Thank you
for standing by, and welcome to the AllianceBernstein Second Quarter 2021 Earnings Review. At this time, all participants are in listen only mode. After the remarks, there will be a question and answer session, and I will give instructions to you on how to ask a question at that time. And will be available for replay for 1 week. I would now like to turn the conference over to the host of this call, Head of Investor Relations for AB, Mr.
Mark Griffin, please go ahead, sir.
Thank you, Angie. Good morning, everyone, and welcome to our Q2 2021 earnings review. This conference call is being webcast and accompanied by a slide presentation that's posted in the Investor Relations section of our website, www.alliancebernstein.com. With us today to discuss the company's results for the quarter are Seth Bernstein, President and CEO and Ali Dibadj, CFO and Head of Strategy. Kate Burke, COO, will join us for questions after our prepared remarks.
Some of the information we'll present today is forward looking and subject to certain SEC rules and regulations regarding disclosure. So I'd like to point out the Safe Harbor language on Slide 2 of our presentation. You can also find our Safe Harbor language in the MD and A of our 2nd from the investment community in a public forum. So please ask all such questions during this call. Now I'll turn it over to Seth.
Thank you, Mark. Good morning and thank you for joining us today. In the Q2, we continued to grow organically across all three channels for 3rd time in the last four quarters. Geographic diversification and differentiated client focused offerings across active equities including ESG, multi asset municipals and alternatives led the way. Our short and long term investment performance improved across both equities and fixed income, while our record institutional pipeline maintained an annualized fee base above $1,000,000 For the quarter, we posted active organic growth of 4%, while expanding our adjusted operating margin to 31.7%.
We delivered 49% growth in both adjusted earnings per unit and distributions per unitholder. Let's get into the specifics, starting with the firm wide overview on Slide 4. Gross sales were $45,000,000,000 or 36 $300,000,000 net of sales associated with the Venerable transaction. Once again, the quarter sales were second only to pre financial crisis levels 14 years ago. Ex Venerable, sales were up $4,500,000,000 or 14% from a year ago and up 9% from the prior quarter.
Firmwide active net flows were $6,700,000,000 up 4% annualized organic growth rate and were up 5% excluding AXIS redemptions and the venerable transaction. Quarter end assets under management of $738,000,000,000 rose 23% year over year and 6% from the prior quarter. An average AUM of 723,000,000,000 25% year over year and 5% sequentially. Slide 5 shows our quarterly flow trend by channel. Firmwide 2nd quarter net inflows of $6,200,000,000 represented a 4% annualized organic growth rate.
Net flows were positive in each channel for the Q3 of the last 4. Retail generated the 2nd strongest gross sales ever with net inflows of $5,200,000,000 as growth in active equities and munis more than offset moderating sequential outflows in taxable fixed income, once again highlighting the balance in our retail business. Institutional sales of $8,900,000,000 excluding the Venerable transaction led to net inflows of $900,000,000 driven by our multi asset retirement solutions and active equity. In Private Wealth, gross sales increased 4% year over year while declining 33% sequentially. Net inflows of 100,000,000 continued client engagement in what has historically been a seasonally lower slower quarter sequentially.
Now let's turn to investment performance beginning on Slide 6. Starting with fixed income. In the Q2, yields diverged amongst developed markets, rising in Europe as growth expectations lifted with vaccine rollouts, While in the U. S, the 10 year yield fell by 27 basis points to 1.47%. U.
S. Bond returns were positive and in developed markets, Credit outperformed governments as investors look through near term transitory inflationary surges. Our fixed income performance continued to strengthen as 91% of our fixed income assets outperformed over the 1 year period, 69% of assets outperformed over the 3 year period and 68% over the 5 year period. Our offerings generally benefited from an underweighted duration and an overweight to credit. Strategies of global and multi sector credit positioning included Global high yield, which ranked 8 percentile in the quarter and American Income, which ranked 28.
Tax exempts continued to post outstanding relative performance with 6 of our 10 retail municipal funds in the top decile of their Morningstar peer group across all periods and all 10 in the top quartile across all periods. Our TaxAware vehicles, including SMA, continued to drive double digit annualized organic growth rates. Turning to equities. Equity markets continued to rise in parallel with earnings expectations, with the S and P 500 up 8.6% and the MSCI World up 7.7% in Through June, the S and P 500 was up 15% year to date, while the S and P 500 earnings had risen by 13% over that same period. Interestingly, factoring out dividends, the return this year has almost exactly matched the rise in earnings expectations.
In equities, our percentage of assets outperforming strengthened in each time period shown, improving to 44% for the 1 year period, 66% for the 3 year period and 71% for the 5 year period. Growth stocks regained favor in the 2nd quarter after lagging in prior quarters, with much of the outperformance of growth stocks spring later in the quarter as longer term interest rates retraced. Our large cap growth, global core and concentrated U. S. And global growth strategies outperformed aided by stock selection in sectors including healthcare and technology.
Our equity platform continues benefit from broadened global distribution relationships in countries like Japan as well as expanded services to existing clients, which we'll focus on in the next section of the client on client channels. Beginning with retail on Slide 7. Once again, gross sales were the 2nd strongest on record, up 22% year over year and up 4% sequentially. Net inflows were $5,200,000,000 driven by an 18% annualized organic growth in the active equities, our 17th straight quarter of active equity inflows. We continue to drive positive flows in U.
S. Retail and Japan. Municipals grew by 23% annualized, helping to offset taxable fixed income outflows, which moderated sequentially as American income redemptions improved by $1,600,000,000 versus the prior quarter. As shown on the upper left chart, A balanced and diverse product offering continues to drive consistent organic growth with the retail channel generating positive net inflows 10 of the last 12 quarters. We remain globally diversified with the U.
S. 39% of sales, Japan, EMEA LATAM 33 percent of sales and Asia ex Japan 28 percent of sales. We now have 62 products of more than $1,000,000,000 each balanced across asset classes as compared to with 48 just a year ago. On a net flows basis, our U. S.
Equity funds ranked 9th out of 4 53 managers. International equity funds ranked 21st out of 250 3 managers and Mimi's ranked 14th of 111 Managers. Several notable individual funds are shown on the bottom right. Turning to institutional on Slide 8. 1st quarter gross sales of $8,900,000,000 excluding the venerable related Sales were up 1% year over year and up 82% sequentially.
Active equity sales of $2,800,000,000 more than tripled sequentially driven by European value, U. S. Mid cap growth and U. S. Concentrated growth.
This was the 12th of the last 14 quarters in which Active Equity posted net inflows. A $4,000,000,000 of CRS customized retirement solutions and LIS Lifetime Income Solutions funded in the quarter. LIS passed the $5,000,000,000 AUM milestone this quarter, ending above $6,000,000,000 a solid achievement for this growing platform. Also in the quarter, Equitable ceded a 50,000,000 Merger arbitrage vehicle, a strategy for which we are seeing active interest given its strong 3 year track record. Fixed income sales slowed in the 2nd quarter with outflows driven by the Venable transaction and the last of the AXA related redemptions.
We've now incurred $13,100,000,000 in lower FEED AXA redemptions since we announced them in early 2020, And this redemption program is now essentially complete. Our institutional channel has grown organically inclusive of these redemptions, highlighting the strength of our globally diversified differentiated solutions, broad client relationships and talented teams. Our ESG portfolios with purpose grew to $25,000,000,000 up 17% sequentially driven by our U. S. And global We launched the AB Sustainable Income Portfolio and also concluded AB's Climate Change and Investment Academy, A first of its kind collaboration with Columbia University, which enrolled over 1,000 clients around the world.
The Academy Integrated Scientific and Academic Analysis of How Climate Change Can Affect Investment Risks and Opportunities from macroeconomic to issuer levels. Our institutional pipeline grew to a record $17,800,000,000 atquarterend, up 17% sequentially, driven principally by a large $8,000,000,000 CRS mandate. The annualized fee base exceeds $50,000,000 or 18% compound annual growth since we began tracking in 2011, with alternatives over half the fee base. Moving to Private Wealth Management on Slide 9. Gross sales of $3,600,000,000 increased 4% year over year and declined 33% sequentially.
Combined with lower redemptions, we generated net inflows of over $100,000,000 reflecting a sequential seasonal slowdown. We built on our successful cash campaign earlier in the year with a new TaxAware campaign, which is highly relevant in today's environment. We raised $58,000,000 in a qualified opportunity fund focused on tax efficient investing and $103,000,000 in the second close of our private
would be fund to funds.
We also launched 2 new products, sustainable intermediate duration bond fund, an ESG offering and Global Disruptors, a technology and innovation focused fund. Our proprietary separately managed equity loss Tax loss harvesting product now stands at over $1,000,000,000 up 41% sequentially. Our muni impact in the ESG portfolios continue to grow strongly as shown on the bottom right. I'll finish our business review with the sell side on Slide 10. Bernstein Research revenues decreased by 7% year over year and were down 11% sequentially, reflecting more normalized trading volumes as compared with more volatile prior periods.
Growth in Asia remains healthy with trading commissions up 20% Namibia continues to ramp strongly. We are successfully engaging clients as evidenced by our 37th Annual Strategic Decisions Conference. Executives attended from 173 of the world's largest and most influential companies with over 2,600 investors, of 30% year over year. Once again, research checks increased year over year. And We ranked highly in the most recent Greenwich U.
S. Portfolio Manager surveys as exemplified by being ranked number 1 in best high quality written research and 1st and most intense sales coverage. I'll close our business overview with progress toward our strategy in the 2nd quarter on Slide 11. Our investment performance improved in the quarter with 2 thirds or more of equity and fixed income assets now outperforming in both the 3 5 year period. Near term performance and fixed income continued strong at 91% of assets outperforming, while equity improved sequentially to 44%.
Our geographic Product balance has now driven organic growth across all channels in 3 of the last four quarters, with retail positive 10 of the last 12 quarters and institutional positive 8 out of the last 9 quarters. Private wealth grew for the 3rd of the last 4 quarters with active Client engagement across our growing inflation and tax aware suite. Our ESG portfolios on purpose stand at $25,000,000,000 in assets under management, up 17% sequentially, and we're growing at double digit annualized rates in alternatives, multi assets and municipals. We are committed to managing our business to deliver strong incremental operating margins. Our 2nd quarter adjusted operating margin of 31.7% was up 3 80 basis points year over year, with adjusted earnings in unitholder distributions up 49% versus the prior year period.
Now I'll turn it over to Ali Dibadj to review the financials followed by an update on our strategic relationship with Equitable. Ali?
Thanks, Seth. Let's start with the GAAP income statement on Slide 13. 2nd quarter GAAP net revenues of $1,100,000,000 increased 24% from the prior year period. Operating income of $284,000,000 increased 35 percent and operating margins of 26.0 percent increased by 4 30 basis points. GAAP TPU of $0.91 in the quarter increased by 54% year over year.
As always, I'll focus my remarks from here on our adjusted results, which removed the effect of certain items that are not considered part of our core operating business. We base our distribution to unitholders on our adjusted results, which we provide in addition to and not as a substitute for our GAAP results, our standard GAAP reporting and a reconciliation of GAAP to adjusted results in our presentation appendix, press release and 10 Q. Our adjusted financial highlights are shown on Slide 14, which I'll touch on as we talk through the P and L shown on Slide 15. On Slide 15, beginning with revenues. Net revenues of $881,000,000 increased 26% for the Q2 versus the same prior year period.
Base fees increased 26% for the Q2 versus the prior year period, reflecting 25% higher average AUM, which grew across all 3 distribution channels and a 1% higher fee rate. The 2nd quarter fee rate of 38.7 basis points was marginally higher sequentially. We continue to believe that although our fee rate may be volatile from time to time, given large mandates such as the $8,000,000,000 CRS mandates added this quarter, that may skew averages, the long term trend should be grinding higher. 2nd quarter performance fees of $54,000,000 increased by $45,000,000 versus the prior year period due primarily to our U. S.
Select Equity and Long Short Fund in our Private Middle Market Lending business. 2nd quarter revenues for Bernstein Research Services decreased by 7% from the Q2 of 20, reflecting higher client trading activity a year ago, driven by outsized market volatility amidst the onset of the COVID-nineteen pandemic. Moving to adjusted expenses. All in, our total second quarter operating expenses of $602,000,000 increased 20% year over year. Total compensation and benefits expense increased 26% in the 2nd quarter due primarily to higher incentive compensation and secondarily to higher base compensation, both of which were driven by higher revenues.
As we guided to, compensation was 48.5 percent of adjusted net revenues for the 2nd quarter, flat with the prior year period. If our current revenue trends continue, we may accrue compensation at a 48.0 percent ratio for the should consider that performance fees have become a bigger piece of our mix, which may drive the comp ratio up. Moreover, as previously mentioned, We expect fringe benefits should ramp up this year post COVID. Promotion and servicing costs increased 12% in the second quarter due to higher transfer and marketing related expenses as well as modestly higher TME. Looking forward, we expect promotion and servicing spend levels to begin to return closer to more normalized levels in the second half of twenty twenty one as travel and meetings resume, though the pace at which these pick up remains uncertain.
All in, G and A expenses increased by 8% in the second quarter versus the same prior year were 6%, including Nashville relocation related occupancy expenses. For the Q2, higher portfolio service costs due to fund launches
and platform build outs,
including our On build outs, including our European commercial release of the debt platform as well as higher professional fees, trading errors and foreign exchange translation drove the increase. We continue to expect full year G and A expenses, excluding the Nashville relocation, to be aligned with inflation, but note that we do expect that inflation will likely be higher going forward. Within other expenses, intangible amortization expenses declined by $5,000,000 from a year ago, once again reflecting the absence of the historical quarterly amortization charge associated with the Bernstein acquisition. 2nd quarter operating income of $279,000,000 increased 43% versus the prior year period as revenue growth outpaced expense increases. 2nd quarter operating margin of 31.7 percent was up 380 basis points year on year, reflecting the operating leverage of our business.
The incremental 2nd quarter margin was 46% as compared to the prior year period. We continue to manage the business to an incremental margin of 45% to 50%, not necessarily every year, but on average over time. The 2nd quarter effective tax rate for AllianceBernstein LP was 4.4%. We now expect an effective tax rate for 2021 of between 5% to 5.5%, down from prior guidance of 5.5% to 6%, reflecting a greater mix of domestic sourced earnings. I'll finish up with an update on our planned corporate headquarters relocation to Nashville, which continues to go well.
At quarter end, we had 864 Nashville based employees, nearly 70% of the way to our target of 12.50. For our major offices in the U. S, Anemia, we began returning to the office in July, which included moving into our new downtown Nashville headquarters building. The new building at 5th and Commerce, which received a silver LEED rating as well as the Well Health safety seal is an integral part of our unique state of the art Complex, which includes the National Museum of African American Music. We're thrilled to welcome back employees into this wonderful headquarters building They will enjoy best in class amenities.
Our new headquarters will also benefit from robust critical system architecture to ensure operations under adverse conditions. For the Q2, estimated expense savings related to our Nashville corporate headquarters relocation totaled $10,000,000 compared to a transition cost of $8,000,000 resulting in a net $2,000,000 increase in operating income or approximately $0.01 per unit. Of the net $2,000,000 approximately $7,000,000 is compensation related savings, offset by $5,000,000 of increased occupancy costs. For 2021, we continue to expect accretion of around $0.02 per unit increasing each year thereafter. We continue to expect ongoing annual expense savings Beginning in 2025, once this transition is over, to be towards the upper end of the range of $75,000,000 to $80,000,000 On last quarter's earnings call, we highlighted our Private Alternatives business and our path to become a global leader in Private Alternatives.
This quarter, we thought it would be helpful to spend a few minutes to discuss in further detail our virtuous cycle with Equitable, especially in the context of recent insurance and asset manager news flow. Turning to Slide 18, Adeliquid's platform, which provide an improved risk adjusted yield for Equitable's general account. AB benefits by delivering differentiated service to Equitable and its other clients, while growing its longer dated, higher fees and higher multiple alternatives offerings. All of this enables Equitable to meet its own objectives, while growing a high multiple business, of which it's a majority owner. It is important to note that Equitable and AXIS initial capital commitments have allowed for a powerful multiplier effect, driving a 4x increase from ceded AUM to at scale AUM from 3rd party committed capital for these businesses.
Today, we're pleased to inform stakeholders that Equitable is committing to provide $10,000,000,000 in permanent capital over the next 3 years to build out AB's private illiquids offerings even further, including private alternatives and private placements. This is almost twice the amount of total fee capital we have already at AB, which has grown to our current $20,000,000,000 in AUM private alternatives business. Our private placement business is another $12,000,000,000 in AUM. We expect this anticipated capital from Equitable, Well, perhaps not immediately, but over time accelerate both organic and inorganic growth in our private alternatives business, allowing us to to deliver to our clients, employees, unitholders and other stakeholders. Slide 19 shows that AD currently manages $121,000,000,000 for Equitable, of which 64% is the general account and 36% is a separate account and other.
As a percentage of Equitable's total general account, AB currently manages approximately 75% of the GA. The $10,000,000,000 of permanent capital over the next 3 years, some of which will be incremental net flows to AB, the some of which will be reallocation, significantly enhances AAB's growth prospects, again considering the past seed investments has realized 4 times growth in committed capital from other clients. Slide 20, which we showed last quarter, highlights our organic and inorganic growth strategy and alternatives. The $10,000,000,000 of permanent capital from Equitable will allow us to grow our core through scaling existing funds, following funds and new funds targeting new client segments as well as existing extending into adjacencies. On the organicinorganic side, Equitable's permanent capital commitment will enhance our ability to attract and retain highly qualified teams, in turn allowing AB to fill gaps while focusing on scalable and higher growth markets.
Slide 21 highlights the large valuation differential between traditional and private alternative managers, just as a reminder to all of us. Equitable's permanent capital will help us accelerate growth into higher multiple business, Combined with the multiplier effect shown through Equitable's prior commitment, we anticipate that growth in private and liquids should be accretive to our valuation, not overnight, but over time. Finally, on Slide 22, we further highlight the benefits to both AB and Equitable of the Virtuos cycle. Equitable is able to enhance its general account income with appropriate risk adjusted returns and diversification and ensuring capacity in priority asset classes. AB remains focused on delivering superior investment performance and expanding our differentiated services for our clients, especially private alternatives.
In conclusion, we feel privileged to have a like minded partner owner in Equitable. We've learned from what some of our traditional and private alternatives are doing in the industry and believe our relationship with Equitable is a long term competitive advantage for Laurence Bernstein. Now I'll turn it back to Seth.
Thank you, Ali. Turning to Slide 23. In the Q1, we continued to make progress on the dimensions we previously outlined. Namely, we drove a 4% active annualized growth rate spanning across each channel led by active equities, multi assets and municipals. We expanded our suite of higher fee alternatives with Equitable funding our Europe credit platform and seeding a new merger arbitrage vehicle.
As Ali just highlighted, Equitable's $10,000,000,000 commitment to Private Liquids over the next 3 years will significantly accelerate our opportunity set in alliance with their strong mutual interest in growing our yield enhancing alternative strategy. We drove healthy incremental margins in the quarter in line with our long term goal. As a partnership, we have a durably low tax rate, and we will pay a distribution of $0.91 per unit for the 2nd quarter for a robust trailing 12 month yield of 7% in a low rate environment. With that, we're pleased to take your questions.
In order to provide all callers the opportunity to ask questions. You are welcome to return to the queue as a follow-up question. Your first question comes from the line of Bill Katz with Citigroup.
Okay. Thank you and good morning everybody. I appreciate the added disclosure. This morning, maybe we could start with that on the insurance side. Could you talk a little bit about just maybe a little more detail on the underlying economics On the $10,000,000,000 it sounds like some of it may be new, some of it may be a replacement.
But maybe you could help us with where you are today in terms of insurance related revenues coming off of Equitable and then how you sort of see the $10,000,000,000 coming through the P and L? Thank you.
Sure. So thanks, Bill, for the question. We think this is a meaningful step Per AllianceBernstein and Equitable, this type of thing should not be unfamiliar to people like yourself who cover some of the private alternative firms well, and you see the news flow. It is $10,000,000,000 and you're right that it is some incremental, some reallocation, But all to our liquids suite, so private placements and private alternatives, which as you know are generally, not always, but generally higher fee areas to manage. The benefit that we get on top of that is we have a track record of taking that AUM and multiplying it by about 4.
We hope that track record continues. And in doing that and thinking about that, we certainly have a glide path that we've developed together with We won't dimensionalize much further about exactly what we're going to do with the $10,000,000,000 how we're going to grow it. A little bit of a freedom to build new businesses together for Equitable and for AB, serving their need to improve their yield and our desire on As we mentioned in the prepared remarks, we managed about $121,000,000,000 for Equitable. And we have about 75, just for sake of background, about 75 insurance clients that we serve as well. And we think that what we're building can serve even more insurance clients, even more growth for us, exactly as Seth said in his remarks as well.
Okay. That's helpful. And then just for my follow-up question. Thanks for taking both questions this morning. Just to unpack maybe the expense discussion a little bit.
If I look at your G and A, it was up pretty measurably and there's a whole bunch of things that sort of fall into that. So I was sort of wondering like what's the exit pacing on that? And then, in line with your commentary around sort of the normalization, whatever that might mean for the second half of the year, how should we be thinking about just sort of the pace of Growth in the promo line and is 2019 still the right baseline to be sort of modeling back to or are there other offsets along the way that can maybe 10% of that normalization? Thank you.
Sure. Let's just aggregate that question into 2 buckets, one about G and A and one about teeny in particular, given that that's in pro loan servicing. From a G and A perspective, as you can tell, G and A has grown 8% on a year over year basis. That includes a relocation expense from Nashville. If you were to take that out, the Nashville relocation, you'd be talking about something like a 6 ish Percent type growth in G and A.
And that was driven by a few things, right? Some of them are very much along the plans that we had in terms of growth, Higher portfolio costs, for launching new products, for example, our European commercial real estate debt platform, which also is in partnership with Equitable. There are some higher professional fees in there, some trading errors, FX, those types of things are in that number, and we expect that To continue as the year goes on. Now what I'd say is, we also continue our guidance previously to stick, which is that Excluding the Nashville relocation costs, we would expect that G and A would grow with inflation. Now as we've in our prepared remarks, we think inflation is probably a little bit higher now than it was before, but that guidance really doesn't change.
And by the way, just by way of interest, We are seeing in the G and A line some re inflation coming from market data costs, from professional services fees. So our eyes wide open about managing that, but that will continue. So that's kind of the G and A part. Now you mentioned promo and servicing, and obviously the big driver Of that for us is watching T and E, watching firm meetings. And look, there, to be fair, over It's hard to say, right?
It's hard to say what's going to come out over the next little while here. We're all watching Delta and being very careful. What I will say is that in some of those key and expenses, for example, some of the firm meetings, we've year on year doubled And sometimes triple the cost of those, I. E, things are ramping back up. Think about what we're doing in Asia as an example.
Those are ramping back up. So those costs have doubled or tripled so far, But still they're significantly to your run rate question, they're significantly lower than what we saw in 2019. Call it, we're below 20% kind of numbers of of our 2019 run rate. So there's a lot more room to run here from an upside perspective. And we'll watch that.
I don't have a great answer What I do know is for all of our sakes, look, I'd certainly like to see some savings relative to 2019 numbers, but for all of our sakes, I sure hope that we get to see clients live, see colleagues, see partners and yes, even see you, Bill, live over the course of the next few months here. So we'll just watch it carefully.
Okay. Thank you very much. Look forward to seeing you guys as well. All right. Thank you for taking the questions this morning.
Your next question comes from the line of John Donne with Evercore ISI.
Hi, good morning. Just thinking about framing the puts and takes of flows in the private wealth channel, You mentioned fund launches, tax harvesting and seasonality, but could you maybe talk about some of
the other drivers in or out?
Sure. I can take that one. Thanks for the question. So not only did we continue to see strength in our cash campaign from earlier in the year where we were having clients move out of cash and back into the more active markets. We also launched a new TaxAware campaign, which we think is highly relevant in today's environment.
And so There you're seeing the wealth advice continue to drive a lot of our clients engagement with us. We will see additional product launches in the back half of the year in alternatives, ESG and the SMA platform to continue to invest in that space and to provide what we think are good additions to our core offering for particularly our complex and high value clients, which continue to grow nicely and are a substantial portion of our net inflows year to date.
Got you. And then, U. S. Growth equities continues to do really well. You kind of give us a regional breakdown of where that demand is coming from?
Sure. The demand has been principally in the United States and in Japan. And Japan has been particularly prominent for us this year. But it's been a pretty strong performer for us globally.
Your next question comes from the line of Alex Blostein with Goldman Sachs.
Hi, thanks for taking
the question. This is Shariq filling in For Alex, my question is on the e tail. We have seen some strengths lately here across the industry. 3. So what's driving the inflows at AllianceBernstein?
And how sustainable are these flows? And then on the fixed Income side, I mean, flows have been pretty strong if you kind of exclude the AXA redemption. So under the current like Given the outlook for the interest rates going forward, what's your outlook for the fixed income flows to keep sustaining these levels of inflows? Thank you.
Thank you for the question. Look, we have and I think we say it in our opening comments, We have had remarkable sustained net inflows, particularly in equities over a pretty extended period of time. And it comes from the fact that We have a pretty diverse group of services that have been selling. We've mentioned large cap growth, but we've also had continuing strong interest in our Portfolios with purpose are sustainable strategies, which really have begun to see strong demand, both in U. S.
And in Europe. And those are taking an increasing share. We've even seen interest in value, which has picked up pretty nicely from a performance perspective in the shorter term. And we've seen with the maturation of our private alts business, It's still early days, as Ali was alluding to, but we're continuing to see strong take up In new, efforts to raise money for our U. S.
Commercial real estate debt business, for our middle market lending business And so forth. So it's been pretty diversified in those areas. But I would also add that, we've Seeing more activity in our multi asset group. Now that can be quite lumpy. As we indicated, in our comments, Specifically, our target date I'm sorry, our customized retirement solutions tend to be very large, although the fees are lower there, Look, we think rates have a likelihood of going higher from here.
But remember, we've seen quite a rally in rates that have taken us back down again over the last month. And we don't necessarily think that's sustainable. In fact, we do think rates will rise. While most of the inflationary Impacts we've seen are transitional in our view. There are some expectations building in.
And certainly, As people in our industry recognize, it's harder to hire people. There's real shortage of talent out there. So there are pressures. The consequence of that is we think rates will be rising. That is beneficial for fixed income Over time, yield really does matter to our clients.
And so where I look in fixed income, I I'm pleasantly surprised just how tempered the outflows have been. And in fact, they've been moderating further from Asia in our income products. But look, Asian demand has historically been fickle. There are obviously other alternatives, whether it's Chinese equities, which may not at the moment be performing very well, but have been performing previously that have siphoned demand away from higher yielding services like AIP and GHY. So, look, again, it's I think it's the Story of a diversified pool of business.
I think our SMA our muni SMA business here in the U. S. Has really seen Strong demand growth because I think we offer quite a differentiated service to our clients. And I think tax concerns continue to drive interest in more tax efficient vehicles. So, I think it's a more mixed story for sure than equities and alternatives And multi asset, but I think it is certainly at manageable levels for us given the mix of business we have.
Got it. Thank you so much.
Your next question comes from the line of Dan Fannon with Jefferies.
Hi, Seth. Hi, Ali.
This is actually Rick Roy filling in for Dan. Thanks for taking my question and I hope you guys are having a good morning. So appreciate the previous detail given on the G and A run rate. And just as a quick follow-up on that, how should we think about the contribution from some of the more Seemingly idiosyncratic items that were detailed in the presentation, kind of like, for example, the trading errors And is that incorporated in the guidance you guys mentioned earlier? And then as a follow-up kind of more broadly, as you guys think about the eventual normalization of Spences and knowing that you guys mentioned the timing around that is a little uncertain.
How much would you guys say you're under spending relative to pre pandemic levels? And to what degree would you say these savings will be sticky? And if you could provide any numbers around this? Thank you.
Sure.
Thanks, Rick. So two parts to that question, right? One is on some of the kind of one off things In our G and A, you mentioned trading errors in particular. I can tackle that head on. Look, no one wants trading errors Ever, but it's part of the business, right?
Sometimes these things happen, sometimes they're bigger than others, and everybody has them, right? So you don't model for it, you don't plan for it, but what we've seen in our rearview mirror in terms of errors and all the other idiosyncratic Impacts to our G and A is in our guidance. So as we look for the full year, expect it to be in line with inflation if you take away the So, your location costs and you stick to that and believe in that. Again, we'll manage these idiosyncratic events as we go along, but that is our guidance. And we believe even what we've delivered so far, leads us very well to get to that point by the end of the So hopefully that covers that.
And it's not just there's foreign exchange in there, there's new product launches in there, etcetera, but we still believe that, that is the right guidance. On broader savings, I guess the way we've articulated it before is that if you think of Last year, we would have under spent by about $50,000,000 a little bit north of $50,000,000 It's an imprecise science. It is what it is, but we think about $50,000,000 is what we saved last year versus the 2019 numbers. Do we think we'll see all of that come back this year? I mean, look, it's halfway through the year and I gave you a sense of the numbers before, probably not.
Our hope is that we can find savings relative to the 2019 number. We haven't articulated exactly how much, but certainly something that we think Clients will want to see us differently and colleagues might travel intra office differently and so we'll find some savings there. But it's I have to say exactly what level it will be at. There will be some savings, however, in travel and all the other costs relative to that $50,000,000 that we saved in 2020 versus 2019.
Great. Appreciate the answer to that question. Thank you.
Your next question comes from the line of Robert Lee with KBW.
Great. Thanks. Good morning. Thanks for taking my questions. I mean, first one maybe on private wealth management.
Just kind of curious if you could update us on some of the growth initiatives Aaron, and I guess particularly interested just given the war for talent out there, particularly experienced financial advisors, you're seeing any kind of pressure on retention or and I know you don't go necessarily go out and recruit new advisors, you may only train them So if you're seeing any issues with kind of growing the advisor forces as you would like?
Sure. Thanks for the question. So in terms of our growth initiatives, we are on plan with our advisor headcount. It's up 3% year to date, and we're on track to hit our 5% growth target for new advisors in 2021. So we continue to have success in finding and attracting great new talent to our advisor force.
And then as you said, we do grow our advisors. We put them through, I think, the best in class training program here so that when they are out with Clients are able to really represent the best of Bernstein's investment and wealth strategy advice. We certainly do know that there is compensation pressure out there in the industry. We continue to pay competitively and are pleased with our existing force and in terms of the turnover we've seen to date, it's pretty much on average with previous years. And so We continue to watch that and invest back into the business and into our people to continue to keep what we think is a great competitive advantage, both in our advisor force as well as with our investment teams and wealth strategy and advice teams that are that have been with us for a long period of time.
Okay, thanks. And maybe as a follow-up, You didn't touch on in the prepared remarks the tax harms being product. And I mean, clearly, you've seen competitors make Position, invest in kind of direct indexing,
similar space.
You talked about, do you have any Current plans to take that capability and roll it out through 3rd party advisors or The current intention to kind of keep that proprietary in house?
I'll start with I can start with the first part of the answer and then Ali can join me, I think, when it comes to how we think about M and A. We're very pleased with our Current closed architecture approach, we leverage AAV products primarily. Though you do see us partner occasionally with an Slide firm in an alternative space that we have not yet gone into, But we do primarily and do primarily plan to continue to grow via AB vehicles. We have launched, For example, and we're in the midst of launching several purpose driven offerings in 2021 around sustainable somatic That's also in conjunction with our retail team, sustainable credit portfolio as well and then ESG improvers. And then we continue to look, as we said, in broadening out the alternatives platform.
I'll turn it over to Ali to talk about where we think about that in terms of M and A in that construct.
Robert, thanks for the question. Just to build on what Kate said, for us, it's all about the client. It's all about what the client needs are in delivering for Client is exactly as Kate mentioned. Once we understand what we believe the client wants and what we think we should be delivering to the client, It then becomes a question of buy, build or partner, right? And we have success in all three, right?
We have success in terms of building things. You mentioned, for example, the PAS The tax harvesting product that we have cost over $1,000,000,000 and very, very quick said, and we want to continue that growth there. And as we look at even in that sleeve, other custom indexing that is out there, we should certainly look at partnering with other folks. If there is a need, that's not fulfilled there, but we've built something that's actually quite robust and quite successful. Then there There's the buy option, which we look at quite carefully, as everybody on the phone, I think, knows.
And we believe there's a lot more activity out there. And we've had a pretty good track record, I'd say, An accelerating track record as well of acquiring or accu hiring investment processes, tools that can Exactly, as I said at the outset, what our clients want. And also, I'd say, as Kate mentioned, there's a partnership track. So it's Not just by our build. We've really thought long and hard about partnering.
We are, an integrated architecture in our Private Wealth business in particular We believe that holistic view delivers better for the client, but there are areas where we won't be all things to everyone and we certainly won't own the investment teams, but we can partner So we're looking at all three dimensions, and it's all under this umbrella of being maniacally client centric and client focused.
Great. Thanks for taking my question.
Our final question comes from the line of Bill Katz with Citigroup.
Just a follow-up, 2 part follow-up, so thanks for taking the extra question.
Can you sort of flesh out
a little bit what you're doing on The LIS portfolio, it sounds interesting to me. And then just a conceptual question, just given a lot of the headline risk that we're seeing in the Asia Pac, particularly in the China Mainland area, which I think is more of a sort of a direct equity issue, but does that have any spillover effect to commingled accounts either in terms of absolute level or maybe the mix of what might coming in the door? Thank you.
Bill, the LIS is a Structure we created some years back in partnership with 1 of our key institutional clients To build an annuity option in defined contribution plans 403b and 401 plans. We have what we think is an option where we can give the plan sponsor access to a number of different insurers For those participants who want an annuity option in their portfolio, as you, I think, know better than most, There is a fundamental public policy issue facing America today, which is many people who are facing Looking forward for retirement are under saved for their post retirement period And the security of having an annuity structure psychologically is very important to a subset of that population. The SECURE Act last year, I think, has reshuffled the deck and has made this a much more important initiative for plan sponsors than it was before. It can become the default option now. And so we are seeing real interest there, but these are Very long process decisions that take considerable amount of time through the RFP stage And ultimately through award and execution.
So, it's a slow moving train, but we're optimistic there will be Opportunities that fall out of that for AB. Switching over to China. Look, the executive orders that come out of Washington do impact how we manage commingled vehicles in the United States With Chinese equities in them and like other money managers, we've been responsive to adjusting Our portfolios accordingly, it doesn't, as I understand it, impact us how we manage those portfolios outside the United And so for example, in our Chinese portfolios, Mainland portfolios, we manage for On short clients or in A Shares, we can in fact, it hasn't really impacted us in the way that we've managed the portfolios.
There are no further questions at this time. Mr. Griffin, I'll turn the call back to you.
Thank you, Angie. Thanks, everyone, for participating in our conference call this morning.