million during the corresponding ~~2019~~2020 period. The change is primarily due to ~~an acquisition,~~higher purchases of furniture, equipment and leasehold improvements of $12.3 million, partially offset by lower cash paid for ~~which we paid $11.5 million, net~~acquisitions of ~~cash acquired.~~$7.7 million.

During the first three months of ~~2020,~~2021, net cash ~~provided by~~used in financing activities was ~~$112.5~~$381.9 million, compared to net cash ~~used~~provided of ~~$318.6~~$113.3 million during the corresponding ~~2019~~2020 period. The change reflects higher net ~~proceeds from the EQH facility~~repayments of ~~$270.0~~debt of $424.8 million, ~~an increase~~a decrease in overdrafts payable of ~~$150.7 million and higher net proceeds from commercial paper of $89.4 million, partially offset by higher distributions to consolidated company-sponsored investment funds of $75.1~~$86.6 million and higher distributions to the General Partner and Unitholders of ~~$62.3~~$35.9 million as a result of higher earnings (distributions on earnings are paid one quarter in arrears)., partially offset by lower redemptions of non-controlling interests of consolidated company-sponsored investment funds of $61.6 million.

As of March 31, ~~2020,~~2021, AB had ~~$975.3 million~~$1.0 billion of cash and cash equivalents (excluding cash and cash equivalents of consolidated company-sponsored investment funds), all of which is available for liquidity but consist primarily of cash on deposit for our broker-dealers related to various customer clearing activities, and cash held by foreign subsidiaries of ~~$599.0~~$608.2 million.

~~Index~~

Debt and Credit Facilities

See Note 16 to AB’s condensed consolidated financial statements contained in Item 1, for disclosures relating to our debt and credit facilities.

Our financial condition and access to public and private debt markets should provide adequate liquidity for our general business needs. Management believes that cash flow from operations and the issuance of debt and AB Units or AB Holding Units will provide us with the resources we need to meet our financial obligations. See “Cautions Regarding Forward-Looking Statements.”

COMMITMENTS AND CONTINGENCIES

AB’s capital commitments, which consist primarily of operating leases for office space, generally are funded from future operating cash flows.

During 2010, as general partner of AllianceBernstein U.S. Real Estate L.P. (“Real Estate Fund”), we committed to invest $25.0 million in the Real Estate Fund. As of March 31, ~~2020,~~2021, we had funded $22.4 million of this commitment. During 2014, as general partner of AllianceBernstein U.S. Real Estate II L.P. (“Real Estate Fund II”), we committed to invest ~~$28.0~~$27.3 million, as amended in ~~2015,~~2020, in Real Estate Fund II. As of March 31, ~~2020,~~2021, we had funded ~~$20.1~~$20.8 million of this commitment.

See Note 12 for discussion of contingencies.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the condensed consolidated financial statements and notes to condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.

~~With the exception of the assessment of our goodwill as~~ ~~discussed inNote 2 to AB’s condensed consolidated financial statements contained in Item 1,~~ ~~there~~There have been no updates to our critical accounting estimates from those disclosed in ““Management’s Discussion and Analysis of Financial ~~Condition~~Condition”” in our Form 10-K for the year ended December 31, ~~2019.~~2020.

ACCOUNTING PRONOUNCEMENTS

See Note 2 to AB’s condensed consolidated financial statements contained in Item 1.

~~Index~~

Index

CAUTIONS REGARDING FORWARD-LOOKING STATEMENTS

Certain statements provided by management in this report and in the portion of AB’s Form 10-Q attached hereto as Exhibit 99.1 are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The most significant of these factors include, but are not limited to, the following: the performance of financial markets, the investment performance of sponsored investment products and separately-managed accounts, general economic conditions, industry trends, future acquisitions, integration of acquired companies, competitive conditions and government regulations, including changes in tax regulations and rates and the manner in which the earnings of publicly-traded partnerships are taxed. We caution readers to carefully consider such factors. Further, these forward-looking statements speak only as of the date on which such statements are made; we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. For further information regarding these forward-looking statements and the factors that could cause actual results to differ, see “Risk Factors” in Part I, Item 1A of our Form 10-K for the year ended December 31, ~~2019~~2020 and Part II, Item 1A in this Form 10-Q. Any or all of the forward-looking statements that we make in our Form 10-K, this Form 10-Q, other documents we file with or furnish to the SEC, and any other public statements we issue, may turn out to be wrong. It is important to remember that other factors besides those listed in “Risk Factors” and those listed below could also adversely impact our revenues, financial condition, results of operations and business prospects.

The forward-looking statements referred to in the preceding paragraph, most of which directly affect AB but also affect AB Holding because AB Holding’s principal source of income and cash flow is attributable to its investment in AB, include statements regarding:

•

•Our belief that the cash flow AB Holding realizes from its investment in AB will provide AB Holding with the resources it needs to meet its financial obligations: AB Holding’s cash flow is dependent on the quarterly cash distributions it receives from AB. Accordingly, AB Holding’s ability to meet its financial obligations is dependent on AB’s cash flow from its operations, which is subject to the performance of the capital markets and other factors beyond our control.

•Our financial condition and ability to access the public and private capital markets providing adequate liquidity for our general business needs: Our financial condition is dependent on our cash flow from operations, which is subject to the performance of the capital markets, our ability to maintain and grow client assets under management and other factors beyond our control. Our ability to access public and private capital markets on reasonable terms may be limited by adverse market conditions, our firm’s credit ratings, our profitability and changes in government regulations, including tax rates and interest rates.

•The outcome of litigation: Litigation is inherently unpredictable, and excessive damage awards do occur. Though we have stated that we do not expect any pending legal proceedings to have a material adverse effect on our results of operations, financial condition or liquidity, any settlement or judgment with respect to a legal proceeding could be significant and could have such an effect.

•The possibility that we will engage in open market purchases of AB Holding Units to help fund anticipated obligations under our incentive compensation award program: The number of AB Holding Units AB may decide to buy in future periods, if any, to help fund incentive compensation awards depends on various factors, some of which are beyond our control, including the fluctuation in the price of an AB Holding Unit (NYSE: AB) and the availability of cash to make these purchases.

•Our determination that adjusted employee compensation expense should not exceed 50% of our adjusted net revenues: Aggregate employee compensation reflects employee performance and competitive compensation levels. Fluctuations in our revenues and/or changes in competitive compensation levels could result in adjusted employee compensation expense exceeding 50% of our adjusted net revenues.

•Our Relocation Strategy: While the expenses, expense savings and EPU impact we expect will result from our Relocation Strategy are presented with numerical specificity, and we believe these figures to be reasonable as of the date of this report, the uncertainties surrounding the assumptions on which our estimates are based create a significant risk that our current estimates may not be realized. These assumptions include:

• AB Holding’s cash flow is dependent on the quarterly cash distributions it receives from AB. Accordingly, AB Holding’s ability to meet its financial obligations is dependent on AB’s cash flow from its operations, which is subject to the performance of the capital markets and other factors beyond our control.

•

~~Our financial condition and ability to access the public and private capital markets providing adequate liquidity for our general business needs:~~ Our financial condition is dependent on our cash flow from operations, which is subject to the performance of the capital markets, our ability to maintain and grow client assets under management and other factors beyond our control. Our ability to access public and private capital markets on reasonable terms may be limited by adverse market conditions, our firm’s credit ratings, our profitability and changes in government regulations, including tax rates and interest rates.


•	~~The outcome of litigation:~~ Litigation is inherently unpredictable, and excessive damage awards do occur. Though we have stated that we do not expect any pending legal proceedings to have a material adverse effect on our results of operations, financial condition or liquidity, any settlement or judgment with respect to a legal proceeding could be significant and could have such an effect.

•

~~The possibility that we will engage in open market purchases of AB Holding Units to help fund anticipated obligations under our incentive compensation award program:~~ The number of AB Holding Units AB may decide to buy in future periods, if any, to help fund incentive compensation awards depends on various factors, some of which are beyond our control, including the fluctuation in the price of an AB Holding Unit (NYSE: AB) and the availability of cash to make these purchases.


•	~~Our determination that adjusted employee compensation expense should not exceed 50% of our adjusted net revenues:~~ Aggregate employee compensation reflects employee performance and competitive compensation levels. Fluctuations in our revenues and/or changes in competitive compensation levels could result in adjusted employee compensation expense exceeding 50% of our adjusted net revenues.

•

~~Our Relocation Strategy:~~ While the expenses, expense savings and EPU impact we expect will result from our Relocation Strategy are presented with numerical specificity, and we believe these figures to be reasonable as of the date of this report, the uncertainties surrounding the assumptions on which our estimates are based create a significant risk that our current estimates may not be realized. These assumptions include:

the amount and timing of employee relocation costs, severance and overlapping compensation and occupancy costs we experience; and

~~Index~~•

the timing for execution of each phase of our relocation implementation plan.

•

~~Our 2020 Margin Target: We previously adopted a goal of increasing~~

Index

•The Adverse Impact of COVID-19: The severity of any possible adverse impact on our adjusted operating margin to a target of 30% by 2020, subject to the assumptions, factors and contingencies described as part of the initial disclosure of this target. Our adjusted operating margin, which was 27.5% during 2019, increased to 27.6% during the first three months of 2020.

~~Our~~ AUM and ~~therefore, our investment advisory~~ revenues ~~including performance-based fee revenues, are heavily dependent~~of any economic downturn caused by the COVID-19 pandemic will depend on the ~~level~~depth and ~~volatility~~length of the ~~financial markets. Based upon~~downturn and its impact on the companies in which we invest. Our conclusions about the possible continuing adverse impact on us is based on our ~~current revenue~~assumptions that the recovery will be gradual and ~~expense projections, we do not~~that there will be lasting high unemployment and economic damage. We believe that ~~achieving the 2020 Margin Target is likely. However, we~~these assumptions are ~~taking additional actions to better align~~reasonable, but they may not be correct and economic conditions likely will differ from our expenses with our expected revenues. We remain committed to achieving an adjusted operating margin of 30% in years subsequent to 2020 and will take continued actions in this regard, subject to prevailing market conditions and the evolution of our business mix. Furthermore, our revenues may continue to be adversely affected by the severe economic impact of the novel coronavirus global pandemic ("COVID-19"). Please refer to “Risk Factors” below for additional information regarding the effect on our business COVID-19 has had and may continue to have.

•

~~The Adverse Impact of COVID-19:~~assumptions. The severity of the expected adverse impact on our AUM and revenues of the economic downturn caused by the COVID-19 pandemic will depend on the depth and length of the downturn and its impact on the companies in which we invest. Our conclusions about the possible continuing significant adverse impact on us is based on our assumptions that the recovery will be gradual and that there will be lasting high unemployment and economic damage. We believe that these assumptions are reasonable, but they may not be correct and economic conditions likely will be either better or worse than we have assumed.

•

~~Our fixed income investment performance:~~ The poor relative performance of many of our funds during the first quarter of 2020 negatively impacted the one-, three- and five-year track records of these funds. As a result, we may experience heightened redemptions in some of our fixed income strategies. An increase in redemptions, absent an offsetting increase in sales, would adversely affect our AUM, revenues and net income.


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~With the exception of the updates regarding Market Risk discussed under~~

~~Risk Factors in Part II, Item 1A, there~~There have been no material changes in AB’s market risk from the information provided under “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of AB's Form 10-K for the year ended December 31, ~~2019.~~2020.


~~Item 4.~~	~~Controls and Procedures~~

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Each of AB Holding and AB maintains a system of disclosure controls and procedures that is designed to ensure that information required to be disclosed in our reports under the Exchange Act is (i) recorded, processed, summarized and reported in a timely manner, and (ii) accumulated and communicated to management, including the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"), to permit timely decisions regarding our disclosure.

As of the end of the period covered by this report, management carried out an evaluation, under the supervision and with the participation of the CEO and the CFO, of the effectiveness of the design and operation of the disclosure controls and procedures. Based on this evaluation, the CEO and the CFO concluded that the disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the first quarter of ~~2020~~2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Index~~50

See Note 12 to the condensed consolidated financial statements contained in Part I, Item 1.

There have been no material changes to the risk factors from those appearing in our Annual Report on Form 10-K ("AB 10-K") for the fiscal year ended December 31, ~~2019.~~

We indicated in the AB 10-K that our revenues and results of operations depend on the market value and composition of our AUM, which can fluctuate significantly based on various factors, many of which are beyond our control. The dramatic securities market declines experienced during March 2020, which resulted from the global effects of COVID-19, caused a significant reduction in our AUM and may result in a significant reduction in our revenues and net income in 2020.

Global economies and financial markets are increasingly interconnected, which increases the probability that conditions in one country or region might adversely impact issuers in a different country or region, as experienced in the first quarter. Conditions affecting the general economy, including political, social or economic instability at the local, regional or global level may also affect the market value of our AUM. Health crises, such as the COVID-19 pandemic, as well as other incidents that interrupt the expected course of events, such as natural disasters, war or civil disturbance, acts of terrorism, power outages and other unforeseeable and external events, and the public response to or fear of such diseases or events, have and may in the future have a significant adverse effect on financial markets and our AUM, revenues and net income. Furthermore, the preventative and protective health-related actions, such as business activity suspensions and population lock-downs, that governments have taken, and will continue to take, in response to COVID-19 have resulted, and will continue to result, in periods of business interruption, inability to obtain raw materials, supplies and component parts, and reduced or disrupted operations. These circumstances are expected to cause a severe economic downturn accompanied by very high levels of unemployment, which will adversely affect the financial condition and results of operations of many of the companies in which we invest, and likely reduce the market value of their securities and thus our AUM and revenues. Furthermore, the significant market volatility and uncertainty, and reductions in the availability of margin financing, we experienced during the first quarter, severely limited the liquidity of certain asset backed and other securities, making it at times impossible to sell these securities at prices reflecting their true economic value. This lack of liquidity makes it more difficult for our funds to meet redemption requests. These circumstances, particularly if they worsen, may have a significant adverse effect on our AUM, revenues and net income in 2020.

~~Please see additional discussion in~~ ~~Management Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2.~~

AB Units bought by us or ~~sold by~~one of our affiliates during the first quarter of 2021 are as follows:



31.1			Certification of Mr. Bernstein furnished pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Mr. ~~Weisenseel~~Dibadj furnished pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1			Certification of Mr. Bernstein furnished for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of Mr. ~~Weisenseel~~ Dibadj furnished for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			XBRL Taxonomy Extension Schema.

101.CAL			XBRL Taxonomy Extension Calculation Linkbase.

101.LAB			XBRL Taxonomy Extension Label Linkbase.

101.PRE			XBRL Taxonomy Extension Presentation Linkbase.

101.DEF			XBRL Taxonomy Extension Definition Linkbase.

104			The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2020,~~2021, formatted in Inline XBRL (included in Exhibit 101).

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:

April ~~28, 2020~~29, 2021

ALLIANCEBERNSTEIN L.P.

By:

/s/ ~~John C. Weisenseel~~Ali Dibadj

~~John C. Weisenseel~~Ali Dibadj

Chief Financial Officer and Head of Strategy

By:

/s/ William R. Siemers

William R. Siemers

Chief Accounting Officer



	March 31, 2020		December 31, 2019
ASSETS
Cash and cash equivalents	$	975,263	$	679,738
Cash and securities segregated, at fair value (cost: $2,005,514 and $1,090,443)	2,012,562		1,094,866
Receivables, net:
Brokers and dealers	358,028		97,966
Brokerage clients	1,814,889		1,536,674
AB funds fees	214,672		261,588
Other fees	122,300		148,744
Investments:
Long-term incentive compensation-related	37,316		50,902
Other	225,192		215,892
Assets of consolidated company-sponsored investment funds:
Cash and cash equivalents	87,277		11,433
Investments	443,472		581,004
Other assets	39,538		19,810
Furniture, equipment and leasehold improvements, net	138,286		145,251
Goodwill	3,088,038		3,076,926
Intangible assets, net	49,004		55,366
Deferred sales commissions, net	49,280		36,296
Right-of-use assets	341,660		362,693
Other assets	446,460		330,943
Total assets	$	10,443,237	$	8,706,092

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND CAPITAL
Liabilities:
Payables:
Brokers and dealers	$	382,632	$	201,778
Securities sold not yet purchased	27,629		30,157
Brokerage clients	3,653,789		2,531,946
AB mutual funds	118,618		71,142
Accounts payable and accrued expenses	281,094		192,110
Lease liabilities	442,590		468,451
Liabilities of consolidated company-sponsored investment funds	104,875		31,017
Accrued compensation and benefits	346,445		276,829
Debt:
EQH Facility	830,000		560,000
Other	104,814		—
Total liabilities	6,292,486		4,363,430



	Three Months Ended March 31,
	2020		2019
	(in millions)
Total amount of AB Holding Units Purchased ⁽¹⁾	0.9		2.0
Total Cash Paid for AB Holding Units Purchased ⁽¹⁾	$	19.8	$	58.6
Open Market Purchases of AB Holding Units Purchased ⁽²⁾	0.8		1.9
Total Cash Paid for Open Market Purchases of AB Holding Units ⁽²⁾	$	17.3	$	55.2



	Classification	March 31, 2020			December 31, 2019
		(in thousands)
Operating Leases
Operating lease right-of-use assets	Right-of-use assets	$	337,933		$	360,185
Operating lease liabilities	Lease liabilities	438,854			465,907

Finance Leases
Property and equipment, gross	Right-of-use assets	5,167			3,825
Amortization of right-of-use assets	Right-of-use assets	(1,440		)	(1,317		)
Property and equipment, net		3,727			2,508
Finance lease liabilities	Lease liabilities	3,736			2,544



	Investment Service
	Equity Actively Managed			Equity Passively Managed⁽¹⁾			Fixed Income Actively Managed - Taxable			Fixed Income Actively Managed - Tax- Exempt			Fixed Income Passively Managed⁽¹⁾			Other⁽²⁾			Total
	(in billions)
Balance as of December 31, 2019	$	177.2		$	60.1		$	258.3		$	47.1		$	9.3		$	70.9		$	622.9
Long-term flows:
Sales/new accounts	12.1			0.4			14.7			2.9			—			1.5			31.6
Redemptions/terminations	(9.1		)	—			(19.8		)	(2.9		)	(0.1		)	(0.8		)	(32.7		)
Cash flow/unreinvested dividends	(1.6		)	(1.7		)	(1.3		)	—			0.8			(0.7		)	(4.5		)
Net long-term inflows (outflows)	1.4			(1.3		)	(6.4		)	—			0.7			—			(5.6		)
Acquisition	—			—			—			—			—			0.2			0.2
Market (depreciation) appreciation	(37.1		)	(11.6		)	(15.8		)	(1.2		)	0.3			(10.3		)	(75.7		)
Net change	(35.7		)	(12.9		)	(22.2		)	(1.2		)	1.0			(10.1		)	(81.1		)
Balance as of March 31, 2020	$	141.5		$	47.2		$	236.1		$	45.9		$	10.3		$	60.8		$	541.8

Balance as of March 31, 2019	$	155.1		$	55.8		$	227.2		$	43.8		$	9.3		$	63.5		$	554.7
Long-term flows:
Sales/new accounts	38.9			0.9			56.2			10.4			0.1			5.9			112.4
Redemptions/terminations	(29.4		)	(0.7		)	(42.1		)	(8.1		)	(0.4		)	(2.3		)	(83.0		)
Cash flow/unreinvested dividends	(5.2		)	(4.8		)	(1.1		)	(0.2		)	0.6			(0.1		)	(10.8		)
Net long-term inflows (outflows)	4.3			(4.6		)	13.0			2.1			0.3			3.5			18.6
Adjustments⁽³⁾	—			—			(0.4		)	(0.5		)	—			—			(0.9		)
Acquisition	—			—			—			—			—			0.2			0.2
Market (depreciation) appreciation	(17.9		)	(4.0		)	(3.7		)	0.5			0.7			(6.4		)	(30.8		)
Net change	(13.6		)	(8.6		)	8.9			2.1			1.0			(2.7		)	(12.9		)
Balance as of March 31, 2020	$	141.5		$	47.2		$	236.1		$	45.9		$	10.3		$	60.8		$	541.8



	Periods Ended March 31, 2020
	Three-months			Twelve-months
	(in billions)
Actively Managed
Equity	$	1.4		$	4.3
Fixed Income	(6.4		)	15.1
Other	(0.2		)	2.9
	(5.2		)	22.3
Passively Managed
Equity	(1.3		)	(4.6		)
Fixed Income	0.7			0.3
Other	0.2			0.6
	(0.4		)	(3.7		)
Total net long-term inflows	$	(5.6	)	$	18.6



	1-Year		3-Year		5-Year

Global High Income - Hedged (fixed income)
Absolute return	(11.6	)%	(1.8	)%	1.6	%
Relative return (vs. Bloomberg Barclays Global High Yield Index - Hedged)	(2.4	)	(1.6	)	(1.0	)
Global Fixed Income - Unhedged (fixed income)
Absolute return	4.2		3.4		2.6
Relative return (vs. Bloomberg Barclays Global Treasury Index)	(1.1	)	(0.5	)	(0.3	)
Global Plus - Hedged (fixed income)
Absolute return	2.4		3.3		3.1
Relative return (vs. Bloomberg Barclays Global Aggregate Index - Hedged)	(4.2	)	(1.4	)	(0.3	)
Intermediate Municipal Bonds (fixed income)
Absolute return	1.6		2.5		2.2
Relative return (vs. Lipper Short/Int. Blended Muni Fund Avg)	(0.3	)	0.3		0.5
U.S. Strategic Core Plus (fixed income)
Absolute return	5.8		4.2		3.4
Relative return (vs. Bloomberg Barclays U.S. Aggregate Index)	(3.2	)	(0.7	)	0.1
Emerging Market Debt (fixed income)
Absolute return	(9.8	)	(1.3	)	1.9
Relative return (vs. JPM EMBI Global/JPM EMBI)	(4.5	)	(1.8	)	(0.9	)
U.S. Relative Value
Absolute return	(17.0	)	0.2		3.4
Relative return (vs. Russell 1000 Value Index)	0.2		2.4		1.5
International Strategic Core Equity
Absolute return	(12.4	)	1.3		2.9
Relative return (vs. MSCI EAFE Index)	2.0		3.2		3.6
U.S. Small & Mid Cap Value
Absolute return	(30.9	)	(9.5	)	(2.6	)
Relative return (vs. Russell 2500 Value Index)	(2.3	)	(1.1	)	(0.4	)
U.S. Strategic Value
Absolute return	(21.3	)	(5.6	)	(2.3	)
Relative return (vs. Russell 1000 Value Index)	(4.1	)	(3.5	)	(4.2	)
U.S. Small Cap Growth
Absolute return	(8.9	)	11.3		9.0
Relative return (vs. Russell 2000 Growth Index)	9.7		11.2		7.3
U.S. Large Cap Growth
Absolute return	3.4		14.2		12.4
Relative return (vs. Russell 1000 Growth Index)	2.5		2.9		2.0
U.S. Small & Mid Cap Growth
Absolute return	(9.4	)	9.3		7.3
Relative return (vs. Russell 2500 Growth Index)	5.0		5.9		3.6



Higher base advisory fees	$	61.4
Higher Bernstein Research Services revenue	39.0
Higher net loss of consolidated entities attributable to non-controlling interest	35.7
Higher distribution revenues	30.3
Higher performance-based fees	3.8
Higher investment losses	(60.0		)
Higher promotion and servicing expense	(42.1		)
Higher employee compensation and benefits expense	(23.0		)
Other	0.1
	$	45.2


~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~


Period	Total Number of AB Units Purchased	Average Price Paid Per AB Unit, net of Commissions		Total Number of AB Units Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of AB Units that May Yet Be Purchased Under the Plans or Programs
1/1/21 - 1/31/21	—	$	—	—	—
2/1/21 - 2/28/21	—	—		—	—
3/1/21 - 3/31/21(1)	1,400	37.00		—	—
Total	1,400	$	37.00	—	—