AllianceBernstein Plans To Shift New York Staff -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 12, 2017).

AllianceBernstein Holding LP is in talks to shift some staff out of New York in the latest example of money managers trying to cut expenses as investors plow money into index-tracking funds with lower fees.

The plans, unlikely to be completed until late 2018, are part of a broad cost-cutting effort at the money manager as its parent insurer AXA SA prepares an initial public offering of a combined U.S. life insurance and asset management firm, according to people familiar with the matter. AllianceBernstein is considering moving staff to locations including Charlotte, N.C., where AXA is expanding its footprint, and San Antonio, where AllianceBernstein already has an office.

No final decisions have been made and the firm may ultimately decide to keep its staff in New York, the people said. The firm's chief executive told staff in a town hall meeting last week that it was considering a number of options for its real estate footprint, including moving some staff out of state, one of the people said.

AllianceBernstein has 3,438 employees globally, according to its annual report, with most based in New York, London and Hong Kong. It has been working to downsize its global office footprint since 2010.

At the end of last year, it occupied about 40% of the 992,043 square feet of space at its New York headquarters under a lease that runs through 2024, and sublet the balance. It also rented space in two other New York City locations and in White Plains, N.Y., according to the annual report.

Money managers are trying to trim costs amid unprecedented changes in the economics of their industry as investors shift money out of active funds managed by stock pickers and into passive index and exchange-traded funds. Many investors have lost faith in so-called active managers' ability to pick winners and have opted to instead pay less to match the performance of an index.

Those funds have gained even more momentum in recent months as stock markets have reached new highs.

Meanwhile, wealth advisers are increasingly offering fee-based portfolios to clients that are filled with lower-cost funds, a trend accelerated by new retirement industry regulations. Those rules have also caused big brokerage firms to cull the number of funds on offer.

As a result, many traditional asset managers have struggled to retain assets and have been forced to reconsider their fee structures, to pursue mergers and acquisitions or to diversify their businesses and revamp their strategies.

AllianceBernstein has to date experimented with most of those moves.

Formed in 2000 when a mutual-fund firm and research outfit merged, the firm is home to stock and bond pickers as well as a private wealth management business and a research arm. It suffered during the 2008 financial crisis, when bad bets on financial firms battered its investment performance and led to the ouster of Chief Executive Lewis Sanders.

Earlier this year AXA removed another AllianceBernstein leader, Peter Kraus, who became the firm's chief executive in late 2008 and had worked to reposition it.

During his tenure AllianceBernstein became less dependent on its stock pickers, cut some fees, launched new funds with performance-linked fees, and pushed into more complex, higher-fee strategies such as hedge funds.

This spring, however, AXA ousted Mr. Kraus and removed nine of AllianceBernstein's 11 directors. It appointed Seth Bernstein, a former J.P. Morgan Chase & Co. executive as its new CEO.

Days later it unveiled plans to take its large U.S. life-insurance operations public and sell shares in a combined life insurance and asset management firm that would also be home to AllianceBernstein.

AXA is growing its footprint in Charlotte. It said in May that it would almost double its head count there over the next five years and invest $18 million in an expansion of its presence. In return, it is eligible for up to $11.8 million through a state economic development grant program.

Charlotte, home to big banks including Wells Fargo & Co. and Bank of America Corp., has emerged as a finance hub in part due to its office space costing less than in such cities as New York and San Francisco.

Write to Sarah Krouse at sarah.krouse@wsj.com

(END) Dow Jones Newswires

October 12, 2017 02:47 ET (06:47 GMT)