Attached files
file | filename |
---|---|
EX-31.1 - EXHIBIT 31.1 - ALLIANCEBERNSTEIN L.P. | ex31_1.htm |
EXCEL - IDEA: XBRL DOCUMENT - ALLIANCEBERNSTEIN L.P. | Financial_Report.xls |
EX-32.2 - EXHIBIT 32.2 - ALLIANCEBERNSTEIN L.P. | ex32_2.htm |
EX-31.2 - EXHIBIT 31.2 - ALLIANCEBERNSTEIN L.P. | ex31_2.htm |
EX-32.1 - EXHIBIT 32.1 - ALLIANCEBERNSTEIN L.P. | ex32_1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended September 30, 2014
OR
o
|
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, NY 10105
(Address of principal executive offices)
(Zip Code)
(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
|
ý
|
No
|
o
|
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
Yes
|
ý
|
No
|
o
|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o
|
Accelerated filer o
|
|
Non-accelerated filer x (Do not check if a smaller reporting company)
|
Smaller reporting company o
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
|
o
|
No
|
ý
|
The number of units of limited partnership interest outstanding as of September 30, 2014 was 269,450,334.
Index to Form 10-Q
Page
|
||
Part I
|
||
FINANCIAL INFORMATION
|
||
Item 1.
|
||
1
|
||
2
|
||
3
|
||
4
|
||
5-19
|
||
Item 2.
|
20-38
|
|
Item 3.
|
38
|
|
Item 4.
|
38
|
|
Part II
|
||
OTHER INFORMATION
|
||
Item 1.
|
39
|
|
Item 1A.
|
39
|
|
Item 2.
|
39
|
|
Item 3.
|
39
|
|
Item 4.
|
39
|
|
Item 5.
|
40-41
|
|
Item 6.
|
42
|
|
43
|
Part I
FINANCIAL INFORMATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
(in thousands, except unit amounts)
September 30, 2014
|
December 31,
2013
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
534,979
|
$
|
509,891
|
||||
Cash and securities segregated, at fair value (cost: $506,211 and $980,458)
|
506,241
|
980,584
|
||||||
Receivables, net:
|
||||||||
Brokers and dealers
|
500,464
|
323,446
|
||||||
Brokerage clients
|
1,175,218
|
938,148
|
||||||
Fees
|
276,416
|
289,039
|
||||||
Investments:
|
||||||||
Long-term incentive compensation-related
|
97,058
|
117,579
|
||||||
Other
|
727,611
|
662,015
|
||||||
Furniture, equipment and leasehold improvements, net
|
163,720
|
174,518
|
||||||
Goodwill
|
3,044,807
|
2,986,539
|
||||||
Intangible assets, net
|
178,146
|
168,875
|
||||||
Deferred sales commissions, net
|
114,322
|
70,574
|
||||||
Other assets
|
185,398
|
164,643
|
||||||
Total assets
|
$
|
7,504,380
|
$
|
7,385,851
|
||||
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND CAPITAL
|
||||||||
Liabilities:
|
||||||||
Payables:
|
||||||||
Brokers and dealers
|
$
|
298,286
|
$
|
291,023
|
||||
Securities sold not yet purchased
|
93,944
|
71,983
|
||||||
Brokerage clients
|
1,416,880
|
1,698,469
|
||||||
AllianceBernstein mutual funds
|
150,594
|
133,005
|
||||||
Accounts payable and accrued expenses
|
484,036
|
529,004
|
||||||
Accrued compensation and benefits
|
618,496
|
324,243
|
||||||
Debt
|
399,940
|
268,398
|
||||||
Total liabilities
|
3,462,176
|
3,316,125
|
||||||
Commitments and contingencies (See Note 12)
|
||||||||
Redeemable non-controlling interest
|
16,504
|
—
|
||||||
Capital:
|
||||||||
General Partner
|
40,202
|
40,382
|
||||||
Limited partners: 269,450,334 and 268,373,419 units issued and outstanding
|
4,059,868
|
4,078,676
|
||||||
Receivables from affiliates
|
(16,919
|
)
|
(16,542
|
)
|
||||
Holding Units held for long-term incentive compensation plans
|
(39,478
|
)
|
(39,649
|
)
|
||||
Accumulated other comprehensive loss
|
(46,098
|
)
|
(35,381
|
)
|
||||
Partners’ capital attributable to AllianceBernstein Unitholders
|
3,997,575
|
4,027,486
|
||||||
Non-controlling interests in consolidated entities
|
28,125
|
42,240
|
||||||
Total capital
|
4,025,700
|
4,069,726
|
||||||
Total liabilities, redeemable non-controlling interest and capital
|
$
|
7,504,380
|
$
|
7,385,851
|
See Accompanying Notes to Condensed Consolidated Financial Statements.
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per unit amounts)
(unaudited)
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Revenues:
|
||||||||||||||||
Investment advisory and services fees
|
$
|
496,503
|
$
|
449,250
|
$
|
1,443,735
|
$
|
1,352,152
|
||||||||
Bernstein research services
|
112,147
|
107,355
|
354,129
|
331,811
|
||||||||||||
Distribution revenues
|
115,513
|
113,968
|
332,041
|
353,488
|
||||||||||||
Dividend and interest income
|
4,744
|
4,419
|
13,523
|
13,399
|
||||||||||||
Investment gains (losses)
|
(6,278
|
)
|
6,460
|
(4,891
|
)
|
21,761
|
||||||||||
Other revenues
|
27,589
|
25,272
|
81,362
|
79,027
|
||||||||||||
Total revenues
|
750,218
|
706,724
|
2,219,899
|
2,151,638
|
||||||||||||
Less: Interest expense
|
470
|
646
|
1,885
|
2,163
|
||||||||||||
Net revenues
|
749,748
|
706,078
|
2,218,014
|
2,149,475
|
||||||||||||
Expenses:
|
||||||||||||||||
Employee compensation and benefits
|
317,259
|
302,526
|
951,764
|
910,248
|
||||||||||||
Promotion and servicing:
|
||||||||||||||||
Distribution-related payments
|
107,859
|
102,426
|
308,469
|
325,348
|
||||||||||||
Amortization of deferred sales commissions
|
11,234
|
10,363
|
29,517
|
31,762
|
||||||||||||
Other
|
54,054
|
47,082
|
166,635
|
152,150
|
||||||||||||
General and administrative:
|
||||||||||||||||
General and administrative
|
107,967
|
104,599
|
321,367
|
314,008
|
||||||||||||
Real estate (credits) charges
|
(980
|
)
|
24,125
|
457
|
26,698
|
|||||||||||
Contingent payment arrangements
|
476
|
171
|
1,117
|
512
|
||||||||||||
Interest on borrowings
|
620
|
612
|
2,169
|
2,388
|
||||||||||||
Amortization of intangible assets
|
6,551
|
5,556
|
18,468
|
16,891
|
||||||||||||
Total expenses
|
605,040
|
597,460
|
1,799,963
|
1,780,005
|
||||||||||||
Operating income
|
144,708
|
108,618
|
418,051
|
369,470
|
||||||||||||
Income taxes
|
9,410
|
7,257
|
27,783
|
27,988
|
||||||||||||
Net income
|
135,298
|
101,361
|
390,268
|
341,482
|
||||||||||||
Net (loss) income of consolidated entities attributable to non-controlling interests
|
(4,500
|
)
|
1,413
|
(2,690
|
)
|
6,304
|
||||||||||
Net income attributable to AllianceBernstein Unitholders
|
$
|
139,798
|
$
|
99,948
|
$
|
392,958
|
$
|
335,178
|
||||||||
Net income per AllianceBernstein Unit:
|
||||||||||||||||
Basic
|
$
|
0.51
|
$
|
0.37
|
$
|
1.45
|
$
|
1.21
|
||||||||
Diluted
|
$
|
0.51
|
$
|
0.37
|
$
|
1.44
|
$
|
1.21
|
See Accompanying Notes to Condensed Consolidated Financial Statements.
AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Net income
|
$
|
135,298
|
$
|
101,361
|
$
|
390,268
|
$
|
341,482
|
||||||||
Other comprehensive (loss) income:
|
||||||||||||||||
Foreign currency translation adjustments
|
(15,081
|
)
|
9,057
|
(8,982
|
)
|
(9,620
|
)
|
|||||||||
Income tax benefit
|
—
|
—
|
—
|
—
|
||||||||||||
Foreign currency translation adjustments, net of tax
|
(15,081
|
)
|
9,057
|
(8,982
|
)
|
(9,620
|
)
|
|||||||||
Unrealized (losses) gains on investments:
|
||||||||||||||||
Unrealized (losses) gains arising during period
|
(36
|
)
|
137
|
806
|
440
|
|||||||||||
Less: reclassification adjustment for gains included in net income
|
5
|
—
|
2
|
6
|
||||||||||||
Change in unrealized (losses) gains on investments
|
(41
|
)
|
137
|
804
|
434
|
|||||||||||
Income tax benefit (expense)
|
126
|
(25
|
)
|
(160
|
)
|
(346
|
)
|
|||||||||
Unrealized gains (losses) on investments, net of tax
|
85
|
112
|
644
|
88
|
||||||||||||
Changes in employee benefit related items:
|
||||||||||||||||
Amortization of transition asset
|
—
|
—
|
—
|
(47
|
)
|
|||||||||||
Amortization of prior service cost
|
(1,299
|
)
|
(872
|
)
|
(3,898
|
)
|
(818
|
)
|
||||||||
Recognized actuarial gain
|
487
|
606
|
1,461
|
1,196
|
||||||||||||
Changes in employee benefit related items
|
(812
|
)
|
(266
|
)
|
(2,437
|
)
|
331
|
|||||||||
Income tax benefit (expense)
|
18
|
3
|
8
|
(96
|
)
|
|||||||||||
Employee benefit related items, net of tax
|
(794
|
)
|
(263
|
)
|
(2,429
|
)
|
235
|
|||||||||
Other comprehensive (loss) income
|
(15,790
|
)
|
8,906
|
(10,767
|
)
|
(9,297
|
)
|
|||||||||
Less: comprehensive (loss) income in consolidated entities attributable to non-controlling interests
|
(4,583
|
)
|
1,354
|
(2,740
|
)
|
6,147
|
||||||||||
Comprehensive income attributable to AllianceBernstein Unitholders
|
$
|
124,091
|
$
|
108,913
|
$
|
382,241
|
$
|
326,038
|
See Accompanying Notes to Condensed Consolidated Financial Statements.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30,
|
||||||||
2014
|
2013
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$
|
390,268
|
$
|
341,482
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Amortization of deferred sales commissions
|
29,517
|
31,762
|
||||||
Non-cash long-term incentive compensation expense
|
15,032
|
13,372
|
||||||
Depreciation and other amortization
|
48,245
|
45,763
|
||||||
Unrealized losses (gains) on investments
|
11,719
|
(36,305
|
)
|
|||||
Other, net
|
(9,860
|
)
|
(1,125
|
)
|
||||
Changes in assets and liabilities:
|
||||||||
Decrease in segregated cash and securities
|
474,343
|
716,970
|
||||||
(Increase) decrease in receivables
|
(413,972
|
)
|
85,778
|
|||||
(Increase) decrease in investments
|
(55,820
|
)
|
111,276
|
|||||
(Increase) in deferred sales commissions
|
(73,265
|
)
|
(11,144
|
)
|
||||
(Increase) in other assets
|
(17,582
|
)
|
(18,319
|
)
|
||||
(Decrease) in payables
|
(214,782
|
)
|
(1,067,994
|
)
|
||||
(Decrease) in accounts payable and accrued expenses
|
(33,571
|
)
|
(11,202
|
)
|
||||
Increase in accrued compensation and benefits
|
295,248
|
284,502
|
||||||
Net cash provided by operating activities
|
445,520
|
484,816
|
||||||
Cash flows from investing activities:
|
||||||||
Purchases of investments
|
(670
|
)
|
(7,950
|
)
|
||||
Proceeds from sales of investments
|
140
|
43
|
||||||
Purchases of furniture, equipment and leasehold improvements
|
(19,626
|
)
|
(13,069
|
)
|
||||
Proceeds from sales of furniture, equipment and leasehold improvements
|
240
|
11
|
||||||
Purchase of business, net of cash acquired
|
(60,610
|
)
|
—
|
|||||
Net cash used in investing activities
|
(80,526
|
)
|
(20,965
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Issuance (repayment) of commercial paper, net
|
90,931
|
(181,059
|
)
|
|||||
Proceeds from bank loan
|
40,000
|
20,000
|
||||||
(Decrease) increase in overdrafts payable
|
(21,462
|
)
|
40,149
|
|||||
Distributions to General Partner and unitholders
|
(433,917
|
)
|
(338,112
|
)
|
||||
Distributions to non-controlling interests in consolidated entities
|
(11,375
|
)
|
(4,355
|
)
|
||||
Capital contributions from General Partner
|
1,282
|
2,001
|
||||||
Capital contributions (to) from Holding
|
(1,411
|
)
|
2,707
|
|||||
Payments of contingent payment arrangements
|
(669
|
)
|
(2,657
|
)
|
||||
Additional investments by Holding from distributions paid to AllianceBernstein consolidated rabbi trust
|
—
|
12,987
|
||||||
Additional investments by Holding with proceeds from exercise of compensatory options to buy Holding Units
|
12,849
|
13,859
|
||||||
Purchases of Holding Units to fund long-term incentive compensation plan awards, net
|
(4,612
|
)
|
(44,903
|
)
|
||||
Purchases of AllianceBernstein Units
|
(1,375
|
)
|
(462
|
)
|
||||
Other
|
(27
|
)
|
(13
|
)
|
||||
Net cash used in financing activities
|
(329,786
|
)
|
(479,858
|
)
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
(10,120
|
)
|
(3,982
|
)
|
||||
Net increase (decrease) in cash and cash equivalents
|
25,088
|
(19,989
|
)
|
|||||
Cash and cash equivalents as of beginning of the period
|
509,891
|
627,182
|
||||||
Cash and cash equivalents as of end of the period
|
$
|
534,979
|
$
|
607,193
|
||||
Non-cash investing activities:
|
||||||||
Fair value of assets acquired
|
$
|
87,821
|
$
|
—
|
||||
Fair value of liabilities assumed
|
10,707
|
—
|
||||||
Fair value of redeemable non-controlling interest recorded
|
16,504
|
—
|
||||||
See Accompanying Notes to Condensed Consolidated Financial Statements.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2014
(unaudited)
The words “we” and “our” refer collectively to AllianceBernstein L.P. and its subsidiaries (“AllianceBernstein”), or to their officers and employees. Similarly, the word “company” refers to AllianceBernstein. These statements should be read in conjunction with AllianceBernstein’s audited consolidated financial statements included in AllianceBernstein’s Form 10-K for the year ended December 31, 2013.
1. | Business Description, Organization and Basis of Presentation |
Business Description
We provide research, diversified investment management 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 AXA and its 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 AllianceBernstein 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 Client 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 (including most institutions for which we manage accounts with less than $25 million in assets), 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 multi-asset strategies, wealth management and alternatives.
We provide a broad range of investment services with expertise in:
• | Actively-managed equity strategies, including style-pure (e.g., value and growth) and absolute return-focused strategies; |
• | Actively-managed traditional and unconstrained fixed income strategies, including taxable and tax-exempt strategies; |
• | Passive management, including index and enhanced index strategies; |
• | Alternative investments, including hedge funds, fund of funds and private equity (e.g., direct real estate investing); and |
• | Multi-asset solutions and services, including dynamic asset allocation, customized target-date funds, target-risk funds and other strategies tailored to help clients meet their investment goals. |
Our services span various investment disciplines, including market capitalization (e.g., large-, mid- and small-cap equities), term (e.g., long-, intermediate- and short-duration debt securities), and geographic location (e.g., U.S., international, global, emerging markets, regional and local), in major markets around the world.
Organization
As of September 30, 2014, AXA, a société anonyme organized under the laws of France and the holding company for an international group of insurance and related financial services companies, through certain of its subsidiaries (“AXA and its subsidiaries”) owns approximately 1.5% of the issued and outstanding units representing assignments of beneficial ownership of limited partnership interests in AllianceBernstein Holding L.P. (“Holding Units”).
As of September 30, 2014, the ownership structure of AllianceBernstein, expressed as a percentage of general and limited partnership interests, is as follows:
AXA and its subsidiaries
|
62.9
|
%
|
||
Holding
|
35.7
|
|||
Unaffiliated holders
|
1.4
|
|||
100.0
|
%
|
AllianceBernstein Corporation (a wholly-owned subsidiary of AXA, “General Partner”) is the general partner of both AllianceBernstein Holding L.P. (“Holding”) and AllianceBernstein. AllianceBernstein Corporation owns 100,000 general partnership units in Holding and a 1% general partnership interest in AllianceBernstein. Including both the general partnership and limited partnership interests in Holding and AllianceBernstein, AXA and its subsidiaries have an approximate 63.5% economic interest in AllianceBernstein as of September 30, 2014.
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 December 31, 2013 condensed consolidated statement of financial condition was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.
The condensed consolidated financial statements include AllianceBernstein and its majority-owned and/or controlled subsidiaries. All significant inter-company transactions and balances among the consolidated entities have been eliminated.
Reclassification
Prior-period amounts in regard to accretion expense related to contingent payment arrangements previously presented as a component of general and administrative expense are now presented separately as contingent payment arrangements in the condensed consolidated statements of income to conform to the current year’s presentation. In addition, prior-period amounts for Institutional and Private Client finders’ fees previously presented as other promotion and servicing are now presented as distribution-related payments in the condensed consolidated statements of income to conform to the current year’s presentation.
2.
|
Accounting Pronouncements
|
Recently Adopted Accounting Pronouncements
In March 2013, the Financial Accounting Standards Board (”FASB”) issued Accounting Standards Update (“ASU”) 2013-05, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. We adopted this standard prospectively, effective January 1, 2014, and there was no material impact on our financial condition or results of operations.
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. We adopted this standard prospectively, effective January 1, 2014, and there was no material impact on our financial condition or results of operations.
Accounting Pronouncements Not Yet Adopted
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The amendment is effective retrospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2016. Management is currently evaluating the impact that the adoption of this standard will have on our consolidated financial statements.
In June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period. The amendment is effective prospectively or retrospectively for fiscal years (and interim periods within those years) beginning after December 15, 2015 and is not expected to have a material impact on our financial condition or results of operations.
3.
|
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.
Awards granted in December 2013 and 2012 allowed participants to allocate their awards between restricted Holding Units and deferred cash. Participants (except certain members of senior management) generally could allocate up to 50% of their awards to deferred cash, not to exceed a total of $250,000 per award. Each of our employees based outside of the United States (other than expatriates) who received a 2013 award of $100,000 or less could have allocated up to 100% of his or her award to deferred cash. For the 2013 awards, participants made their elections prior to the Compensation Committee meeting on December 12, 2013, the date on which the awards were granted and were valued using the closing price of a Holding Unit on that day. For the 2012 awards, participants had until mid-January 2013 to make their elections. The number of restricted Holding Units issued equaled the remaining dollar value of the award divided by the average of the closing prices of a Holding Unit for a five business day period in January 2013 commencing after participants made their elections. For the 2013 and 2012 awards:
• | We engaged in open-market purchases of Holding Units, or purchased newly-issued Holding Units from Holding, that were awarded to participants and held in a consolidated rabbi trust. |
• | Quarterly distributions on vested and unvested Holding Units are paid currently to participants, regardless of whether or not a long-term deferral election has been made. |
• | Interest on deferred cash is accrued monthly based on our monthly weighted average cost of funds. |
We recognize compensation expense related to equity compensation grants in the financial statements using the fair value method. Fair value of restricted Holding Unit awards is the closing price of a Holding Unit on the grant date; fair value of options is determined using the Black-Scholes option valuation model. Under the fair value method, compensatory expense is measured at the grant date based on the estimated fair value of the award and is recognized over the required service period. For year-end long-term incentive compensation awards, employees who resign or are terminated without cause may retain their awards, subject to compliance with certain agreements and restrictive covenants set forth in the applicable award agreement, including restrictions on competition and employee and client solicitation, and a claw-back for failing to follow existing risk management policies. Most equity replacement, sign-on or similar deferred compensation awards included in separate employment agreements or arrangements include a required service period. Irrespective of whether or not the award agreement includes employee service requirements, Holding Units typically are distributed to employees ratably over four years, unless a long-term deferral election has been made.
Grants of restricted Holding Units and options to buy Holding Units typically are awarded to eligible members of the Board of Directors (“Eligible Directors”) of the General Partner during the second quarter. Restricted Holding Units are distributed on the third anniversary of the grant date and the options become exercisable ratably over three years. These restricted Holding Units and options are not forfeitable (except if the Eligible Director is terminated for “Cause”, as that term is defined in the applicable award agreement). Due to there being no service requirement, we fully expense these awards on each grant date.
We fund our restricted Holding Unit awards either by purchasing Holding Units on the open market or purchasing newly-issued Holding Units from Holding, all of which are then held in a consolidated rabbi trust until they are distributed to employees or retired. In accordance with the Amended and Restated Agreement of Limited Partnership of AllianceBernstein (“AllianceBernstein Partnership Agreement”), when AllianceBernstein purchases newly-issued Holding Units from Holding, Holding is required to use the proceeds it receives from AllianceBernstein to purchase the equivalent number of newly-issued AllianceBernstein Units, thus increasing its percentage ownership interest in AllianceBernstein. 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 AllianceBernstein.
During the third quarter and first nine months of 2014, we purchased approximately 0.1 million and 0.2 million Holding Units for $1.3 million and $5.4 million, respectively (on a trade date basis). These amounts reflect purchases of Holding Units from employees to allow them to fulfill statutory tax withholding requirements at the time of distribution of long-term incentive compensation awards. Purchases of Holding Units reflected on the condensed consolidated statement of cash flows are net of Holding Units purchased by employees as part of a distribution reinvestment election.
During the third quarter and first nine months of 2013, we purchased 0.8 million and 2.1 million Holding Units for $16.3 million and $43.3 million, respectively (on a trade date basis). These amounts reflect open-market purchases of 0.8 million and 1.9 million Holding Units for $15.3 million and $38.5 million, respectively, with the remainder relating to purchases of Holding Units from employees to allow them to fulfill statutory tax withholding requirements at the time of distribution of long-term incentive compensation awards. Purchases of Holding Units reflected on the condensed consolidated statement of cash flows are net of Holding Units purchased by employees as part of a distribution reinvestment election.
Each quarter, AllianceBernstein implements plans to repurchase Holding Units pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (“Exchange Act”). A Rule 10b5-1 plan 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 selected by AllianceBernstein has the authority under the terms and limitations specified in the plan to repurchase Holding Units on AllianceBernstein’s behalf in accordance with the terms of the plan. Repurchases are subject to SEC regulations as well as certain price, market volume and timing constraints specified in the plan. The plan adopted during the third quarter of 2014 expired at the close of business on October 22, 2014. AllianceBernstein did not buy any Holding Units pursuant to Rule 10b5-1 plans during the first nine months of 2014. AllianceBernstein may adopt additional Rule 10b5-1 plans in the future to engage in open-market purchases of Holding Units to help fund anticipated obligations under its incentive compensation award program and for other corporate purposes.
During the first nine months of 2014, we granted to employees and Eligible Directors 0.8 million restricted Holding Unit awards. During the first nine months of 2013, we granted to employees and Eligible Directors 6.9 million restricted Holding Unit awards (including 6.5 million granted in January 2013 for 2012 year-end awards). Prior to the third quarter of 2013 (and our decision described in the next paragraph to retire unallocated Holding Units in AllianceBernstein’s consolidated rabbi trust), we funded awards by allocating previously repurchased Holding Units that had been held in the rabbi trust. In the first nine months of 2014, we used Holding Units repurchased during the period and newly-issued Holding Units to fund restricted Holding Unit awards.
Effective July 1, 2013, management retired all unallocated Holding Units in AllianceBernstein’s consolidated rabbi trust. To retire such units, AllianceBernstein delivered the unallocated Holding Units held in the rabbi trust to Holding in exchange for the same number of AllianceBernstein units. Each entity then retired its units. As a result, on July 1, 2013, each of AllianceBernstein’s and Holding’s units outstanding decreased by approximately 13.1 million units. AllianceBernstein and Holding intend (subject to compliance with applicable safe harbor rules to avoid AllianceBernstein being treated as a publicly-traded partnership) to retire additional units as AllianceBernstein purchases Holding Units on the open market or from employees to allow them to fulfill statutory tax withholding requirements at the time of distribution of long-term incentive compensation awards, if such units are not required to fund new employee awards in the near future. If a sufficient number of Holding Units is not available in the rabbi trust to fund new awards, AllianceBernstein will purchase newly-issued Holding Units from Holding.
During the first nine months of 2014, Holding issued 753,622 Holding Units upon exercise of options to buy Holding Units. Holding used the proceeds of $12.8 million received from employees as payment in cash for the exercise price to purchase the equivalent number of newly-issued AllianceBernstein Units.
4.
|
Cash Distributions
|
AllianceBernstein is required to distribute all of its Available Cash Flow, as defined in the AllianceBernstein Partnership Agreement, to its unitholders and to the General Partner. Available Cash Flow can be summarized as the cash flow received by AllianceBernstein from operations minus such amounts as the General Partner determines, in its sole discretion, should be retained by AllianceBernstein 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 that one or more non-GAAP adjustments that are made for adjusted net income should not be made with respect to the Available Cash Flow calculation.
On October 23, 2014, the General Partner declared a distribution of $0.51 per AllianceBernstein Unit, representing a distribution of Available Cash Flow for the three months ended September 30, 2014. 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 November 20, 2014 to holders of record on November 3, 2014.
5.
|
Real Estate Charges
|
During 2010, we performed a comprehensive review of our real estate requirements in New York in connection with our workforce reductions commencing in 2008. As a result, during 2010 we decided to sub-lease over 380,000 square feet in New York (100% of this space has been sublet) and consolidate our New York-based employees into two office locations from three. During the third quarter of 2012, in an effort to further reduce our global real estate footprint, we completed a comprehensive review of our worldwide office locations and began implementing a global space consolidation plan. As a result, our intention is to sub-lease approximately 510,000 square feet of office space (in excess of 80% of this space has been sublet), more than 70% of which is New York office space (in addition to the 380,000 square foot space reduction in 2010), with the remainder consisting of office space in England, Australia and various U.S. locations.
During the first nine months of 2014, we recorded real estate charges of $0.5 million, comprising $0.8 million relating to W.P. Stewart & Co., Ltd. (“WPS”) acquired properties and $5.0 million of accelerated amortization of leasehold improvements (relating to the 2012 plan), offset by $5.3 million from a change in estimates relating to previously recorded real estate charges (primarily relating to the 2010 and 2012 plans).
The activity in the liability account relating to our 2010 and 2012 office space consolidation initiatives for the following periods is as follows:
Nine Months Ended September 30, 2014
|
Twelve Months Ended December 31, 2013
|
|||||||
(in thousands)
|
||||||||
Balance as of beginning of period
|
$
|
199,527
|
$
|
238,784
|
||||
(Credit) expense incurred
|
(4,899
|
)
|
18,371
|
|||||
Deferred rent
|
—
|
326
|
||||||
Payments made
|
(37,360
|
)
|
(62,627
|
)
|
||||
Interest accretion
|
3,464
|
4,673
|
||||||
Balance as of end of period
|
$
|
160,732
|
$
|
199,527
|
6.
|
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 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 units outstanding for each period.
Three Months Ended September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
(in thousands, except per unit amounts)
|
||||||||||||||||
Net income attributable to AllianceBernstein Unitholders
|
$
|
139,798
|
$
|
99,948
|
$
|
392,958
|
$
|
335,178
|
||||||||
Weighted average units outstanding - basic
|
269,372
|
264,709
|
268,874
|
273,521
|
||||||||||||
Dilutive effect of compensatory options to buy Holding Units
|
1,249
|
756
|
1,174
|
994
|
||||||||||||
Weighted average units outstanding – diluted
|
270,621
|
265,465
|
270,048
|
274,515
|
||||||||||||
Basic net income per AllianceBernstein Unit
|
$
|
0.51
|
$
|
0.37
|
$
|
1.45
|
$
|
1.21
|
||||||||
Diluted net income per AllianceBernstein Unit
|
$
|
0.51
|
$
|
0.37
|
$
|
1.44
|
$
|
1.21
|
For the three months and nine months ended September 30, 2014, we excluded 2,774,117 and 2,806,033 options, respectively, from the diluted net income per unit computation due to their anti-dilutive effect. For the three months and nine months ended September 30, 2013, we excluded 3,045,173 and 2,974,935 options, respectively, from the diluted net income per unit computation due to their anti-dilutive effect.
As discussed in Note 3, on July 1, 2013, management retired all unallocated Holding Units in AllianceBernstein’s consolidated rabbi trust, and, since that time, has continued to retire units as we have purchased Holding Units on the open market or from employees to allow them to fulfill statutory tax withholding requirements at the time of distribution of long-term incentive compensation awards, if such units are not required to fund new employee awards in the near future.
7.
|
Cash and Securities Segregated Under Federal Regulations and Other Requirements
|
As of September 30, 2014 and December 31, 2013, $0.4 billion and $0.9 billion, respectively, of United States Treasury Bills were segregated in a special reserve bank custody account for the exclusive benefit of brokerage customers of Sanford C. Bernstein & Co., LLC (one of our subsidiaries, “SCB LLC”) under Rule 15c3-3 of the Exchange Act.
AllianceBernstein Investments, Inc. (one of our subsidiaries, “AllianceBernstein Investments”), the distributor of company-sponsored mutual funds, maintains several special bank accounts for the exclusive benefit of customers. As of September 30, 2014 and December 31, 2013, $66.3 million and $56.0 million, respectively, of cash were segregated in these bank accounts.
8.
|
Investments
|
Investments consist of:
|
||||||||
September 30, 2014
|
December 31, 2013
|
|||||||
(in thousands)
|
||||||||
Available-for-sale (primarily seed capital)
|
$
|
5,942
|
$
|
4,858
|
||||
Trading:
|
||||||||
Long-term incentive compensation-related
|
72,590
|
88,385
|
||||||
United States Treasury Bills
|
28,987
|
38,986
|
||||||
Seed capital
|
433,537
|
316,681
|
||||||
Equities and exchange-traded options
|
127,593
|
130,059
|
||||||
Investments in limited partnership hedge funds:
|
||||||||
Long-term incentive compensation-related
|
24,468
|
29,194
|
||||||
Seed capital
|
51,446
|
75,354
|
||||||
Consolidated private equity fund (10% seed capital)
|
28,829
|
45,741
|
||||||
Private equity (seed capital)
|
46,022
|
45,360
|
||||||
Other
|
5,255
|
4,976
|
||||||
Total investments
|
$
|
824,669
|
$
|
779,594
|
Total investments related to long-term incentive compensation obligations of $97.1 million and $117.6 million as of September 30, 2014 and December 31, 2013, respectively, consist of company-sponsored mutual funds and hedge funds. For long-term incentive compensation awards granted before 2009, we typically made investments in our services 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 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 AllianceBernstein.
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.
United States Treasury Bills are held by SCB LLC in its investment account, the majority of which are pledged as collateral with clearing organizations. These clearing organizations have the ability by contract or custom to sell or re-pledge this collateral.
We provide seed capital to our investment teams to develop new products and services for our clients. The seed capital trading investments are equity and fixed income products, primarily in the form of separately-managed account portfolios, U.S. 1940 Act funds, Luxembourg funds, Japanese investment trust management funds or Delaware business trusts.
Trading securities also include long positions in corporate equities and long exchange-traded options traded through our options desk.
9.
|
Derivative Instruments
|
We enter into various futures, forwards and swaps to economically hedge certain seed money investments. In addition, we have currency forwards that economically hedge certain cash accounts. We do not hold any derivatives designated in a formal hedge relationship under Accounting Standards Codification (“ASC”) 815-10, Derivatives and Hedging.
The notional value and fair value as of September 30, 2014 and December 31, 2013 for derivative instruments not designated as hedging instruments were as follows:
Fair Value
|
||||||||||||
Notional
Value
|
Asset
Derivatives
|
Liability
Derivatives
|
||||||||||
(in thousands)
|
||||||||||||
September 30, 2014:
|
||||||||||||
Exchange-traded futures
|
$
|
75,706
|
$
|
2,946
|
$
|
241
|
||||||
Currency forwards
|
161,330
|
3,199
|
324
|
|||||||||
Interest rate swaps
|
81,976
|
1,177
|
1,552
|
|||||||||
Credit default swaps
|
52,880
|
475
|
175
|
|||||||||
Option swaps
|
286
|
266
|
160
|
|||||||||
Total return swaps
|
104,104
|
2,197
|
2,704
|
|||||||||
Total derivatives
|
$
|
476,282
|
$
|
10,260
|
$
|
5,156
|
Fair Value
|
||||||||||||
Notional
Value
|
Asset
Derivatives
|
Liability
Derivatives
|
||||||||||
(in thousands)
|
||||||||||||
December 31, 2013:
|
||||||||||||
Exchange-traded futures
|
$
|
63,107
|
$
|
289
|
$
|
2,542
|
||||||
Currency forwards
|
111,774
|
576
|
927
|
|||||||||
Interest rate swaps
|
81,253
|
1,149
|
573
|
|||||||||
Credit default swaps
|
42,270
|
696
|
126
|
|||||||||
Option swaps
|
144
|
87
|
86
|
|||||||||
Total return swaps
|
85,107
|
488
|
2,057
|
|||||||||
Total derivatives
|
$
|
383,655
|
$
|
3,285
|
$
|
6,311
|
As of September 30, 2014 and December 31, 2013, the derivative assets and liabilities are included in both receivables and payables to brokers and dealers on our condensed consolidated statements of financial condition.
The gains and losses for the three months and nine months ended September 30, 2014 and 2013 recognized in investment gains (losses) in the condensed consolidated statements of income were as follows:
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Exchange-traded futures
|
$
|
1,715
|
$
|
(4,664
|
)
|
$
|
(2,681
|
)
|
$
|
(6,909
|
)
|
|||||
Currency forwards
|
3,462
|
(2,365
|
)
|
450
|
(1,983
|
)
|
||||||||||
Interest rate swaps
|
170
|
(169
|
)
|
(1,757
|
)
|
337
|
||||||||||
Credit default swaps
|
320
|
(506
|
)
|
(59
|
)
|
(507
|
)
|
|||||||||
Options swaps
|
(93
|
)
|
(29
|
)
|
(235
|
)
|
(215
|
)
|
||||||||
Total return swaps
|
(1,154
|
)
|
(2,030
|
)
|
(10,764
|
)
|
(2,631
|
)
|
||||||||
Net gains (losses) on derivative instruments
|
$
|
4,420
|
$
|
(9,763
|
)
|
$
|
(15,046
|
)
|
$
|
(11,908
|
)
|
We may be exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. We take steps to minimize our counterparty exposure through a credit review and approval process. In addition, we 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 September 30, 2014 and December 31, 2013, we held $3.4 million and $1.4 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 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 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 related to each counterparty’s credit rating. In some ISDA Master Agreements, if the counterparty’s credit rating (or in some agreements, our AUM) falls below a specified threshold, either a default or a termination event permitting 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 September 30, 2014 and December 31, 2013, we delivered $5.4 million and $8.9 million, respectively, of cash collateral into brokerage accounts, which is reported in cash and cash equivalents in our condensed consolidated statements of financial condition.
10.
|
Offsetting Assets and Liabilities
|
Offsetting of securities borrowed as of September 30, 2014 and December 31, 2013 was as follows:
Gross Amounts of Recognized Assets
|
Gross Amounts Offset in the Statement of Financial Position
|
Net Amounts of Assets Presented in the Statement of Financial Position
|
Financial Instruments
|
Cash Collateral Pledged
|
Net Amount
|
|||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
September 30, 2014
|
$
|
157,545
|
$
|
—
|
$
|
157,545
|
$
|
—
|
$
|
157,545
|
$
|
—
|
||||||||||||
December 31, 2013
|
$
|
83,619
|
$
|
—
|
$
|
83,619
|
$
|
—
|
$
|
83,619
|
$
|
—
|
Offsetting of securities loaned as of September 30, 2014 and December 31, 2013 was as follows:
Gross Amounts of Recognized Liabilities
|
Gross Amounts Offset in the Statement of Financial Position
|
Net Amounts of Liabilities Presented in the
Statement of Financial Position
|
Financial Instruments
|
Cash Collateral Received
|
Net Amount
|
|||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
September 30, 2014
|
$
|
20,600
|
$
|
—
|
$
|
20,600
|
$
|
—
|
$
|
20,600
|
$
|
—
|
||||||||||||
December 31, 2013
|
$
|
65,101
|
$
|
—
|
$
|
65,101
|
$
|
—
|
$
|
65,101
|
$
|
—
|
11.
|
Fair Value
|
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 September 30, 2014 and December 31, 2013 was as follows:
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
(in thousands)
|
||||||||||||||||
September 30, 2014:
|
||||||||||||||||
Money markets
|
$
|
172,686
|
$
|
—
|
$
|
—
|
$
|
172,686
|
||||||||
U.S. Treasury Bills
|
—
|
470,439
|
—
|
470,439
|
||||||||||||
Available-for-sale
|
||||||||||||||||
Equity securities
|
5,712
|
—
|
—
|
5,712
|
||||||||||||
Fixed income securities
|
230
|
—
|
—
|
230
|
||||||||||||
Trading
|
||||||||||||||||
Equity securities
|
401,731
|
—
|
—
|
401,731
|
||||||||||||
Fixed income securities
|
203,723
|
1,788
|
—
|
205,511
|
||||||||||||
Long exchange-traded options
|
26,477
|
—
|
—
|
26,477
|
||||||||||||
Derivatives
|
2,946
|
7,314
|
—
|
10,260
|
||||||||||||
Private equity
|
10,743
|
208
|
53,649
|
64,600
|
||||||||||||
Total assets measured at fair value
|
$
|
824,248
|
$
|
479,749
|
$
|
53,649
|
$
|
1,357,646
|
||||||||
Securities sold not yet purchased
|
||||||||||||||||
Short equities – corporate
|
$
|
86,922
|
$
|
—
|
$
|
—
|
$
|
86,922
|
||||||||
Short exchange-traded options
|
7,022
|
—
|
—
|
7,022
|
||||||||||||
Derivatives
|
241
|
4,915
|
—
|
5,156
|
||||||||||||
Total liabilities measured at fair value
|
$
|
94,185
|
$
|
4,915
|
$
|
—
|
$
|
99,100
|
||||||||
December 31, 2013:
|
||||||||||||||||
Money markets
|
$
|
153,630
|
$
|
—
|
$
|
—
|
$
|
153,630
|
||||||||
U.S. Treasury Bills
|
—
|
964,953
|
—
|
964,953
|
||||||||||||
Available-for-sale
|
||||||||||||||||
Equity securities
|
4,794
|
—
|
—
|
4,794
|
||||||||||||
Fixed income securities
|
64
|
—
|
—
|
64
|
||||||||||||
Trading
|
||||||||||||||||
Equity securities
|
312,931
|
1,235
|
—
|
314,166
|
||||||||||||
Fixed income securities
|
194,085
|
4,253
|
—
|
198,338
|
||||||||||||
Long exchange-traded options
|
22,621
|
—
|
—
|
22,621
|
||||||||||||
Derivatives
|
289
|
2,996
|
—
|
3,285
|
||||||||||||
Private equity
|
19,836
|
8,934
|
52,081
|
80,851
|
||||||||||||
Total assets measured at fair value
|
$
|
708,250
|
$
|
982,371
|
$
|
52,081
|
$
|
1,742,702
|
||||||||
Securities sold not yet purchased
|
||||||||||||||||
Short equities – corporate
|
$
|
46,978
|
$
|
—
|
$
|
—
|
$
|
46,978
|
||||||||
Short exchange-traded options
|
25,005
|
—
|
—
|
25,005
|
||||||||||||
Derivatives
|
2,542
|
3,769
|
—
|
6,311
|
||||||||||||
Total liabilities measured at fair value
|
$
|
74,525
|
$
|
3,769
|
$
|
—
|
$
|
78,294
|
Following is 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 United States 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 and fixed income securities: Our equity and fixed income securities consist principally of company-sponsored mutual funds with net asset values and various separately-managed portfolios consisting primarily of equity and fixed income securities 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 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.
|
• | Private equity: Generally, the valuation of private equity investments owned by our consolidated venture capital fund requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity and the long-term nature of such investments. Private equity investments are valued initially at cost. The carrying values of private equity investments are adjusted either up or down from cost to reflect expected exit values as evidenced by financing and sale transactions with third parties, or when determination of a valuation adjustment is confirmed through ongoing review in accordance with our valuation policies and procedures. A variety of factors are reviewed and monitored to assess positive and negative changes in valuation, including current operating performance and future expectations of investee companies, industry valuations of comparable public companies, changes in market outlooks, and the third party financing environment over time. In determining valuation adjustments resulting from the investment review process, particular emphasis is placed on current company performance and market conditions. For these reasons, which make the fair value of private equity investments unobservable, equity investments are included in Level 3 of the valuation hierarchy. However, if private equity investments owned by our consolidated venture capital fund become publicly-traded, they are included in Level 1 of the valuation hierarchy. Also, if these investments contain trading restrictions, publicly-traded equity investments are included in Level 2 of the valuation hierarchy. During the second quarter of 2013, one of our private securities went public and, due to a trading restriction period, $19.2 million was transferred from a Level 3 classification to a Level 2 classification. During the first quarter of 2014, the trading restriction period for one of our public securities lapsed and, as a result, $3.0 million was transferred from a Level 2 classification to a Level 1 classification. During the second quarter of 2014, the trading restriction period for one of our public securities lapsed and, as a result, $4.0 million was transferred from a Level 2 classification to a Level 1 classification. During the third quarter of 2014, one of our investments began actively trading and, as a result, $1.6 million was transferred from a Level 3 classification to a Level 1 classification. |
• | 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. |
The change in carrying value associated with Level 3 financial instruments carried at fair value is as follows:
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Balance as of beginning of period
|
$
|
53,006
|
$
|
61,426
|
$
|
52,081
|
$
|
76,953
|
||||||||
Transfers out
|
(1,607
|
)
|
—
|
(1,607
|
)
|
(19,220
|
)
|
|||||||||
Purchases
|
—
|
2,289
|
2,821
|
2,386
|
||||||||||||
Sales
|
—
|
(2,632
|
)
|
(1,121
|
)
|
(2,666
|
)
|
|||||||||
Realized gains (losses), net
|
—
|
—
|
721
|
(6,581
|
)
|
|||||||||||
Unrealized gains (losses), net
|
2,250
|
(1,287
|
)
|
754
|
8,924
|
|||||||||||
Balance as of end of period
|
$
|
53,649
|
$
|
59,796
|
$
|
53,649
|
$
|
59,796
|
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. Approximately one-third of the Level 3 investments are private equity investments owned by our consolidated venture capital fund, of which we own 10% and non-controlling interests own 90%.
Quantitative information about Level 3 fair value measurements as of September 30, 2014 and December 31, 2013 is as follows:
Fair Value as of September 30, 2014
|
Valuation Technique
|
Unobservable Input
|
Range
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Private Equity:
|
||||||||||||||||
Technology, Media and Telecommunications
|
$
|
17,099
|
Market comparable companies
|
Revenue multiple
|
2.5 – 3.0
|
|||||||||||
Discount rate
|
18%
|
|
||||||||||||||
Discount years
|
1.25 years
|
As of September 30, 2014, there is only one Healthcare and Cleantech investment (fair value of $0.6 million) that is classified as Level 3. This investment’s valuation is based on liquidation value. In addition, we own a warrant (fair value of $0.1 million) that is classified as Level 3. This warrant’s valuation is determined using the Black-Scholes option valuation model. Also, we have an investment in a private equity fund focused exclusively on the energy sector (fair value of $7.2 million) that is classified as Level 3. This investment’s valuation is based on a market approach, considering recent transactions of the fund and the industry.
Fair Value as of December 31, 2013
|
Valuation Technique
|
Unobservable Input
|
Range
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Private Equity:
|
||||||||||||||||
Technology, Media and Telecommunications
|
$
|
13,956
|
Market comparable companies
|
Revenue multiple
|
2.5 – 3.5
|
|||||||||||
Discount rate
|
18%
|
|
||||||||||||||
Discount years
|
1.0
|
|||||||||||||||
Healthcare and Cleantech
|
$
|
2,892
|
Market comparable companies
|
Revenue multiple(1)
|
1.2 – 49.0
|
|||||||||||
R&D multiple(1)
|
1.1 – 17.1
|
|||||||||||||||
Discount for lack of marketability and risk factors
|
50-60%
|
(1) | The median for the Healthcare and Cleantech revenue multiple is 12.5; the median R&D multiple is 11.0. |
The significant unobservable inputs used in the fair value measurement of the reporting entities’ venture capital securities in the Technology, Media and Telecommunications areas are enterprise value to revenue multiples and a discount rate to account for the time until the securities are likely monetized and various risk factors. Significant increases (decreases) in the enterprise value to revenue multiple inputs in isolation would result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in the discount rate would result in a significantly lower (higher) fair value measurement.
The significant unobservable inputs used in the fair value measurement of the reporting entities’ venture capital securities in the Healthcare and Cleantech areas as of December 31, 2013 are enterprise value to revenue multiples, enterprise value to R&D investment multiples, and a discount for lack of marketability and various risk factors. Significant increases (decreases) in the enterprise value to revenue multiple and enterprise value to R&D investment multiple inputs in isolation would result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in the discount for lack of marketability and various risk factors in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the level of enterprise value to revenue multiple is accompanied by a directionally similar change in the assumption used for the enterprise value to R&D multiple. In addition, a change in the assumption used for the discount for lack of marketability and various risk factors is not correlated to changes in the assumptions used for the enterprise value to revenue multiple or the enterprise value to R&D investment multiple.
One of our private equity investments is a venture capital fund (fair value of $28.6 million and unfunded commitment of $7.8 million as of September 30, 2014) that invests in communications, consumer, digital media, healthcare and information technology markets. In addition, one of the investments included in our consolidated private equity fund (fair value of $0.1 million and no unfunded commitment as of September 30, 2014) is a venture capital fund investing in clean energy, resource and energy efficiency and other sustainable industries. The fair value of each of these investments has been estimated using the capital account balances provided by the partnerships. The interests in these partnerships cannot be redeemed.
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 nine months ended September 30, 2014 or during the year ended December 31, 2013.
12.
|
Commitments and Contingencies
|
Legal Proceedings
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 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 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.
During the first quarter of 2012, we received a legal letter of claim (“Letter of Claim”) sent on behalf of Philips Pension Trustees Limited and Philips Electronics U.K. Limited (“Philips”), a former pension fund client, alleging that AllianceBernstein Limited (one of our subsidiaries organized in the U.K.) was negligent and failed to meet certain applicable standards of care with respect to the initial investment in, and management of, a £500 million portfolio of U.S. mortgage-backed securities. The alleged damages range between $177 million and $234 million, plus compound interest on an alleged $125 million of realized losses in the portfolio. On January 2, 2014, Philips filed a claim form (“Claim”) in the High Court of Justice in London, England, which formally commenced litigation with respect to the allegations in the Letter of Claim.
We believe that any losses to Philips resulted from adverse developments in the U.S. housing and mortgage market that precipitated the financial crisis in 2008 and not from any negligence or failure on our part. We believe that we have strong defenses to these claims, which are set forth in our October 12, 2012 response to the Letter of Claim and our June 27, 2014 Statement of Defence in response to the Claim, and will defend this matter vigorously. Currently, we are unable to estimate a reasonably possible range of loss because the matter remains in its early stages.
In addition to the Claim discussed immediately above, we are involved in various other matters, including regulatory inquiries, administrative proceedings and litigation, some of which allege significant damages.
In management’s opinion, an adequate accrual has been made as of September 30, 2014 to provide for any probable losses regarding any litigation matters for which we can reasonably estimate an amount of loss. It is reasonably possible that we could incur additional losses pertaining to these matters, but currently we cannot estimate any such additional losses.
Management, after consultation with legal counsel, currently believes that the outcome of any 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 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.
13. Units Outstanding
Changes in limited partnership units outstanding during the nine-month period ended September 30, 2014 are as follows:
Outstanding as of December 31, 2013
|
268,373,419
|
|||
Options exercised
|
753,622
|
|||
Units issued
|
566,277
|
|||
Units retired
|
(242,984
|
)
|
||
Outstanding as of September 30, 2014
|
269,450,334
|
During the first nine months of 2014, we purchased 54,769 AllianceBernstein Units in private transactions and retired them.
As discussed in Note 3, on July 1, 2013, management retired all unallocated Holding Units in AllianceBernstein’s consolidated rabbi trust, and, since that time, has continued to retire units as we have purchased Holding Units on the open market or from employees to allow them to fulfill statutory tax withholding requirements at the time of distribution of long-term incentive compensation awards, if such units are not required to fund new employee awards in the near future.
14.
|
Income Taxes
|
As of September 30, 2014, we maintain valuation allowances of approximately $28 million, primarily due to the uncertainty of realizing net deferred tax assets given the recent losses incurred by certain of our subsidiaries. Management’s decision to maintain the valuation allowances on the net deferred tax assets of these subsidiaries requires significant judgment and an analysis of all the positive and negative evidence regarding the likelihood that these future benefits will be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the applicable net operating loss carryforward period are achieved or if objective negative evidence in the form of cumulative recent losses is no longer present. If a determination is made that it is “more likely than not” that a subsidiary will generate sufficient future taxable income to realize its net deferred tax assets, we will reduce the subsidiary’s valuation allowance, which would result in an income tax benefit in the period such a determination is made.
15.
|
Debt
|
As of September 30, 2014 and December 31, 2013, AllianceBernstein had $359.9 million and $268.4 million, respectively, in commercial paper outstanding with weighted average interest rates of approximately 0.2% and 0.3%, respectively. 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 nine months of 2014 and the full year 2013 were $361.2 million and $282.0 million, respectively, with weighted average interest rates of approximately 0.2% and 0.3%, respectively.
As of September 30, 2014, SCB LLC had $40.0 million in unsecured bank loans outstanding with an interest rate of 1.0%. As of December 31, 2013, SCB LLC had no bank loans outstanding. Average daily borrowings of bank loans during the first nine months of 2014 and full year 2013 were $6.1 million and $6.2 million, respectively, with a weighted average interest rate of approximately 1.0% for both periods.
AllianceBernstein has a $1.0 billion committed, unsecured senior revolving credit facility (the “Credit Facility”) with a group of commercial banks and other lenders. As of September 30, 2014 and December 31, 2013, we had no amounts outstanding under the Credit Facility. During the first nine months of 2014 and the full year 2013, we did not draw upon the Credit Facility.
On October 22, 2014, as part of an amendment and restatement, the maturity date of the Credit Facility was extended from January 17, 2017 to October 22, 2019. There were no other significant changes included in the amendment.
16.
|
Changes in Capital
|
Changes in capital during the nine-month period ended September 30, 2014 are as follows:
Partners’ Capital Attributable to AllianceBernstein Unitholders
|
Non-Controlling Interests In Consolidated Entities
|
Total Capital
|
||||||||||
(in thousands)
|
||||||||||||
Balance as of December 31, 2013
|
$
|
4,027,486
|
$
|
42,240
|
$
|
4,069,726
|
||||||
Comprehensive income:
|
||||||||||||
Net income
|
392,958
|
(2,690
|
)
|
390,268
|
||||||||
Other comprehensive income, net of tax:
|
||||||||||||
Unrealized gains on investments
|
644
|
—
|
644
|
|||||||||
Foreign currency translation adjustments
|
(8,932
|
)
|
(50
|
)
|
(8,982
|
)
|
||||||
Changes in employee benefit related items
|
(2,429
|
)
|
—
|
(2,429
|
)
|
|||||||
Comprehensive income
|
382,241
|
(2,740
|
)
|
379,501
|
||||||||
Distributions to General Partner and unitholders
|
(433,917
|
)
|
—
|
(433,917
|
)
|
|||||||
Purchases of AllianceBernstein Units
|
(1,375
|
)
|
—
|
(1,375
|
)
|
|||||||
Compensation-related transactions
|
23,140
|
—
|
23,140
|
|||||||||
Distributions to non-controlling interests
|
—
|
(11,375
|
)
|
(11,375
|
)
|
|||||||
Balance as of September 30, 2014
|
$
|
3,997,575
|
$
|
28,125
|
$
|
4,025,700
|
Changes in capital during the nine-month period ended September 30, 2013 are as follows:
Partners’ Capital Attributable to AllianceBernstein Unitholders
|
Non-Controlling Interests In Consolidated Entities
|
Total Capital
|
||||||||||
(in thousands)
|
||||||||||||
Balance as of December 31, 2012
|
$
|
3,759,766
|
$
|
43,502
|
$
|
3,803,268
|
||||||
Comprehensive income:
|
||||||||||||
Net income
|
335,178
|
6,304
|
341,482
|
|||||||||
Other comprehensive income, net of tax:
|
||||||||||||
Unrealized gains on investments
|
88
|
—
|
88
|
|||||||||
Foreign currency translation adjustments
|
(9,463
|
)
|
(157
|
)
|
(9,620
|
)
|
||||||
Changes in employee benefit related items
|
235
|
—
|
235
|
|||||||||
Comprehensive income
|
326,038
|
6,147
|
332,185
|
|||||||||
Distributions to General Partner and unitholders
|
(338,112
|
)
|
—
|
(338,112
|
)
|
|||||||
Receivables from affiliates
|
(4,517
|
)
|
—
|
(4,517
|
)
|
|||||||
Compensation-related transactions
|
126,090
|
—
|
126,090
|
|||||||||
Other
|
(462
|
)
|
(4,355
|
)
|
(4,817
|
)
|
||||||
Balance as of September 30, 2013
|
$
|
3,868,803
|
$
|
45,294
|
$
|
3,914,097
|
Deferred taxes are not recognized on foreign currency translation adjustments for foreign subsidiaries whose earnings are considered permanently invested outside the United States.
17.
|
Acquisitions
|
On June 20, 2014, we acquired an approximate 82% ownership interest in CPH Capital Fondsmaeglerselskab A/S (“CPH”), a Danish asset management firm that manages approximately $3 billion in global core equity assets for institutional investors, for a cash payment of $64.4 million. The valuation of the fair value of assets and liabilities acquired was determined provisionally as of June 30, 2014. The excess of the purchase price over the fair value of identifiable assets acquired resulted in the preliminary recognition of $85.8 million of goodwill as of June 30, 2014. Upon completion of the valuation, during the third quarter of 2014 we recorded $24.1 million of definite-lived intangible assets relating to separately-managed account relationships and $3.5 million of indefinite-lived intangible assets relating to an acquired fund’s investment contract. As a result of the recording of intangible assets, as well as other minor adjustments, recorded goodwill as of September 30, 2014 for this acquisition is $58.1 million. We also recorded redeemable non-controlling interest of $16.5 million relating to the fair value of the remaining approximate 18% of CPH. This acquisition does not have a significant impact on revenues and earnings. As a result, we have not provided supplemental pro forma information.
Executive Overview
Our total assets under management (“AUM”) as of September 30, 2014 were $473.0 billion, down $7.2 billion, or 1.5%, compared to June 30, 2014, and up $27.8 billion, or 6.2%, compared to September 30, 2013. During the third quarter of 2014, AUM decreased as a result of market depreciation of $8.9 billion and an AUM adjustment of $1.1 billion (we now exclude assets for which we provide administrative services but not investment management services from AUM), offset by net inflows of $2.8 billion (Institutional inflows of $2.8 billion and Private Client inflows of $0.1 billion, offset by Retail outflows of $0.1 billion).
Institutional AUM decreased $3.5 billion, or 1.5%, to $236.8 billion during the third quarter of 2014, primarily due to market depreciation of $5.3 billion and the AUM adjustment of $1.1 billion, offset by net inflows of $2.8 billion. Gross sales decreased $4.7 billion sequentially from $10.5 billion during the second quarter of 2014 to $5.8 billion during the third quarter of 2014. Additionally, redemptions and terminations increased 33.0% sequentially from $2.3 billion to $2.9 billion.
Retail AUM decreased $3.4 billion, or 2.0%, to $162.0 billion during the third quarter of 2014, primarily due to market depreciation of $3.2 billion and net outflows of $0.1 billion. Gross sales increased $0.2 billion sequentially from $11.4 billion during the second quarter of 2014 to $11.6 billion during the third quarter of 2014. Additionally, redemptions and terminations increased 13.5% sequentially from $9.0 billion to $10.2 billion.
Private Client AUM decreased $0.3 billion, or 0.3%, to $74.2 billion during the third quarter of 2014, due to market depreciation of $0.4 billion, offset by net inflows of $0.1 billion. Gross sales decreased 19.5% sequentially from $1.7 billion during the second quarter of 2014 to $1.4 billion during the third quarter of 2014. Additionally, redemptions and terminations decreased 54.6% sequentially from $2.0 billion to $1.0 billion.
Bernstein Research Services revenue for the third quarter of 2014 was $112.2 million, up $4.9 million, or 4.5%, compared to the third quarter of 2013, as a result of strong growth in Europe and Asia.
Net revenues for the third quarter increased $43.6 million, or 6.2%, to $749.7 million from $706.1 million in the third quarter of 2013. The most significant contributors to the increase were higher base advisory fees of $44.6 million and higher Bernstein Research Services revenue of $4.9 million, offset by lower investment gains and losses of $12.8 million. Operating expenses for the third quarter of 2014 increased $7.5 million, or 1.3%, to $605.0 million from $597.5 million in the third quarter of 2013. The increase was primarily due to higher employee compensation and benefits expenses of $14.8 million and higher promotion and servicing expenses of $13.2 million, offset by lower real estate charges of $25.1 million. Operating income for the third quarter of 2014 increased $36.1 million, or 33.2%, from the third quarter of 2013, and our operating margin increased from 15.2% (22.7% on an adjusted basis) in the third quarter of 2013 to 19.9% (23.8% on an adjusted basis) in the third quarter of 2014.
Assets Under Management
Assets under management by distribution channel are as follows:
As of September 30,
|
||||||||||||||||
2014
|
2013
|
$ Change
|
% Change
|
|||||||||||||
(in billions)
|
||||||||||||||||
Institutions
|
$
|
236.8
|
$
|
227.3
|
$
|
9.5
|
4.1
|
%
|
||||||||
Retail
|
162.0
|
149.8
|
12.2
|
8.1
|
||||||||||||
Private Client
|
74.2
|
68.1
|
6.1
|
9.1
|
||||||||||||
Total
|
$
|
473.0
|
$
|
445.2
|
$
|
27.8
|
6.2
|
Assets under management by investment service are as follows:
As of September 30,
|
||||||||||||||||
2014
|
2013
|
$ Change
|
% Change
|
|||||||||||||
(in billions)
|
||||||||||||||||
Equity
|
||||||||||||||||
Actively Managed
|
$
|
112.3
|
$
|
100.7
|
$
|
11.6
|
11.5
|
%
|
||||||||
Passively Managed(1)
|
49.6
|
46.2
|
3.4
|
7.5
|
||||||||||||
Total Equity
|
161.9
|
146.9
|
15.0
|
10.3
|
||||||||||||
Fixed Income
|
||||||||||||||||
Actively Managed
|
||||||||||||||||
Taxable
|
220.8
|
219.4
|
1.4
|
0.7
|
||||||||||||
Tax–exempt
|
31.1
|
29.4
|
1.7
|
5.5
|
||||||||||||
251.9
|
248.8
|
3.1
|
1.2
|
|||||||||||||
Passively Managed(1)
|
10.0
|
9.3
|
0.7
|
7.5
|
||||||||||||
Total Fixed Income
|
261.9
|
258.1
|
3.8
|
1.5
|
||||||||||||
Other(2)
|
49.2
|
40.2
|
9.0
|
22.5
|
||||||||||||
Total
|
$
|
473.0
|
$
|
445.2
|
$
|
27.8
|
6.2
|
_____________
(1) | Includes index and enhanced index services. |
(2) | Includes multi-asset solutions and services, and certain alternative investments. |
Changes in assets under management for the three-month, nine-month and twelve-month periods ended September 30, 2014 are as follows:
Distribution Channel
|
||||||||||||||||
Institutions
|
Retail
|
Private
Client
|
Total
|
|||||||||||||
(in billions)
|
||||||||||||||||
Balance as of June 30, 2014
|
$
|
240.3
|
$
|
165.4
|
$
|
74.5
|
$
|
480.2
|
||||||||
Long-term flows:
|
||||||||||||||||
Sales/new accounts
|
5.8
|
11.6
|
1.4
|
18.8
|
||||||||||||
Redemptions/terminations
|
(2.9
|
)
|
(10.2
|
)
|
(1.0
|
)
|
(14.1
|
)
|
||||||||
Cash flow/unreinvested dividends
|
(0.1
|
)
|
(1.5
|
)
|
(0.3
|
)
|
(1.9
|
)
|
||||||||
Net long-term inflows (outflows)
|
2.8
|
(0.1
|
)
|
0.1
|
2.8
|
|||||||||||
Transfers
|
0.1
|
(0.1
|
)
|
—
|
—
|
|||||||||||
AUM adjustment (3)
|
(1.1
|
)
|
—
|
—
|
(1.1
|
)
|
||||||||||
Market depreciation
|
(5.3
|
)
|
(3.2
|
)
|
(0.4
|
)
|
(8.9
|
)
|
||||||||
Net change
|
(3.5
|
)
|
(3.4
|
)
|
(0.3
|
)
|
(7.2
|
)
|
||||||||
Balance as of September 30, 2014
|
$
|
236.8
|
$
|
162.0
|
$
|
74.2
|
$
|
473.0
|
||||||||
Balance as of December 31, 2013
|
$
|
226.0
|
$
|
153.0
|
$
|
71.4
|
$
|
450.4
|
||||||||
Long-term flows:
|
||||||||||||||||
Sales/new accounts
|
19.1
|
32.9
|
5.3
|
57.3
|
||||||||||||
Redemptions/terminations
|
(8.5
|
)
|
(29.1
|
)
|
(4.6
|
)
|
(42.2
|
)
|
||||||||
Cash flow/unreinvested dividends
|
(4.8
|
)
|
(3.1
|
)
|
(0.5
|
)
|
(8.4
|
)
|
||||||||
Net long-term inflows
|
5.8
|
0.7
|
0.2
|
6.7
|
||||||||||||
Acquisitions
|
0.1
|
2.8
|
—
|
2.9
|
||||||||||||
Transfers
|
0.1
|
(0.1
|
)
|
—
|
—
|
|||||||||||
AUM adjustment (3)
|
(1.1
|
)
|
—
|
—
|
(1.1
|
)
|
||||||||||
Market appreciation
|
5.9
|
5.6
|
2.6
|
14.1
|
||||||||||||
Net change
|
10.8
|
9.0
|
2.8
|
22.6
|
||||||||||||
Balance as of September 30, 2014
|
$
|
236.8
|
$
|
162.0
|
$
|
74.2
|
$
|
473.0
|
||||||||
Balance as of September 30, 2013
|
$
|
227.3
|
$
|
149.8
|
$
|
68.1
|
$
|
445.2
|
||||||||
Long-term flows:
|
||||||||||||||||
Sales/new accounts
|
24.7
|
40.6
|
6.8
|
72.1
|
||||||||||||
Redemptions/terminations
|
(17.7
|
)
|
(39.6
|
)
|
(6.4
|
)
|
(63.7
|
)
|
||||||||
Cash flow/unreinvested dividends
|
(6.8
|
)
|
(4.2
|
)
|
(1.0
|
)
|
(12.0
|
)
|
||||||||
Net long-term inflows (outflows)
|
0.2
|
(3.2
|
)
|
(0.6
|
)
|
(3.6
|
)
|
|||||||||
Acquisitions
|
0.3
|
3.6
|
1.1
|
5.0
|
||||||||||||
Transfers
|
0.1
|
(0.1
|
)
|
—
|
—
|
|||||||||||
AUM adjustment (3)
|