AllianceBernstein LP
10/29/2026 | Press release | Distributed by Public on 10/29/2026 14:54
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Executive Overview
Our total assets under management ("AUM") as of September 30, 2026 were $900.4 billion, down $5.1 billion, or 0.6%, compared to June 30, 2026, and up $40.3 billion, or 4.7%, compared to September 30, 2025. During the third quarter of 2026 AUM decreased due to market depreciation of $11.7 billion, offset by net inflows of $6.6 billion (Institutional net inflows of $15.7 billion, offset by Retail net outflows of $8.4 billion and Private Wealth net outflows of $0.7 billion).
Institutional AUM increased $11.3 billion, or 3.0%, to $382.4 billion during the third quarter of 2026, due to net inflows of $15.7 billion, offset by market depreciation of $4.4 billion. Gross sales increased sequentially from $8.3 billion during the second quarter of 2026 to $21.5 billion during the third quarter of 2026. Redemptions and terminations decreased sequentially from $4.3 billion to $2.8 billion.
Retail AUM decreased $14.4 billion, or 3.9%, to $352.9 billion during the third quarter of 2026, due to net outflows of $8.4 billion and market depreciation of $6.0 billion. Gross sales decreased sequentially from $31.0 billion during the second quarter of 2026 to $20.0 billion during the third quarter of 2026. Redemptions and terminations decreased sequentially from $27.0 billion to $25.0 billion.
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Private Wealth AUM decreased $2.0 billion, or 1.2%, to $165.1 billion during the third quarter of 2026, due to market depreciation of $1.3 billion and net outflows of $0.7 billion. Gross sales increased sequentially from $5.5 billion during the second quarter of 2026 to $5.6 billion during the third quarter of 2026. Redemptions and terminations increased sequentially from $6.2 billion to $6.3 billion.
Net revenues for the third quarter of 2026 increased $88.4 million, or 7.8%, to $1.2 billion from $1.1 billion in the third quarter of 2025. The increase was primarily due to higher performance-based fees of $99.5 million and higher investment advisory base fees of $16.1 million, partially offset by lower distribution revenues of $13.1 million, higher investment losses of $8.7 million and lower net dividend and interest income of $3.6 million.
Operating expenses for the third quarter of 2026 increased $122.3 million, or 14.3%, to $976.0 million from $853.7 million in the third quarter of 2025. The increase is primarily due to higher employee compensation and benefits expense of $113.4 million and higher general and administrative expense of $27.6 million, partially offset by lower promotion and servicing expense of $16.3 million.
Operating income decreased $33.9 million, or 12.0%, to $249.5 million from $283.5 million in the third quarter of 2025 and our operating margin decreased to 21.9% in the third quarter of 2026 from 24.3% in the third quarter of 2025.
Market Environment
U.S. Equities
U.S. equities extended their gains in the third quarter of 2026, with the S&P 500 returning 2.3% despite rising bond yields, renewed energy-price pressures, and persistent inflation uncertainty. Investors largely looked through rate volatility, focusing instead on the resilience of economic growth, continued earnings strength, and companies' ability to sustain margins amid higher financing costs. Performance across sectors diverged sharply, favoring more value-oriented areas of the market. Energy was the clear standout, driven by higher oil prices and supply concerns stemming from the Middle East conflict. Technology also advanced, supported by sustained enthusiasm around artificial intelligence and long-cycle technology spending. Healthcare outperformed following the resolution of drug-pricing negotiations between federal health programs and major pharmaceutical companies, removing a key policy overhang. Conversely, real estate and utilities lagged as higher Treasury yields reduced the relative appeal of their dividend yields and pressured valuations. On the policy front, the Federal Reserve raised interest rates by 25 basis points to 3.75%-4.00% in September, its first increase since 2023. The 10-year Treasury yield ended the quarter at its highest level since 2007.
Global and Non-U.S. Equities
International equity markets delivered mixed results during the third quarter, with developed markets generally advancing while emerging markets posted modest declines. Markets navigated a backdrop of Middle East tensions, higher energy prices, and tighter global monetary policy. Eurozone equities edged lower as strength in energy, financials, and materials was offset by weakness in real estate and consumer discretionary sectors. The European Central Bank raised its deposit rate by 25 basis points to 2.50% as inflation accelerated to 3.2% in August from 2.0% a year earlier, while economic growth remained resilient. U.K. equities advanced despite persistent inflation pressures, with the Bank of England holding rates at 3.75% while maintaining a hawkish bias. Political developments, including Andy Burnham's replacement of Keir Starmer as Labour leader and prime minister, generated limited market reaction. Japanese equities gained, with the Tokyo Stock Price Index rising 3.8% in local-currency terms. Market leadership shifted throughout the quarter, rotating from AI- and semiconductor-related stocks toward value and cyclical sectors, before financials emerged as leaders following the Bank of Japan's decision to raise rates to 1.25%. Emerging markets modestly underperformed developed peers as enthusiasm surrounding the first-half AI rally faded. Korea was among the weakest markets, reflecting pressure on memory-chip manufacturers amid concerns over hyperscaler capital spending and increased Chinese competition. India also underperformed, while Chinese equities advanced. South Africa and Brazil were among the strongest performers, benefiting from higher commodity prices and favorable inflation developments.
Global Bonds
Global bond markets struggled during the third quarter as escalating geopolitical tensions and higher energy prices reinforced expectations that major central banks would maintain restrictive policy stances for a longer period of time. Strong economic data, including composite Purchasing Managers' Index readings that reached five-year highs in the U.S. and three-year highs in the eurozone, provided policymakers with additional room to keep monetary policy tight, pushing sovereign yields higher across major markets. The Federal Reserve's 25 basis point rate increase to 3.75%-4.00% was accompanied by further tightening abroad. The European Central Bank raised its deposit rate to 2.50%, while the Bank of Japan increased rates to 1.25%. The Bank of England held rates steady at 3.75%, though a divided vote underscored ongoing inflation concerns. By quarter-end, the 10-year U.S. Treasury yield had reached its highest closing level since 2007, while the 10-year German Bund yield climbed to its highest level since 2011. Meanwhile, the spread between French and German government bonds widened to its broadest level since 2012. Corporate credit remained relatively resilient through much of the quarter, supported by solid
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fundamentals and attractive all-in yields. However, the rise in government bond yields ultimately drove total returns into loss territory. High-yield bonds outperformed investment-grade credit on a total-return basis, benefiting from shorter duration and higher carry, although excess returns reflected losses across credit sectors.
Relationship with EQH and its Subsidiaries
Permanent Capital Deployment
EQH (our parent company) and its subsidiaries are our largest client. EQH is collaborating with AB in order to improve the risk-adjusted yield for the General Accounts of EQH's insurance subsidiaries by investing additional assets at AB, including the utilization of AB's higher-fee, longer-duration alternative offerings. In mid-2021, Equitable Financial Life Insurance Company, a subsidiary of EQH ("Equitable Financial"), agreed to provide an initial $10 billion in permanent capital to build out AB's private illiquid offerings, including private alternatives and private placements. Deployment of the initial $10 billion in permanent capital is now complete. During the second quarter of 2023, EQH committed to provide an additional $10 billion in permanent capital, deployment of which is now also complete. We expect this capital from EQH's insurance subsidiaries will continue to accelerate both organic and inorganic growth in our private alternatives business, allowing us to continue to deliver for our clients, employees, unitholders and other stakeholders.
Permanent capital means investment capital of indefinite duration, for which commitments may be withdrawn under certain conditions. Such conditions primarily include potential regulatory restrictions, lacking sufficient liquidity to fund the capital commitments to AB and AB's inability to identify attractive investment opportunities which align with the investment strategy. Although EQH's insurance subsidiaries have indicated their intention over time to provide this investment capital to AB, they have no binding commitment to do so. While the withdrawal of their commitment could potentially slow down our introduction of certain products, the impact to our overall operations would not be material.
Equitable and Corebridge Merger
On March 26, 2026, Equitable Holdings, Inc. and Corebridge Financial, Inc. entered into a Merger Agreement to combine their businesses. Through a series of transactions, both Equitable and Corebridge will continue to operate as direct, wholly-owned subsidiaries of a newly formed parent holding company ("HoldCo"). Upon closing, HoldCo will become the ultimate parent entity, and its common stock will trade on the NYSE. Upon completion of the transaction, Corebridge stockholders are expected to own approximately 51% of HoldCo, with Equitable stockholders owning approximately 49%, and the 14-member board of directors of HoldCo will include seven directors designated by Corebridge and seven directors designated by Equitable Holdings. No changes to AB's Executive leadership, senior management, operating model, or ownership structure are anticipated as a result of this transaction.
The completion of the merger remains subject to customary closing conditions, including the receipt of required regulatory approvals.
Additionally, as part of this strategic merger, AB will have the opportunity to manage a larger pool of general and separate account insurance assets, including an estimated $100 billion in assets, and to collaborate closely on Retirement solutions.
Joint Venture with Societe Generale
On April 1, 2024 (the "Initial Close") AB and Societe Generale ("SocGen") formed a global joint venture with two joint venture holding companies, one outside of North America ( the "ROW JV") and one within North America ("NA JV", and together the "JVs"). As of December 31, 2025, AB owned a 66.7% majority interest in the NA JV while SocGen owned a 51% majority interest in the ROW JV.
As a result of the greater value of the business AB contributed to the JVs at the Initial Close, SocGen paid AB $304.0 million in cash to equalize the value of the contributions by AB and SocGen to the JVs. The cash payment of $304.0 million included $102.6 million of prepaid consideration for an option, exercisable by AB during the following five years from the Initial Close, that would result in SocGen having a 51% ownership of the NA JV (the "AB option").
On January 1, 2026 AB entered into an Amended and Restated Shareholder agreement with SocGen, (the "Amendment Agreement") and exercised the AB option to deliver a 17.7% interest in the NA JV to SocGen resulting in AB owning a 49% interest in the NA JV and SocGen having a majority interest of 51% in the NA JV. The prepaid consideration received was in excess of the carrying value of the 17.7% equity in the NA JV resulting in a gain of $48.4 million recognized in the first quarter of 2026.
Subsequent to the Amendment Agreement, on January 1, 2026, AB entered into a Contribution Agreement (the "Contribution Agreement") with SocGen. Prior to the Contribution Agreement, SocGen and AB had a 51% and 49% interest in both JVs,
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respectively. Under the Contribution Agreement, AB contributed its 49% interest in NA JV, and SocGen contributed its 51% interest in NA JV, for an equal interest in newly issued shares of ROW JV resulting in a single JV comprised of the operations and interest of both JVs (the "AB/SG JV"). AB maintains its additional option to sell its ownership interests in the AB/SG JV to SocGen after five years from the Initial Close, at the fair market value of AB's interests in the AB/SG JV, subject to regulatory approval.
Assets Under Management
Assets under management by distribution channel are as follows:
| As of September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in billions) | |||||||||||||||||||||||
| Institutions | $ | 382.4 | $ | 351.4 | $ | 31.0 | 8.8 | % | |||||||||||||||
| Retail | 352.9 | 356.2 | (3.3) | (0.9) | |||||||||||||||||||
| Private Wealth | 165.1 | 152.5 | 12.6 | 8.3 | |||||||||||||||||||
| Total | $ | 900.4 | $ | 860.1 | $ | 40.3 | 4.7 | % | |||||||||||||||
Assets under management by investment service are as follows:
| As of September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (in billions) | |||||||||||||||||||||||
| Equity | |||||||||||||||||||||||
| Actively Managed | $ | 266.3 | $ | 281.3 | $ | (15.0) | (5.3) | % | |||||||||||||||
|
Passively Managed(1)
|
89.4 | 77.3 | 12.1 | 15.8 | |||||||||||||||||||
| Total Equity | 355.7 | 358.6 | (2.9) | (0.8) | |||||||||||||||||||
| Fixed Income | |||||||||||||||||||||||
| Actively Managed | |||||||||||||||||||||||
| Taxable | 202.2 | 214.3 | (12.1) | (5.6) | |||||||||||||||||||
| Tax-exempt | 95.1 | 85.8 | 9.3 | 10.8 | |||||||||||||||||||
| 297.3 | 300.1 | (2.8) | (0.9) | ||||||||||||||||||||
|
Passively Managed(1)
|
17.5 | 10.1 | 7.4 | 73.4 | |||||||||||||||||||
| Total Fixed Income | 314.8 | 310.2 | 4.6 | 1.5 | |||||||||||||||||||
|
Alternatives/Multi-Asset Solutions(2)
|
|||||||||||||||||||||||
| Actively Managed | 212.9 | 177.9 | 35.0 | 19.7 | |||||||||||||||||||
|
Passively Managed(1)
|
17.0 | 13.4 | 3.6 | 27.2 | |||||||||||||||||||
| Total Alternatives/Multi-Asset Solutions | 229.9 | 191.3 | 38.6 | 20.2 | |||||||||||||||||||
| Total | $ | 900.4 | $ | 860.1 | $ | 40.3 | 4.7 | % | |||||||||||||||
(1)Includes index and enhanced index services.
(2)Includes certain multi-asset solutions and services not included in equity or fixed income services.
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Changes in assets under management for the three-month, nine-month and twelve-month periods ended September 30, 2026 are as follows:
| Distribution Channel | |||||||||||||||||||||||
| Institutions | Retail |
Private Wealth |
Total | ||||||||||||||||||||
| (in billions) | |||||||||||||||||||||||
| Balance as of June 30, 2026 | $ | 371.1 | $ | 367.3 | $ | 167.1 | $ | 905.5 | |||||||||||||||
| Long-term flows: | |||||||||||||||||||||||
| Sales/new accounts | 21.5 | 20.0 | 5.6 | 47.1 | |||||||||||||||||||
| Redemptions/terminations | (2.8) | (25.0) | (6.3) | (34.1) | |||||||||||||||||||
| Cash flow/unreinvested dividends | (3.0) | (3.4) | - | (6.4) | |||||||||||||||||||
| Net long-term inflows (outflows) | 15.7 | (8.4) | (0.7) | 6.6 | |||||||||||||||||||
| Market (depreciation) | (4.4) | (6.0) | (1.3) | (11.7) | |||||||||||||||||||
| Net change | 11.3 | (14.4) | (2.0) | (5.1) | |||||||||||||||||||
| Balance as of September 30, 2026 | $ | 382.4 | $ | 352.9 | $ | 165.1 | $ | 900.4 | |||||||||||||||
| Balance as of December 31, 2025 | $ | 354.2 | $ | 356.4 | $ | 156.3 | $ | 866.9 | |||||||||||||||
| Long-term flows: | |||||||||||||||||||||||
| Sales/new accounts | 35.2 | 74.2 | 18.0 | 127.4 | |||||||||||||||||||
| Redemptions/terminations | (10.3) | (78.4) | (18.7) | (107.4) | |||||||||||||||||||
| Cash flow/unreinvested dividends | (10.6) | (9.1) | - | (19.7) | |||||||||||||||||||
| Net long-term inflows (outflows) | 14.3 | (13.3) | (0.7) | 0.3 | |||||||||||||||||||
| Transfers | 1.1 | (1.1) | - | - | |||||||||||||||||||
| Market appreciation | 12.8 | 10.9 | 9.5 | 33.2 | |||||||||||||||||||
| Net change | 28.2 | (3.5) | 8.8 | 33.5 | |||||||||||||||||||
| Balance as of September 30, 2026 | $ | 382.4 | $ | 352.9 | $ | 165.1 | $ | 900.4 | |||||||||||||||
| Balance as of September 30, 2025 | $ | 351.4 | $ | 356.2 | $ | 152.5 | $ | 860.1 | |||||||||||||||
| Long-term flows: | |||||||||||||||||||||||
| Sales/new accounts | 39.7 | 96.7 | 24.7 | 161.1 | |||||||||||||||||||
| Redemptions/terminations | (13.9) | (101.4) | (24.7) | (140.0) | |||||||||||||||||||
| Cash flow/unreinvested dividends | (13.5) | (12.1) | 0.1 | (25.5) | |||||||||||||||||||
| Net long-term inflows (outflows) | 12.3 | (16.8) | 0.1 | (4.4) | |||||||||||||||||||
| Transfers | 1.1 | (1.1) | - | - | |||||||||||||||||||
| Market appreciation | 17.6 | 14.6 | 12.5 | 44.7 | |||||||||||||||||||
| Net change | 31.0 | (3.3) | 12.6 | 40.3 | |||||||||||||||||||
| Balance as of September 30, 2026 | $ | 382.4 | $ | 352.9 | $ | 165.1 | $ | 900.4 | |||||||||||||||
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| 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 June 30, 2026 | $ | 279.1 | $ | 85.9 | $ | 207.5 | $ | 98.7 | $ | 18.4 | $ | 215.9 | $ | 905.5 | |||||||||||||||||||||||||||
| Long-term flows: | |||||||||||||||||||||||||||||||||||||||||
| Sales/new accounts | 9.9 | 3.9 | 8.5 | 7.1 | (0.1) | 17.8 | 47.1 | ||||||||||||||||||||||||||||||||||
| Redemptions/terminations | (17.8) | (0.3) | (8.9) | (5.8) | - | (1.3) | (34.1) | ||||||||||||||||||||||||||||||||||
| Cash flow/unreinvested dividends | (4.6) | (1.1) | 0.7 | 0.3 | (0.2) | (1.5) | (6.4) | ||||||||||||||||||||||||||||||||||
| Net long-term (outflows) inflows | (12.5) | 2.5 | 0.3 | 1.6 | (0.3) | 15.0 | 6.6 | ||||||||||||||||||||||||||||||||||
| Market (depreciation) appreciation | (0.3) | 1.0 | (5.6) | (5.2) | (0.6) | (1.0) | (11.7) | ||||||||||||||||||||||||||||||||||
| Net change | (12.8) | 3.5 | (5.3) | (3.6) | (0.9) | 14.0 | (5.1) | ||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2026 | $ | 266.3 | $ | 89.4 | $ | 202.2 | $ | 95.1 | $ | 17.5 | $ | 229.9 | $ | 900.4 | |||||||||||||||||||||||||||
| Balance as of December 31, 2025 | $ | 278.0 | $ | 78.3 | $ | 213.1 | $ | 90.8 | $ | 9.7 | $ | 197.0 | $ | 866.9 | |||||||||||||||||||||||||||
| Long-term flows: | |||||||||||||||||||||||||||||||||||||||||
| Sales/new accounts | 34.8 | 4.9 | 26.6 | 20.9 | 9.0 | 31.2 | 127.4 | ||||||||||||||||||||||||||||||||||
| Redemptions/terminations | (55.2) | (1.1) | (32.2) | (13.5) | (0.1) | (5.3) | (107.4) | ||||||||||||||||||||||||||||||||||
| Cash flow/unreinvested dividends | (13.7) | (2.2) | (0.4) | 0.4 | (0.5) | (3.3) | (19.7) | ||||||||||||||||||||||||||||||||||
| Net long-term (outflows) inflows | (34.1) | 1.6 | (6.0) | 7.8 | 8.4 | 22.6 | 0.3 | ||||||||||||||||||||||||||||||||||
| Market appreciation (depreciation) | 22.4 | 9.5 | (4.9) | (3.5) | (0.6) | 10.3 | 33.2 | ||||||||||||||||||||||||||||||||||
| Net change | (11.7) | 11.1 | (10.9) | 4.3 | 7.8 | 32.9 | 33.5 | ||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2026 | $ | 266.3 | $ | 89.4 | $ | 202.2 | $ | 95.1 | $ | 17.5 | $ | 229.9 | $ | 900.4 | |||||||||||||||||||||||||||
| Balance as of September 30, 2025 | $ | 281.3 | $ | 77.3 | $ | 214.3 | $ | 85.8 | $ | 10.1 | $ | 191.3 | $ | 860.1 | |||||||||||||||||||||||||||
| Long-term flows: | |||||||||||||||||||||||||||||||||||||||||
| Sales/new accounts | 46.6 | 5.6 | 35.2 | 28.3 | 8.9 | 36.5 | 161.1 | ||||||||||||||||||||||||||||||||||
| Redemptions/terminations | (70.7) | (2.0) | (42.4) | (17.3) | (0.6) | (7.0) | (140.0) | ||||||||||||||||||||||||||||||||||
| Cash flow/unreinvested dividends | (17.6) | (2.9) | (0.7) | 0.6 | (0.4) | (4.5) | (25.5) | ||||||||||||||||||||||||||||||||||
| Net long-term (outflows) inflows | (41.7) | 0.7 | (7.9) | 11.6 | 7.9 | 25.0 | (4.4) | ||||||||||||||||||||||||||||||||||
| Market appreciation (depreciation) | 26.7 | 11.4 | (4.2) | (2.3) | (0.5) | 13.6 | 44.7 | ||||||||||||||||||||||||||||||||||
| Net change | (15.0) | 12.1 | (12.1) | 9.3 | 7.4 | 38.6 | 40.3 | ||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2026 | $ | 266.3 | $ | 89.4 | $ | 202.2 | $ | 95.1 | $ | 17.5 | $ | 229.9 | $ | 900.4 | |||||||||||||||||||||||||||
(1)Includes index and enhanced index services.
(2)Includes certain multi-asset solutions and services not included in equity or fixed income services.
Index
Net long-term inflows (outflows) for actively managed investment services as compared to passively managed investment services for the three-month, nine-month and twelve-month periods ended September 30, 2026 are as follows:
| Periods Ended September 30, 2026 | |||||||||||||||||
| Three-months | Nine-months | Twelve-months | |||||||||||||||
| (in billions) | |||||||||||||||||
| Actively Managed | |||||||||||||||||
| Equity | $ | (12.5) | $ | (34.1) | $ | (41.7) | |||||||||||
|
Fixed Income
|
1.9 | 1.8 | 3.7 | ||||||||||||||
| Alternatives/Multi-Asset Solutions | 14.7 | 21.5 | 23.4 | ||||||||||||||
| Total Actively Managed | 4.1 | (10.8) | (14.6) | ||||||||||||||
| Passively Managed | |||||||||||||||||
| Equity | 2.5 | 1.6 | 0.7 | ||||||||||||||
|
Fixed Income
|
(0.3) | 8.4 | 7.9 | ||||||||||||||
| Alternatives/Multi-Asset Solutions | 0.3 | 1.1 | 1.6 | ||||||||||||||
| Total Passively Managed | 2.5 | 11.1 | 10.2 | ||||||||||||||
| Total net long-term inflows (outflows) | $ | 6.6 | $ | 0.3 | $ | (4.4) | |||||||||||
Average assets under management by distribution channel and investment service are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| (in billions) | (in billions) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution Channel: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Institutions | $ | 381.0 | $ | 343.5 | $ | 37.5 | 10.9 | % | $ | 368.0 | $ | 332.7 | $ | 35.3 | 10.6 | % | ||||||||||||||||||||||||||||||||||
| Retail | 360.5 | 349.5 | 11.0 | 3.1 | 356.5 | 339.2 | 17.3 | 5.1 | ||||||||||||||||||||||||||||||||||||||||||
| Private Wealth | 166.8 | 147.8 | 19.0 | 12.9 | 162.9 | 141.9 | 21.0 | 14.8 | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 908.3 | $ | 840.8 | $ | 67.5 | 8.0 | % | $ | 887.4 | $ | 813.8 | $ | 73.6 | 9.0 | % | ||||||||||||||||||||||||||||||||||
| Investment Service: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity Actively Managed | $ | 272.4 | $ | 276.1 | $ | (3.7) | (1.4) | % | $ | 273.7 | $ | 266.3 | $ | 7.4 | 2.8 | % | ||||||||||||||||||||||||||||||||||
|
Equity Passively Managed(1)
|
88.6 | 74.3 | 14.3 | 19.3 | 83.5 | 70.6 | 12.9 | 18.3 | ||||||||||||||||||||||||||||||||||||||||||
| Fixed Income Actively Managed - Taxable | 205.0 | 212.8 | (7.8) | (3.7) | 208.9 | 211.2 | (2.3) | (1.1) | ||||||||||||||||||||||||||||||||||||||||||
| Fixed Income Actively Managed - Tax-exempt | 97.6 | 82.2 | 15.4 | 18.7 | 95.5 | 79.6 | 15.9 | 19.9 | ||||||||||||||||||||||||||||||||||||||||||
|
Fixed Income Passively Managed(1)
|
18.0 | 10.1 | 7.9 | 78.5 | 12.9 | 10.2 | 2.7 | 27.1 | ||||||||||||||||||||||||||||||||||||||||||
|
Alternatives/Multi-Asset Solutions(2)
|
226.7 | 185.3 | 41.4 | 22.3 | 212.9 | 175.9 | 37.0 | 21.0 | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 908.3 | $ | 840.8 | $ | 67.5 | 8.0 | % | $ | 887.4 | $ | 813.8 | $ | 73.6 | 9.0 | % | ||||||||||||||||||||||||||||||||||
(1)Includes index and enhanced index services.
(2)Includes certain multi-asset solutions and services not included in equity or fixed income services.
Our Institutional channel third quarter average AUM of $381.0 billion increased $37.5 billion, or 10.9%, compared to the third quarter of 2025, while Institutional channel third quarter ending AUM increased $31.0 billion, or 8.8%, to $382.4 billion from September 30, 2025. The $31.0 billion increase in AUM resulted primarily from market appreciation of $17.6 billion and net inflows of $12.3 billion from September 30, 2025.
Index
Our Retail channel third quarter average AUM of $360.5 billion increased $11.0 billion, or 3.1%, compared to the third quarter of 2025, while Retail channel third quarter ending AUM decreased $3.3 billion, or 0.9%, to $352.9 billion from September 30, 2025. The $3.3 billion decrease resulted primarily from net outflows of $16.8 billion, partially offset by market appreciation of $14.6 billion from September 30, 2025. The difference between average and ending AUM growth primarily reflects September 2026 heightened market depreciation of $6.2 billion and net outflows of $2.3 billion.
Our Private Wealth channel third quarter average AUM of $166.8 billion increased $19.0 billion, or 12.9%, compared to the third quarter of 2025, while Private Wealth channel third quarter ending AUM increased $12.6 billion, or 8.3%, to $165.1 billion from September 30, 2025. The $12.6 billion increase resulted from market appreciation of $12.5 billion and net inflows of $0.1 billion from September 30, 2025.
Absolute investment composite returns, gross of fees, and relative performance as of September 30, 2026 compared to benchmarks for certain representative Institutional equity and fixed income services are as follows:
| 1-Year |
3-Year(1)
|
5-Year(1)
|
|||||||||||||||
| Income (fixed income) | |||||||||||||||||
| Absolute return | (2.1) | % | 5.8 | % | 1.2 | % | |||||||||||
| Relative return (vs. Bloomberg Barclays U.S. Aggregate Index) | (0.3) | 1.8 | 1.8 | ||||||||||||||
| High Income (fixed income) | |||||||||||||||||
| Absolute return | 2.3 | 9.0 | 4.3 | ||||||||||||||
| Relative return (vs. Bloomberg Barclays Global High Yield Index - Hedged) | (0.8) | (0.8) | - | ||||||||||||||
| Global Plus - Hedged (fixed income) | |||||||||||||||||
| Absolute return | (0.6) | 4.5 | 0.4 | ||||||||||||||
| Relative return (vs. Bloomberg Barclays Global Aggregate Index - Hedged) | - | 0.3 | - | ||||||||||||||
| Intermediate Municipal Bonds (fixed income) | |||||||||||||||||
| Absolute return | (0.6) | 3.5 | 1.2 | ||||||||||||||
| Relative return (vs. Lipper Short/Int. Blended Muni Fund Avg) | 0.4 | 0.6 | 0.5 | ||||||||||||||
| U.S. Core Fixed Income (fixed income) | |||||||||||||||||
| Absolute return | (2.4) | 4.3 | (0.4) | ||||||||||||||
| Relative return (vs. Bloomberg Barclays U.S. Aggregate Index) | (0.6) | 0.2 | 0.2 | ||||||||||||||
| Emerging Market Debt (fixed income) | |||||||||||||||||
| Absolute return | 3.4 | 11.0 | 2.4 | ||||||||||||||
| Relative return (vs. JPM EMBI Global/JPM EMBI) | 1.6 | 2.0 | 0.6 | ||||||||||||||
| Sustainable Global Thematic | |||||||||||||||||
| Absolute return | 0.2 | 9.7 | 2.1 | ||||||||||||||
| Relative return (vs. MSCI ACWI Index) | (16.5) | (12.1) | (9.5) | ||||||||||||||
| International Strategic Core Equity | |||||||||||||||||
| Absolute return | 10.3 | 19.3 | 9.7 | ||||||||||||||
| Relative return (vs. MSCI EAFE Index) | (5.4) | 0.9 | 0.4 | ||||||||||||||
| U.S. Small & Mid Cap Value | |||||||||||||||||
| Absolute return | 12.8 | 13.8 | 6.7 | ||||||||||||||
| Relative return (vs. Russell 2500 Value Index) | (9.7) | (5.3) | (3.0) | ||||||||||||||
| U.S. Large Cap Value | |||||||||||||||||
| Absolute return | 24.1 | 21.1 | 14.4 | ||||||||||||||
| Relative return (vs. Russell 1000 Value Index) | 0.3 | 1.1 | 2.5 | ||||||||||||||
| U.S. Small Cap Growth | |||||||||||||||||
| Absolute return | 11.4 | 15.3 | 0.7 | ||||||||||||||
| Relative return (vs. Russell 2000 Growth Index) | (0.6) | (2.3) | (4.0) | ||||||||||||||
Index
| 1-Year |
3-Year(1)
|
5-Year(1)
|
|||||||||||||||
| U.S. Large Cap Growth | |||||||||||||||||
| Absolute return | 6.1 | 19.6 | 10.3 | ||||||||||||||
| Relative return (vs. Russell 1000 Growth Index) | (1.4) | (4.7) | (3.3) | ||||||||||||||
| U.S. Small & Mid Cap Growth | |||||||||||||||||
| Absolute return | 8.9 | 14.6 | 1.3 | ||||||||||||||
| Relative return (vs. Russell 2500 Growth Index) | 1.3 | (0.3) | (2.2) | ||||||||||||||
| Concentrated U.S. Growth | |||||||||||||||||
| Absolute return | (6.5) | 8.7 | 3.3 | ||||||||||||||
| Relative return (vs. S&P 500 Index) | (22.3) | (14.2) | (10.5) | ||||||||||||||
| Select U.S. Equity | |||||||||||||||||
| Absolute return | 14.8 | 23.6 | 14.5 | ||||||||||||||
| Relative return (vs. S&P 500 Index) | (0.9) | 0.7 | 0.7 | ||||||||||||||
| Strategic Equities | |||||||||||||||||
| Absolute return | 12.3 | 20.9 | 12.0 | ||||||||||||||
| Relative return (vs. Russell 3000 Index) | (2.8) | (1.4) | (0.6) | ||||||||||||||
| Global Core Equity | |||||||||||||||||
| Absolute return | 11.6 | 16.2 | 8.0 | ||||||||||||||
| Relative return (vs. MSCI ACWI Index) | (5.2) | (5.5) | (3.6) | ||||||||||||||
| U.S. Strategic Core Equity | |||||||||||||||||
| Absolute return | 5.9 | 16.7 | 11.7 | ||||||||||||||
| Relative return (vs. S&P 500 Index) | (9.9) | (6.2) | (2.1) | ||||||||||||||
| Select U.S. Equity Long/Short | |||||||||||||||||
| Absolute return | 8.9 | 15.3 | 9.6 | ||||||||||||||
| Relative return (vs. S&P 500 Index) | (6.8) | (7.6) | (4.2) | ||||||||||||||
| Global Strategic Core Equity | |||||||||||||||||
| Absolute return | 6.4 | 15.8 | 10.4 | ||||||||||||||
| Relative return (vs. MSCI World Index - Hedged) | (8.8) | (5.6) | (1.5) | ||||||||||||||
(1)Reflects annualized returns.
Index
Consolidated Results of Operations
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except per unit amounts) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net revenues | $ | 1,225,565 | $ | 1,137,147 | $ | 88,418 | 7.8 | % | $ | 3,598,295 | $ | 3,306,661 | $ | 291,634 | 8.8 | % | ||||||||||||||||||||||||||||||||||
| Expenses | 976,019 | 853,670 | 122,349 | 14.3 | 2,732,797 | 2,564,721 | 168,076 | 6.6 | ||||||||||||||||||||||||||||||||||||||||||
| Operating income | 249,546 | 283,477 | (33,931) | (12.0) | 865,498 | 741,940 | 123,558 | 16.7 | ||||||||||||||||||||||||||||||||||||||||||
| Income taxes | 11,191 | 17,085 | (5,894) | (34.5) | 46,137 | 46,566 | (429) | (0.9) | ||||||||||||||||||||||||||||||||||||||||||
| Net income | 238,355 | 266,392 | (28,037) | (10.5) | 819,361 | 695,374 | 123,987 | 17.8 | ||||||||||||||||||||||||||||||||||||||||||
| Net (loss) income of consolidated entities attributable to non-controlling interests | (18,549) | 7,129 | (25,678) | n/m | 11,750 | 4,845 | 6,905 | 142.5 | ||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to AB Unitholders | $ | 256,904 | $ | 259,263 | $ | (2,359) | (0.9) | $ | 807,611 | $ | 690,529 | $ | 117,082 | 17.0 | % | |||||||||||||||||||||||||||||||||||
| Net income per AB Unit | $ | 0.87 | $ | 0.88 | $ | (0.01) | (1.1) | $ | 2.72 | $ | 2.34 | $ | 0.38 | 16.2 | % | |||||||||||||||||||||||||||||||||||
| Distributions per AB Unit | $ | 0.96 | $ | 0.94 | $ | 0.02 | 2.1 | $ | 2.77 | $ | 2.66 | $ | 0.11 | 4.1 | % | |||||||||||||||||||||||||||||||||||
|
Operating margin (1)
|
21.9 | % | 24.3 | % | 23.7 | % | 22.3 | % | ||||||||||||||||||||||||||||||||||||||||||
(1)Operating income excluding net income (loss) attributable to non-controlling interests as a percentage of net revenues.
Net income attributable to AB Unitholders for the three months ended September 30, 2026 decreased $2.4 million, or 0.9%, from the three months ended September 30, 2025. The decrease primarily is due to (in millions):
| Higher employee compensation and benefits expense | $ | (113.4) | |||
| Higher general and administrative expense | (27.6) | ||||
| Lower distribution revenues | (13.1) | ||||
| Higher investment losses | (8.7) | ||||
| Lower net dividend and interest income | (3.6) | ||||
| Higher performance-based fees | 99.5 | ||||
| Higher net losses of consolidated entities attributable to non-controlling interest | 25.7 | ||||
| Higher investment advisory base fees | 16.1 | ||||
| Lower promotion and servicing expense | 16.3 | ||||
| Lower income tax expense | 5.9 | ||||
| Other | 0.5 | ||||
| $ | (2.4) | ||||
Index
Net income attributable to AB Unitholders for the nine months ended September 30, 2026 increased $117.1 million, or 17.0%, from the nine months ended September 30, 2025. The increase primarily is due to (in millions):
| Higher performance-based fees | $ | 136.2 | |||
| Higher investment advisory base fees | 102.4 | ||||
|
Higher investment gains(2)
|
64.2 | ||||
| Lower promotion and servicing expense | 17.2 | ||||
| Higher employee compensation and benefits expense | (192.0) | ||||
| Higher net income of consolidated entities attributable to non-controlling interest | (6.9) | ||||
| Lower distribution revenues | (6.8) | ||||
| Other | 2.8 | ||||
| $ | 117.1 | ||||
(2)During the first quarter of 2026, we recognized a gain of $48.4 million related to the exercise of the AB option as discussed above under Joint Venture with Societe Generale in this Item 2.
Units Outstanding; Unit Repurchases
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 to repurchase AB Holding Units on our behalf in accordance with the terms and limitations specified in the plan. 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 third quarter of 2026 expired at the close of business on October 26, 2026. We may adopt additional plans in the future to engage in open-market purchases of AB Holding Units for anticipated obligations under our incentive compensation award program and for other corporate purposes.
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 net income per Unit for the quarter multiplied by the number of general and limited partnership interests at the end of the quarter. Management anticipates that Available Cash Flow will continue to be based on adjusted net income per Unit. If management determines, with the concurrence of the Board of Directors, that certain adjustments to Available Cash Flow are necessary or unnecessary, such adjustments will be made in future periods. See Note 6 to our condensed 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 additional operating metrics management uses in evaluating and comparing period-to-period operating performance. Management uses these additional 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, acquisition-related expenses, interest expense 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.
We provide the non-GAAP measures "adjusted net income" and "adjusted net income per Unit" because our quarterly distribution per unit is typically our adjusted net income per unit (which is derived from adjusted net income).
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.
Index
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| (in thousands, except per unit amounts) | ||||||||||||||||||||||||||
| Net revenues, US GAAP basis | $ | 1,225,565 | $ | 1,137,147 | $ | 3,598,295 | $ | 3,306,661 | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Distribution-related adjustments: | ||||||||||||||||||||||||||
| Distribution revenues | (197,280) | (210,424) | (601,017) | (607,811) | ||||||||||||||||||||||
| Investment advisory services fees | (12,052) | (18,876) | (41,636) | (60,969) | ||||||||||||||||||||||
| Pass-through adjustments: | ||||||||||||||||||||||||||
| Investment advisory services fees | (10,828) | (13,970) | (43,708) | (40,385) | ||||||||||||||||||||||
| Other revenues | (14,574) | (15,433) | (45,607) | (46,471) | ||||||||||||||||||||||
| Impact of consolidated company-sponsored investment funds | 5,725 | (7,059) | (149) | (4,679) | ||||||||||||||||||||||
| Acquisition related investment advisory and services fees | (95,908) | - | (159,812) | - | ||||||||||||||||||||||
| Incentive compensation-related items | 693 | (2,404) | (2,379) | (11,369) | ||||||||||||||||||||||
| Equity loss (gain) on JV | 4,614 | 16,162 | (47,434) | 35,606 | ||||||||||||||||||||||
| (Gain) loss on other equity method investments | (1,701) | (471) | 6,384 | (3,263) | ||||||||||||||||||||||
| Adjusted net revenues | $ | 904,254 | $ | 884,672 | $ | 2,662,937 | $ | 2,567,320 | ||||||||||||||||||
| Operating income, US GAAP basis | $ | 249,546 | $ | 283,477 | $ | 865,498 | $ | 741,940 | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Incentive compensation-related items | 880 | 1,214 | 1,940 | 2,756 | ||||||||||||||||||||||
| EQH award compensation | 487 | 344 | 1,530 | 1,017 | ||||||||||||||||||||||
| Retirement plan settlement loss | - | (2,442) | - | 17,733 | ||||||||||||||||||||||
| Acquisition-related expenses | 25,372 | 12,545 | 51,432 | 38,571 | ||||||||||||||||||||||
| Equity loss (gain) on JVs | 4,614 | 16,162 | (47,434) | 35,606 | ||||||||||||||||||||||
| (Gain) loss on other equity method investments | (1,701) | (471) | 6,384 | (3,263) | ||||||||||||||||||||||
| AB Funds reimbursement expense | - | (8,500) | - | 5,796 | ||||||||||||||||||||||
| Total of non-GAAP adjustments before interest on borrowings | 29,652 | 18,852 | 13,852 | 98,216 | ||||||||||||||||||||||
| Interest on borrowings | 4,929 | 7,167 | 19,235 | 22,768 | ||||||||||||||||||||||
| Sub-total of non-GAAP adjustments | 34,581 | 26,019 | 33,087 | 120,984 | ||||||||||||||||||||||
| Less: Net (loss) income of consolidated entities attributable to non-controlling interests | (18,549) | 7,129 | 11,750 | 4,845 | ||||||||||||||||||||||
| Adjusted operating income | 302,676 | 302,367 | 886,835 | 858,079 | ||||||||||||||||||||||
| Less: Interest on borrowings | 4,929 | 7,167 | 19,235 | 22,768 | ||||||||||||||||||||||
| Adjusted pre-tax income | 297,747 | 295,200 | 867,600 | 835,311 | ||||||||||||||||||||||
| Less: Adjusted income taxes | 13,351 | 17,802 | 46,248 | 52,458 | ||||||||||||||||||||||
| Adjusted net income | $ | 284,396 | $ | 277,398 | $ | 821,352 | $ | 782,853 | ||||||||||||||||||
| Net income per AB Unit, GAAP basis | $ | 0.87 | $ | 0.88 | $ | 2.72 | $ | 2.34 | ||||||||||||||||||
| Impact of non-GAAP adjustments | 0.09 | 0.06 | 0.05 | 0.31 | ||||||||||||||||||||||
| Adjusted net income per AB Unit | $ | 0.96 | $ | 0.94 | $ | 2.77 | $ | 2.65 | ||||||||||||||||||
| Operating margin, GAAP basis | 21.9 | % | 24.3 | % | 23.7 | % | 22.3 | % | ||||||||||||||||||
| Impact of non-GAAP adjustments | 11.6 | 9.9 | 9.6 | 11.1 | ||||||||||||||||||||||
| Adjusted operating margin | 33.5 | % | 34.2 | % | 33.3 | % | 33.4 | % | ||||||||||||||||||
Index
Adjusted operating income for the three months ended September 30, 2026 increased $0.3 million, or 0.1%, from the three months ended September 30, 2025, primarily due to higher investment advisory base fees of $24.6 million and higher performance based fees of $5.1 million, partially offset by higher employee compensation and benefits expense of $10.4 million, higher general and administrative expense of $7.5 million, lower investment gains of $6.3 million and lower net dividend and interest income of $3.2 million.
Adjusted operating income for the nine months ended September 30, 2026 increased $28.8 million, or 3.4%, from the nine months ended September 30, 2025, primarily due to higher investment advisory base fees of $118.8 million, partially offset by higher employee compensation and benefits expense of $49.9 million, lower performance-based fees of $17.0 million, higher general and administrative expense of $15.2 million, lower net dividend and interest income of $4.9 million and higher investment losses compared to gains of $4.7 million.
Adjusted Net Revenues
Net Revenue, as adjusted, excludes 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 to third-party client intermediaries, while for certain other products, we collect investment advisory services fees and a portion is 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 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.
We adjust investment advisory and services fees and other revenues for pass through costs, primarily related to our transfer agent and shareholder servicing fees. Also, we adjust for certain investment advisory and services fees passed through to our investment advisors. These fees do not affect operating income, as such, we exclude these fees from adjusted net revenues. We also adjust for certain pass through costs associated with the transition of services to the JV entered into with SocGen. These amounts are expensed by us and passed to the JV for reimbursement. These fees do not affect operating income, 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.
We also adjust investment advisory and services fees for pass through performance fees, primarily related to acquisition-related funds in which we do not participate in the performance. During the nine months ended September 30, 2026, acquisition-related adjustments include $152.0 million in performance-based fees earned on certain legacy AB CarVal Investors ("AB CarVal") funds, in which we do not participate in the performance.
Adjusted net revenues exclude investment gains and losses and dividends and interest on employee long-term incentive compensation-related investments. Also, we adjust for certain acquisition-related pass-through performance-based fees and performance related compensation.
We also adjust net revenues to exclude our portion of the equity income or loss associated with our equity method investments, including our investment in the JV and reinsurance sidecars, as we don't consider this activity part of our core business operations and these investments generate non-cash volatility which distort core earnings performance. Effective April 1, 2024 following the close of the transaction with SocGen, we record all income or loss associated with the JV as an equity method investment income (loss). As we no longer consider this activity part of our core business operations and our intent is to fully divest from the joint venture, we consider these amounts temporary, and as such, we exclude these amounts from our adjusted net revenues. On January 1, 2026, AB entered into an Amended and Restated Shareholder agreement with SocGen (the "Amendment Agreement") and exercised the AB option (as discussed above) to deliver a 17.7% interest in the NA JV to SocGen. The prepaid consideration received was in excess of the carrying value of the 17.7% equity in the NA JV resulting in a gain of $48.4 million recognized in the first quarter of 2026.
Index
Adjusted Operating Income
Adjusted operating income represents operating income on a US GAAP basis excluding (1) 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, (2) the equity compensation paid by EQH to certain AB executives, (3) retirement plan settlement loss, (4) acquisition-related expenses, (5) income (loss) related to our equity method investments, (6) AB Funds reimbursement expense, (7) interest on borrowings and (8) the impact of consolidated company-sponsored investment funds.
Long-term incentive compensation awards that are notionally invested in AB investment services are economically hedged to reduce the firm's exposure to market movements through the purchase and holding of these investments on AB's balance sheet. Fluctuation in the value of investments is recorded within investment gains and losses on the income 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 equity awards to Mr. Bernstein, our CEO, and other AB executives for their membership on the EQH Management Committee. These individuals may receive additional equity or cash compensation from EQH in the future related to their service on the Management Committee. Any awards granted to these individuals 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 (gains) losses associated with the termination of our defined benefit retirement plan are non-cash, short term in nature and not considered a part of our core operating results when comparing financial results from period to period.
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. Acquisition-related expenses include professional fees, the recording of changes in estimates or fair value remeasurements to, and accretion expense related to, our contingent payment arrangements associated with our acquisitions, certain compensation-related expenses and amortization of intangible assets for contracts acquired. During the nine months ended September 30, 2026, acquisition-related adjustments include $152.0 million of performance-based fees earned on certain AB CarVal funds and $139.9 million of related compensation expense. As these are acquisition-related funds in which we do not participate in the performance, the revenues and related compensation expense have been excluded from our operating income.
We also adjust operating income to exclude our portion of the equity income or loss associated with our equity method investments, including our investment in the JV and reinsurance sidecar, as we don't consider this activity part of our core business operations and these investments generate non-cash volatility which distort core earnings performance. Effective April 1, 2024, following the close of the transaction with SocGen, we record all income or loss associated with the JV as an equity method investment (income) loss. As we no longer consider this activity part of our core business operations and our intent is to fully divest from the joint venture, we consider these amounts temporary, and as such, we exclude these amounts from our adjusted operating income. On January 1, 2026, AB entered into the Amendment Agreement with SocGen and exercised the AB option (as discussed above) to deliver a 17.7% interest in the NA JV to SocGen. The prepaid consideration received was in excess of the carrying value of the 17.7% equity in the NA JV resulting in a gain of $48.4 million recognized in the first quarter of 2026.
During the first quarter of 2025, we identified an error in the billing practices of a third-party service provider, who had overbilled certain AB mutual funds for omnibus account services, sub-accounting services, and related transfer agency expenses in prior years. In the second quarter of 2025, at the request of the mutual fund Board, AB agreed to reimburse the affected funds for the entirety of the overpayment plus interest. During the third quarter of 2025, we resolved this matter with the service provider and recovered a portion of the overbilled amounts. We have adjusted operating income to exclude these amounts. We believe adjusting for these costs is useful for our investors and other users of our financial statements as such presentation appropriately reflects the non-core nature of this expenditure.
We adjust operating income to exclude interest on borrowings in order to align with our industry peer group.
We adjust 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 exclude the limited partner interests we do not own.
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Adjusted Net Income per AB Unit
As previously discussed, our quarterly distribution is typically our adjusted net income per Unit (which is derived from adjusted net income) for the quarter multiplied by the number of general and limited partnership interests outstanding at the end of the quarter. Adjusted net income is derived from adjusted operating income less interest expense and adjusted income taxes. Adjusted income taxes, used in calculating adjusted net income, are calculated using the GAAP effective tax rate adjusted for non-GAAP income tax adjustments.
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.
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Net Revenues
The components of net revenues are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Investment advisory and services fees: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Institutions: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Base fees | $ | 165,203 | $ | 156,982 | $ | 8,221 | 5.2% | $ | 479,992 | $ | 459,387 | $ | 20,605 | 4.5% | ||||||||||||||||||||||||||||||||||||
| Performance-based fees | 100,217 | 3,979 | 96,238 | n/m | 185,918 | 36,330 | 149,588 | n/m | ||||||||||||||||||||||||||||||||||||||||||
| 265,420 | 160,961 | 104,459 | 64.9 | 665,910 | 495,717 | 170,193 | 34.3 | |||||||||||||||||||||||||||||||||||||||||||
| Retail: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Base fees | 395,559 | 409,391 | (13,832) | (3.4) | 1,183,713 | 1,185,563 | (1,850) | (0.2) | ||||||||||||||||||||||||||||||||||||||||||
| Performance-based fees | 68 | (632) | 700 | n/m | 10,908 | 7,377 | 3,531 | 47.9 | ||||||||||||||||||||||||||||||||||||||||||
| 395,627 | 408,759 | (13,132) | (3.2) | 1,194,621 | 1,192,940 | 1,681 | 0.1 | |||||||||||||||||||||||||||||||||||||||||||
| Private Wealth: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Base fees | 307,786 | 286,105 | 21,681 | 7.6 | 914,327 | 830,713 | 83,614 | 10.1 | ||||||||||||||||||||||||||||||||||||||||||
| Performance-based fees | 21,137 | 18,625 | 2,512 | 13.5 | 37,272 | 54,170 | (16,898) | (31.2) | ||||||||||||||||||||||||||||||||||||||||||
| 328,923 | 304,730 | 24,193 | 7.9 | 951,599 | 884,883 | 66,716 | 7.5 | |||||||||||||||||||||||||||||||||||||||||||
| Total: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Base fees | 868,548 | 852,478 | 16,070 | 1.9 | 2,578,032 | 2,475,663 | 102,369 | 4.1 | ||||||||||||||||||||||||||||||||||||||||||
| Performance-based fees | 121,422 | 21,972 | 99,450 | n/m | 234,098 | 97,877 | 136,221 | 139.2 | ||||||||||||||||||||||||||||||||||||||||||
| 989,970 | 874,450 | 115,520 | 13.2 | 2,812,130 | 2,573,540 | 238,590 | 9.3 | |||||||||||||||||||||||||||||||||||||||||||
| Distribution revenues | 197,280 | 210,424 | (13,144) | (6.2) | 601,017 | 607,811 | (6,794) | (1.1) | ||||||||||||||||||||||||||||||||||||||||||
| Dividend and interest income | 30,511 | 35,944 | (5,433) | (15.1) | 90,182 | 106,431 | (16,249) | (15.3) | ||||||||||||||||||||||||||||||||||||||||||
| Investment (losses) gains | (11,454) | (2,721) | (8,733) | n/m | 33,110 | (31,084) | 64,194 | n/m | ||||||||||||||||||||||||||||||||||||||||||
| Other revenues | 32,598 | 34,253 | (1,655) | (4.8) | 100,713 | 98,345 | 2,368 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||
| Total revenues | 1,238,905 | 1,152,350 | 86,555 | 7.5 | 3,637,152 | 3,355,043 | 282,109 | 8.4 | ||||||||||||||||||||||||||||||||||||||||||
| Less: broker-dealer related interest expense | 13,340 | 15,203 | (1,863) | (12.3) | 38,857 | 48,382 | (9,525) | (19.7) | ||||||||||||||||||||||||||||||||||||||||||
| Net revenues | $ | 1,225,565 | $ | 1,137,147 | $ | 88,418 | 7.8 | $ | 3,598,295 | $ | 3,306,661 | $ | 291,634 | 8.8% | ||||||||||||||||||||||||||||||||||||
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 30 to 105 basis points for actively managed equity services, 10 to 65 basis points for actively-managed fixed income services and 1 to 50 basis points for
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passively managed services. Average basis points realized for other services could range from 3 basis points for certain Institutional third party managed services to over 190 basis points for certain 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 and sub-committee (the "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 consisting of senior officers and employees, oversees a consistent framework of 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 is overseen by the Valuation Committee and is responsible for managing 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 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 7.3%, 5.7% and 0.5% of the assets we manage for private wealth clients, institutional clients and retail clients, respectively (in total, 3.9% of our AUM).
For the three months ended September 30, 2026, our investment advisory and services fees increased by $115.5 million, or 13.2%, from the three months ended September 30, 2025, due to a $99.5 million increase in performance-based fees and a $16.1 million, or 1.9%, increase in base fees. The increase in base fees is primarily due to an 8.0% increase in average AUM, partially offset by a decrease in portfolio fee rate. Performance-based fees increased primarily due to $95.6 million in performance-based fees earned on certain AB CarVal funds.
For the nine months ended September 30, 2026, our investment advisory and services fees increased by $238.6 million, or 9.3%, from the nine months ended September 30, 2025, due to a $136.2 million increase in performance-based fees and a $102.4 million, or 4.1%, increase in base fees. The increase in base fees is primarily due to a 9.0% increase in average AUM, partially offset by a decrease in portfolio fee rate. Performance-based fees increased primarily due to $152.0 million in performance-based fees earned on certain AB CarVal funds, partially offset by lower performance fees earned on our Private Credit fund.
Institutional base fees for the three months ended September 30, 2026 increased by $8.2 million, or 5.2%, from the three months ended September 30, 2025, primarily due to a 10.9% increase in average AUM, partially offset by a decrease in portfolio fee rate. Retail base fees for the three months ended September 30, 2026 decreased by $13.8 million, or 3.4%, from the three months ended September 30, 2025, primarily due to a decrease in portfolio fee rate, partially offset by a 3.1% increase in average AUM. Private Wealth base fees for the three months ended September 30, 2026 increased $21.7 million, or 7.6%, from the three months ended September 30, 2025, primarily due to a 12.9% increase in average AUM, partially offset by a decrease in portfolio fee rate.
Institutional base fees for the nine months ended September 30, 2026 increased by $20.6 million, or 4.5%, from the nine months ended September 30, 2025, primarily due to a 10.6% increase in average AUM, partially offset by a decrease in portfolio fee rate. Retail base fees for the nine months ended September 30, 2026 decreased by $1.9 million, or 0.2%, from the nine months ended September 30, 2025, primarily due to a decrease in portfolio fee rate, partially offset by a 5.1% increase in average AUM. Private Wealth base fees for the nine months ended September 30, 2026 increased $83.6 million, or 10.1%, from the nine months ended September 30, 2025, primarily due to a 14.8% increase in average AUM, partially offset by a decrease in
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portfolio fee rate.
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 full or 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 September 30, 2026 decreased $13.1 million, or 6.2%, compared to the three months ended September 30, 2025, primarily due to a shift in product mix leading to a decrease in distribution fee rates. Distribution revenues for the nine months ended September 30, 2026 decreased $6.8 million, or 1.1%, compared to the nine months ended September 30, 2025, primarily due to a shift in product mix leading to a decrease in distribution fee rates, partially offset by the corresponding average AUM of these mutual funds increasing 4.0%.
Dividend and Interest Income and Broker-Dealer Related 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. Broker-dealer related interest expense principally reflects interest accrued on cash balances in customers' brokerage accounts.
For the three months ended September 30, 2026, dividend and interest income decreased $5.4 million, or 15.1%, compared to the three months ended September 30, 2025, primarily due to lower interest earned on cash balances and dividends received on certain proprietary investments. For the nine months ended September 30, 2026, dividend and interest income decreased $16.2 million, or 15.3%, compared to the nine months ended September 30, 2025, due to lower interest earned on cash balances and dividends received on certain proprietary investments.
Broker-dealer related interest expense for the three months ended September 30, 2026 decreased $1.9 million, or 12.3%, compared to the three months ended September 30, 2025, primarily due to lower interest paid on cash balances in customers' brokerage accounts, as a result of lower interest rates and lower cash balances in client accounts. Broker-dealer related interest expense for the nine months ended September 30, 2026 decreased $9.5 million, or 19.7%, compared to the nine months ended September 30, 2025, primarily due to lower interest paid on cash balances in customers' brokerage accounts, as a result of lower interest rates and lower cash balances in client 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) seed capital investments, (iv) derivatives and (v) 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 and equity gains (losses) related to our equity investments in the JV.
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Investment gains (losses) are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| Long-term incentive compensation-related investments: | ||||||||||||||||||||||||||
| Realized gains | $ | 186 | $ | 43 | $ | 11,762 | $ | 1,031 | ||||||||||||||||||
| Unrealized (losses) gains | (990) | 1,917 | (9,745) | 2,584 | ||||||||||||||||||||||
| Investments held by consolidated company-sponsored investment funds: | ||||||||||||||||||||||||||
| Realized (losses) gains | (4,857) | 1,092 | (3,686) | 2,551 | ||||||||||||||||||||||
| Unrealized (losses) gains | (11,141) | 4,433 | (11,134) | 4,598 | ||||||||||||||||||||||
| Seed capital and other investments: | ||||||||||||||||||||||||||
| Realized gains (losses): | ||||||||||||||||||||||||||
| Seed capital and other | 3,076 | (42) | 6,379 | 4,736 | ||||||||||||||||||||||
| Derivatives | (492) | (11,144) | (7,647) | (23,090) | ||||||||||||||||||||||
| Unrealized (losses) gains: | ||||||||||||||||||||||||||
| Seed capital and other | (6,107) | 10,011 | (3,065) | 13,985 | ||||||||||||||||||||||
| Derivatives | 11,764 | 6,383 | 9,341 | (5,174) | ||||||||||||||||||||||
| Brokerage-related investments: | ||||||||||||||||||||||||||
| Realized gains | 11 | 112 | 103 | 162 | ||||||||||||||||||||||
| Unrealized gains (losses) | 9 | 165 | (248) | (124) | ||||||||||||||||||||||
| Equity investments: | ||||||||||||||||||||||||||
|
(Loss) gain on JV(1)
|
(4,614) | (16,162) | 47,434 | (35,606) | ||||||||||||||||||||||
| Gain (loss) on other equity method investments | 1,701 | 471 | (6,384) | 3,263 | ||||||||||||||||||||||
| $ | (11,454) | $ | (2,721) | $ | 33,110 | $ | (31,084) | |||||||||||||||||||
(1) During the first quarter of 2026, we recognized a gain of $48.4 million related to the exercise of the AB option as discussed above under Joint Venture with Societe Generale in this Item 2.
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 subsidiaries, and other miscellaneous revenues. Other revenues for the three months ended September 30, 2026 decreased $1.7 million, or 4.8%, compared to the three months ended September 30, 2025, primarily due to lower JV-related revenue reimbursements, partially offset by higher shareholder servicing fees. Other revenues for the nine months ended September 30, 2026 increased $2.4 million, or 2.4%, compared to the nine months ended September 30, 2025, primarily due to higher shareholder servicing fees, partially offset by lower JV related revenue reimbursements.
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Expenses
The components of expenses are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | 2026 | 2025 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Employee compensation and benefits | $ | 564,223 | $ | 450,793 | $ | 113,430 | 25.2 | % | $ | 1,502,907 | $ | 1,310,878 | $ | 192,029 | 14.6 | % | ||||||||||||||||||||||||||||||||||
| Promotion and servicing: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution-related payments | 189,673 | 208,435 | (18,762) | (9.0) | 580,343 | 606,615 | (26,272) | (4.3) | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of deferred sales commissions | 19,659 | 20,872 | (1,213) | (5.8) | 62,310 | 62,183 | 127 | 0.2 | ||||||||||||||||||||||||||||||||||||||||||
| Trade execution, marketing, T&E and other | 40,593 | 36,907 | 3,686 | 10.0 | 123,192 | 114,239 | 8,953 | 7.8 | ||||||||||||||||||||||||||||||||||||||||||
| 249,925 | 266,214 | (16,289) | (6.1) | 765,845 | 783,037 | (17,192) | (2.2) | |||||||||||||||||||||||||||||||||||||||||||
| General and administrative | 145,792 | 118,203 | 27,589 | 23.3 | 411,316 | 414,156 | (2,840) | (0.7) | ||||||||||||||||||||||||||||||||||||||||||
| Interest on borrowings | 4,929 | 7,167 | (2,238) | (31.2) | 19,235 | 22,768 | (3,533) | (15.5) | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 11,150 | 11,293 | (143) | (1.3) | 33,494 | 33,882 | (388) | (1.1) | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 976,019 | $ | 853,670 | $ | 122,349 | 14.3 | $ | 2,732,797 | $ | 2,564,721 | $ | 168,076 | 6.6 | % | |||||||||||||||||||||||||||||||||||
Employee Compensation and Benefits
Employee compensation and benefits expense consists 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 46.0% and 39.6% for the three months ended September 30, 2026 and 2025, respectively. Compensation expense as a percentage of net revenues was 41.8% and 39.6% for the nine months ended September 30, 2026 and 2025, 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 Compensation and Workplace Practices Committee of the Board of Directors of AllianceBernstein Corporation ("Compensation Committee"), continue to believe 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 was 1.2% and 1.1% of adjusted net revenues for the three months ended September 30, 2026 and September 30, 2025, and 1.2% and 1.1% of adjusted net revenues for the nine months ended September 30, 2026 and September 30, 2025, respectively), and excludes the impact of mark-to-market vesting expense, as well as dividends and interest expense, associated with employee incentive compensation-related investments and the amortization expense associated with the awards issued by EQH to some of our firm's executive officers relating to their roles as members 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, excluding the impact of performance-based fees, generally should not exceed 50.0% of our adjusted net revenues in any year, except in unexpected or unusual circumstances. Our ratio of adjusted compensation expense as a percentage of adjusted net revenues was 48.5% for the three and nine months ended September 30, 2026 and September 30, 2025.
For the three months ended September 30, 2026, employee compensation and benefits expense increased $113.4 million, or 25.2%, compared to the three months ended September 30, 2025, primarily due to higher incentive compensation of $109.0
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million (primarily due to $105.4 million of incentive compensation related to certain AB CarVal funds) and higher commissions of $10.4 million, partially offset by lower base compensation of $3.6 million and lower fringe benefits of $3.3 million. For the nine months ended September 30, 2026, employee compensation and benefits expense increased $192.0 million, or 14.6%, compared to the nine months ended September 30, 2025, due to higher incentive compensation of $148.6 million (primarily due to $139.9 million of incentive compensation related to certain AB CarVal funds), higher commissions of $32.5 million, higher base compensation of $4.2 million, higher other employment costs of $3.5 million and higher fringe benefits of $3.3 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 shares of AB mutual funds. Also included in this expense category are costs related to trade execution and clearance, travel and entertainment, advertising and promotional materials.
Promotion and servicing expenses decreased $16.3 million, or 6.1%, during the three months ended September 30, 2026 compared to the three months ended September 30, 2025. The decrease was primarily due to lower distribution-related payments of $18.8 million, partially offset by higher marketing and communication expense of $3.3 million. Promotion and servicing expenses decreased $17.2 million, or 2.2%, during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The decrease was primarily due to lower distribution-related payments of $26.3 million, partially offset by higher marketing and communication expense of $6.8 million and higher travel and entertainment expenses of $3.9 million.
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 11.9% and 10.4% for the three months ended September 30, 2026 and 2025, respectively. General and administrative expenses as a percentage of net revenues were 11.4% and 12.5% for the nine months ended September 30, 2026 and 2025, respectively.
General and administrative expenses increased $27.6 million, or 23.3%, during the three months ended September 30, 2026 compared to the three months ended September 30, 2025, primarily due to higher professional fees of $17.9 million, a partial recovery of $8.5 million in the third quarter of 2025 related to the recognition of the AB Funds reimbursement expense recognized in the second quarter of 2025, higher technology and related expenses of $4.7 million and the final settlement of our pension obligation in 2025 of $2.4 million, partially offset by lower office-related expenses of $6.3 million.
General and administrative expenses decreased $2.8 million, or 0.7%, during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025, primarily due to a retirement plan settlement loss of $17.7 million in 2025, a favorable foreign exchange impact of $5.9 million, a $5.8 million AB Funds reimbursement expense (net of $8.5 million recovered in the third quarter of 2025) related to a disputed billing practice of a third-party service provider in 2025 and lower portfolio services and related expenses of $4.1 million, partially offset by higher professional fees of $20.6 million and higher technology and related expenses of $11.1 million.
Interest on Borrowings
Interest on borrowings reflects interest expense related to our 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. For the three months ended September 30, 2026 interest on borrowings decreased $2.2 million, or 31.2%, compared to the three months ended September 30, 2025. The decrease was primarily due to lower weighted average interest rates and lower weighted average borrowings. For the nine months ended September 30, 2026 interest on borrowings decreased $3.5 million, or 15.5%, compared to the nine months ended September 30, 2025. The decrease was primarily due to lower weighted average interest rates and lower weighted average borrowings.
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Amortization of Intangible Assets
Amortization of intangible assets reflects our amortization of costs assigned to acquired investment management contracts with a finite life. These assets are recognized at fair value and generally are amortized on a straight-line basis over their estimated useful life. Amortization of intangible assets decreased $0.1 million, or 1.3%, during the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Amortization of intangible assets decreased $0.4 million, or 1.1%, during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025.
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 September 30, 2026 decreased $5.9 million, or 34.5%, compared to the three months ended September 30, 2025. The decrease was primarily due to a decrease in foreign income in jurisdictions that carry a higher tax rate. Income tax expense for the nine months ended September 30, 2026 decreased $0.4 million, or 0.9%, compared to the nine months ended September 30, 2025. The decrease was primarily due to a decrease in foreign income in jurisdictions that carry a higher tax rate. There were no material changes to uncertain tax positions (FIN 48 reserves) or valuation allowances against deferred tax assets for the three and nine months ended September 30, 2026.
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 and certain other investments. For the three months ended September 30, 2026, we had $18.5 million of net losses of consolidated entities attributable to non-controlling interests compared to net income of $7.1 million for the three months ended September 30, 2025. During the three months ended September 30, 2026, approximately $24.6 million of net income of consolidated entities attributable to non-controlling interests was reclassified to compensation and benefits expense. For the nine months ended September 30, 2026, we had $11.8 million of net income of consolidated entities attributable to non-controlling interests compared to net income of $4.8 million for the nine months ended September 30, 2025. The increase is driven by higher net income of consolidated entities attributable to non-controlling interests. Period-to-period fluctuations 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 for 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 nine months of 2026, net cash provided by operating activities was $1.1 billion compared to net cash provided by operating activities of $0.9 billion during the corresponding 2025 period. The increase is primarily due to a decrease in net broker dealer assets of $224.3 million, an increase in accrued compensation and benefits liability of $114.1 million, an increase in net income of $100.7 million (net of non cash adjustments) and the net activity of our consolidated company-sponsored investment funds of $42.7 million, partially offset by an increase in fees receivable of $184.9 million, a decrease in accounts payable and accrued liabilities of $90.2 million and an increase in other assets of $54.7 million.
During the first nine months of 2026, net cash used in investing activities was $140.8 million, compared to net cash used in investing activities of $27.8 million during the corresponding 2025 period. The change is due to the funding of our $100.0 million commitment to invest in a reinsurance sidecar vehicle sponsored by RGA, of which $99.9 million was funded during the third quarter of 2026, approximately $6.0 million in other investments and higher purchases of furniture, equipment and leasehold improvements of $7.0 million. See Note 12 to AB's condensed consolidated financial statements contained in Item 1, for additional detail related to the funding of this commitment.
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During the first nine months of 2026, net cash used in financing activities was $0.9 billion, compared to net cash used in financing activities of $1.0 billion during the corresponding 2025 period. The change is primarily due to an decrease in debt repayments of $190.0 million, partially offset by a decrease in third-party capital invested into consolidated company-sponsored investment funds of $22.0 million and an increase in purchases of AB Holding Units for long term incentive compensation of $17.6 million.
As of September 30, 2026, AB had $663.8 million of cash and cash equivalents (excluding cash and cash equivalents of consolidated company-sponsored investment funds and segregated cash), all of which is available for liquidity but consists primarily of cash on deposit for our broker-dealers related to various customer clearing activities, and cash held by foreign subsidiaries of $417.5 million.
See Note 16 to AB's condensed consolidated financial statements contained in Item 1, for disclosures relating to our debt and credit facilities. We use our debt and credit facilities to seed certain new investment products which may expose us to market risk, credit risk and material gains and losses. To reduce our exposure, we enter into various futures, forwards, options and swaps primarily to economically hedge certain of our seed money investments. While in most cases broad market risks are hedged and are effective in reducing our exposure, our hedges are imperfect and we may remain exposed to some market risk and credit-related losses in the event of non-performance by counterparties on these derivative instruments.
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" for a discussion of credit markets and our ability to renew our credit facilities at expiration.
COMMITMENTS AND CONTINGENCIES
AB's capital commitments, which consist primarily of operating leases for office space, generally are funded from future operating cash flows. See Note 13 for discussion of lease commitments.
See Note 12 for discussion of commitments and 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.
There have been no updates to our critical accounting estimates during the third quarter of 2026 from those disclosed in "Management's Discussion and Analysis of Financial Condition" in our Form 10-K for the year ended December 31, 2025.
ACCOUNTING PRONOUNCEMENTS
See Note 2 to AB's condensed consolidated financial statements contained in Item 1.
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, the impact of tariffs and potential disruptions in international trade on financial markets, product and account performance, asset levels and 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, 2025
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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 and may 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 for anticipated obligations under our incentive compensation award program: The number of AB Holding Units AB may decide to buy in future periods, if any, for 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, excluding the impact of performance-based fees, generally should not exceed 50% of our adjusted net revenues on an annual basis: 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 initiative to replace our investment management technology: While we believe that our initiative to replace our existing investment management technology will result in long term savings to the business based on reasonable assumptions as of the date of this report, the duration and complexity of the project creates a significant risk that our current assumptions may not be realized.
AllianceBernstein LP published this content on October 29, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 29, 2026 at 20:54 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]