Index

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
FORM 10-Q
(Mark One)
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2023
OR
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                         to
Commission File No.  000-29961
ALLIANCEBERNSTEIN L.P.
(Exact name of registrant as specified in its charter)
Delaware13-4064930
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1345 Avenue of the Americas, New York, NY  10105501 Commerce Street, Nashville, TN  37203
(Address of principal executive offices)
(Zip Code)
(212) 969-1000(615) 622-0000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yesx☒Noo☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
x

☒		Noo☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☐
Emerging growth company☐
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x (Do not check if a smaller reporting company)
Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Index

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

Index
Securities registered pursuant to Section 12(g) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
NoneNoneNone

The number of units of limited partnership interest outstanding as of September 30, 2017March 31, 2023 was 265,824,057.285,654,435.



Index

ALLIANCEBERNSTEIN L.P.
Index to Form 10-Q

Page
Part I
FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Statements of Financial Condition
1
Condensed Consolidated Statements of Income
3
Condensed Consolidated Statements of Comprehensive Income
4
Condensed Consolidated Statements of Changes in Partners' Capital
5
Condensed Consolidated Statements of Cash Flows
56
Notes to Condensed Consolidated Financial Statements
78
Item 2.
2927
Item 3.
5146
Item 4.
5146
Part II
OTHER INFORMATION
Item 1.
5246
Item 1A.
5246
Item 2.
5246
Item 3.
5247
Item 4.
5247
Item 5.
5347
Item 6.
5448
5549




Index

Part I
FINANCIAL INFORMATION
Item 1.    Financial Statements
ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Condensed Consolidated Statements of Financial Condition
(in thousands, except unit amounts)
(unaudited)
 March 31,
2023		December 31,
2022
ASSETS
Cash and cash equivalents$886,145 $1,130,143 
Cash and securities segregated, at fair value (cost: $1,041,813 and $1,511,916)1,054,643 1,522,431 
Receivables, net:  
Brokers and dealers92,337 112,226 
Brokerage clients1,729,210 1,881,496 
AB funds fees345,016 314,247 
Other fees139,695 127,040 
Investments:  
Long-term incentive compensation-related43,984 47,870 
Other167,954 169,648 
Assets of consolidated company-sponsored investment funds:
   Cash and cash equivalents20,417 19,751 
   Investments543,339 516,536 
   Other assets30,795 44,424 
Furniture, equipment and leasehold improvements, net189,670 189,258 
Goodwill3,598,591 3,598,591 
Intangible assets, net298,754 310,203 
Deferred sales commissions, net58,216 52,250 
Right-of-use assets355,608 371,898 
Assets held for sale671,069 551,351 
Other assets165,422 179,568 
Total assets$10,390,865 $11,138,931 
1
Index
 September 30,
2017		 December 31,
2016
    
ASSETS   
Cash and cash equivalents$802,209
 $656,985
Cash and securities segregated, at fair value (cost: $784,535 and $946,093)784,566
 946,097
Receivables, net: 
  
Brokers and dealers299,641
 335,686
Brokerage clients1,651,524
 1,513,656
AB funds fees171,165
 165,997
Other fees104,196
 104,376
Investments: 
  
Long-term incentive compensation-related64,716
 67,761
Other455,037
 373,344
Assets of consolidated company-sponsored investment funds:   
   Cash and cash equivalents445,250
 337,525
   Investments799,935
 574,076
   Other assets6,455
 44,570
Furniture, equipment and leasehold improvements, net152,448
 159,564
Goodwill3,066,700
 3,066,700
Intangible assets, net112,556
 134,606
Deferred sales commissions, net37,004
 63,890
Other assets231,249
 195,615
Total assets$9,184,651
 $8,740,448
    
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND CAPITAL 
  
Liabilities: 
  
Payables: 
  
Brokers and dealers$299,382
 $239,578
Securities sold not yet purchased33,811
 40,944
Brokerage clients2,386,422
 2,360,481
AB mutual funds123,678
 150,939
Accounts payable and accrued expenses519,886
 430,569
Liabilities of consolidated company-sponsored investment funds593,800
 292,800
Accrued compensation and benefits612,230
 251,019
Debt297,436
 512,970
Total liabilities4,866,645
 4,279,300
    
Commitments and contingencies (See Note 12)


 

 March 31,
2023		December 31,
2022
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND CAPITAL
Liabilities:  
Payables:  
Brokers and dealers$408,878 $389,828 
Brokerage clients2,594,685 3,322,903 
AB mutual funds89,238 162,291 
Contingent consideration liability248,185 247,309 
Accounts payable and accrued expenses147,327 173,466 
Lease liabilities409,749 427,479 
Liabilities of consolidated company-sponsored investment funds43,647 55,529 
Accrued compensation and benefits436,747 415,878 
Debt1,035,000 990,000 
Liabilities held for sale157,761 107,952 
Total liabilities5,571,217 6,292,635 
Commitments and contingencies (See Note 12)
Redeemable non-controlling interest of consolidated entities376,290 368,656 
Capital:  
General Partner45,595 45,985 
Limited partners: 285,654,435 and 285,979,913 units issued and outstanding4,609,592 4,648,113 
Receivables from affiliates(5,097)(4,270)
AB Holding Units held for long-term incentive compensation plans(96,077)(95,318)
Accumulated other comprehensive (loss)(122,998)(129,477)
Partners’ capital attributable to AB Unitholders4,431,015 4,465,033 
Non-redeemable non-controlling interests in consolidated entities12,343 12,607 
Total capital4,443,358 4,477,640 
Total liabilities, redeemable non-controlling interest and capital$10,390,865 $11,138,931 
Index

    
Redeemable non-controlling interest421,618
 392,959
    
Capital: 
  
General Partner39,620
 41,100
Limited partners: 265,824,057 and 268,893,534 units issued and outstanding4,010,144
 4,154,810
Receivables from affiliates(11,978) (12,830)
AB Holding Units held for long-term incentive compensation plans(48,786) (32,967)
Accumulated other comprehensive loss(94,219) (118,096)
Partners’ capital attributable to AB Unitholders3,894,781
 4,032,017
Non-redeemable non-controlling interests in consolidated entities1,607
 36,172
Total capital3,896,388
 4,068,189
Total liabilities, redeemable non-controlling interest and capital$9,184,651
 $8,740,448

See Accompanying Notes to Condensed Consolidated Financial Statements.
2
Index

ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per unit amounts)
(unaudited)
 Three Months Ended March 31,
 20232022
Revenues:
Investment advisory and services fees$728,907 $823,782 
Bernstein research services100,038 117,807 
Distribution revenues141,078 168,341 
Dividend and interest income50,679 11,475 
Investment gains (losses)5,264 (39,024)
Other revenues26,146 26,155 
Total revenues1,052,112 1,108,536 
Less: Interest expense28,021 2,849 
Net revenues1,024,091 1,105,687 
Expenses:  
Employee compensation and benefits434,163 439,420 
Promotion and servicing:  
Distribution-related payments148,381 176,244 
Amortization of deferred sales commissions8,154 9,383 
Trade execution, marketing, T&E and other50,630 51,227 
General and administrative139,653 177,625 
Contingent payment arrangements2,444 838 
Interest on borrowings13,713 1,411 
Amortization of intangible assets11,693 1,136 
Total expenses808,831 857,284 
Operating income215,260 248,403 
Income taxes11,342 12,721 
Net income203,918 235,682 
Net income (loss) of consolidated entities attributable to non-controlling interests9,767 (25,045)
Net income attributable to AB Unitholders$194,151 $260,727 
Net income per AB Unit:  
Basic$0.67 $0.95 
Diluted$0.67 $0.95 
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
Revenues:        
Investment advisory and services fees $543,107
 $489,393
 $1,572,560
 $1,417,856
Bernstein research services 108,385
 110,885
 330,596
 352,403
Distribution revenues 106,042
 97,625
 302,745
 287,638
Dividend and interest income 17,619
 9,908
 51,023
 30,128
Investment gains (losses) 18,808
 17,606
 68,122
 85,469
Other revenues 24,902
 24,240
 71,532
 75,044
Total revenues 818,863
 749,657
 2,396,578
 2,248,538
Less: Interest expense 6,713
 2,066
 17,198
 6,015
Net revenues 812,150
 747,591
 2,379,380
 2,242,523
         
Expenses:  
  
  
  
Employee compensation and benefits 329,777
 316,737
 979,387
 927,997
Promotion and servicing:  
  
  
  
Distribution-related payments 108,284
 95,844
 307,407
 276,188
Amortization of deferred sales commissions 7,629
 9,787
 25,015
 31,606
Trade execution, marketing, T&E and other 48,088
 47,205
 149,537
 156,763
General and administrative:  
    
  
General and administrative 128,712
 106,504
 360,395
 322,184
Real estate charges (credits) 18,655
 (140) 39,400
 24,645
Contingent payment arrangements (140) (21,129) 215
 (20,423)
Interest on borrowings 2,105
 1,009
 6,227
 3,293
Amortization of intangible assets 7,013
 6,465
 20,921
 19,344
Total expenses 650,123
 562,282
 1,888,504
 1,741,597
         
Operating income 162,027
 185,309
 490,876
 500,926
         
Income taxes 4,547
 11,578
 24,869
 37,315
         
Net income 157,480
 173,731
 466,007
 463,611
         
Net income of consolidated entities attributable to non-controlling interests 16,526
 15,696
 50,013
 14,791
         
Net income attributable to AB Unitholders $140,954
 $158,035
 $415,994
 $448,820
         
Net income per AB Unit:  
  
  
  
Basic $0.53
 $0.58
 $1.54
 $1.65
Diluted $0.52
 $0.58
 $1.54
 $1.64


See Accompanying Notes to Condensed Consolidated Financial Statements.
3
Index

ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
 
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
         
Net income $157,480
 $173,731
 $466,007
 $463,611
Other comprehensive income (loss):        
Foreign currency translation adjustment, before reclassification and tax 7,735
 437
 24,091
 539
Less: reclassification adjustment for (losses) included in net income upon liquidation —
 (6) —
 (6)
Foreign currency translation adjustments, before tax 7,735
 443
 24,091
 545
Income tax benefit —
 —
 —
 —
Foreign currency translation adjustments, net of tax 7,735
 443
 24,091
 545
Unrealized (losses) gains on investments:  
  
    
Unrealized (losses) gains arising during period (4) 12
 6
 (7)
Less: reclassification adjustment for (losses) included in net income —
 (7) —
 (10)
Change in unrealized (losses) gains on investments (4) 19
 6
 3
Income tax benefit (expense) 5
 (8) 3
 (5)
Unrealized gains (losses) on investments, net of tax 1
 11
 9
 (2)
Changes in employee benefit related items:  
  
    
Amortization of prior service cost 6
 6
 18
 87
Recognized actuarial loss 295
 244
 818
 202
Changes in employee benefit related items 301
 250
 836
 289
Income tax (expense) benefit (2) 24
 (81) (51)
Employee benefit related items, net of tax 299
 274
 755
 238
Other comprehensive income 8,035
 728
 24,855
 781
Less: Comprehensive income in consolidated entities attributable to non-controlling interests 16,554
 15,725
 50,990
 14,815
Comprehensive income attributable to AB Unitholders $148,961
 $158,734
 $439,872
 $449,577
 Three Months Ended March 31,
 20232022
Net income$203,918 $235,682 
Other comprehensive income (loss):
Foreign currency translation adjustments, before tax6,131 (11,822)
Income tax benefit47 101 
Foreign currency translation adjustments, net of tax6,178 (11,721)
Changes in employee benefit related items:
Amortization of prior service cost6 6 
Recognized actuarial gain298 323 
Changes in employee benefit related items304 329 
Income tax (expense)(3)(9)
Employee benefit related items, net of tax301 320 
Other comprehensive income (loss)6,479 (11,401)
Less: Comprehensive income (loss) in consolidated entities attributable to non-controlling interests9,767 (25,045)
Comprehensive income attributable to AB Unitholders$200,630 $249,326 
 
See Accompanying Notes to Condensed Consolidated Financial Statements.


4
Index

ALLIANCEBERNSTEIN L.P.

AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Partners' Capital
(in thousands)
(unaudited)
Three Months Ended March 31,
20232022
General Partner’s Capital
Balance, beginning of period$45,985 $42,850 
Net income1,941 2,607 
Cash distributions to General Partner(2,221)(3,781)
Long-term incentive compensation plans activity15 (1)
(Retirement) issuance of AB Units, net(125)157 
Balance, end of period45,595 41,832 
Limited Partners' Capital
Balance, beginning of period4,648,113 4,336,211 
Net income192,210 258,120 
Cash distributions to Unitholders(219,698)(374,029)
Long-term incentive compensation plans activity1,438 (157)
(Retirement) issuance of AB Units, net(12,471)15,498 
Balance, end of period4,609,592 4,235,643 
Receivables from Affiliates
Balance, beginning of period(4,270)(8,333)
Long-term incentive compensation awards expense191 174 
Capital contributions (to) from AB Holding(1,018)33 
Balance, end of period(5,097)(8,126)
AB Holding Units held for Long-term Incentive Compensation Plans
Balance, beginning of period(95,318)(119,470)
Purchases of AB Holding Units to fund long-term compensation plans, net(18,090)(13,822)
Retirement (issuance) of AB Units, net12,510 (15,655)
Long-term incentive compensation awards expense6,585 18,442 
Re-valuation of AB Holding Units held in rabbi trust(1,764)(409)
Balance, end of period(96,077)(130,914)
Accumulated Other Comprehensive (Loss)
Balance, beginning of period(129,477)(90,335)
Foreign currency translation adjustment, net of tax6,178 (11,721)
Changes in employee benefit related items, net of tax301 320 
Balance, end of period(122,998)(101,736)
Total Partners' Capital attributable to AB Unitholders4,431,015 4,036,699 
Non-redeemable Non-controlling Interests in Consolidated Entities 
Balance, beginning of period12,607 — 
Adjustment(264)— 
Balance, end of period12,343 — 
Total Capital$4,443,358 $4,036,699 
See Accompanying Notes to Condensed Consolidated Financial Statements.
5
Index
ALLIANCEBERNSTEIN L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Three Months Ended March 31,
 20232022
Cash flows from operating activities:
Net income$203,918 $235,682 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:  
Amortization of deferred sales commissions8,154 9,383 
Non-cash long-term incentive compensation expense6,776 18,616 
Depreciation and other amortization22,849 11,124 
Unrealized (gains) losses on investments(4,662)21,024 
Unrealized (gains) losses on investments of consolidated company-sponsored investment funds(16,162)40,898 
Non-cash lease expense26,426 26,557 
Loss on assets held for sale2,500 — 
Other, net(3,523)4,395 
Changes in assets and liabilities:  
Decrease (increase) in securities, segregated467,788 (188,669)
Decrease (increase) in receivables126,176 (193,178)
Decrease in investments18,571 8,434 
(Increase) decrease in investments of consolidated company-sponsored investment funds(10,641)85,201 
(Increase) in deferred sales commissions(14,120)(3,562)
(Increase) in other assets(102,965)(111,939)
Increase (decrease) in other assets and liabilities of consolidated company-sponsored investment funds, net1,747 (50,360)
(Decrease) increase in payables(764,090)199,166 
(Decrease) increase in accounts payable and accrued expenses(12,365)20,473 
Increase in accrued compensation and benefits23,277 43,766 
Cash payments to relieve operating lease liabilities(26,566)(26,828)
Net cash (used in) provided by operating activities(46,912)150,183 
Cash flows from investing activities:  
Purchases of furniture, equipment and leasehold improvements(10,572)(6,237)
Net cash used in investing activities(10,572)(6,237)
6
Index
 Nine Months Ended September 30,
 2017 2016
Cash flows from operating activities:   
Net income$466,007
 $463,611
    
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Amortization of deferred sales commissions25,015
 31,606
Non-cash long-term incentive compensation expense26,947
 6,530
Depreciation and other amortization49,995
 44,010
Unrealized losses (gains) on investments3,323
 (27,659)
Unrealized (gains) on investments of consolidated company-sponsored investment funds(33,062) (16,675)
Other, net10,195
 8,099
Changes in assets and liabilities: 
  
Consolidation of cash and cash equivalents of consolidated company-sponsored investment funds—
 8,512
Decrease in segregated cash and securities161,531
 73,252
Decrease (increase) in receivables8,079
 (206,052)
(Increase) decrease in investments(76,780) 184,655
(Increase) in investments of consolidated company-sponsored investment funds(192,797) (34,576)
Decrease (increase) in deferred sales commissions1,871
 (2,171)
(Increase) in other assets(33,003) (40,933)
Decrease (increase) in other assets and liabilities of consolidated company-sponsored investment funds339,115
 (1,791)
(Decrease) increase in payables(58,126) 268,937
Increase in accounts payable and accrued expenses23,982
 59,950
Increase in accrued compensation and benefits358,586
 322,600
Net cash provided by operating activities1,080,878
 1,141,905
    
Cash flows from investing activities: 
  
Purchases of investments(11) —
Proceeds from sales of investments10
 191
Purchases of furniture, equipment and leasehold improvements(24,952) (28,318)
Proceeds from sales of furniture, equipment and leasehold improvements39
 14
Purchase of business, net of cash acquired—
 (20,541)
Net cash used in investing activities(24,914) (48,654)
    
Cash flows from financing activities: 
  
(Repayment) of commercial paper, net(220,363) (197,064)
Increase (decrease) in overdrafts payable66,134
 (74,837)
Distributions to General Partner and Unitholders(489,049) (400,441)
Redemptions of non-controlling interests of consolidated company-sponsored investment funds, net(8,373) (36,226)
Capital contributions (to) from non-controlling interests in consolidated entities(43,217) 364
Purchase of non-controlling interest(1,833) —
Capital contributions from affiliates79
 439
Payments of contingent payment arrangements/purchases of shares(6,344) (4,994)
Additional investments by AB Holding with proceeds from exercise of compensatory options to buy AB Holding Units17,672
 2,371
 Three Months Ended March 31,
 20232022
Cash flows from financing activities:  
Proceeds from debt, net45,000 95,000 
Increase (decrease) in overdrafts payable86 (14,736)
Distributions to General Partner and Unitholders(221,919)(377,810)
(Redemptions) of non-controlling interest in consolidated company-sponsored investment funds, net(2,133)(58,103)
Capital contributions (to) affiliates(1,324)(529)
Purchases of AB Holding Units to fund long-term incentive compensation plan awards, net(18,090)(13,822)
Other, net(2,339)(1,173)
Net cash used in financing activities(200,719)(371,173)
Effect of exchange rate changes on cash and cash equivalents10,232 (11,431)
Net (decrease) in cash and cash equivalents(247,971)(238,658)
Cash and cash equivalents as of beginning of the period1,309,017 1,376,026 
Cash and cash equivalents as of end of the period$1,061,046 $1,137,368 
Index

Purchases of AB Holding Units to fund long-term incentive compensation plan awards, net(134,186) (128,778)
Purchases of AB Units(993) (359)
Other—
 (19)
Net cash used in financing activities(820,473) (839,544)
    
Effect of exchange rate changes on cash and cash equivalents17,458
 7,155
    
Net increase in cash and cash equivalents252,949
 260,862
Cash and cash equivalents as of beginning of the period994,510
 577,300
Cash and cash equivalents as of end of the period$1,247,459
 $838,162
    

See Accompanying Notes to Condensed Consolidated Financial Statements.
7
Index

ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2017March 31, 2023
(unaudited)


The words “we” and “our” refer collectively to AllianceBernstein L.P. and its subsidiaries (“AB”), or to their officers and employees. Similarly, the word “company” refers to AB. These statements should be read in conjunction with AB’s audited consolidated financial statements included in AB’s Form 10-K for the year ended December 31, 2016.2022.


1.Business Description Organization and Basis of Presentation


Business Description


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


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


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


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


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


We also provide distribution, shareholder servicing, transfer agency services and administrative services to the mutual funds we sponsor.
 
Our high-quality, in-depth research is the foundation of our business.asset management and private wealth management businesses. Our research disciplines include economic, fundamental equity, fixed income and quantitative research. In addition, we have experts focused onexpertise in multi-asset strategies, wealth management, environmental, social and corporate governance ("ESG"), and alternative investments.


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


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


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


•Passive management, including index and enhanced index strategies;

AlternativeActively-managed alternative investments, including hedge funds, fund of funds and private equity (e.g.direct assets (e.g., direct lending, real estate investing and direct lending)private equity); and


•Portfolios with Purpose, including actively managed, impact-focused and Responsible+ (climate-conscious, ESG leaders, change catalysts) equity, fixed income and multi-asset strategies that address our clients evolving need to invest their capital with purpose while pursuing strong investment returns;

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

Our services span various investment disciplines, including market capitalization (e.g., large-, mid- and small-cap equities), term (e.g., long-, intermediate- and short-duration debt securities), and geographic location (e.g., U.S., international, global, emerging markets, regional and local), in major markets around the world.
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•Some passive management, including index, ESG index and enhanced index strategies.


Organization


As of September 30, 2017, AXA, a société anonyme organized under the laws of France and the holding company for the AXA Group, a worldwide leader in financial protection, through certain of its subsidiaries (“AXA and its subsidiaries”), ownsMarch 31, 2023, EQH owned approximately 2.7%3.5% of the issued and outstanding units representing assignments of beneficial ownership of limited partnership interests in AllianceBernstein Holding L.P. (“AB Holding Units”). AllianceBernstein Corporation (an indirect wholly-owned subsidiary of AXA,EQH, “General Partner”) is the general partner of both AllianceBernstein Holding L.P. (“AB Holding”) and AB. AllianceBernstein Corporation owns 100,000 general partnership units in AB Holding and a 1%1.0% general partnership interest in AB.


As of September 30, 2017,March 31, 2023, the ownership structure of AB, including limited partnership units outstanding as well as the general partner's 1%1.0% interest, iswas as follows:


AXAEQH and its subsidiaries64.060.0 %
AB Holding34.939.3 
Unaffiliated holders1.10.7 
100.0%


Including both the general partnership and limited partnership interests in AB Holding and AB, AXAEQH and its subsidiaries had an approximate 64.9%61.4% economic interest in AB as of September 30, 2017.March 31, 2023.


Basis of Presentation


The interim condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the interim results, have been made. The preparation of the condensed consolidated financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the interim reporting periods. Actual results could differ from those estimates. The condensed consolidated statement of financial condition as of December 31, 20162022 was derived from audited financial statements. Certain disclosures included in the annual financial statements but doeshave been condensed or omitted from these financial statements as they are not include all disclosures required by accountingfor interim financial statements under principles generally accepted in the United States of America (“GAAP”("GAAP"). and the rules of the SEC.


Principles of Consolidation


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


ReclassificationsSubsequent Events


During 2017, prior period amounts for our consolidated VOEs' investments previously presented as other investments are now presented as investments of consolidated company-sponsored investment fundsWe have evaluated subsequent events through the date that these financial statements were filed with the SEC and did not identify any subsequent events that would require disclosure in the condensed consolidated statements ofthese financial condition to conform to the current period's presentation. Additionally, prior period amounts for dividend and interest related to our consolidated company-sponsored investment funds previously presented as other revenues are now presented as dividend and interest income in the condensed consolidated statements of income to conform to the current period's presentation.statements.

Lastly, all disclosures relating to the investments, derivatives and fair value of consolidated company-sponsored investment funds previously presented in Notes 8, 9, 10 and 11 are now separately disclosed in Note 13, Consolidated Company-Sponsored Investment Funds.

2.     Significant Accounting Policies


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2.
Significant Accounting Policies


Recently Adopted Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-07, Investments - Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting. The amendment eliminates the current requirement for a retroactive adjustment and instead requires that the investor add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Additionally, the amendment requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. We adopted this standard on January 1, 2017. The adoption of this standard did not have a material impact on our financial condition or results of operations.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The amendment includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements, including income tax effects of share-based payments, minimum statutory tax withholding requirements and forfeitures. We adopted this standard on January 1, 2017 on a prospective basis. The adoption of this standard did not have a material impact on our financial condition or results of operations.

Accounting Pronouncements Not Yet Adopted


In May 2014,During the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which revises revenue recognition criteria for revenue arising from contracts with customers, requires certain costs to obtain and fulfill contracts with customers to be capitalized if they meet certain criteria, and expands disclosure requirements. We will adopt this newfirst quarter of 2023, there have been no recently adopted accounting standard on January 1, 2018 on a modified retrospective basis, recognizing the cumulative effect of initial adoption in Partners’ Capital. Wepronouncements or pronouncements not yet adopted that have or are continuing to monitor the interpretations of this new accounting guidance by relevant industry groups. Based on our analysis performed to-date, we do not expect any changes in the timing of revenue recognition for our base management fees, distribution revenues, shareholder servicing revenues and broker-dealer revenues. However, performance-based management fees, which are currently recognized at the end of the applicable measurement periods when no risk of reversal remains, may in certain instances be recognized prior to the measurement date under the new standard when it is probable that significant reversal of performance-based fees recognized will not occur. This amendment is not expected to have a material impact on our financial condition orconsolidated results of operations. Our financial statements will include additional disclosures as required by ASU 2014-09.


In January 2016,

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3. Revenue Recognition

Revenues for the FASB issued ASU 2016-01, Recognitionthree months ended March 31, 2023 and Measurement of Financial Assets and Financial Liabilities. The amendment addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments and is effective for fiscal years (and interim periods within those years) beginning after December 15, 2017. The amendment will result in a cumulative-effect adjustment to the balance sheet as2022 consisted of the beginning of the fiscal year of adoption, except for one provision relating to equity securities without readily determinable fair values, which provision will be applied prospectively. The amendment is not expected to have a material impact on our financial condition or results of operations.following:

Three Months Ended March 31,
20232022
(in thousands)
Subject to contracts with customers:
    Investment advisory and services fees
        Base fees$692,327 $747,813 
        Performance-based fees36,580 75,969 
    Bernstein research services100,038 117,807 
    Distribution revenues
        All-in-management fees68,788 81,221 
        12b-1 fees15,155 19,517 
        Other distribution fees57,135 67,603 
    Other revenues
        Shareholder servicing fees20,293 22,414 
        Other5,691 3,509 
996,007 1,135,853 
Not subject to contracts with customers:
    Dividend and interest income, net of interest expense22,658 8,626 
    Investment gains (losses)5,264 (39,024)
    Other revenues162 232 
28,084 (30,166)
Total net revenues$1,024,091 $1,105,687 
In February 2016, the FASB issued ASU 2016-02, Leases. The amendment requires recognition of lease assets and lease liabilities on the statement of financial condition and disclosure of key information about leasing arrangements. Specifically, this guidance requires an operating lease lessee to recognize on the statement of financial condition a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. However, for leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. The amendment is effective for fiscal years (and interim periods within those years) beginning after December 15, 2018 and requires lessees to recognize and measure leases at the beginning of the earliest period presented in the financial statements using a modified retrospective approach. Management currently is evaluating the impact that the adoption of this standard will have on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). The amendment is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The amendment is effective for fiscal years (and interim periods within those years) beginning after December 15, 2017 and should be applied using the retrospective transition method. The amendment is not expected to have a material impact on our financial condition or results of operations.4.    Long-term Incentive Compensation Plans

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In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. As a result of the revised guidance, a goodwill impairment will be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The revised guidance will be applied prospectively, and is effective in 2020. The revised guidance is not expected to have a material impact on our financial condition or results of operations.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendment requires that an employer disaggregate the service cost component from the other components of net benefit costs on the income statement. The amendment is effective for fiscal years (and interim periods within those years) beginning after December 15, 2017 and should be applied retrospectively. The amendment is not expected to have a material impact on our results of operations.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation, Scope of Modification Accounting. The amendment provides clarity and reduces both diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation - Stock Compensation, to a change to the terms or conditions of a share-based payment award. This amendment is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 and will be applied prospectively to an award modified on or after the adoption date. This amendment is not expected to have a material impact on our results of operations.

Consolidation of company-sponsored investment funds
We adopted ASU 2015-02, Consolidation - Amendments to the Consolidation Analysis (“ASU 2015-02”) effective January 1, 2016.
For legal entities (company-sponsored investment funds) evaluated for consolidation, we first determine whether the fees we receive and the interests we hold qualify as a variable interest in the entity, including an evaluation of fees paid to us as a decision maker or service provider to the entity being evaluated. Fees received by us are not variable interests if (i) the fees are compensation for services provided and are commensurate with the level of effort required to provide those services, (ii) the service arrangement includes only terms, conditions or amounts that are customarily present in arrangements for similar services negotiated at arm’s length, and (iii) our other economic interests in the entity held directly and indirectly through our related parties, as well as economic interests held by related parties under common control, would not absorb more than an insignificant amount of the entity’s losses or receive more than an insignificant amount of the entity’s benefits.
For those entities in which we have a variable interest, we perform an analysis to determine whether the entity is a VIE by considering whether the entity’s equity investment at risk is insufficient, whether the investors lack decision making rights proportional to their ownership percentage of the entity, and whether the investors lack the obligation to absorb an entity’s expected losses or the right to receive an entity’s expected income.
A VIE must be consolidated by its primary beneficiary, which generally is defined as the party that has a controlling financial interest in the VIE. We are deemed to have a controlling financial interest in a VIE if we have (i) the power to direct the activities of the VIE that most significantly affect the VIE's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive income from the VIE that could potentially be significant to the VIE. For purposes of evaluating (ii) above, fees paid to us as a decision maker or service provider are excluded if the amount of fees is commensurate with the level of effort required to be performed and the arrangement includes only customary terms, conditions or amounts present in arrangements for similar services negotiated at arm’s length. The primary beneficiary evaluation generally is performed qualitatively based on all facts and circumstances, as well as quantitatively, as appropriate.
If we have a variable interest in an entity that is determined not to be a VIE, the entity is then evaluated for consolidation under the VOE model. For limited partnerships and similar entities, we are deemed to have a controlling financial interest in a VOE, and would be required to consolidate the entity, if we own a majority of the entity’s kick-out rights through voting limited partnership interests and limited partners do not hold substantive participating rights (or other rights that would indicate that we do not control the entity). For entities other than limited partnerships, we are deemed to have a controlling financial interest in a VOE if we own a majority voting interest in the entity.
The analysis performed regarding the determination of variable interests held, whether entities are VIEs or VOEs, and whether we have a controlling financial interest in such entities requires the exercise of judgment. The analysis is updated continuously as circumstances change or new entities are formed.
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3.
Long-term Incentive Compensation Plans


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


We fund our restricted AB Holding Unit awards either by purchasing AB Holding Units on the open market or purchasing newly-issued AB Holding Units from AB Holding, and then keeping all of these AB Holding Units in a consolidated rabbi trust until delivering them or retiring them. In accordance with the Amended and Restated Agreement of Limited Partnership of AB (“AB Partnership Agreement”), when AB purchases newly-issued AB Holding Units from AB Holding, AB Holding is required to use the proceeds it receives from AB to purchase the equivalent number of newly-issued AB Units, thus increasing its percentage ownership interest in AB. AB Holding Units held in the consolidated rabbi trust are corporate assets in the name of the trust and are available to the general creditors of AB.


During the three
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Repurchases and nine months ended September 30, 2017, we purchased 0.3 million and 5.9 millionretention of AB Holding Units for $6.9 millionthe three months ended March 31, 2023 and $134.6 million, respectively (on2022 consisted of the following:
Three Months Ended March 31,
20232022
(in millions)
Total amount of AB Holding Units Purchased/Retained (1)
0.5 0.3 
Total Cash Paid for AB Holding Units Purchased/Retained (1)
$18.8 $14.0 
Open Market Purchases of AB Holding Units Purchased (1)
— — 
Total Cash Paid for Open Market Purchases of AB Holding Units (1)
$— $— 
(1) Purchased on a trade date basis). These amounts reflectbasis. The difference between open-market purchases of 0.3 million and 5.2 million AB Holding Units for $6.8 million and $117.1 million, respectively, withunits retained reflects the remainder relating to purchasesretention of AB Holding Units from employees to allow them to fulfill statutory tax withholding requirements at the time of delivery of long-term incentive compensation awards. During the three and nine months ended September 30, 2016, we purchased 2.0 million and 5.8 million AB Holding Units for $45.2 million and $129.2 million, respectively (on a trade date basis). These amounts reflect open-market purchases of 2.0 million and 5.7 million AB Holding Units for $45.1 million and $127.1 million, respectively, with the remainder relating to purchases of AB Holding Units from employees to allow them to fulfill statutory tax withholding requirements at the time of delivery of long-term incentive compensation awards.
Purchases of AB Holding Units reflected on the condensed consolidated statements of cash flows are net of AB Holding Unit purchases by employees as part of a distribution reinvestment election.


Each quarter, we consider whether to implement a plan to repurchase AB Holding Units pursuant to RuleRules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (“("Exchange Act”Act"). A Rule 10b5-1 plan of this type allows a company to repurchase its shares at times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods or because it possesses material non-public information. Each broker we select has the authority under the terms and limitations specified in the plan to repurchase AB Holding Units on our behalf in accordance with the terms of the plan.behalf. Repurchases are subject to regulations promulgated by the SEC as well as certain price, market volume and timing constraints specified in the plan. The plan adopted during the second quarter of 2017 expired at the close of business on July 26, 2017. We did not adopt a plan during the thirdfirst quarter of 2017. We2023.We may adopt additional Rule 10b5-1 plans in the future to engage in open-market purchases of AB Holding Units to help fund anticipated obligations under our incentive compensation award program and for other corporate purposes.


During the first ninethree months of 20172023 and 2016,2022, we grantedawarded to employees and Eligible Directors 2.20.3 million and 0.7 million restricted AB Holding Unit awards, respectively. We useduse any AB Holding Units repurchased during the applicable period and newly-issued AB Holding Units to fund these awards.


During the first nine months of 2017 and 2016, AB Holding issued 1.0 million and 0.1 million AB Holding Units, respectively, upon exercise of options to buy AB Holding Units. AB Holding used the proceeds of $17.7 million and $2.4 million, respectively, received as payment in cash
5.     Net Income per Unit

Basic net income per unit is derived by reducing net income for the exercise price to purchase1% general partnership interest and dividing the equivalentremaining 99% by the basic weighted average number of newly-issued AB Units.limited partnership units outstanding for each period. Diluted net income per unit is derived by reducing net income for the 1% general partnership interest and dividing the remaining 99% by the total of the diluted weighted average number of limited partnership units outstanding for each period.

 Three Months Ended March 31,
 20232022
(in thousands, except per unit amounts)
Net income attributable to AB Unitholders$194,151 $260,727 
Weighted average limited partnership units outstanding – basic285,726 271,383 
Dilutive effect of compensatory options to buy AB Holding Units— 3 
Weighted average limited partnership units outstanding – diluted285,726 271,386 
Basic net income per AB Unit$0.67 $0.95 
Diluted net income per AB Unit$0.67 $0.95 

4.
Cash Distributions

There were no anti-dilutive options excluded from diluted net income in the three months ended March 31, 2023 or 2022.

6. Cash Distributions

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


Typically, Available Cash Flow has been the adjusted diluted net income per unit for the quarter multiplied by the number of general and limited partnership interests at the end of the quarter. In future periods, management anticipates that Available Cash Flow will be based on adjusted diluted net income per unit, unless management determines, with the concurrence of the Board of Directors, that one or more adjustments that are made for adjusted net income should not be made with respect to the Available Cash Flow calculation.
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On October 25, 2017,April 26, 2023, the General Partner declared a distribution of $0.58$0.74 per AB Unit, representing a distribution of Available Cash Flow for the three months ended September 30, 2017.March 31, 2023. The General Partner, as a result of its 1% general partnership interest, is entitled to receive 1% of each distribution. The distribution is payable on November 16, 2017May 25, 2023 to holders of record on November 6, 2017.May 8, 2023.



5.
Real Estate Charges

7.     Cash and Securities Segregated Under Federal Regulations and Other Requirements
Since 2010, in connection with our workforce reductions and in an effort to reduce our global real estate footprint, we have implemented a global office space consolidation. As a result, we have sub-leased over one million square feet of office space. The activity in the liability account relating to our global space consolidation initiatives for the following periods is:
 Nine Months Ended
September 30, 2017		 Twelve Months Ended
December 31, 2016
 (in thousands)
    
Balance as of beginning of period$112,932
 $123,912
Expense incurred32,036
 12,248
Deferred rent6,991
 4,930
Payments made(28,011) (32,988)
Interest accretion3,160
 4,830
Balance as of end of period$127,108
 $112,932

6.
Net Income per Unit

Basic net income per unit is derived by reducing net income for the 1% general partnership interest and dividing the remaining 99% by the basic weighted average number of units outstanding for each period. Diluted net income per unit is derived by reducing net income for the 1% general partnership interest and dividing the remaining 99% by the total of the diluted weighted average number of units outstanding for each period.
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in thousands, except per unit amounts)
         
Net income attributable to AB Unitholders $140,954
 $158,035
 $415,994
 $448,820
         
Weighted average units outstanding – basic 265,585
 268,133
 267,448
 269,896
Dilutive effect of compensatory options to buy AB Holding Units 400
 590
 455
 554
Weighted average units outstanding – diluted 265,985
 268,723
 267,903
 270,450
Basic net income per AB Unit $0.53
 $0.58
 $1.54
 $1.65
Diluted net income per AB Unit $0.52
 $0.58
 $1.54
 $1.64

For the three and nine months ended September 30, 2017, we excluded 2,427,527 options from the diluted net income computation due to their anti-dilutive effect. For the three and nine months ended September 30, 2016, we excluded 2,873,106 options from the diluted net income computation due to their anti-dilutive effect.
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7.
Cash and Securities Segregated Under Federal Regulations and Other Requirements


As of September 30, 2017March 31, 2023 and December 31, 2016, $0.72022, $1.1 billion and $0.9$1.5 billion, respectively, of U.S. Treasury Bills were segregated in a special reserve bank custody account for the exclusive benefit of our brokerage customers under Rule 15c3-3 of the Exchange Act.

One of our subsidiaries, which serves as the distributor of our U.S. mutual funds, maintains several special bank accounts for the exclusive benefit of customers. As of September 30, 2017 and December 31, 2016, $61.5 million and $52.9 million, respectively, of cash was segregated in these bank accounts.

8.     Investments


8.
Investments

Investments consist of:
 March 31,
2023		December 31,
2022
 (in thousands)
Equity securities:
    Long-term incentive compensation-related$17,145 $21,055 
    Seed capital134,775 138,012 
Investments in limited partnership hedge funds:  
Long-term incentive compensation-related26,839 26,815 
Seed capital15,731 15,711 
Time deposits7,528 7,750 
Other9,920 8,175 
Total investments$211,938 $217,518 
Investments consist of:   
 September 30,
2017		 December 31,
2016
 (in thousands)
Trading: 
  
 U.S. Treasury Bills$52,605
 $28,937
Long-term incentive compensation-related50,966
 50,935
Seed capital158,754
 188,053
Equities105,826
 6,602
Exchange-traded options9,368
 3,106
Investments in limited partnership hedge funds: 
  
Long-term incentive compensation-related13,750
 16,826
Seed capital25,740
 23,704
Private equity (seed capital)38,553
 45,278
Time deposits52,090
 70,097
Other12,101
 7,567
Total investments$519,753
 $441,105


Total investments related to long-term incentive compensation obligations of $64.7$44.0 million and $67.8$47.9 million as of September 30, 2017March 31, 2023 and December 31, 2016,2022, respectively, consist of company-sponsored mutual funds and hedge funds. For long-term incentive compensation awards granted before 2009, we typically made investments in company-sponsored mutual funds and hedge funds that were notionally elected by plan participants and maintained them (and continue to maintain them) in a consolidated rabbi trust or separate custodial account. The rabbi trust and custodial account enable us to hold such investments separate from our other assets for the purpose of settling our obligations to participants. The investments held in the rabbi trust and custodial account remain available to the general creditors of AB.


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


U.S. Treasury Bills, the majority of which are pledged as collateral with clearing organizations, are held in our investment account. These clearing organizations have the ability by contract or custom to sell or re-pledge this collateral.

We allocate seed capital to our investment teams to help develop new products and services for our clients. TheA portion of our seed capital trading investments are equity and fixed income products, primarily in the form of separately-managed account portfolios, U.S. mutual funds, Luxembourg funds, Japanese investment trust management funds or Delaware business trusts. We also may allocate seed capital to investments in private equity funds, such as a third-party venture capital fund that invests in communications, consumer, digital media, healthcare and information technology markets. In regard tofunds. Regarding our seed capital investments, the amounts above reflect those funds in which we are not the primary beneficiary of a VIE or hold a controlling
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financial interest in a VOE. See Note 13,14, Consolidated Company-Sponsored Investment Funds, for a description
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of the seed capital investments that are consolidated entities.we consolidate. As of September 30, 2017March 31, 2023 and December 31, 2016,2022, our total seed capital investments were $462.9$324.6 million and $500.0$309.6 million, respectively. Seed capital investments in unconsolidated company-sponsored investment funds are valued using published net asset values or non-published net asset values if they are not listed on an active exchange but have net asset values that are comparable to funds with published net asset values and have no redemption restrictions.


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


The portion of tradingunrealized gains (losses) for the three and nine months ended September 30, 2017 and 2016 related to tradingequity securities, as defined by ASC 321-10, held as of September 30, 2017March 31, 2023 and 20162022 were as follows:

 Three Months Ended March 31,
 20232022
 (in thousands)
Net gains (losses) recognized during the period$5,464 $(16,550)
Less: net gains recognized during the period on equity securities sold during the period590 4,539 
Unrealized gains (losses) recognized during the period on equity securities held$4,874 $(21,089)

9.     Derivative Instruments
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in thousands)
         
Net (losses) gains recognized during the period $(1,829) $9,052
 $14,436
 $17,678
Less: net gains (losses) recognized during the period on trading securities sold during the period 311
 1,411
 12,850
 (11,285)
Unrealized (losses) gains recognized during the period on trading securities held $(2,140) $7,641
 $1,586
 $28,963


9.
Derivative Instruments

See Note 13,14, Consolidated Company-Sponsored Investment Funds, for disclosure of derivative instruments held by our consolidated company-sponsored investment funds.


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


The notional value and fair value as of September 30, 2017March 31, 2023 and December 31, 20162022 for derivative instruments (excluding derivative instruments relating to our options desk trading activities discussed below) not designated as hedging instruments were as follows:

 Fair Value
 Notional ValueDerivative AssetsDerivative Liabilities
 (in thousands)
March 31, 2023:
Exchange-traded futures$164,368 $4 $4,878 
Currency forwards35,796 4,456 5,019 
Interest rate swaps14,890 204 162 
Credit default swaps218,604 11,796 4,882 
Total return swaps52,247 227 1,178 
Option swaps50,000 — 292 
Total derivatives$535,905 $16,687 $16,411 
December 31, 2022:
Exchange-traded futures$154,687 $1,768 $162 
Currency forwards34,597 4,446 5,047 
Interest rate swaps16,847 386 262 
Credit default swaps225,671 17,507 7,302 
Total return swaps28,742 605 933 
Option swaps50,000 — 6 
Total derivatives$510,544 $24,712 $13,712 
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   Fair Value
 Notional Value Asset Derivatives Liability Derivatives
 (in thousands)
September 30, 2017:     
Exchange-traded futures$88,695
 $1,111
 $962
Currency forwards139,983
 3,077
 3,119
Interest rate swaps32,526
 951
 877
Credit default swaps38,609
 600
 1,380
Total return swaps63,657
 107
 262
Total derivatives$363,470
 $5,846
 $6,600
      
December 31, 2016:     
Exchange-traded futures$103,108
 $1,224
 $1,092
Currency forwards180,820
 4,541
 4,711
Interest rate swaps40,664
 940
 897
Credit default swaps45,108
 1,205
 905
Total return swaps90,043
 503
 1,044
Total derivatives$459,743
 $8,413
 $8,649


As of September 30, 2017March 31, 2023 and December 31, 2016,2022, the derivative assets and liabilities are included in both receivables and payables to brokers and dealers on our condensed consolidated statements of financial condition.

13
Index

The gains and losses for derivative instruments (excluding our options desk trading activities)activities discussed below) for the three and nine months ended September 30, 2017March 31, 2023 and 20162022 recognized in investment gains (losses) in the condensed consolidated statements of income were as follows:

 Three Months Ended March 31,
 20232022
 (in thousands)
Exchange-traded futures$(4,632)$7,513 
Currency forwards(105)544 
Interest rate swaps(63)(73)
Credit default swaps(2,228)1,717 
Total return swaps(2,056)7,406 
Option swaps(1,410)2,625 
Net (losses) gains on derivative instruments$(10,494)$19,732 
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in thousands)
         
Exchange-traded futures $(3,290) $(4,975) $(12,123) $(2,542)
Currency forwards (62) (641) (992) (2,461)
Interest rate swaps 151
 (251) (97) (2,182)
Credit default swaps (273) (352) (1,182) (958)
Options swaps —
 (157) —
 (70)
Total return swaps (1,417) (1,666) (5,376) (8,438)
Net (losses) on derivative instruments $(4,891) $(8,042) $(19,770) $(16,651)


We may be exposed to credit-related losses in the event of nonperformancenon-performance by counterparties to derivative financial instruments. We minimize our counterparty exposure through a credit review and approval process. In addition, we have executed various collateral arrangements with counterparties to the over-the-counter derivative transactions that require both pledging and accepting collateral in the form of cash. As of September 30, 2017, we had no cash collateral payable to trade counterparties. As ofMarch 31, 2023 and December 31, 2016,2022, we held $0.8$7.9 million and $8.4 million, respectively, of cash collateral payable to trade counterparties. This obligation to return cash is reported in payables to brokers and dealers in our condensed consolidated statements of financial condition.


Although notional amount typically is utilized as the most commonly used measure of volume in the derivativederivatives market, it is not used as a measure of credit risk. Generally, the current credit exposure of our derivative contracts is limited to the net positive estimated fair value of derivative contracts at the reporting date after taking into consideration the existence of netting agreements and any collateral received. A derivative with positive value (a derivative asset) indicates existence of credit risk because the counterparty would owe us if the contract were closed. Alternatively, a derivative contract with negative value (a derivative liability) indicates we would owe money to the counterparty if the contract were closed. Generally, if there is more than one
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derivative transaction with a single counterparty, a master netting arrangement exists with respect to derivative transactions with that counterparty to provide for aggregate net settlement.


Certain of our standardized contracts for over-the-counter derivative transactions (“ISDA Master Agreements”) contain credit risk related contingent provisions pertaining to each counterparty’s credit rating. In some ISDA Master Agreements, if the counterparty’s credit rating, or in some agreements, our assets under management (“AUM”), falls below a specified threshold, either a default or a termination event permitting us or the counterparty to terminate the ISDA Master Agreement would be triggered. In all agreements that provide for collateralization, various levels of collateralization of net liability positions are applicable, depending on the credit rating of the counterparty. As of September 30, 2017March 31, 2023 and December 31, 2016,2022, we delivered $6.4$10.0 million and $6.2$4.2 million, respectively, of cash collateral into brokerage accounts. We report this cash collateral in cash and cash equivalents in our condensed consolidated statementsstatement of financial condition.


As of September 30, 2017March 31, 2023 and December 31, 2016, we held $9.4 million2022, long and $3.1 million, respectively, of longshort exchange-traded equity options which arewere classified as trading investments and included in other investmentsheld for sale on our condensed consolidated statements of financial condition. In addition, as of September 30, 2017 and December 31, 2016, we held $13.3 million and $0.7 million, respectively, of short exchange-traded equity options, which are included in securities sold not yet purchased on our condensed consolidated statementsstatement of financial condition. Our options desk provides our clients with equity derivative strategies and execution for exchange-traded options on single stocks, exchange-traded funds and indices. While predominately agency-based, the options desk may commit capital to facilitate a client’s transaction. Our options desk hedges the risks associated with this activity by taking offsetting positions in equities. For the three and nine months ended September 30, 2017,March 31, 2023 and 2022, we recognized $12.7losses of $2.9 million and $21.8$2.0 million, respectively, of losses on equity options activity. For the threeThese gains and nine months ended September 30, 2016, we recognized $10.9 million and $27.6 million, respectively, of losses on equity options activity. These losses are recognized in investment gains (losses) in the condensed consolidated statementsstatement of income.
10.
Offsetting Assets and Liabilities

10.     Offsetting Assets and Liabilities

See Note 13,14, Consolidated Company-Sponsored Investment Funds, for disclosure of offsetting assets and liabilities of our consolidated company-sponsored investment funds.


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Index
Offsetting of assets as of September 30, 2017March 31, 2023 and December 31, 20162022 was as follows:
 
 Gross Amounts of Recognized AssetsGross Amounts Offset in the Statement of Financial ConditionNet Amounts of Assets Presented in the Statement of Financial ConditionFinancial
Instruments Collateral		Cash Collateral
Received		Net
Amount
 (in thousands)
March 31, 2023:
Securities borrowed$45,772 $— $45,772 $(45,772)$— $— 
Derivatives$16,687 $— $16,687 $— $(7,871)$8,816 
December 31, 2022:      
Securities borrowed$62,063 $— $62,063 $(62,058)$— $5 
Derivatives$24,712 $— $24,712 $— $(8,361)$16,351 
 Gross Amounts of Recognized Assets Gross Amounts Offset in the Statement of Financial Condition Net Amounts of Assets Presented in the Statement of Financial Condition 
Financial
Instruments
 
Cash Collateral
Received
 
Net
Amount
 (in thousands)
September 30, 2017:           
Securities borrowed$75,609
 $—
 $75,609
 $(73,600) $—
 $2,009
Derivatives$5,846
 $—
 $5,846
 $—
 $—
 $5,846
Long exchange-traded options$9,368
 $—
 $9,368
 $—
 $—
 $9,368
December 31, 2016: 
  
  
  
  
  
Securities borrowed$82,814
 $—
 $82,814
 $(80,277) $—
 $2,537
Derivatives$8,413
 $—
 $8,413
 $—
 $(810) $7,603
Long exchange-traded options$3,106
 $—
 $3,106
 $—
 $—
 $3,106

Index

Offsetting of liabilities as of September 30, 2017March 31, 2023 and December 31, 20162022 was as follows:
 Gross Amounts of Recognized LiabilitiesGross Amounts Offset in the Statement of Financial ConditionNet Amounts of Liabilities Presented in the Statement of Financial ConditionFinancial
Instruments Collateral		Cash Collateral
Pledged		Net Amount
 (in thousands)
March 31, 2023:
Securities loaned$274,650 $— $274,650 $(271,957)$— $2,693 
Derivatives$16,411 $— $16,411 $— $(9,987)$6,424 
December 31, 2022:      
Securities loaned$272,580 $— $272,580 $(267,053)$— $5,527 
Derivatives$13,712 $— $13,712 $— $(4,158)$9,554 
 Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statement of Financial Condition Net Amounts of Liabilities Presented in the Statement of Financial Condition 
Financial
Instruments
 
Cash Collateral
Pledged
 Net Amount
 (in thousands)
September 30, 2017:           
Securities loaned$61,719
 $—
 $61,719
 $(61,719) $—
 $—
Derivatives$6,600
 $—
 $6,600
 $—
 $(6,367) $233
Short exchange-traded options$13,272
 $—
 $13,272
 $—
 $—
 $13,272
December 31, 2016: 
  
  
  
  
  
Securities loaned$—
 $—
 $—
 $—
 $—
 $—
Derivatives$8,649
 $—
 $8,649
 $—
 $(6,239) $2,410
Short exchange-traded options$692
 $—
 $692
 $—
 $—
 $692


Cash collateral, whether pledged or received on derivative instruments, is not considered material and, accordingly, is not disclosed by counterparty.
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11.
Fair Value

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11.     Fair Value

See Note 13,14, Consolidated Company-Sponsored Investment Funds, for disclosure of fair value of our consolidated company-sponsored investment funds.


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


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


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


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


Valuation of our financial instruments by pricing observability levels as of September 30, 2017March 31, 2023 and December 31, 20162022 was as follows (in thousands):
 Level 1Level 2Level 3
NAV Expedient(1)
OtherTotal
March 31, 2023:
Money markets$95,690 $— $— $— $— $95,690 
Securities segregated (U.S. Treasury Bills)— 1,054,638 — — — 1,054,638 
Derivatives4 16,683 — — — 16,687 
Investments:
  Equity securities121,971 28,255 170 1,524 — 151,920 
   Limited partnership hedge funds(2)
— — — — 42,570 42,570 
   Time deposits(3)
— — — — 7,528 7,528 
   Other investments6,894 — — — 3,026 9,920 
Total investments128,865 28,255 170 1,524 53,124 211,938 
Total assets measured at fair value$224,559 $1,099,576 $170 $1,524 $53,124 $1,378,953 
Derivatives4,878 11,533 — — — 16,411 
Contingent payment arrangements— — 248,185 — — 248,185 
Total liabilities measured at fair value$4,878 $11,533 $248,185 $— $— $264,596 
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Index
 Level 1 Level 2 Level 3 
NAV Expedient(1)
 Other Total
September 30, 2017:           
Money markets$152,893
 $—
 $—
 $—
 $—
 $152,893
Securities segregated (U.S. Treasury Bills)—
 723,029
 —
 —
 —
 723,029
Derivatives1,111
 4,735
 —
 —
 —
 5,846
Investments           
    Trading 
  
  
      
      U.S. Treasury Bills—
 52,605
 —
 —
 —
 52,605
      Equity securities231,897
 4,108
 116
 98
 —
 236,219
      Fixed income securities68,328
 10,986
 —
 13
 —
 79,327
      Long exchange-traded options9,368
 —
 —
 —
 —
 9,368
    Limited partnership hedge funds(2)
—
 —
 —
 —
 39,490
 39,490
    Private equity—
 —
 954
 37,599
 —
 38,553
    Time deposits(3)
—
 —
 —
 —
 52,090
 52,090
    Other           
        Available-for-sale98
 —
 —
 —
 —
 98
        Other investments(2)(4)
—
 —
 —
 —
 12,003
 12,003
Total investments309,691
 67,699
 1,070
 37,710
 103,583
 519,753
Total assets measured at fair value$463,695
 $795,463
 $1,070
 $37,710
 $103,583
 $1,401,521
            
Securities sold not yet purchased 
  
  
      
Short equities – corporate$20,539
 $—
 $—
 $—
 $—
 $20,539
Short exchange-traded options13,272
 —
 —
 —
 —
 13,272
Derivatives962
 5,638
 —
 —
 —
 6,600
Contingent payment arrangements—
 —
 12,103
 —
 —
 12,103
Total liabilities measured at fair value$34,773
 $5,638
 $12,103
 $—
 $—
 $52,514
            
December 31, 2016:           
Money markets$107,250
 $—
 $—
 $—
 $—
 $107,250
Securities segregated (U.S. Treasury Bills)—
 893,189
 —
 —
 —
 893,189
Derivatives1,224
 7,189
 —
 —
 —
 8,413
Investments           
    Trading 
  
  
     

      U.S. Treasury Bills—
 28,937
 —
 —
 —
 28,937
      Equity securities148,128
 5,724
 110
 36
 —
 153,998
      Fixed income securities80,473
 11,107
 —
 12
 —
 91,592
      Long exchange-traded options3,106
 —
 —
 —
 —
 3,106
    Limited partnership hedge funds(2)
—
 —
 —
 —
 40,530
 40,530
    Private equity—
 —
 4,913
 40,365
 —
 45,278
    Time deposits(3)
—
 —
 —
 —
 70,097
 70,097
 Level 1Level 2Level 3
NAV Expedient(1)
OtherTotal
December 31, 2022:
Money markets$95,521 $— $— $— $— $95,521 
Securities segregated (U.S. Treasury Bills)— 1,521,705 — — — 1,521,705 
Derivatives1,768 22,944 — — — 24,712 
Investments:
  Equity securities129,655 27,799 129 1,484 — 159,067 
    Limited partnership hedge funds(2)
— — — — 42,526 42,526 
    Time deposits(3)
— — — — 7,750 7,750 
    Other investments6,689 — — — 1,486 8,175 
Total investments136,344 27,799 129 1,484 51,762 217,518 
Total assets measured at fair value$233,633 $1,572,448 $129 $1,484 $51,762 $1,859,456 
Derivatives162 13,550 — — — 13,712 
Contingent payment arrangements— — 247,309 — — 247,309 
Total liabilities measured at fair value$162 $13,550 $247,309 $— $— $261,021 
Index


    Other           
        Available-for-sale45
 —
 —
 —
 —
 45
        Other investments(2)(4)
—
 —
 —
 —
 7,522
 7,522
Total investments231,752
 45,768
 5,023
 40,413
 118,149
 441,105
Total assets measured at fair value$340,226
 $946,146
 $5,023
 $40,413
 $118,149
 $1,449,957
            
Securities sold not yet purchased 
  
  
      
Short equities – corporate$40,252
 $—
 $—
 $—
 $—
 $40,252
Short exchange-traded options692
 —
 —
 —
 —
 692
Derivatives1,092
 7,557
 —
 —
 —
 8,649
Contingent payment arrangements—
 —
 17,589
 —
 —
 17,589
Total liabilities measured at fair value$42,036

$7,557

$17,589

$—
 $—
 $67,182

(1) Investments measured at fair value using NAV (or its equivalent) as a practical expedient.
(2) Investments in equity method investees that are not measured at fair value in accordance with GAAP.
(3) Investments carried at amortized cost that are not measured at fair value in accordance with GAAP.
(4) Investments carried
Other investments included in Level 1 of the fair value hierarchy include our investment in a mutual fund measured at costfair value ($6.9 million and $6.7 million as of March 31, 2023 and December 31, 2022, respectively). Other investments not measured at fair value include (i) investment in a start-up company that does not have a readily available fair value (this investment was $0.3 million as of both March 31, 2023 and December 31, 2022) and (ii) broker dealer exchange memberships that are not measured at fair value in accordance with GAAP.

One of our private equity investments (measured at fair value using NAV as a practical expedient) is a venture capital fund with a fair value of $37.6GAAP ($2.7 million and an unfunded commitment of $0.8$1.2 million as of September 30, 2017. This partnership invests in communications, consumer, digital media, healthcareMarch 31, 2023 and information technology markets. The fair value of this investment has been estimated using the capital account balances provided by the partnership. The interest in this partnership cannot be redeemed.December 31, 2022, respectively).

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


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


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


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


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


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

Private equity: Generally, the valuation of private equity investments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity and the long-term nature of such investments. Private equity investments are valued initially at cost. The carrying values of private equity investments are adjusted either up or down from cost to reflect expected exit values as evidenced by financing and sale transactions with third parties, or when determination of a valuation adjustment is confirmed through ongoing review in accordance with our valuation policies and procedures. A variety of factors are reviewed and monitored to assess positive and negative changes in valuation, including current operating performance and future expectations of investee companies, industry valuations of comparable public companies, changes in market outlooks, and the third party financing environment over time. In
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determining valuation adjustments resulting from the investment review process, particular emphasis is placed on current company performance and market conditions. For these reasons, which make the fair value of private equity investments unobservable, equity investments are included in Level 3 of the valuation hierarchy. If private equity investments become publicly traded, they are included in Level 1 of the valuation hierarchy; provided, however, if they contain trading restrictions, publicly-traded equity investments are included in Level 2 of the valuation hierarchy until the trading restrictions expire.

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

Contingent payment arrangements: Contingent payment arrangements relate to contingent payment liabilities associated with various acquisitions. At each reporting date, we estimate the fair values of the contingent consideration expected to be paid based upon probability-weighted AUM and revenue projections, using unobservable market data inputs, which are included in Level 3 of the valuation hierarchy.
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Index
During the ninethree months ended September 30, 2017,March 31, 2023 there were no transfers between Level 12 and Level 23 securities.
The change in carrying value associated with Level 3 financial instruments carried at fair value, classified as private equity and trading equity securities, is as follows:
 Three Months Ended March 31,
 20232022
 (in thousands)
Balance as of beginning of period$129 $126 
Purchases— — 
Sales— — 
Realized gains (losses), net— — 
Unrealized gains (losses), net41 (7)
Balance as of end of period$170 $119 
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in thousands)
         
Balance as of beginning of period $5,028
 $4,938
 $5,023
 $16,148
Reclassification (see below)
 —
 —
 —
 (9,532)
Purchases —
 —
 —
 —
Sales —
 —
 —
 —
Realized gains (losses), net —
 —
 —
 —
Unrealized gains (losses), net (3,958) 2
 (3,953) (1,676)
Balance as of end of period $1,070
 $4,940
 $1,070
 $4,940


Transfers into and out of all levels of the fair value hierarchy are reflected at end-of-period fair values. We reclassified the investments of our consolidated private equity fund from investments to investments of consolidated company-sponsored investment funds on our condensed consolidated statement of financial condition (see Note 13, Consolidated Company-Sponsored Investment Funds). Realized and unrealized gains and losses on Level 3 financial instruments are recorded in investment gains and losses in the condensed consolidated statements of income.

As of September 30, 2017 and December 31, 2016, we have an investment in a private equity fund focused exclusively on the energy sector (fair value of $1.0 million and $4.9 million, respectively) that is classified as Level 3.This investment's valuation is based on a market approach, considering recent transactions in the fund and the industry.
Index


We acquired Ramius Alternative Solutions LLC in 2016, CPH Capital Fondsmaeglerselskab A/S in 2014 and SunAmerica's alternative investment group in 2010, all of which includedOur acquisitions may include contingent consideration arrangements as part of the purchase price. The change in carrying value associated with Level 3 financial instruments carried at fair value, classified as contingent payment arrangements, is as follows:
 Three Months Ended March 31,
 20232022
 (in thousands)
Balance as of beginning of period$247,309 $38,260 
Accretion2,443 838 
Payments(792)— 
Held for sale reclassification(775)— 
Balance as of end of period$248,185 $39,098 
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in thousands)
         
Balance as of beginning of period $16,777
 $30,861
 $17,589
 $31,399
Additions —
 11,893
 —
 11,893
Accretion 53
 354
 408
 1,060
Changes in estimates (193) (21,483) (193) (21,483)
Payments (4,534) (3,608) (5,701) (4,852)
Balance as of end of period $12,103
 $18,017
 $12,103
 $18,017

During the third quarter of 2017, we made the final contingent consideration payment relating to our 2014 acquisition and recorded a change in estimate and wrote off the remaining contingent consideration payable relating to our 2010 acquisition. As of September 30, 2017, one acquisition-related contingent consideration liability of $12.1 million remains relating to our 2016 acquisition, which was valued using a revenue growth rate of 31% and a discount rate ranging from 1.4% to 2.3%.


As of DecemberMarch 31, 2016,2023, the three acquisition-related contingent consideration liabilities recorded have a combined fair value of $17.6 million and are valued using a projected AUM weighted average growth rate of 18% for one acquisition, andexpected revenue growth rates ranged from 2.0% to 83.9%, with a weighted average of 10.3%, calculated using cumulative revenues and range of revenue growth rates. The discount rates rangingrange from 4%1.9% to 31%10.4%, with a weighted average of 4.6%, calculated using total contingent liabilities and 1.4%range of discount rates. As of March 31, 2022, the expected revenue growth rates ranged from 2.0% to 6.4%83.9%, respectively, for the three acquisitions.with a weighted average of 7.9%, calculated using cumulative revenues and a range of revenue growth rates (excluding revenue growth from additional AUM contributed from existing clients). The discount rates ranged from 1.9% to 10.4%, with a weighted average of 7.0%, calculated using total contingent liabilities and range of discount rates.


Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis


We did not have any material assets or liabilities that were measured at fair value for impairment on a nonrecurring basis during the ninethree months ended September 30, 2017March 31, 2023 or during the year ended December 31, 2016.2022.


12.
Commitments and Contingencies

12.     Commitments and Contingencies

Legal Proceedings


With respect to all significant litigation matters, we consider the likelihood of a negative outcome. If we determine the likelihood of a negative outcome is probable and the amount of the loss can be reasonably estimated, we record an estimated loss for the expected outcome of the litigation. If the likelihood of a negative outcome is reasonably possible and we are able to determine an estimate of the possible loss or range of loss in excess of amounts already accrued, if any, we disclose that fact together with the estimate of the possible loss or range of loss. However, it is often difficult to predict the outcome or estimate a possible loss or range of loss because litigation is subject to inherent uncertainties, particularly when
18
Index
plaintiffs allege substantial or indeterminate damages. Such is also the case when the litigation is in its early stages or when the litigation is highly complex or broad in scope. In these cases, we disclose that we are unable to predict the outcome or estimate a possible loss or range of loss.


On December 14, 2022, four individual participants in the Profit Sharing Plan for Employees of AllianceBernstein L.P., (the "Plan") filed a class action complaint (the “Complaint”) in the U.S. District Court for the Southern District of New York against AB, current and former members of the Compensation Committee, and the Investment and Administrative Committees under the Plan. Plaintiffs, who seek to represent a class of all participants in the Plan from December 14, 2016 to the present, allege that defendants violated their fiduciary duties and engaged in prohibited transactions under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), by including proprietary collective investment trusts as investment options offered under the Plan. The Complaint seeks unspecified damages, disgorgement and other equitable relief. AB is prepared to defend itself vigorously against these claims. While the ultimate outcome of this matter is currently not determinable given the matter remains in its early stages, we do not believe this litigation will have a material adverse effect on our results of operations, financial condition or liquidity.

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

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

Other

AllianceBernstein L.P., in its capacity as a general partner, committed to funding $52.3 million in two Real Estate Funds. As of March 31, 2023, we had funded $44.1 million of these commitments.

13.     Leases

We lease office space, furniture and office equipment under various operating and financing leases. Our current leases have remaining lease terms of one year to 15 years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. Since 2010, we have sub-leased over one million square feet of office space.
Leases included in the condensed consolidated statement of financial condition as of March 31, 2023 and December 31, 2022 were as follows:
ClassificationMarch 31, 2023December 31, 2022
(in thousands)
Operating Leases
Operating lease right-of-use assetsRight-of-use assets$344,293 $360,092 
Operating lease liabilitiesLease liabilities398,686 415,539 
Finance Leases
Property and equipment, grossRight-of-use assets18,701 18,116 
Amortization of right-of-use assetsRight-of-use assets(7,386)(6,310)
Property and equipment, net11,315 11,806 
Finance lease liabilitiesLease liabilities11,063 11,940 
19
Index

The components of lease expense included in the condensed consolidated statement of income as of March 31, 2023 and March 31, 2022 were as follows:

Three Months Ended March 31,
Classification20232022
(in thousands)
Operating lease costGeneral and administrative$23,164 $24,525 
Financing lease cost:
Amortization of right-of-use assetsGeneral and administrative1,076 740 
Interest on lease liabilitiesInterest expense65 37 
Total finance lease cost1,141 777 
Variable lease cost (1)
General and administrative8,867 10,687 
Sublease incomeGeneral and administrative(8,260)(8,561)
Net lease cost$24,912 $27,428 
(1) Variable lease expense includes operating expenses, real estate taxes and employee parking.
13.The sub-lease income represents all revenues received from sub-tenants. It is primarily fixed base rental payments combined with variable reimbursements such as operating expenses, real estate taxes and employee parking. The vast majority of sub-tenant income is derived from our New York metro sub-tenant agreements. Sub-tenant income related to base rent is recorded on a straight-line basis. 
Maturities of lease liabilities were as follows:
Operating LeasesFinancing LeasesTotal
Year ending December 31,(in thousands)
2023 (excluding the three months ended March 31, 2023)$74,188 $2,853 $77,041 
2024105,833 3,468 109,301 
202538,128 3,039 41,167 
202636,546 1,810 38,356 
202733,578 324 33,902 
Thereafter147,132 — 147,132 
Total lease payments435,405 11,494 446,899 
Less interest(36,719)(431)
Present value of lease liabilities$398,686 $11,063 
We have signed a lease that commences in 2024, relating to approximately 166,000 square feet of space in New York City. Our estimated total base rent obligation (excluding taxes, operating expenses and utilities) over the 20-year lease term is approximately $393.0 million.
Lease term and discount rate:
Weighted average remaining lease term (years):
Operating leases7.28
Finance leases3.23
Weighted average discount rate:
Operating leases2.70 %
Finance leases2.29 %
20
Index
Supplemental non-cash activity related to leases was as follows:
Three Months Ended March 31,
20232022
(in thousands)
Right-of-use assets obtained in exchange for lease obligations(1):
Operating leases3,390 7,719 
Finance leases585 2,569 
(1) Represents non-cash activity and, accordingly, is not reflected in the condensed consolidated statement of cash flows.
14. Consolidated Company-Sponsored Investment Funds


We regularly provide seed capital to new company-sponsored investment funds. As such, we may consolidate or de-consolidate a variety of company-sponsored investment funds each quarter. Due to the similarity of risks related to our involvement with each company-sponsored investment fund, disclosures required under the VIE model are aggregated, such as disclosures regarding the carrying amount and classification of assets.
We are not required to provide financial support to company-sponsored investment funds, and only the assets of such funds are available to settle each fund's own liabilities. Our exposure to loss in regard toregarding consolidated company-sponsored investment funds is limited to our investment in, and our management fee earned from, such funds. Equity and debt holders of such funds have no recourse to AB’s assets or to the general credit of AB.
The balances of consolidated VIEs and VOEs included in our condensed consolidated statements of financial condition were as follows:
March 31, 2023December 31, 2022
(in thousands)
VIEsVOEsTotalVIEsVOEsTotal
Cash and cash equivalents$20,417 $— $20,417 $19,751 $— $19,751 
Investments526,530 16,809 543,339 516,536 — 516,536 
Other assets30,556 239 30,795 44,424 — 44,424 
Total assets$577,503 $17,048 $594,551 $580,711 $— $580,711 
Liabilities$43,586 $61 $43,647 $55,529 $— $55,529 
Redeemable non-controlling interest374,736 1,554 376,290 368,656 — 368,656 
Partners' capital attributable to AB Unitholders159,181 15,433 174,614 156,526 — 156,526 
Total liabilities, redeemable non-controlling interest and partners' capital$577,503 $17,048 $594,551 $580,711 $— $580,711 
  September 30, 2017 December 31, 2016
  (in thousands)
             
  VIEs VOEs Total VIEs VOEs Total
Cash and cash equivalents $445,176
 $74
 $445,250
 $337,525
 $—
 $337,525
Investments 770,953
 28,982
 799,935
 550,850
 23,226
 574,076
Other assets 5,850
 605
 6,455
 44,570
 —
 44,570
Total assets $1,221,979
 $29,661
 $1,251,640
 $932,945
 $23,226
 $956,171
             
Liabilities $591,231
 $2,569
 $593,800
 $292,800
 $—
 $292,800
Redeemable non-controlling interest 415,761
 493
 416,254
 384,294
 —
 384,294
Partners' capital attributable to AB Unitholders 214,146
 26,599
 240,745
 221,229
 23,226
 244,455
Non-redeemable non-controlling interests in consolidated entities 841
 —
 841
 34,622
 —
 34,622
Total liabilities, redeemable non-controlling interest and partners' capital $1,221,979
 $29,661
 $1,251,640
 $932,945
 $23,226
 $956,171
             
During three-month period ended March 31, 2023, we deconsolidated one fund in which we had a seed investment of approximately $1.7 million as of December 31, 2022, due to no longer having a controlling financial interest.
Index


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

21
Index

Valuation of consolidated company-sponsored investment funds' financial instruments by pricing observability levels as of September 30, 2017March 31, 2023 and December 31, 20162022 was as follows (in thousands):
 Level 1Level 2Level 3Total
March 31, 2023:
  Investments - VIEs$125,788 $400,742 $— $526,530 
  Investments - VOEs16,809 — — 16,809 
  Derivatives - VIEs1,211 2,459 — 3,670 
Total assets measured at fair value$143,808 $403,201 $— $547,009 
Derivatives - VIEs14,830 1,481 — 16,311 
Total liabilities measured at fair value$14,830 $1,481 $— $16,311 
December 31, 2022:
  Investments - VIEs$129,706 $386,830 $— $516,536 
  Derivatives - VIEs1,529 6,023 — 7,552 
Total assets measured at fair value$131,235 $392,853 $— $524,088 
Derivatives - VIEs$14,932 $6,608 $— $21,540 
Total liabilities measured at fair value$14,932 $6,608 $— $21,540 
 Level 1 Level 2 Level 3 NAV Expedient Total
September 30, 2017:         
  Investments - VIEs$663,348
 $105,627
 $1,897
 $81
 $770,953
  Investments - VOEs6,830
 22,031
 121
 —
 28,982
  Derivatives - VIEs68
 1,668
 —
 —
 1,736
  Derivatives - VOEs17
 63
 —
 —
 80
Total assets measured at fair value$670,263
 $129,389
 $2,018
 $81
 $801,751
          
Short equities - VIEs$583,491
 $—
 $—
 $—
 $583,491
Derivatives - VIEs104
 2,564
 —
 —
 2,668
  Derivatives - VOEs7
 128
 —
 —
 135
Total liabilities measured at fair value$583,602
 $2,692
 $—
 $—
 $586,294
          
December 31, 2016:         
  Investments - VIEs$341,830
 $203,197
 $5,741
 $82
 $550,850
  Investments - VOEs10,188
 12,061
 —
 977
 23,226
  Derivatives - VIEs58
 1,739
 —
 —
 1,797
Total assets measured at fair value$352,076
 $216,997
 $5,741
 $1,059
 $575,873
          
Short equities - VIEs$248,419
 $—
 $—
 $—
 $248,419
Derivatives - VIEs48
 2,033
 —
 —
 2,081
Total liabilities measured at fair value$248,467
 $2,033
 $—
 $—
 $250,500


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




The change in carrying value associated with Level 3 financial instruments carried at fair value within consolidated company-sponsored investment funds was as follows:
 Three Months Ended March 31,
 20232022
 (in thousands)
Balance as of beginning of period$— $3,357 
Deconsolidated funds— (3,351)
Transfers (out)— (6)
Purchases— 248 
Balance as of end of period$— $248 
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in thousands)
         
Balance as of beginning of period $2,797
 $13,108
 $5,741
 $—
Impact of adoption of ASU 2015-02 —
 —
 —
 14,740
Deconsolidated funds —
 (1,403) (6,697) (1,403)
Transfers (out) in (35) (23,566) 378
 (24,881)
Purchases 346
 640
 5,358
 996
Sales (1,148) (278) (3,045) (786)
Realized gains (losses), net 5
 15
 1
 (24)
Unrealized gains (losses), net 52
 14,243
 269
 14,120
Accrued discounts 1
 —
 13
 (3)
Balance as of end of period $2,018
 $2,759
 $2,018
 $2,759


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


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


Derivative Instruments
As of September 30, 2017March 31, 2023 and December 31, 2016,2022, the VIEs held $14.1$12.6 million and $2.9$14.0 million (net), respectively, of futures, forwards and swaps within their portfolios (including $15.0 million and $3.2 million, respectively, of derivatives included in their investments balance on the condensed consolidated statements of financial condition).portfolios. For the three and nine months ended September 30, 2017,March 31, 2023 and March 31, 2022, we recognized $3.8$1.7 million and $18.8 million, respectively, of gains on these derivative positions. For the three and nine months ended September 30, 2016, we recognized $2.0 million of losses and $0.7$0.5 million of gains, respectively, on these derivative positions.derivatives. These gains and losses are recognized in investment gains (losses) in the condensed consolidated statements of income.
22
Index
As of September 30, 2017March 31, 2023 and December 31, 2016,2022, the VIEs held $0.2$1.7 million and $0.5$2.7 million, respectively, of cash collateral payable to trade counterparties. This obligation to return cash is reported in the liabilities of consolidated company-sponsored investment funds in our condensed consolidated statements of financial condition.
As of September 30, 2017March 31, 2023 and December 31, 2016,2022, the VIEs delivered $4.6 million and $3.3$5.4 million, respectively, of cash collateral into brokerage accounts. The VIEs report this cash collateral in the consolidated company-sponsored investment funds cash and cash equivalents in our condensed consolidated statements of financial condition.
As of September 30, 2017,March 31, 2023, the VOEs held no futures, forwards, options or swaps within their portfolios.
As of March 31, 2023, the VOEs held no cash collateral and investment gains (losses) are not considered material and, accordingly,payable to trade counterparties.
As of March 31, 2023, the VOEs delivered no further discloses are necessary.
Index


cash collateral in brokerage accounts.
Offsetting Assets and Liabilities
Offsetting of derivative assets of consolidated company-sponsored investment funds as of September 30, 2017March 31, 2023 and December 31, 20162022 was as follows:
 
 Gross Amounts of Recognized AssetsGross Amounts Offset in the Statement of Financial ConditionNet Amounts of Assets Presented in the Statement of Financial ConditionFinancial
Instruments Collateral		Cash Collateral
Received		Net
Amount
 (in thousands)
March 31, 2023:
Derivatives - VIEs$3,670 $— $3,670 $— $(1,689)$1,981 
December 31, 2022:     
Derivatives - VIEs$7,552 $— $7,552 $— $(2,731)$4,821 
 Gross Amounts of Recognized Assets Gross Amounts Offset in the Statement of Financial Condition Net Amounts of Assets Presented in the Statement of Financial Condition 
Financial
Instruments
 
Cash Collateral
Received
 
Net
Amount
 (in thousands)
September 30, 2017:           
Derivatives - VIEs$16,767
 $—
 $16,767
 $—
 $(186) $16,581
Derivatives - VOEs$80
 $—
 $80
 $—
 $(12) $68
December 31, 2016: 
  
    
  
  
Derivatives - VIEs$4,997
 $—
 $4,997
 $—
 $(461) $4,536


Offsetting of derivative liabilities of consolidated company-sponsored investment funds as of September 30, 2017March 31, 2023 and December 31, 20162022 was as follows:
 Gross Amounts of Recognized LiabilitiesGross Amounts Offset in the Statement of Financial ConditionNet Amounts of Liabilities Presented in the Statement of Financial ConditionFinancial
Instruments Collateral		Cash Collateral
Pledged		Net Amount
 (in thousands)
March 31, 2023:
Derivatives - VIEs$16,311 $— $16,311 $— $(4,634)$11,677 
December 31, 2022:     
Derivatives - VIEs$21,540 $— $21,540 $— $(5,444)$16,096 
 Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statement of Financial Condition Net Amounts of Liabilities Presented in the Statement of Financial Condition 
Financial
Instruments
 
Cash Collateral
Pledged
 Net Amount
 (in thousands)
September 30, 2017:           
Derivatives - VIEs$2,668
 $—
 $2,668
 $—
 $(2,668) $—
Derivatives - VOEs$135
 $—
 $135
 $—
 $(34) $101
December 31, 2016: 
  
    
  
  
Derivatives - VIEs$2,081
 $—
 $2,081
 $—
 $(2,081) $—


Cash collateral, whether pledged or received on derivative instruments, is not considered material and, accordingly, is not disclosed by counterparty.
Non-Consolidated VIEs
As of September 30, 2017,March 31, 2023, the net assets of company-sponsored investment products that are non-consolidated VIEs are approximately $52.1$49.0 billion, and our maximum risk of loss is our investment of $7.4$8.8 million in these VIEs and our advisory fee receivables from these VIEs which are not material.is $57.5 million. As of December 31, 2022, the net assets of company-sponsored investment products that were non-consolidated VIEs was approximately $46.4 billion; our maximum risk of loss was our investment of $5.7 million in these VIEs and our advisory fees receivable from these VIEs was $54.2 million.
23
Index

15.     Units Outstanding

14.
Units Outstanding


Changes in AB Units outstanding during the nine-monththree-month period ended September 30, 2017March 31, 2023 were as follows:
 
Outstanding as of December 31, 20162022268,893,534285,979,913 
Options exercised1,039,632
Units issued1,944,31094,258 
Units retired(1)
(6,053,419(419,736))
BalanceOutstanding as of September 30, 2017March 31, 2023265,824,057285,654,435

(1) Includes 43,600 During the three-months ended March 31, 2023, we purchased 600 AB Units purchased in private transactions and retired them.

16.     Debt

Credit Facility
AB has an $800.0 million committed, unsecured senior revolving credit facility (the “Credit Facility”) with a group of commercial banks and other lenders, which matures on October 13, 2026. The Credit Facility was amended and restated on February 9, 2023, to reflect the transition from US LIBOR, which will be retired as of June 30, 2023, to the term Secured Overnight Financial Rate or "SOFR". Other than this immaterial change, there were no other significant changes included in the amendment. The Credit Facility provides for possible increases in the principal amount by up to an aggregate incremental amount of $200.0 million; any such increase is subject to the consent of the affected lenders. The Credit Facility is available for AB and Sanford C. Bernstein & Co., LLC ("SCB LLC") business purposes, including the support of AB’s commercial paper program. Both AB and SCB LLC can draw directly under the Credit Facility and management may draw on the Credit Facility from time to time. AB has agreed to guarantee the obligations of SCB LLC under the Credit Facility.

The Credit Facility contains affirmative, negative and financial covenants, which are customary for facilities of this type, including restrictions on dispositions of assets, restrictions on liens, a minimum interest coverage ratio and a maximum leverage ratio. As of March 31, 2023, we were in compliance with these covenants. The Credit Facility also includes customary events of default (with customary grace periods, as applicable), including provisions under which, upon the occurrence of an event of default, all outstanding loans may be accelerated and/or lender’s commitments may be terminated. Also, under such provisions, upon the occurrence of certain insolvency- or bankruptcy-related events of default, all amounts payable under the Credit Facility would automatically become immediately due and payable, and the lender’s commitments automatically would terminate.

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

As of March 31, 2023 and December 31, 2022, we had no amounts outstanding under the Credit Facility. Furthermore, during the first ninethree months of 2017.2023 and the full year 2022, we did not draw upon the Credit Facility.


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

The EQH Facility contains affirmative, negative and financial covenants which are substantially similar to those in AB’s committed bank facilities. As of March 31, 2023, we were in compliance with these covenants. The EQH Facility also includes customary events of default substantially similar to those in AB’s committed bank facilities, including provisions under which, upon the occurrence of an event of default, all outstanding loans may be accelerated and/or the lender’s commitment may be terminated.

Amounts under the EQH Facility may be borrowed, repaid and re-borrowed by us from time to time until the maturity of the facility. AB or EQH may reduce or terminate the commitment at any time without penalty upon proper notice. EQH also may terminate the facility immediately upon a change of control of our general partner.
24
Index
15.
Debt


As of September 30, 2017both March 31, 2023 and December 31, 2016,2022, AB had $297.4$900.0 million outstanding under the EQH Facility, with interest rates of approximately 4.7% and 4.3%, respectively. Average daily borrowings on the EQH Facility for the first three months of 2023 and the full year 2022 were $804.1 million and $513.0$655.2 million, respectively, in commercial paper outstanding with weighted average interest rates of approximately 1.4%4.4% and 0.9%1.7%, respectively.

EQH Uncommitted Facility
In addition to the EQH Facility, AB has a $300.0 million uncommitted, unsecured senior credit facility (“EQH Uncommitted Facility”) with EQH. The EQH Uncommitted Facility matures on September 1, 2024 and is available for AB's general business purposes. Borrowings under the EQH Uncommitted Facility generally bear interest at a rate per annum based on prevailing overnight commercial paper rates. The EQH Uncommitted Facility contains affirmative, negative and financial covenants which are substantially similar to those in the EQH Facility. As of March 31, 2023 and December 31, 2022, we had $135.0 million and $90.0 million outstanding under the EQH Uncommitted Facility, with interest rates of approximately 4.7% and 4.3%, respectively. Average daily borrowing on the EQH Uncommitted Facility for the first three months of 2023 and the full year 2022 were $7.0 million and $0.7 million, respectively, with weighted average interest rates of approximately 4.5% and 4.3%, respectively.

Commercial Paper
As of March 31, 2023 and December 31, 2022, we had no commercial paper outstanding. The commercial paper is short term in nature, and as such, recorded value is estimated to approximate fair value (and considered a Level 2 security in the fair value hierarchy). Average daily borrowings of commercial paper during the first ninethree months of 20172023 and the full year 20162022 were $449.6$339.5 million and $422.9$189.9 million, respectively, with weighted average interest rates of approximately 1.3%4.7% and 0.6%1.5%, respectively.
16.
Changes in Capital


Changes in capitalSCB Lines of Credit
SCB LLC currently has five uncommitted lines of credit with five financial institutions. Four of these lines of credit permit us to borrow up to an aggregate of approximately $315.0 million, with AB named as an additional borrower, while the other line has no stated limit. AB has agreed to guarantee the obligations on SCB LLC under these lines of credit. As of March 31, 2023 and December 31, 2022, SCB LLC had no outstanding balance on these lines of credit. Average daily borrowings during the nine-month period ended September 30, 2017first three months of 2023 and full year 2022 were as follows: $3.7 million and $1.4 million, respectively, with weighted average interest rates of approximately 7.7% and 3.7%, respectively.


 Partners’ Capital Attributable to AB Unitholders Non-Controlling Interests In Consolidated Entities Total Capital
 (in thousands)
      
Balance as of December 31, 2016$4,032,017
 $36,172
 $4,068,189
Comprehensive income: 
  
  
Net income415,994
 9,680
 425,674
Other comprehensive income, net of tax: 
  
  
Unrealized gains on investments9
 —
 9
Foreign currency translation adjustments23,114
 977
 24,091
Changes in employee benefit related items755
 —
 755
Comprehensive income439,872
 10,657
 450,529
      
Distributions to General Partner and unitholders(489,049) —
 (489,049)
Compensation-related transactions(89,567) —
 (89,567)
Capital contributions from affiliates79
 —
 79
Purchase of non-controlling interest172
 (2,005) (1,833)
Distributions to non-controlling interests of our consolidated venture capital fund—
 (43,217) (43,217)
Other1,257
 —
 1,257
Balance as of September 30, 2017$3,894,781
 $1,607
 $3,896,388
17. Divestitures

Index


Changes in capital during the nine-month period ended September 30, 2016 were as follows:

 Partners’ Capital Attributable to AB Unitholders Non-Controlling Interests In Consolidated Entities Total Capital
 (in thousands)
      
Balance as of December 31, 2015$3,992,748
 $24,473
 $4,017,221
Comprehensive income: 
  
  
Net income (loss)448,820
 5,689
 454,509
Other comprehensive income, net of tax: 
  
  
Unrealized (losses) on investments(2) —
 (2)
Foreign currency translation adjustments521
 24
 545
Changes in employee benefit related items238
 —
 238
Comprehensive income449,577
 5,713
 455,290
      
Distributions to General Partner and unitholders(400,441) —
 (400,441)
Compensation-related transactions(119,877) —
 (119,877)
Capital contributions from affiliates439
 —
 439
Other1,742
 363
 2,105
Balance as of September 30, 2016$3,924,188
 $30,549
 $3,954,737

During 2016, deferred taxes were not recognized on foreign currency translation adjustments for foreign subsidiaries which had earnings that were considered permanently invested outsideOn November 22, 2022, AB and SocGen, a leading European bank, announced plans to form a joint venture combining their respective cash equities and research businesses. The consummation of the United States.


17.
Non-controlling Interests

Non-controllingjoint venture is subject to customary closing conditions, including regulatory clearances. The closing is expected to occur before the end of 2023. Upon closing, AB will own a 49% interest in netthe joint venture and SocGen will own a 51% interest, with an option to reach 100% ownership after five years. The assets and liabilities of AB's research services business (“the disposal group”) have been classified as held for sale on the condensed consolidated statement of financial condition and recorded at fair value, less cost to sell.As a result of classifying these assets as held for sale, we recognized a non-cash valuation adjustment of $2.5 million and $7.4 million on the condensed consolidated statement of income for the three and nine months ended September 30, 2017March 31, 2023 and 2016 consistedDecember 31, 2022, respectively, to recognize the net carrying value at lower of cost or fair value, less estimated costs to sell.
The following table summarizes the assets and liabilities of the following:
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in thousands)
         
Non-redeemable non-controlling interests:        
    Consolidated company-sponsored investment funds $21
 $12,499
 $9,436
 $5,346
    Other 50
 143
 245
 343
Total non-redeemable non-controlling interests 71
 12,642
 9,681
 5,689
Redeemable non-controlling interests:        
    Consolidated company-sponsored investment funds 16,455
 3,054
 40,332
 9,102
Total non-controlling interest in net income (loss) $16,526
 $15,696
 $50,013
 $14,791
Index

Non-redeemable non-controlling interestdisposal group classified as held for sale on the condensed consolidated statement of financial condition as of September 30, 2017March 31, 2023 and December 31, 2016 consisted2022:
25
March 31, 2023December 31, 2022
Cash and cash equivalents$154,484 $159,123 
Receivables, net:
Brokers and dealers64,547 44,717 
Brokerage clients29,709 29,243 
Other fees22,245 22,988 
Investments15,988 24,507 
Furniture and equipment, net4,008 4,128 
Other assets223,933 107,764 
Right-of-use assets1,537 1,552 
Intangible assets4,692 4,903 
Goodwill159,826 159,826 
Valuation adjustment (allowance) on disposal group(9,900)(7,400)
Total assets held for sale$671,069 $551,351 
Payables:
Brokers and dealers$43,001 $32,983 
Brokerage clients31,529 10,232 
Other liabilities66,407 50,884 
Accrued compensation and benefits16,824 13,853 
Total liabilities held for sale$157,761 $107,952 
As of the following:
 September 30, 2017 December 31, 2016
 (in thousands)
    
Consolidated company-sponsored investment funds$841
 $34,622
Other766
 1,550
Total non-redeemable non-controlling interest$1,607
 $36,172

Redeemable non-controlling interest as of September 30, 2017March 31, 2023 and December 31, 2016 consisted2022, cash and cash equivalents classified as held for sale included in the condensed consolidated statement of cash flows was $154.5 million and $159.1 million, respectively.
We have determined that the exit from the sell-side research business does not represent a strategic shift that has had, or is likely to have a major effect on our consolidated results of operations. Accordingly, we have not classified the disposal group as discontinued operations. The results of operations of the following:disposal group up to the respective dates of sale will be included in our consolidated results of operations for all periods presented. The lower of amortized cost or fair value adjustment upon transferring these assets to held for sale was not material.

26
 September 30, 2017 December 31, 2016
 (in thousands)
    
Consolidated company-sponsored investment funds$416,254
 $384,294
CPH Capital Fondsmaeglerselskab A/S acquisition5,364
 8,665
Total redeemable non-controlling interest$421,618
 $392,959



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


Executive Overview
Our total assets under management ("AUM"(“AUM”) as of September 30, 2017March 31, 2023 were $534.9$675.9 billion, up $18.3$29.5 billion, or 3.6%4.6%, compared to June 30, 2017,December 31, 2022, and up $44.7down $59.5 billion, or 9.1%8.1%, compared to September 30, 2016.March 31, 2022. During the thirdfirst quarter of 2017,2023, AUM increased as a result ofdue to market appreciation of $13.8$28.7 billion and net inflows of $4.5$0.8 billion (primarily due to Retail and Institutional(Private Wealth net inflows of $3.0$1.9 billion and $1.4Retail net inflows of $1.6 billion, respectively)offset by Institutional net outflows of $2.7 billion). During the twelve months ended September 30, 2017,

Institutional AUM increased as a result$9.3 billion, or 3.1%, to $306.6 billion during the first quarter of 2023, due to market appreciation of $35.9$12.0 billion, offset by net outflows of $2.7 billion. Gross sales decreased sequentially from $12.6 billion during the fourth quarter of 2022 to $3.0 billion during the first quarter of 2023, reflecting a $6.4 billion custom target date sale in the fourth quarter of 2022. Redemptions and terminations decreased sequentially from $3.5 billion to $3.4 billion.

Retail AUM increased $13.8 billion, or 5.7%, to $256.7 billion during the first quarter of 2023, due to market appreciation of $12.2 billion and net inflows of $8.8 billion (primarily due to Retail and Institutional net inflows of $6.3 billion and $2.4 billion, respectively).
During the third quarter of 2017, we had net inflows of $4.9 billion in our actively managed investment services and net outflows of $0.4 billion in our passively managed investment services. During the twelve months ended September 30, 2017, we had net inflows of $15.1 billion in our actively managed investment services and net outflows of $6.3 billion in our passively managed investment services.
Institutional AUM$1.6 billion. Gross sales increased $7.1 billion, or 2.8%, to $260.0sequentially from $14.2 billion during the thirdfourth quarter of 2017,2022 to $16.8 billion during the first quarter of 2023. Redemptions and terminations decreased sequentially from $15.4 billion to $13.3 billion.

Private Wealth AUM increased $6.4 billion, or 6.0%, to $112.6 billion during the first quarter of 2023, due to market appreciation of $5.7$4.5 billion and net inflows of $1.4$1.9 billion. Gross sales decreased 18.5%increased sequentially from $4.0$4.1 billion during the secondfourth quarter of 20172022 to $3.3$5.8 billion during the thirdfirst quarter of 2017.2023. Redemptions and terminations decreased 33.0% sequentially from $2.9$4.3 billion to $2.0$3.9 billion.
Retail AUM increased $8.4 billion, or 4.8%, to $185.7 billion during the third quarter of 2017, due to market appreciation of $5.4 billion and net inflows of $3.0 billion. Gross sales increased 3.0% sequentially from $13.5 billion during the second quarter of 2017 to $13.9 billion during the third quarter of 2017. Redemptions and terminations increased 5.3% sequentially from $8.9 billion to $9.4 billion.
Private Wealth Management AUM increased $2.8 billion, or 3.2%, to $89.2 billion during the third quarter of 2017, due to market appreciation of $2.7 billion and net inflows of $0.1 billion. Gross sales decreased 5.0% sequentially from $2.9 billion during the second quarter of 2017 to $2.8 billion during the third quarter of 2017. Redemptions and terminations were essentially flat sequentially.
Bernstein Research Services revenue for the thirdfirst quarter of 20172023 was $108.4$100.0 million, down $2.5$17.8 million, or 2.3%15.1%, compared to the thirdfirst quarter of 2016,2022. The decrease was driven primarily by lower clienta significant decline in customer trading activity in the U.S., partially offset by an increase in client activity in both Europe and Asia and the impactacross all regions as a result of a weaker U.S. dollar.market conditions.

Net revenues for the thirdfirst quarter of 2017 increased $64.62023 decreased $81.6 million, or 8.6%7.4%, to $812.2 million$1.0 billion from $747.6 million$1.1 billion in the thirdfirst quarter of 2016.2022. The most significant contributorsdecrease was primarily due to the increase were higherlower investment advisory base advisory fees of $51.4$55.5 million, higherlower performance-based fees of $39.4 million, lower distribution revenues of $8.4$27.3 million and lower Bernstein Research Services revenue of $17.8 million, partially offset by higher investment gains of $44.3 million compared to investment losses in the prior-year period and higher net dividend and interest income of $3.1 million, higher performance-based fees of $2.3 million and higher investment gains of $1.2$14.0 million. Operating expenses for the thirdfirst quarter of 2017 increased $87.92023 decreased $48.5 million, or 15.6%5.7%, to $650.2$808.8 million from $562.3$857.3 million in the thirdfirst quarter of 2016.2022. The increase primarilydecrease was due to higher otherlower general and administrative expenses of $22.2$38.0 million, (see below), lower adjustments to contingent payment arrangements of $21.3 million, higher real estate charges of $18.8 million, higher employee compensation and benefits of $13.0 million and higher promotion and servicing expenses of $11.2$29.7 million and lower employee compensation and benefits expenses of $5.3 million, offset by higher interest expense of $12.3 million, higher amortization of intangibles of $10.6 million and higher accretion expense associated with contingent payment arrangements of $1.6 million. Our operating income decreased $23.3$33.1 million, or 12.6%13.3%, to $162.0$215.3 million from $185.3$248.4 million in the first quarter of 2022 and our operating margin decreased to 17.9%20.1% in the thirdfirst quarter of 20172023 from 22.7%24.7% in the thirdfirst quarter of 2016.2022.
During
Market Commentary

Despite significant market volatility during the thirdfirst quarter of 2017, we recorded2023, equity and debt markets had positive returns, with the S&P 500, the Dow Jones Industrial Average and the Nasdaq each registering positive returns to end the quarter. The market volatility, particularly during March 2023, was driven by significant instability in the banking sector. This turmoil in banking stocks triggered declines in yields for U.S. Treasuries and Eurozone bonds, and gold prices renewed their recent rally as investors sought safe havens. The markets experienced additional volatility in the quarter as the U.S. Federal Reserve continued with interest rate increases in a $19.7 million reserve forfurther effort to reduce inflation. The Fed, however, held off on a payment we expectmore aggressive rate increase in March 2023 that could have roiled markets after weeks of bank turmoil.

Further fears of a banking crisis arose globally, as Switzerland's Central Bank stepped in to make to a third-party vendor as a result ofshore up liquidity and investor confidence in the early termination of an outsourcing contract relating to our trade settlement and reconciliation processes. We intend to transition these processes back to AB from our vendor withinSwiss banking system, particularly Credit Suisse. In the next two years. As a result of this transition, we expect to incur $2 millionU.K., equities fell in additional transitional costs in 2018 and realize ongoing annual savings of approximately $11 million in general and administrative expenses beginning in 2019.

Market Environment
The third quarter of 2017 built upon the strength of the first halfquarter, as the European Central Bank increased interest rates despite the banking turmoil in its continued effort to dampen inflation. The anticipation of another rate increase in 2023 gave rise to an upgraded economic outlook for the U.K., which anticipates modest growth in the second quarter. The U.K., however, continues to face labor shortages and the impact of rising taxes. In China, the People's Bank of China, surprised markets by cutting its reserve requirement ratio by 25 basis points in a move expected to inject 500 billion yuan (US$72.6 billion) worth of liquidity into the interbank system. China’s economy continued to show a mild recovery at the start of the year - U.S. equity markets reached record highs, emerging markets continued to gain momentumas the zero tolerance COVID policy was lifted, but its resilience could still be tested by domestic employment and fixed income assets added to their already positive year-to-date returns. The volatility index spiked in August, asreal estate pressures, coupled with a complex geopolitical tensions flaredenvironment.
27

Relationship with EQH and natural disasters rattled markets, but settled down to muted levels by quarter-end. In the U.S., inflation remains low as unemployment improves, but wages have been slower to recover, leaving core CPI without a driver. The U.S. Federal Reserve kept rates steady, but indicated that it intended to begin shrinking its balance sheetSubsidiaries
Index


in October 2017EQH (our parent company) and maintained its forecast for a third rate increase during the fourth quarter of 2017. Globally, monetary policy between developed and emerging markets continues to diverge,subsidiaries are our largest client. EQH is collaborating with emerging market stocks trading at a substantial discount, and uncertainty persists over the potential for rising inflation in the U.S. and the ability of the Trump administration to pursue pro-growth policies, ongoing concerns about geopolitics, MiFID II implementation in Europe and the sustainability of emerging markets growth. Additionally, while the industry-wide shift from actively-managed investment services to passively-managed investment services has persisted in 2017, with $509 billion in passive inflows year-to-date, total active flows are positive, at $66 billion year-to-date, as fixed income strength has offset continued, though improving, equity outflows.

MiFID II
The second installment of the Markets in Financial Instruments Directive II (“MiFID II”), which is effective January 1, 2018, makes significant modifications to the manner in which European broker-dealers can be compensated for research. These modifications are recognized in the industry as having the potential to significantly decrease the overall research spend by European buy-side firms. Consequently, our U.K.-based broker-dealer is considering new charging mechanisms for its researchAB in order to minimizeimprove 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. Equitable Financial Life Insurance Company, a subsidiary of EQH ("Equitable Financial"), has agreed to provide $10 billion in permanent capital1 to build out AB's private illiquid offerings, including private alternatives and private placements. Deployment of this impact as part of its broader MiFID II implementation program. Itcapital commitment is importantapproximately 70% completed and is expected to note, however, thatcontinue over the next year. We expect this anticipated capital from Equitable Financial will continue to accelerate both organic and inorganic growth in our new charging techniquesprivate alternatives business, allowing us to continue to deliver for our clients, employees, unitholders and other strategic decisionsstakeholders. For example included in this $10 billion commitment by EQH is $750 million in capital to address the new environment created by MiFID II may not be successful, which could result in a significant decline in our sell-side revenues.deployed through AB CarVal.

Also, although MiFID II does permit buy-side firms to purchase research through the use of client-funded research payment accounts most buy-side firms that operate in the Eurozone, including our U.K. buy-side subsidiaries, have decided to use their own funds to pay for research in the Eurozone. This change in practice will increase our expenses in the Eurozone and, if this practice become more pervasive globally, may have a significant adverse effect on our net income in future periods.

The ultimate impact of MiFID II on payments for research currently is uncertain.
AXA America Holdings IPO
On May, 10, 2017, AXA S.A. (“AXA”) announced its intention to sell and list for trading a minority stake of its U.S. operations (expected to consist of AXA’s U.S. Life & Savings business and its interest in AB) during the first half of 2018, subject to market conditions and SEC review process. While we cannot at this time predict the eventual impact, if any, on AB of this proposed transaction, it could include a reduction in the support AXA has provided to AB in the past with respect to AB's investment management business, resulting in a decrease to our revenues and ability to initiate new investment services. Also, AB relies on AXA for a number of significant services and benefits from its affiliation with AXA in certain common vendor relationships. These arrangements also may change with possible negative financial implications for AB.



Index




Assets Under Management


Assets under management by distribution channel are as follows:

 As of March 31,
 20232022$ Change% Change
 (in billions)
Institutions$306.6 $325.9 $(19.3)(5.9)%
Retail256.7 292.6 (35.9)(12.3)
Private Wealth112.6 116.9 (4.3)(3.6)
Total$675.9 $735.4 $(59.5)(8.1)%
 As of September 30,    
 2017 2016 $ Change % Change
 (in billions)  
        
Institutions$260.0
 $247.0
 $13.0
 5.3%
Retail185.7
 162.2
 23.5
 14.5
Private Wealth Management89.2
 81.0
 8.2
 10.1
Total$534.9
 $490.2
 $44.7
 9.1


Assets under management by investment service are as follows:

 As of September 30,    
 2017 2016 $ Change % Change
 (in billions)  
Equity       
Actively Managed$131.7
 $111.1
 $20.6
 18.5 %
Passively Managed(1)
52.3
 48.5
 3.8
 7.9
Total Equity184.0
 159.6
 24.4
 15.3
        
Fixed Income 
  
  
  
Actively Managed 
  
  
  
Taxable243.0
 229.9
 13.1
 5.7
Tax–exempt39.4
 38.2
 1.2
 3.1
 282.4
 268.1
 14.3
 5.3
        
Passively Managed(1)
9.9
 11.6
 (1.7) (14.6)
Total Fixed Income292.3
 279.7
 12.6
 4.5
        
Other(2)
    

 

 Actively Managed58.6
 50.9
 7.7
 15.1
Passively Managed(1)
—
 —
 —
 —
Total Other58.6
 50.9
 7.7
 15.1
Total$534.9
 $490.2
 $44.7
 9.1
 As of March 31,
 20232022$ Change% Change
 (in billions)
Equity
Actively Managed$229.1 $265.2 $(36.1)(13.6)%
Passively Managed(1)
56.6 66.2 (9.6)(14.6)
Total Equity285.7 331.4 (45.7)(13.8)
Fixed Income   
Actively Managed   
Taxable198.4 225.9 (27.5)(12.2)
Tax–exempt55.3 54.9 0.4 0.8 
 253.7 280.8 (27.1)(9.7)
Passively Managed(1)
9.5 12.7 (3.2)(24.4)
Total Fixed Income263.2 293.5 (30.3)(10.3)
Alternatives/Multi-Asset Solutions(2)
 Actively Managed119.9 104.7 15.2 14.5 
Passively Managed(1)
7.1 5.8 1.3 22.3 
Total Alternatives/Multi-Asset Solutions127.0 110.5 16.5 14.9 
Total$675.9 $735.4 $(59.5)(8.1)%
(1)Includes index and enhanced index services.
(2)Includes certain multi-asset solutions and services andnot included in equity or fixed income services.
1 Permanent capital means investment capital of indefinite duration, which may be withdrawn under certain alternative investments.











conditions. Although Equitable Financial has indicated its intention over time to provide this investment capital to AB, which is mutually beneficial to both firms, it has no binding commitment to do so.
28



Changes in assets under management for the three-month nine-month and twelve-month periods ended September 30, 2017March 31, 2023 are as follows:

 Distribution Channel
 Institutions Retail 
Private
Wealth Management
 Total
 (in billions)
        
Balance as of June 30, 2017$252.9
 $177.3
 $86.4
 $516.6
Long-term flows: 
  
  
  
Sales/new accounts3.3
 13.9
 2.8
 20.0
Redemptions/terminations(2.0) (9.4) (2.5) (13.9)
Cash flow/unreinvested dividends0.1
 (1.5) (0.2) (1.6)
Net long-term inflows1.4
 3.0
 0.1
 4.5
Market appreciation5.7
 5.4
 2.7
 13.8
Net change7.1
 8.4
 2.8
 18.3
Balance as of September 30, 2017$260.0
 $185.7
 $89.2
 $534.9
        
Balance as of December 31, 2016$239.3
 $160.2
 $80.7
 $480.2
Long-term flows: 
  
  
  
Sales/new accounts9.8
 40.9
 8.7
 59.4
Redemptions/terminations(10.4) (28.4) (7.9) (46.7)
Cash flow/unreinvested dividends1.2
 (4.6) (0.3) (3.7)
Net long-term inflows0.6
 7.9
 0.5
 9.0
Market appreciation20.1
 17.6
 8.0
 45.7
Net change20.7
 25.5
 8.5
 54.7
Balance as of September 30, 2017$260.0
 $185.7
 $89.2
 $534.9
        
Balance as of September 30, 2016$247.0
 $162.2
 $81.0
 $490.2
Long-term flows: 
  
  
  
Sales/new accounts16.5
 51.2
 11.0
 78.7
Redemptions/terminations(11.6) (38.9) (10.4) (60.9)
Cash flow/unreinvested dividends(2.5) (6.0) (0.5) (9.0)
Net long-term inflows2.4
 6.3
 0.1
 8.8
Market appreciation10.6
 17.2
 8.1
 35.9
Net change13.0
 23.5
 8.2
 44.7
Balance as of September 30, 2017$260.0
 $185.7
 $89.2
 $534.9
        










Index


 Investment Service
 
Equity
Actively
Managed
 
Equity
Passively
Managed(1)
 
Fixed
Income
Actively
Managed -
Taxable
 
Fixed
Income
Actively
Managed -
Tax-
Exempt
 
Fixed
Income
Passively
Managed(1)
 
Other(2)
 Total
 (in billions)  
              
Balance as of June 30, 2017$124.5
 $50.1
 $236.6
 $39.2
 $9.9
 $56.3
 $516.6
Long-term flows: 
  
  
  
  
  
  
Sales/new accounts5.8
 0.7
 10.4
 1.6
 0.1
 1.4
 20.0
Redemptions/terminations(4.7) (0.2) (6.5) (1.7) (0.1) (0.7) (13.9)
Cash flow/unreinvested dividends(0.2) (0.8) (0.2) —
 (0.1) (0.3) (1.6)
Net long-term inflows (outflows)0.9
 (0.3) 3.7
 (0.1) (0.1) 0.4
 4.5
Market appreciation6.3
 2.5
 2.7
 0.3
 0.1
 1.9
 13.8
Net change7.2
 2.2
 6.4
 0.2
 —
 2.3
 18.3
Balance as of September 30, 2017$131.7
 $52.3
 $243.0
 $39.4
 $9.9
 $58.6
 $534.9
              
Balance as of December 31, 2016$111.9
 $48.1
 $220.9
 $36.9
 $11.1
 $51.3
 $480.2
Long-term flows: 
  
  
  
  
  
  
Sales/new accounts15.9
 1.1
 32.2
 5.7
 0.1
 4.4
 59.4
Redemptions/terminations(13.8) (1.3) (22.8) (4.7) (1.7) (2.4) (46.7)
Cash flow/unreinvested dividends(1.3) (2.6) 0.5
 —
 (0.1) (0.2) (3.7)
Net long-term inflows (outflows)0.8
 (2.8) 9.9
 1.0
 (1.7) 1.8
 9.0
Market appreciation19.0
 7.0
 12.2
 1.5
 0.5
 5.5
 45.7
Net change19.8
 4.2
 22.1
 2.5
 (1.2) 7.3
 54.7
Balance as of September 30, 2017$131.7
 $52.3
 $243.0
 $39.4
 $9.9
 $58.6
 $534.9
              
              
              
              
Index

              
              
Balance as of September 30, 2016$111.1
 $48.5
 $229.9
 $38.2
 $11.6
 $50.9
 $490.2
Long-term flows: 
  
  
  
  
  
  
Sales/new accounts20.1
 1.2
 43.9
 7.6
 0.1
 5.8
 78.7
Redemptions/terminations(18.2) (1.8) (29.5) (6.6) (1.8) (3.0) (60.9)
Cash flow/unreinvested dividends(2.3) (4.1) (1.9) (0.2) 0.1
 (0.6) (9.0)
Net long-term (outflows) inflows(0.4) (4.7) 12.5
 0.8
 (1.6) 2.2
 8.8
Market appreciation21.0
 8.5
 0.6
 0.4
 (0.1) 5.5
 35.9
Net change20.6
 3.8
 13.1
 1.2
 (1.7) 7.7
 44.7
Balance as of September 30, 2017$131.7
 $52.3
 $243.0
 $39.4
 $9.9
 $58.6
 $534.9
     ��        
 Distribution Channel
 InstitutionsRetailPrivate
Wealth		Total
 (in billions)
Balance as of December 31, 2022$297.3 $242.9 $106.2 $646.4 
Long-term flows:    
Sales/new accounts3.0 16.8 5.8 25.6 
Redemptions/terminations(3.4)(13.3)(3.9)(20.6)
Cash flow/unreinvested dividends(2.3)(1.9)— (4.2)
Net long-term (outflows) inflows(2.7)1.6 1.9 0.8 
Market appreciation12.0 12.2 4.5 28.7 
Net change9.3 13.8 6.4 29.5 
Balance as of March 31, 2023$306.6 $256.7 $112.6 $675.9 
Balance as of March 31, 2022$325.9 $292.6 $116.9 $735.4 
Long-term flows:
Sales/new accounts20.9 62.1 17.3 100.3 
Redemptions/terminations(14.5)(60.9)(16.0)(91.4)
Cash flow/unreinvested dividends(12.9)(10.3)— (23.2)
Net long-term (outflows) inflows(1)
(6.5)(9.1)1.3 (14.3)
Adjustments(2)
(0.4)— — (0.4)
Transfers(0.1)0.1 — — 
Acquisition(3)
12.2 — — 12.2 
Market depreciation(24.5)(26.9)(5.6)(57.0)
Net change(19.3)(35.9)(4.3)(59.5)
Balance as of March 31, 2023$306.6 $256.7 $112.6 $675.9 
(1)Net flows include $4.5 billion of AXA redemptions for the twelve-month period ended March 31, 2023.
(2)Approximately $0.4 billion of Institutional AUM was removed from our total assets under management during the second quarter of 2022 due to a change in the fee structure.
(3)The CarVal acquisition added approximately $12.2 billion of Institutional AUM in the third quarter of 2022.













29
 Investment Service
 Equity
Actively
Managed
Equity
Passively
Managed(1)
Fixed
Income
Actively
Managed -
Taxable		Fixed
Income
Actively
Managed -
Tax-
Exempt
Fixed
Income
Passively
Managed(1)
Alternatives/ Multi-Asset Solutions(2)
Total
 (in billions)
Balance as of December 31, 2022$217.9 $53.8 $190.3 $52.5 $9.4 $122.5 $646.4 
Long-term flows:       
Sales/new accounts8.5 0.2 11.1 3.9 — 1.9 25.6 
Redemptions/terminations(10.6)— (6.1)(2.5)(0.1)(1.3)(20.6)
Cash flow/unreinvested dividends(1.3)(1.0)(1.5)0.2 (0.1)(0.5)(4.2)
Net long-term (outflows) inflows(3.4)(0.8)3.5 1.6 (0.2)0.1 0.8 
Market appreciation14.6 3.6 4.6 1.2 0.3 4.4 28.7 
Net change11.2 2.8 8.1 2.8 0.1 4.5 29.5 
Balance as of March 31, 2023$229.1 $56.6 $198.4 $55.3 $9.5 $127.0 $675.9 
Balance as of March 31, 2022$265.2 $66.2 $225.9 $54.9 $12.7 $110.5 $735.4 
Long-term flows:   
Sales/new accounts37.1 1.8 29.5 16.0 — 15.9 100.3 
Redemptions/terminations(39.2)(3.1)(28.3)(14.6)(1.5)(4.7)(91.4)
Cash flow/unreinvested dividends(8.6)(3.1)(11.0)— (0.4)(0.1)(23.2)
Net long-term (outflows) inflows(3)
(10.7)(4.4)(9.8)1.4 (1.9)11.1 (14.3)
Adjustments(4)
— — — — — (0.4)(0.4)
Acquisition(5)
— — — — — 12.2 12.2 
Market depreciation(25.4)(5.2)(17.7)(1.0)(1.3)(6.4)(57.0)
Net change(36.1)(9.6)(27.5)0.4 (3.2)16.5 (59.5)
Balance as of March 31, 2023$229.1 $56.6 $198.4 $55.3 $9.5 $127.0 $675.9 
(1)Includes index and enhanced index services.
(2)Includes certain multi-asset solutions and services and certain alternative investments.not included in equity or fixed income services.

(3)Net flows include $4.5 billion of AXA redemptions for the twelve-month period ended March 31, 2023.

(4)Approximately $0.4 billion of Institutional AUM was removed from our total assets under management during the second quarter of 2022 due to a change in the fee structure.
(5)The CarVal acquisition added approximately $12.2 billion of Institutional AUM in the third quarter of 2022.
30

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, 2017March 31, 2023 are as follows:
 Periods Ended March 31, 2023
 Three-monthsTwelve-months
 (in billions)
Actively Managed
  Equity$(3.4)$(10.7)
 Fixed Income5.1 (8.4)
Alternatives/Multi-Asset Solutions0.1 9.5 
1.8 (9.6)
Passively Managed  
  Equity(0.8)(4.4)
 Fixed Income(0.2)(1.9)
Alternatives/Multi-Asset Solutions— 1.6 
 (1.0)(4.7)
Total net long-term inflows (outflows)$0.8 $(14.3)
 Periods Ended September 30, 2017
 Three-months Nine-months Twelve-months
 (in billions)
Actively Managed     
  Equity$0.9
 $0.8
 $(0.4)
 Fixed Income3.6
 10.9
 13.3
 Other0.4
 1.8
 2.2
 4.9
 13.5
 15.1
Passively Managed 
  
  
  Equity(0.3) (2.8) (4.7)
 Fixed Income(0.1) (1.7) (1.6)
 Other—
 —
 —
 (0.4) (4.5) (6.3)
Total net long-term inflows$4.5
 $9.0
 $8.8


Index


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

  Three Months Ended September 30,     Nine Months Ended September 30,    
  2017 2016 $ Change % Change 2017 2016 $ Change % Change
  (in billions)   (in billions)  
Distribution Channel:                
Institutions $257.1
 $250.0
 $7.1
 2.8 % $250.1
 $244.3
 $5.8
 2.4 %
Retail 181.7
 161.5
 20.2
 12.5
 173.4
 157.1
 16.3
 10.4
Private Wealth Management 87.8
 80.5
 7.3
 9.1
 85.3
 78.5
 6.8
 8.6
Total $526.6
 $492.0
 $34.6
 7.0
 $508.8
 $479.9
 $28.9
 6.0
                 
Investment Service:                
Equity Actively Managed $128.0
 $110.8
 $17.2
 15.6 % $121.9
 $109.1
 $12.8
 11.7 %
Equity Passively Managed(1)
 51.1
 47.9
 3.2
 6.6
 49.9
 46.2
 3.7
 7.9
Fixed Income Actively Managed – Taxable 240.7
 230.1
 10.6
 4.6
 233.4
 221.0
 12.4
 5.6
Fixed Income Actively Managed – Tax-exempt 39.6
 37.7
 1.9
 5.0
 38.5
 35.9
 2.6
 7.0
Fixed Income Passively Managed(1)
 9.9
 11.6
 (1.7) (14.1) 10.4
 10.9
 (0.5) (4.8)
Other (2)
 57.3
 53.9
 3.4
 6.3
 54.7
 56.8
 (2.1) (3.6)
Total $526.6
 $492.0
 $34.6
 7.0
 $508.8
 $479.9
 $28.9
 6.0
 Three Months Ended March 31,
 20232022$ Change% Change
 (in billions)
Distribution Channel:
Institutions$304.6 $331.6 $(27.0)(8.2)%
Retail252.0 301.5 (49.5)(16.4)
Private Wealth110.2 118.1 (7.9)(6.7)
Total$666.8 $751.2 $(84.4)(11.2)%
Investment Service:
Equity Actively Managed$226.8 $270.5 $(43.7)(16.2)%
Equity Passively Managed(1)
55.9 67.5 (11.6)(17.3)
Fixed Income Actively Managed – Taxable195.3 236.2 (40.9)(17.3)
Fixed Income Actively Managed – Tax-exempt54.1 56.1 (2.0)(3.4)
Fixed Income Passively Managed(1)
9.5 12.9 (3.4)(26.3)
Alternatives/Multi-Asset Solutions(2)
125.2 108.0 17.2 15.9 
Total$666.8 $751.2 $(84.4)(11.2)%
(1)Includes index and enhanced index services.
(2)Includes certain multi-asset solutions and services and certain alternative investments.not included in equity of fixed income services.


Our Institutional channel thirdfirst quarter average AUM of $257.1$304.6 billion increased $7.1decreased $27.0 billion, or 2.8%8.2%, compared to the thirdfirst quarter of 2016,2022, primarily due to our Institutionalthis AUM increasing $13.0decreasing $19.3 billion, or 5.3%5.9%, to $260.0$306.6 billion over the last twelve months.from March 31, 2022. The $13.0$19.3 billion increasedecrease in AUM resulted primarily from market appreciationdepreciation of $10.6$24.5 billion and net inflowsoutflows of $2.4 billion.$6.5 billion, partially offset by an addition of $12.2 billion due to the CarVal acquisition.
Our Retail channel thirdfirst quarter average AUM of $181.7$252.0 billion increased $20.2decreased $49.5 billion, or 12.5%16.4%, compared to the thirdfirst quarter of 2016,2022, primarily due to our Retailthis AUM increasing $23.5decreasing $35.9 billion, or 14.5%12.3%, to $185.7$256.7 billion over the last twelve months.from March 31, 2022. The $23.5$35.9 billion increase in AUMdecrease resulted primarily from market appreciationdepreciation of $17.2$26.9 billion and net inflowsoutflows of $6.3$9.1 billion.
Our Private Wealth Management channel thirdfirst quarter average AUM of $87.8$110.2 billion increased $7.3decreased $7.9 billion, or 9.1%6.7%, compared to the thirdfirst quarter of 2016,2022, primarily due to our Private Wealth Managementthis AUM increasing $8.2decreasing $4.3 billion, or 10.1%3.6%, to $89.2$112.6 billion over the last twelve months.from March 31, 2022. The $8.2$4.3 billion increase in AUMdecrease resulted from market appreciationdepreciation of $8.1$5.6 billion, andoffset by net inflows of $0.1$1.3 billion.










31
Index


Absolute investment composite returns, gross of fees, and relative performance as of September 30, 2017March 31, 2023 compared to benchmarks for certain representative Institutional equity and fixed income services are as follows:
 1-Year
3-Year(1)
5-Year(1)
Global High Income - Hedged (fixed income)
Absolute return(3.9)%6.9 %1.9 %
Relative return (vs. Bloomberg Barclays Global High Yield Index - Hedged)(0.4)1.8 — 
Global Plus - Hedged (fixed income)
Absolute return(3.8)(0.4)1.2 
Relative return (vs. Bloomberg Barclays Global Aggregate Index - Hedged)— 1.7 0.2 
Intermediate Municipal Bonds (fixed income)
Absolute return1.2 1.6 2.2 
Relative return (vs. Lipper Short/Int. Blended Muni Fund Avg)0.7 1.1 0.8 
U.S. Strategic Core Plus (fixed income)
Absolute return(4.7)(1.3)1.2 
Relative return (vs. Bloomberg Barclays U.S. Aggregate Index)0.1 1.4 0.3 
Emerging Market Debt (fixed income)
Absolute return(7.9)1.8 (0.6)
Relative return (vs. JPM EMBI Global/JPM EMBI)(2.0)1.5 (0.4)
Sustainable Global Thematic (equity)
Absolute return(8.9)17.2 10.2 
Relative return (vs. MSCI ACWI Index)(1.5)1.9 3.2 
International Strategic Core Equity (equity)
Absolute return(3.3)10.4 3.2 
Relative return (vs. MSCI EAFE Index)(1.9)(2.6)(0.3)
U.S. Small & Mid Cap Value (equity)
Absolute return(8.5)24.9 5.8 
Relative return (vs. Russell 2500 Value Index)2.0 3.1 0.1 
U.S. Strategic Value (equity)
Absolute return(0.5)21.6 7.0 
Relative return (vs. Russell 1000 Value Index)5.4 3.7 (0.5)
U.S. Small Cap Growth (equity)
Absolute return(14.5)12.9 8.8 
Relative return (vs. Russell 2000 Growth Index)(3.9)(0.5)4.5 
U.S. Large Cap Growth (equity)
Absolute return(8.3)16.4 13.8 
Relative return (vs. Russell 1000 Growth Index)2.6 (2.1)0.1 
U.S. Small & Mid Cap Growth (equity)
Absolute return(15.4)12.4 7.4 
Relative return (vs. Russell 2500 Growth Index)(5.0)(2.3)0.6 
32
Index
 1-Year 3-Year 5-Year
Global High Income - Hedged (fixed income)     
Absolute return10.5% 6.4% 7.0%
Relative return (vs. Bloomberg Barclays Global High Yield Index - Hedged)1.7
 (0.4) (0.1)
U.S. High Yield (fixed income)     
Absolute return8.5
 5.3
 6.7
Relative return (vs. Bloomberg Barclays U.S. Corp. High Yield Index)(0.4) (0.5) 0.4
Global Plus - Hedged (fixed income)     
   Absolute return1.4
 4.0
 3.7
Relative return (vs. Bloomberg Barclays Global Aggregate Index - Hedged)1.6
 0.8
 0.6
Intermediate Municipal Bonds (fixed income)     
Absolute return0.9
 2.4
 2.1
Relative return (vs. Lipper Short/Int. Blended Muni Fund Avg)0.4
 0.9
 0.7
U.S. Strategic Core Plus (fixed income)     
Absolute return1.3
 3.7
 3.1
Relative return (vs. Bloomberg Barclays U.S. Aggregate Index)1.2
 1.0
 1.0
Emerging Market Debt (fixed income)     
Absolute return7.6
 6.6
 4.9
Relative return (vs. JPM EMBI Global/JPM EMBI)3.4
 0.6
 0.6
Emerging Markets Value     
Absolute return19.7
 4.4
 3.7
Relative return (vs. MSCI EM Index)(2.7) (0.5) (0.3)
Global Strategic Value     
Absolute return21.6
 8.2
 14.0
Relative return (vs. MSCI ACWI Index)3.0
 0.8
 3.8
U.S. Small & Mid Cap Value     
Absolute return18.4
 11.6
 15.9
Relative return (vs. Russell 2500 Value Index)2.6
 1.6
 2.6
U.S. Strategic Value     
Absolute return15.6
 5.4
 13.2
Relative return (vs. Russell 1000 Value Index)0.5
 (3.2) —
U.S. Small Cap Growth     
Absolute return29.6
 12.0
 14.3
Relative return (vs. Russell 2000 Growth Index)8.6
 (0.2) —
U.S. Large Cap Growth     
Absolute return22.7
 15.2
 17.7
Relative return (vs. Russell 1000 Growth Index)0.8
 2.5
 2.5
U.S. Small & Mid Cap Growth     
Absolute return25.1
 10.5
 13.7
Relative return (vs. Russell 2500 Growth  Index)5.1
 (0.7) (0.8)
Concentrated U.S. Growth     
   Absolute return22.0
 11.9
 15.5
   Relative return (vs. S&P 500 Index)3.4
 1.1
 1.3
Select U.S. Equity     
Absolute return19.5
 10.5
 14.3
Relative return (vs. S&P 500 Index)0.9
 (0.3) 0.1
Strategic Equities     
   Absolute return17.0
 10.6
 14.2
   Relative return (vs. Russell 3000 Index)(1.7) (0.2) —
Global Core Equity     
Absolute return18.9
 8.8
 11.8
Relative return (vs. MSCI ACWI Index)0.3
 1.4
 1.6
 1-Year
3-Year(1)
5-Year(1)
Concentrated U.S. Growth (equity)
Absolute return(9.3)16.8 12.5 
Relative return (vs. S&P 500 Index)(1.6)(1.8)1.3 
Select U.S. Equity (equity)
Absolute return(7.3)19.3 11.3 
Relative return (vs. S&P 500 Index)0.4 0.7 0.1 
Strategic Equities (equity)
Absolute return(8.6)16.7 9.3 
Relative return (vs. Russell 3000 Index)— (1.8)(1.2)
Global Core Equity (equity)
Absolute return(5.0)13.6 7.1 
Relative return (vs. MSCI ACWI Index)2.4 (1.8)0.2 
U.S. Strategic Core Equity (equity)
Absolute return(2.3)16.4 10.8 
Relative return (vs. S&P 500 Index)5.5 (2.3)(0.3)
Select U.S. Equity Long/Short (alternatives)
Absolute return(5.6)11.2 7.9 
Relative return (vs. S&P 500 Index)2.1 (7.5)(3.3)
Global Strategic Core Equity (equity)
Absolute return(3.8)13.8 8.0 
Relative return (vs. S&P 500 Index)3.2 (2.6)— 
(1)Reflects annualized returns.
33
Index


Consolidated Results of Operations
  Three Months Ended September 30,     Nine Months Ended September 30,    
  2017 2016 $ Change % Change 2017 2016 $ Change % Change
  (in thousands, except per unit amounts)   (in thousands, except per unit amounts)  
                 
Net revenues $812,150
 $747,591
 $64,559
 8.6 % $2,379,380
 $2,242,523
 $136,857
 6.1 %
Expenses 650,123
 562,282
 87,841
 15.6
 1,888,504
 1,741,597
 146,907
 8.4
Operating income 162,027
 185,309
 (23,282) (12.6) 490,876
 500,926
 (10,050) (2.0)
Income taxes 4,547
 11,578
 (7,031) (60.7) 24,869
 37,315
 (12,446) (33.4)
Net income 157,480
 173,731
 (16,251) (9.4) 466,007
 463,611
 2,396
 0.5
Net income of consolidated entities attributable to non-controlling interests 16,526
 15,696
 830
 5.3
 50,013
 14,791
 35,222
 238.1
Net income attributable to AB Unitholders $140,954
 $158,035
 $(17,081) (10.8) $415,994
 $448,820
 $(32,826) (7.3)
                 
Diluted net income per AB Unit $0.52
 $0.58
 $(0.06) (10.3) $1.54
 $1.64
 $(0.10) (6.1)
                 
Distributions per AB Unit $0.58
 $0.51
 $0.07
 13.7
 $1.66
 $1.42
 $0.24
 16.9
                 
Operating margin (1)
 17.9% 22.7%     18.5% 21.7%  
  
 Three Months Ended March 31,
 20232022$ Change% Change
 (in thousands, except per unit amounts)
Net revenues$1,024,091 $1,105,687 $(81,596)(7.4)%
Expenses808,831 857,284 (48,453)(5.7)
Operating income215,260 248,403 (33,143)(13.3)
Income taxes11,342 12,721 (1,379)(10.8)
Net income203,918 235,682 (31,764)(13.5)
Net income (loss) of consolidated entities attributable to non-controlling interests9,767 (25,045)34,812 n/m
Net income attributable to AB Unitholders$194,151 $260,727 $(66,576)(25.5)
Diluted net income per AB Unit$0.67 $0.95 $(0.28)(29.5)
Distributions per AB Unit$0.74 $0.99 $(0.25)(25.3)
Operating margin (1)
20.1 %24.7 % 
(1)Operating income excluding net (loss) income attributable to non-controlling interests as a percentage of net revenues.


Net income attributable to AB Unitholders for the three months ended September 30, 2017March 31, 2023 decreased $17.1$66.6 million, or 10.8%25.5%, from the three months ended September 30, 2016.March 31, 2022. The decrease resulted fromprimarily is due to (in millions):

Lower base advisory fees$(55.5)
Lower performance-based fees(39.4)
Higher net income of consolidated entities attributable to non-controlling interest(34.8)
Lower distribution revenues(27.3)
Lower Bernstein Research Services revenue(17.8)
Higher interest on borrowings(12.3)
Higher amortization of intangible assets(10.6)
Higher investment gains44.3 
Lower general and administrative expenses38.0 
Lower promotion and servicing expenses29.7 
Higher net dividend and interest income14.0 
Lower employee compensation and benefits expense5.3 
Other(0.2)
$(66.6)
Higher other general and administrative expenses$(22.2)
Lower adjustments to contingent payment arrangements(21.3)
Higher real estate charges(18.8)
Higher employee compensation and benefits(13.0)
Higher promotion and servicing expenses(11.2)
Higher base advisory fees51.4
Higher distribution revenues8.4
Lower income tax expense7.0
Other2.6
 $(17.1)

Index

Net income attributable to AB Unitholders for the nine months ended September 30, 2017 decreased $32.8 million, or 7.3%, from the nine months ended September 30, 2016. The decrease resulted from (in millions):
Higher employee compensation and benefits$(51.4)
Higher other general and administrative expenses(38.2)
Higher net income of consolidated entities attributable to non-controlling interest(35.2)
Lower Bernstein Research Services revenue(21.8)
Lower adjustments to contingent payment arrangements(21.3)
Higher promotion and servicing expenses(17.4)
Lower investment gains(17.3)
Higher real estate charges(14.8)
Higher base advisory fees133.0
Higher performance-based fees21.7
Higher distribution revenues15.1
Lower income tax expense12.4
Other2.4
 $(32.8)

Real Estate Charges

Since 2010, in connection with our workforce reductions and in an effort to reduce our global real estate footprint, we have implemented a global office space consolidation. As a result, we have sub-leased over one million square feet of office space.

During the first nine months of 2017, we recorded pre-tax real estate charges of $39.4 million, resulting from new charges of $40.2 million primarily relating to the further consolidation of office space at our New York offices, offset by changes in estimates pertaining to previously recorded real estate charges of $0.8 million. During the first nine months of 2016, we recorded pre-tax real estate charges of $24.6 million, resulting from new charges of $26.7 million relating to the further consolidation of office space at our New York offices, offset by changes in estimates related to previously recorded real estate charges of $2.1 million.


Units OutstandingOutstanding; Unit Repurchases


Each quarter, we consider whether to implement a plan to repurchase AB Holding Units pursuant to RuleRules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (“Exchange Act”Act”). A Rule 10b5-1 plan of this type allows a company to repurchase its shares at times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods or because it possesses material non-public information. Each broker we select has the authority under the terms and limitations specified in the plan to repurchase AB Holding Units on our behalf in accordance with the terms ofand 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 second quarter of 2017 expired at the close of business on July 26, 2017. We did not adopt a new plan during the thirdfirst quarter of 2017.2023. We may adopt additional Rule 10b5-1 plans in the future to engage in open-market purchases of AB Holding Units to help fund anticipated obligations under our incentive compensation award program and for other corporate purposes.

34
Index
Cash Distributions


AB isWe are required to distribute all of itsour Available Cash Flow, as defined in the AB Partnership Agreement, to itsour Unitholders and to the General Partner. Available Cash Flow typically is the adjusted diluted net income per unit for the quarter multiplied by the number of general and limited partnership interests at the end of the quarter. In future periods, management anticipates that Available Cash Flow will continue to be based on adjusted diluted net income per unit, unless management determines, with the concurrence of the Board of Directors, that one or more adjustments that are made for adjusted net income should not be made with respect to the Available Cash Flow calculation. See Note 46 to the condensedour 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”,revenues,” “adjusted operating income” and “adjusted operating margin” because they are the principal operating metrics management uses in evaluating and comparing period-to-period operating performance. Management principally uses these metrics in evaluating performance because they present a clearer picture of our
Index

operating performance and allow management to see long-term trends without the distortion primarily caused by long-term incentive compensation-related mark-to-market adjustments, real estate consolidation chargesacquisition-related expenses and other adjustment items. Similarly, we believe that these management operating metrics help investors better understand the underlying trends in our results and, accordingly, provide a valuable perspective for investors.


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


 Three Months Ended March 31,
 20232022
 (in thousands, except per unit amounts)
Net revenues, US GAAP basis$1,024,091 $1,105,687 
Adjustments:  
Distribution-related adjustments:
Distribution revenues(141,078)(168,341)
Investment advisory services fees(15,456)(17,285)
Pass-through adjustments:
Investment advisory services fees(9,763)(35,976)
Other revenues(9,343)(8,963)
Impact of consolidated company-sponsored funds(10,409)24,538 
Incentive compensation-related items(5,443)4,084 
Adjusted net revenues$832,599 $903,744 
35
Index
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in thousands)
         
Net revenues, US GAAP basis $812,150
 $747,591
 $2,379,380
 $2,242,523
Adjustments:      
  
Long-term incentive compensation-related investment (gains) (2,055) (2,556) (6,960) (2,021)
Long-term incentive compensation-related dividends and interest (130) (142) (438) (435)
Distribution-related payments (108,284) (95,844) (307,407) (276,188)
Amortization of deferred sales commissions (7,629) (9,787) (25,015) (31,606)
Pass-through fees and expenses (9,759) (9,768) (29,868) (33,126)
   Gain on sale of investment carried at cost —
 —
 —
 (75,273)
   Gain on sale of software technology (361) —
 (4,593) —
   Impact of consolidated company-sponsored funds (23,368) (16,114) (71,222) (16,529)
Adjusted net revenues $660,564
 $613,380
 $1,933,877
 $1,807,345
         
Operating income, US GAAP basis $162,027
 $185,309
 $490,876
 $500,926
Adjustments:      
  
Long-term incentive compensation-related items 329
 363
 813
 972
Gain on sale of investment carried at cost —
 —
 —
 (75,273)
Gain on sale of software technology (361) —
 (4,593) —
 Acquisition-related expenses 1,462
 303
 2,012
 542
Contingent payment arrangements (193) (21,483) (193) (21,483)
Real estate charges (credits) 18,655
 (140) 39,400
 24,645
Sub-total of non-GAAP adjustments 19,892
 (20,957) 37,439
 (70,597)
Less: Net income of consolidated entities attributable to non-controlling interests 16,526
 15,696
 50,013
 14,791
Adjusted operating income 165,393
 148,656
 478,302
 415,538
Adjusted income taxes 10,188
 10,268
 29,511
 32,126
Adjusted net income 155,205
 138,388
 448,791
 383,412
         
Diluted net income per AB Unit, GAAP basis $0.52
 $0.58
 $1.54
 $1.64
Impact of non-GAAP adjustments 0.06
 (0.07) 0.12
 (0.24)
Adjusted diluted net income per AB Unit $0.58
 $0.51
 $1.66
 $1.40
         
Adjusted operating margin 25.0% 24.2% 24.7% 23.0%
 Three Months Ended March 31,
 20232022
Operating income, US GAAP basis$215,260 $248,403 
Adjustments:  
Real estate(206)(206)
Incentive compensation-related items1,608 945 
EQH award compensation191 175 
Acquisition-related expenses17,725 10,687 
Sub-total of non-GAAP adjustments19,318 11,601 
Less: Net income (loss) of consolidated entities attributable to non-controlling interests9,767 (25,045)
Adjusted operating income224,811 285,049 
Adjusted income taxes11,848 14,595 
Adjusted net income$212,963 $270,454 
Diluted net income per AB Unit, GAAP basis$0.67 $0.95 
Impact of non-GAAP adjustments0.07 0.04 
Adjusted diluted net income per AB Unit$0.74 $0.99 
Operating margin, GAAP basis20.1 %24.7 %
Impact of non-GAAP adjustments6.9 6.8 
Adjusted operating margin27.0 %31.5 %

Index


Adjusted operating income for the three months ended September 30, 2017 increased $16.7March 31, 2023 decreased $60.2 million, or 11.3%21.1%, from the three months ended September 30, 2016,March 31, 2022, primarily due to higherlower investment advisory base fees of $51.8$58.5 million, lower Bernstein Research Services revenue of $17.8 million, higher interest on borrowings of $12.3 million and lower performance-based fees of $12.0 million, partially offset by higher generallower employee compensation and administrative expenses (excluding real estate charges) of $15.4 million, higher employee compensationbenefits expense (excluding the impact of long-term incentive compensation-related items) of $13.6$21.5 million, investments losses in current year compared to investments gains in prior yearhigher net dividend and interest income of $3.2$13.7 million and lower Bernstein Research Services revenueinvestment losses of $2.5 million. Adjusted operating income for the nine months ended September 30, 2017 increased $62.8 million, or 15.1%, from the nine months ended September 30, 2016, primarily due to higher investment advisory base fees of $134.6 million and higher performance-based fees of $21.7 million, offset by higher employee compensation expense (excluding the impact of long-term incentive compensation-related items) of $46.1 million, lower Bernstein Research Services revenue of $21.8 million and higher general and administrative expenses (excluding real estate charges) of $20.1$3.8 million.


Adjusted Net Revenues


Adjusted netNet Revenue, as adjusted, is reduced to exclude all of the company's distribution revenues, exclude investment gains and losses and dividends and interestwhich are recorded as a separate line item on employee long-term incentive compensation-related investments. In addition, adjusted net revenues offset distribution-related payments to third partiesthe consolidated statement of income, as well as amortizationa portion of deferred sales commissions againstinvestment advisory services fees received that is used to pay distribution revenues.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 netdistribution revenues by distribution-related paymentsand 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 whothat perform functions on behalf of our sponsored mutual funds and/or shareholders of these funds. We offsetDistribution-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 against net revenues because suchas these costs, over time, essentiallywill offset our distributionsuch revenues.
We also exclude additional pass-through expenses we incur (primarilyadjust investment advisory and services fees and other revenues for pass through costs, primarily related to our transfer agency) that are reimbursedagent and recorded asshareholder servicing fees. Also, we adjust for certain investment advisory and service fees in revenues.passed through to our investment advisors. These fees do not affect operating income, but they do affect our operating margin. Asas 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. Lastly, in the second
36
Index
Adjusted net revenues exclude investment gains and third quarters of 2017losses and dividends and interest on employee long-term incentive compensation-related investments. Also, we excluded a cumulative realized gain of $4.6 million on the exchange of software technologyadjust for an ownership stake in a third party provider of financial market datacertain acquisition-related pass-through performance-based fees and trading tools and in the first quarter of 2016 we excluded a realized gain of $75.3 million resulting from the liquidation of an investment in Jasper Wireless Technologies, Inc. ("Jasper"), which was acquired by Cisco Systems, Inc., because these transactions are not part of our core operating results.

performance related compensation.
Adjusted Operating Income


Adjusted operating income represents operating income on a US GAAP basis excluding (1) real estate charges (credits), (2) 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 gain on the sale of our investment in Jasper during 2016, (3) the gain on the sale of software technology during 2017equity compensation paid by EQH to certain AB executives, (4) real estate charges (credits), (5) acquisition-related expenses (6) adjustments to contingent payment arrangements, and (7)(5) the impact of consolidated company-sponsored investment funds.

Real estate charges (credits) incurred during the fourth quarter of 2019 through the fourth quarter of 2020, while excluded in the period in which the charges (credits) were recorded, are included ratably over the remaining applicable lease term.
Prior to 2009, a significant portion of employee compensation was in the form of long-term incentive compensation awards that were notionally invested in AB investment services and generally vested over a period of four years. AB economically hedged the exposure to market movements by purchasing and holding these investments on its balance sheet. All such investments had vested as of year-end 2012 and the investments have been delivered to the participants, except for those investments with respect to which the participant elected a long-term deferral. Fluctuation in the value of these investments, which also impacts compensation expense, is recorded within investment gains and losses on the income statement and also impacts compensation expense.statement. Management believes it is useful to reflect the offset achieved from economically hedging the market exposure of these investments in the calculation of adjusted operating income and adjusted operating margin. The non-GAAP measures exclude gains and losses and dividends and interest on employee long-term incentive compensation-related investments included in revenues and compensation expense.

A realized gainThe board of directors of EQH granted to Seth Bernstein, our CEO, equity awards in connection with EQH's IPO. Additionally, equity awards have been granted to Mr. Bernstein and other AB executives for their membership on the liquidationEQH 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 our Jasper investment during 2016income. The compensation expense associated with these awards has been excluded due to its non-recurring nature and because it is not part offrom our core operating results.

A realized gain on the exchange of software technology for an ownership stake in a third party company during 2017 has been excluded due to its non-recurring nature and because it is not part of our core operating results.

Real estate charges (credits) have been excludednon-GAAP measures because they are non-cash and are based upon EQH's, and not considered part of our core operating results when comparingAB's, financial results from period to period and to industry peers.

Index

performance.
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.

The Acquisition-related expenses include professional fees, amortization of acquired intangible assets and certain compensation-related expenses. These expenses also include the recording of accretion expense and changes in estimates of contingent consideration payable with respect to acquisition related contingent payment arrangements associated with our acquisitions are not considered part of our core operating results and, accordingly, have been excluded.

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


Adjusted Net Income and Adjusted Diluted Net Income per AB Unit


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


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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Index

Net Revenues


The components of net revenues are as follows:
 Three Months Ended March 31,
 20232022$ Change% Change
 (in thousands)
Investment advisory and services fees:
Institutions:
Base fees$155,366 $138,073 $17,293 12.5 %
Performance-based fees18,803 41,809 (23,006)(55.0)
 174,169 179,882 (5,713)(3.2)
Retail:    
Base fees308,713 366,174 (57,461)(15.7)
Performance-based fees(9)556 (565)n/m
 308,704 366,730 (58,026)(15.8)
Private Wealth:    
Base fees228,248 243,566 (15,318)(6.3)
Performance-based fees17,786 33,604 (15,818)(47.1)
 246,034 277,170 (31,136)(11.2)
Total:    
Base fees692,327 747,813 (55,486)(7.4)
Performance-based fees36,580 75,969 (39,389)(51.8)
 728,907 823,782 (94,875)(11.5)
Bernstein Research Services100,038 117,807 (17,769)(15.1)
Distribution revenues141,078 168,341 (27,263)(16.2)
Dividend and interest income50,679 11,475 39,204 n/m
Investment gains (losses)5,264 (39,024)44,288 n/m
Other revenues26,146 26,155 (9)— 
Total revenues1,052,112 1,108,536 (56,424)(5.1)
Less: Interest expense28,021 2,849 25,172 n/m
Net revenues$1,024,091 $1,105,687 $(81,596)(7.4)
  Three Months Ended September 30,     Nine Months Ended September 30,    
  2017 2016 $ Change % Change 2017 2016 $ Change % Change
  (in thousands)   (in thousands)  
Investment advisory and services fees:                
Institutions:                
Base fees $108,849
 $103,001
 $5,848
 5.7 % $318,347
 $301,229
 $17,118
 5.7 %
Performance-based fees 1,140
 1,754
 (614) (35.0) 7,818
 2,779
 5,039
 181.3
  109,989
 104,755
 5,234
 5.0
 326,165
 304,008
 22,157
 7.3
Retail:          
  
  
  
Base fees 240,006
 207,377
 32,629
 15.7
 673,286
 599,080
 74,206
 12.4
Performance-based fees 229
 164
 65
 39.6
 13,652
 166
 13,486
 8,124.1
  240,235
 207,541
 32,694
 15.8
 686,938
 599,246
 87,692
 14.6
Private Wealth Management:          
  
  
  
Base fees 189,697
 176,775
 12,922
 7.3
 555,580
 513,941
 41,639
 8.1
Performance-based fees 3,186
 322
 2,864
 889.4
 3,877
 661
 3,216
 486.5
  192,883
 177,097
 15,786
 8.9
 559,457
 514,602
 44,855
 8.7
Total:          
  
  
  
Base fees 538,552
 487,153
 51,399
 10.6
 1,547,213
 1,414,250
 132,963
 9.4
Performance-based fees 4,555
 2,240
 2,315
 103.3
 25,347
 3,606
 21,741
 602.9
  543,107
 489,393
 53,714
 11.0
 1,572,560
 1,417,856
 154,704
 10.9
                 
Bernstein Research Services 108,385
 110,885
 (2,500) (2.3) 330,596
 352,403
 (21,807) (6.2)
Distribution revenues 106,042
 97,625
 8,417
 8.6
 302,745
 287,638
 15,107
 5.3
Dividend and interest income 17,619
 9,908
 7,711
 77.8
 51,023
 30,128
 20,895
 69.4
Investment gains (losses) 18,808
 17,606
 1,202
 6.8
 68,122
 85,469
 (17,347) (20.3)
Other revenues 24,902
 24,240
 662
 2.7
 71,532
 75,044
 (3,512) (4.7)
Total revenues 818,863
 749,657
 69,206
 9.2
 2,396,578
 2,248,538
 148,040
 6.6
Less: Interest expense 6,713
 2,066
 4,647
 224.9
 17,198
 6,015
 11,183
 185.9
Net revenues $812,150
 $747,591
 $64,559
 8.6
 $2,379,380
 $2,242,523
 $136,857
 6.1


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 the account and the total amount of assets we manage for a particular client.
Index

Accordingly, fee income generally increases or decreases as AUM increasesincrease or decreasesdecrease 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 4030 to 110105 basis points for actively-managed equity services, 10 to 7570 basis points for actively-managed fixed income services and 2 to 2050 basis points for passively-managed services. Average basis points realized for other services could range from 53 basis points for certain Institutional asset allocationthird party managed services to over 100190 basis points for certain Retail and Private Wealth Management alternative services. These ranges include all-inclusive fee arrangements (covering investment management, trade execution and other services) for our Private Wealth Management clients.


We calculate AUM using established market-based valuation methodspolicies and procedures in accordance with applicable rules. Market-based 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;
38
evaluated bid prices from recognized pricing vendors for fixed income, asset-backed or mortgage-backed issues; and mid prices derived from market standard models with inputs from recognized pricing vendors and brokers for credit default swaps; and quoted bids or spreads from pricing vendors and brokers for other derivative products. FairOTC derivatives. Internally derived fair valuation methods include:are used only when AUM cannot be valued using any of above valuation methods, and include discounted cash flow models evaluation of assets versus liabilities or any other methodology that is validated and approved by our Valuation Committee (see paragraph immediately below for more information regarding our Valuation Committee). Fair valuation methods are used only where AUM cannot be valued using market-based valuation methods, such as in the case of private equity or illiquid securities.Committee.


The Valuation Committee, which consists of senior officers and employees, is responsible for overseeing the pricing and valuation of all investments held in client and AB portfolios. The Valuation Committee has adopted a Statement of Pricing Policies describing principles and policies that apply to pricing and valuing investments held in these portfolios. We also have a Pricing Group, which reports to the Valuation Committee and is responsible for overseeing the pricing process for all investments.
 
We sometimes charge our clients performance-based fees. In these situations, we charge a base advisory fee and are eligible to earn an additional performance-based fee or incentive allocation that is calculated as either a percentage of absolute investment results or a percentage of investment results in excess of a stated benchmark over a specified 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 7.1%9.8%, 3.9%8.7% and 1.0%0.4% of the assets we manage for institutional clients, private wealth clients and retail clients, respectively (in total, 4.4%6.1% of our AUM).

During 2016 and 2017, we received carried interest distributions of $74.5 million, as general partner of our real estate fund ($66.6 million) and as investment advisor to a middle market lending fund ($7.9 million). In accordance with our revenue recognition policies, we did not recognize these carried interest distributions as performance fee revenues, instead recording a deferred revenue liability, because the distributions are subject to claw-back provisions. We will recognize the distribution as revenues when the potential claw-back obligations are mathematically remote, which may not occur until at or near termination of the applicable fund. In addition, we have revenue-sharing arrangements whereby certain employees are entitled to a share of carried interest proceeds distributed by certain funds, including the real estate fund. As such, we distributed $33.2 million of these carried interest proceeds to certain real estate fund employees. We have recorded this payment, which, like our carried interest distribution, is subject to claw-back provisions, as an advance to employees and will recognize it as compensation expense in the period in which the applicable revenue is recognized.


For the three months ended September 30, 2017,March 31, 2023, our investment advisory and services fees increaseddecreased by $53.7$94.9 million, or 11.0%11.5%, from the three months ended September 30, 2016,March 31, 2022, due to a $55.5 million, or 7.4%, decrease in base fees and a $39.4 million, or 51.8%, decrease in performance-based fees. The decrease in base fees is primarily due to a $51.4 million, or 10.6%, increase in base fees, which primarily resulted from a 7.0% increasean 11.2% decrease in average AUM, and the impact ofpartially offset by a shift in distribution channel mix from Institutions to Retail and Private Wealth Management, which generally have higher fees. In addition, performance-basedportfolio fee rate. Performance-based fees increased by $2.3 million. For the nine months ended September 30, 2017, our investment advisory and services fees increased by $154.7 million, or 10.9%, from the nine months ended September 30, 2016,decreased primarily due to a $133.0 million, or 9.4%, increase in baselower performance fees which primarily resulted from a 6.0% increase in average AUMearned on our U.S. Real Estate Funds, partially offset by higher performance fees earned on our Private Credit Fund and the impact of a shift in distribution channel mix from Institutions to Retail and Private Wealth Management. Also, performance-based fees increased by $21.7 million.Global Opportunistic Credit Fund.


Institutional investment advisory and servicesbase fees for the three months ended September 30, 2017March 31, 2023 increased by $5.2$17.3 million, or 5.0%12.5%, from the three months ended September 30, 2016,March 31, 2022, primarily due to a $5.8 million, or 5.7%, increase in base fees, which primarily resulted fromhigher portfolio fee rate, partially offset by a 2.8% increase8.2% decrease in average AUM and the impact of a shift in product mix into active equities, which generally have higher fees. Institutional investment advisory and services fees for the nine months ended September 30, 2017 increased by $22.1 million, or 7.3%, from the nine months ended September 30, 2016, primarily due to a $17.1 million, or 5.7%,
Index

increase inAUM. Retail base fees, which primarily resulted from a 2.4% increase in average AUM and the impact of a shift in product mix into active equities. In addition, performance-based fees increased by $5.0 million.

Retail investment advisory and services fees for the three months ended September 30, 2017 increased by $32.7March 31, 2023 decreased $57.5 million, or 15.8%15.7%, from the three months ended September 30, 2016,March 31, 2022, primarily due to an increase in base fees of $32.6 million, or 15.7%, primarily resulting from a 12.5% increase16.4% decrease in average AUM. Retail investment advisory and services fees for the nine months ended September 30, 2017 increased by $87.7 million, or 14.6%, from the nine months ended September 30, 2016, due to an increase in base fees of $74.2 million, or 12.4%, primarily resulting from a 10.4% increase in average AUM. In addition, performance-based fees increased by $13.5 million.

Private Wealth Management investment advisory and servicesbase fees for the three months ended September 30, 2017 increased by $15.8March 31, 2023 decreased $15.3 million, or 8.9%6.3%, from the three months ended September 30, 2016,March 31, 2022, primarily due to an increase in base fees of $12.9 million, or 7.3%, primarily resulting from a 9.1% increase6.7% decrease in average AUM. In addition, performance-based fees increased by $2.8 million. Private Wealth Management investment advisory and services fees for the nine months ended September 30, 2017 increased by $44.9 million, or 8.7%, from the nine months ended September 30, 2016, due to an increase in base fees of $41.6 million, or 8.1%, primarily resulting from an 8.6% increase in average AUM. In addition, performance-based fees increased by $3.2 million.


Bernstein Research Services


We earn revenues for providing investment research to, and executing brokerage transactions for, institutional clients. These clients compensate us principally by directing us to execute brokerage transactions on their behalf, for which we earn commissions, and to a lesser extent, but increasingly, by paying us directly for research through commission sharing agreements or cash payments. In the fourth quarter of 2022, AB and Société Générale (EURONEXT: SCGLY, “SocGen”), a leading European bank, announced plans to form a joint venture combining their respective cash equities and research businesses. As a result, the Bernstein Research Services revenue consists principallybusiness has been classified as held for sale on the condensed consolidated statement of equity commissions received for providing equity research and brokerage-related services to institutional investors.

financial condition. For further discussion, see Note 17 Divestitures.
Revenues from Bernstein Research Services for the three months ended September 30, 2017March 31, 2023 decreased $2.5$17.8 million, or 2.3%15.1%, compared tofrom the corresponding period in 2016,three months ended March 31, 2022. This decrease was driven by lower clienta significant decline in customer trading activity in the U.S., partially offset by an increase in client activity in both Europe and Asia and the impactacross all regions as a result of a weaker U.S. dollar. Revenues for the nine months ended September 30, 2017 decreased $21.8 million, or 6.2%, compared to the corresponding period in 2016, driven by lower client activity in the U.S., a volume mix shift to electronic trading in Europe and the impact of a stronger U.S. dollar, partially offset by increased client activity in Asia.market conditions.


Distribution Revenues


Two of our subsidiaries act as distributors and/or placingplacement 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.

39
Index
Distribution revenues for the three and nine months ended September 30, 2017 increased $8.4March 31, 2023 decreased $27.3 million, or 8.6%16.2%, and $15.1 million, or 5.3%, respectively, compared tofrom the corresponding periods in 2016,three months ended March 31, 2022, primarily due to the corresponding average AUM of these mutual funds increasing 13.7%decreasing 15.0% and 9.0%, respectively, offset bya decrease in the impact of a shift in product mix. For the three months ended September 30, 2017, average AUM of A-share mutual funds (which have lower distributionoverall portfolio fee rates than B-share and C-share mutual funds) increased 18.9%, while average AUM of B-share and C-share mutual funds decreased by 18.7%. For the nine months ended September 30, 2017, average AUM of A-share mutual funds increased 21.6%, while average AUM of B-share and C-share mutual funds decreased 11.3%.rate.


Dividend and Interest Income and Brokerage 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. Interest expense principally reflects interest accrued on cash balances in customers’ brokerage accounts.

Dividend and interest income net offor the three months ended March 31, 2023 increased $39.2 million, from the three months ended March 31, 2022, primarily due to higher interest earned on customer margin balances and higher interest earned on U.S. Treasury Bills. Brokerage related interest expense for the three and ninemonths ended September 30, 2017March 31, 2023 increased $3.1$25.2 million or 39.1%, and $9.7 million, or 40.3%, respectively, compared tofrom the corresponding periods in 2016, primarilythree months ended March 31, 2022, due to higher dividend and interest incomepaid on cash balances in our consolidated company-sponsored investment funds.customers' brokerage accounts.


Investment Gains (Losses)


Investment gains (losses) consist primarily of realized and unrealized investment gains or losses on: (i) employee long-term incentive compensation-related investments, (ii) U.S. Treasury Bills, (iii) market-making in exchange-traded options and equities, (iv) seed capital investments, (v) derivatives and (vi) investments in our consolidated company-sponsored investment funds.
Index

Investments Investment gains (losses) also include equity in earnings of proprietary investments in limited partnership hedge funds that we sponsor and manage.

40
Index
Investment (losses) gains (losses) are as follows:
 Three Months Ended March 31,
 20232022
 (in thousands)
Long-term incentive compensation-related investments:
Realized gains$655 $1,335 
Unrealized gains (losses)1,150 (5,485)
Investments held by consolidated company-sponsored investment funds:
  Realized (losses)(5,582)(989)
  Unrealized gains (losses)16,162 (40,898)
Seed capital investments:
Realized gains (losses):
Seed capital and other52 3,576 
Derivatives(4,480)16,628 
Unrealized gains (losses):
Seed capital and other3,652 (15,537)
Derivatives(5,995)3,104 
Brokerage-related investments:
Realized (losses)(199)(667)
Unrealized (losses)(151)(91)
 $5,264 $(39,024)
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
 (in thousands)
Long-term incentive compensation-related investments        
Realized gains (losses) $105
 $147
 $1,878
 $1,288
Unrealized gains (losses) 1,950
 2,409
 5,082
 733
         
Investments held by consolidated company-sponsored funds        
  Realized gains (losses) 9,788
 (2,334) 38,169
 (2,662)
  Unrealized gains (losses) 14,512
 19,274
 33,062
 16,675
         
Seed capital investments      
  
Realized gains (losses)      
  
Seed capital 976
 2,033
 21,871
 67,287
Derivatives (4,797) (10,293) (20,251) (16,340)
Unrealized gains (losses)      
  
Seed capital (3,245) 5,916
 (9,205) 22,505
Derivatives (83) 2,255
 488
 (307)
         
Brokerage-related investments      
  
Realized gains (losses) (447) (1,684) (2,895) (3,780)
Unrealized gains (losses) 49
 (117) (77) 70
  $18,808
 $17,606
 $68,122
 $85,469

The investment gains in the three and nine months ended September 30, 2017, as well as the three months ended September 30, 2016, were primarily driven by gains on investments held by consolidated company-sponsored funds. The investment gains in the nine months ended September 30, 2016 were primarily the result of the sale of our investment in Jasper (see below) and gains on investments held by consolidated company-sponsored funds.
During 2017, we realized a gain of $4.6 million on the exchange of software technology for an ownership stake in a third party provider of financial market data and trading tools.
During the first quarter of 2016, we sold our investment in Jasper, a company in which we owned a 7.6% equity interest. We expect to receive a total of $85.5 million in cash, subject to final transaction costs and working capital adjustments. During March 2016, the transaction closed and we received $74.8 million in cash, recorded a $10.7 million receivable (of which we have received $10.2 million as of September 30, 2017) for the balance retained in escrow for 18 months and recorded an investment gain of $75.3 million.
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 AXAEQH and its subsidiaries, and other miscellaneous revenues. Other revenues for the three months ended September 30, 2017 increased $0.7 million, or 2.7%,March 31, 2023 were flat as compared to the three months ended September 30, 2016, primarily due to higher shareholder servicing fees, offset by lower other revenue. Other revenues for the nine months ended September 30, 2017 decreased $3.5 million, or 4.7%, compared to the corresponding period in 2016, primarily due to lower shareholder servicing fees, offset by higher mutual fund reimbursements and other revenue.March 31, 2022.
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Expenses


The components of expenses are as follows:

 Three Months Ended March 31,
 20232022$ Change% Change
 (in thousands)
Employee compensation and benefits$434,163 $439,420 $(5,257)(1.2)%
Promotion and servicing: 
Distribution-related payments148,381 176,244 (27,863)(15.8)
Amortization of deferred sales commissions8,154 9,383 (1,229)(13.1)
Trade execution, marketing, T&E and other50,630 51,227 (597)(1.2)
 207,165 236,854 (29,689)(12.5)
General and administrative139,653 177,625 (37,972)(21.4)
Contingent payment arrangements2,444 838 1,606 191.6 
Interest on borrowings13,713 1,411 12,302 n/m
Amortization of intangible assets11,693 1,136 10,557 n/m
Total$808,831 $857,284 $(48,453)(5.7)
  Three Months Ended September 30,     Nine Months Ended September 30,    
  2017 2016 $ Change % Change 2017 2016 $ Change % Change
          (in thousands)  
                 
Employee compensation and benefits $329,777
 $316,737
 $13,040
 4.1 % $979,387
 $927,997
 $51,390
 5.5 %
Promotion and servicing:          
  
  
  
Distribution-related payments 108,284
 95,844
 12,440
 13.0
 307,407
 276,188
 31,219
 11.3
Amortization of deferred sales commissions 7,629
 9,787
 (2,158) (22.0) 25,015
 31,606
 (6,591) (20.9)
Trade execution, marketing, T&E and other 48,088
 47,205
 883
 1.9
 149,537
 156,763
 (7,226) (4.6)
  164,001
 152,836
 11,165
 7.3
 481,959
 464,557
 17,402
 3.7
General and administrative:          
  
  
  
General and administrative 128,712
 106,504
 22,208
 20.9
 360,395
 322,184
 38,211
 11.9
Real estate charges (credits) 18,655
 (140) 18,795
 n/m
 39,400
 24,645
 14,755
 59.9
  147,367
 106,364
 41,003
 38.5
 399,795
 346,829
 52,966
 15.3
Contingent payment arrangements (140) (21,129) 20,989
 (99.3) 215
 (20,423) 20,638
 n/m
Interest 2,105
 1,009
 1,096
 108.6
 6,227
 3,293
 2,934
 89.1
Amortization of intangible assets 7,013
 6,465
 548
 8.5
 20,921
 19,344
 1,577
 8.2
Total $650,123
 $562,282
 $87,841
 15.6
 $1,888,504
 $1,741,597
 $146,907
 8.4


Employee Compensation and Benefits


Employee compensation and benefits consistexpense 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 40.6%42.4% and 42.4%39.7% for the three months ended September 30, 2017March 31, 2023 and 2016, respectively. Compensation expense as a percentage of net revenues was 41.2% and 41.4% for the nine months ended September 30, 2017 and 2016,2022, respectively. Compensation expense generally is determined on a discretionary basis and is primarily a function of our firm’s current-year financial performance. The amounts of incentive compensation we award are designed to motivate, reward and retain top talent while aligning our executives' interests with the interests of our Unitholders. Senior management, with the approval of the Compensation and Workplace Practices Committee of the Board of Directors of AllianceBernstein Corporation (“Compensation Committee”), periodically confirms that the appropriate metric to consider in determining the amount of incentive compensation is the ratio of adjusted employee compensation and benefits expense to adjusted net revenues. Adjusted net revenues used in the adjusted compensation ratio are the same as the adjusted annual net revenues presented as a non-GAAP measure (discussed earlier in this MD&AItem 2). Adjusted employee compensation and benefits expense is total employee compensation and benefits
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expense minus other employment costs such as recruitment, training, temporary help and meals (which werewas 1.0% and 1.1%, respectively, of adjusted net revenues for each of the three and nine months ended September 30, 2017, and was 1.1% and 1.2%, respectively,0.9% of adjusted net revenues for the three and nine months ended September 30, 2016)March 31, 2023 and March 31, 2022, respectively), and excludes the impact of mark-to-market vesting expense, as well as dividends and interest expense, associated with employee long-term incentive compensation-related investments.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% 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% and 49.2%, respectively,49.5% for the three and nine months ended September 30, 2017. Our ratio of adjusted compensation expense as a percentage of adjusted net revenuesMarch 31, 2023 and was 50.0%48.0% for the three and nine months ended September 30, 2016.March 31, 2022.


For the three months ended September 30, 2017,March 31, 2023, employee compensation and benefits expense increased $13.0decreased $5.3 million, or 4.1%1.2%, compared to the three months ended September 30, 2016,March 31, 2022, primarily due to higherlower incentive compensation of $13.8 million. For the nine months ended September 30, 2017, employee compensation$32.5 million and benefits expense increased $51.4lower commissions of $9.1 million, or 5.5%, compared to the nine months ended September 30, 2016, primarily due to higher incentive compensation of $40.9 million,partially offset by higher base compensation of $6.4$31.5 million which resulted from higher severance, and higher fringes of $2.8$4.6 million.


Promotion and Servicing


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


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Index
Promotion and servicing expenses increased $11.2decreased $29.7 million, or 7.3%12.5%, during the three months ended September 30, 2017March 31, 2023 compared to the three months ended September 30, 2016.March 31, 2022. The increasedecrease was primarily was due to higherlower distribution-related payments of $12.4$27.9 million, higherlower transfer fees of $0.7$3.3 million, and higher marketing costslower trade execution expenses of $0.6$1.8 million offset byand lower amortization of deferred sales commissions of $2.2$1.2 million, and loweroffset by higher travel and entertainment expenses of $0.9 million. Promotion and servicing expenses increased $17.4 million, or 3.7%, during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increase primarily was due to higher distribution-related payments of $31.2 million, offset by lower amortization of deferred sales commissions of $6.6 million, lower transfer fees of $2.7 million, lower travel and entertainment of $2.6 million, lower marketing costs of $1.0$3.0 million and lower trade executionhigher marketing and clearing costscommunication expenses of $1.0$1.5 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 18.1% (15.8% excluding real estate charges)13.6% and 14.2% (including and excluding real estate charges)16.1% for the three months ended September 30, 2017March 31, 2023 and 2016,2022, respectively. General and administrative expenses increased $41.0decreased $38.0 million, or 38.5%21.4%, during the third quarter of 2017three months ended March 31, 2023 compared to the samecorresponding period in 2016,2022, primarily due to lower portfolio servicing fees of $34.7 million, lower professional fees of $6.0 million and a vendor termination accrualfavorable foreign exchange translation impact of $19.7$2.1 million, (partially offset by higher valuation adjustments related to the classification of Bernstein Research Services as held for additional information see Executive Overview), higher real estate chargessale of $18.8$2.5 million and higher technology expenses related to our consolidated company-sponsored investment funds of $6.3$2.2 million. General and administrative expenses as a percentage of net revenues were 16.8% (15.1% excluding real estate charges) and 15.5% (14.4% excluding real estate charges) for the nine months ended September 30, 2017 and 2016, respectively. General and administrative expenses increased $53.0 million, or 15.3%, during the first nine months of 2017 compared to the same period in 2016, primarily due to the vendor termination accrual of $19.7 million, higher expenses related to our consolidated company-sponsored investment funds of $19.4 million and higher real estate charges of $14.8 million.


Contingent Payment Arrangements


Contingent payment arrangements reflect changes in estimates of contingent payment liabilities associated with acquisitions in previous periods, as well as accretion expense of these liabilities. The expense forThere were no changes in our estimates during the ninefirst three months ended September 30, 2017March 31, 2023 or 2022.

Interest on Borrowings

Interest on borrowings reflects accretion expenses of $0.4 million, offset by a changeinterest expense related to our debt and credit facilities. See Note 16 to AB's condensed consolidated financial statements contained in estimate of the contingent consideration payableItem 1, for disclosures relating to our 2010 acquisition of $0.2 million. Thedebt and credit to operating expenses of $20.4 million forfacilities. For the ninethree months ended September 30, 2016March 31, 2023 interest on borrowings increased $12.3 million, compared to the three months ended March 31, 2022. The increase was due to higher average borrowings and higher interest rates.

Amortization of Intangible Assets

Amortization of intangible assets reflects changes in estimatesour 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 increased $10.6 million during the contingent consideration payable relatingthree months ended March 31, 2023 compared to our 2013 and 2010 acquisitions of $21.5 million, offset by accretion expense of $1.1 million.the three months ended March 31, 2022. This increase was primarily due to acquired intangible assets associated with the CarVal acquisition.




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Income Taxes


AB, a private limited partnership, is not subject to federal or state corporate income taxes, buttaxes. 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, 2017March 31, 2023 decreased $7.0$1.4 million, or 60.7%10.8%, compared to the three months ended September 30, 2016.March 31, 2022. The decrease iswas primarily due to a lower effective tax rateone-time discrete items in the current quarter of 2.8% compared to 6.2% in the third quarter of 2016, driven by the benefit of discrete tax items, primarily the $5.4 million reduction of the income tax liability originally recorded in the third quarter of 2016 relating to the Section 956 of the Internal Revenue Code deemed dividend inclusion, partially offset by the less favorable mix of earnings across the AB tax filing groups. Income tax expense for the ninethree months ended September 30, 2017 decreased $12.4 million, or 33.4%, compared to the nine months ended September 30, 2016. The decrease is due to a lower effective tax rate in the first nine months of 2017 of 5.1%, compared to 7.4% in the first nine months of 2016, driven by the benefit of discrete items described above, partially offset by the less favorable mix of earnings across the AB tax filing groups.March 31, 2023. There were no material changes to uncertain tax positions (FIN 48 reserves) or valuation allowances against deferred tax assets duringfor the three months and nine months ended September 30, 2017.March 31, 2023.


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. DuringFor the first ninethree months of 2017,ended March 31, 2023, we had $50.0$9.8 million of net gains of consolidated entities attributable to non-controlling interests compared to net gainslosses of $14.8$25.0 million duringfor the first ninethree months ended March 31, 2022. Period-to-period fluctuations result primarily from the number of 2016.consolidated company-sponsored investment funds and their respective market performance.


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CAPITAL RESOURCES AND LIQUIDITY


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

During the first ninethree months of 2017 and 2016,2023, net cash used in operating activities was $46.9 million, compared to net cash provided by operating activities was $1.1 billionof $150.2 million during the corresponding 2022 period. The change is primarily due to lower earnings of $121.4 million (after non-cash reconciling items), an increase in each period. Lowerfees receivable of $101.6 million and net redemptionsactivity of seed capital and higher net purchasesour consolidated funds of broker-dealer investments of $261.4$43.7 million, andpartially offset by a decrease in broker-dealer related receivables (net of payables and segregated U.S. Treasurytreasury bills activity) of $16.6 million, offset an increase in net activity of our consolidated investment funds of $174.2 million and an increase in cash provided by net income of $38.9$114.1 million.


During the first ninethree months of 2017,2023, net cash used in investing activities was $24.9$10.6 million, compared to $48.7$6.2 million net cash used during the corresponding 20162022 period. The change reflects the third quarter 2016 purchase of a business of $20.5 million and loweris due to higher purchases of furniture, equipment and leasehold improvements of $3.4$4.3 million.


During the first ninethree months of 2017,2023, net cash used in financing activities was $820.5$200.7 million, compared to $839.5$371.2 million during the corresponding 20162022 period. The change reflects an increase in overdrafts payable of $141.0 million,is primarily due to lower net redemptions of consolidated company-sponsored investment funds of $27.9 million and an increase in investment by AB Holding with proceeds from exercise of options to buy AB Holding Units of $15.3 million, offset by higher distributions to the General Partner and Unitholders of $88.6$155.9 million as a result of higher earnings (distributions on earnings are paid one quarter in arrears), higher distributions toand lower net contributions from non-controlling interests inof consolidated entitiescompany-sponsored investment funds during the first three months of $43.62023 as compared to the corresponding 2022 period of $56.0 million, higherpartially offset by lower net repaymentsborrowings of commercial paperdebt of $23.3 million and higher repurchases of AB Holding Units of $5.4$50.0 million.


As of September 30, 2017,March 31, 2023, AB had $802.2 million$1.1 billion of cash and cash equivalents (excluding(including cash and cash equivalents of consolidated company-sponsored investment funds)funds and cash held-for-sale), all of which areis available for liquidity but consist primarily of cash on deposit for our broker-dealers related to comply with various customer clearing activities, and cash held by foreign subsidiaries of $513.4$544.0 million. Taxes are provided on foreign cash repatriated to the U.S.


Debt and Credit Facilities


As of September 30, 2017 and December 31, 2016, AB had $297.4 million and $513.0 million, respectively,See Note 16 to AB’s condensed consolidated financial statements contained in commercial paper outstanding with weighted average interest rates of approximately 1.4% and 0.9%, respectively. The commercial paper is short term in nature, and as such, recorded value is estimated to approximate fair value (and considered a Level 2 security in the fair value hierarchy). Average daily borrowings of commercial paper during the first nine months of 2017 and the full year 2016 were $449.6 million and $422.9 million, respectively, with weighted average interest rates of approximately 1.3% and 0.6%, respectively.

AB has a $1.0 billion committed, unsecured senior revolving credit facility (the “Credit Facility”) with a group of commercial banks and other lenders, which matures on October 22, 2019. The Credit Facility providesItem 1, for possible increases in the principal
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amount by up to an aggregate incremental amount of $250.0 million; any such increase is subject to the consent of the affected lenders. The Credit Facility is available for AB and Sanford C. Bernstein & Co., LLC ("SCB LLC") business purposes, including the support of AB’s $1.0 billion commercial paper program. Both AB and SCB LLC can draw directly under the Credit Facility and management may draw on the Credit Facility from time to time. AB has agreed to guarantee the obligations of SCB LLC under the Credit Facility.

The Credit Facility contains affirmative, negative and financial covenants, which are customary for facilities of this type, including restrictions on dispositions of assets, restrictions on liens, a minimum interest coverage ratio and a maximum leverage ratio. As of September 30, 2017, we were in compliance with these covenants. The Credit Facility also includes customary events of default (with customary grace periods, as applicable), including provisions under which, upon the occurrence of an event of default, all outstanding loans may be accelerated and/or lender’s commitments may be terminated. Also, under such provisions, upon the occurrence of certain insolvency- or bankruptcy-related events of default, all amounts payable under the Credit Facility would automatically become immediately due and payable, and the lender’s commitments would automatically terminate.

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


As of September 30, 2017 and December 31, 2016, we had no amounts outstanding under the Credit Facility. During the first nine months of 2017 and the full year 2016, we did not draw upon the Credit Facility.

On December 1, 2016, AB entered into a $200.0 million, unsecured 364-day senior revolving credit facility (the "Revolver") with a leading international bank and the other lending institutions that may be party thereto. The Revolver is available for AB's and SCB LLC's business purposes, including the provision of additional liquidity to meet funding requirements primarily related to SCB LLC's operations. Both AB and SCB LLC can draw directly under the Revolver and management expects to draw on the Revolver from time to time. AB has agreed to guarantee the obligations of SCB LLC under the Revolver. The Revolver contains affirmative, negative and financial covenants that are identical to those of the Credit Facility. As of September 30, 2017 and December 31, 2016, we had no amounts outstanding under the Revolver. Average daily borrowing of the Revolver during the first nine months of 2017 and full year 2016 were $22.7 million and $7.3 million, respectively, with weighted average interest rates of approximately 1.9% and 1.6%, respectively.

In addition, SCB LLC has four uncommitted lines of credit with four financial institutions. Three of these lines of credit permit us to borrow up to an aggregate of approximately $225.0 million, with AB named as an additional borrower, while one line has no stated limit. As of September 30, 2017 and December 31, 2016, SCB LLC had no bank loans outstanding. Average daily borrowings of bank loans during the first nine months of 2017 and full year 2016 were $4.3 million and $4.4 million, respectively, with weighted average interest rates of approximately 1.3% and 1.1%, respectively.

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.

We entered into a subscription agreement, under which we committed to invest up to $35.0 million in a venture capital fund. As of September 30, 2017, we had funded $34.2 million of this commitment.

As general partner of AllianceBernstein U.S. Real Estate L.P. (“Real Estate Fund”), we committed to invest $25.0 million in the Real Estate Fund. As of September 30, 2017, we had funded $21.6 million of this commitment. As general partner of AllianceBernstein U.S. Real Estate II L.P. (“Real Estate Fund II”), we committed to invest $28.0 million in Real Estate Fund II. As of September 30, 2017, we had funded $9.6 million of this commitment.

We entered into an investment agreement under which we committed to invest up to $8.0 million in an oil and gas fund. As of September 30, 2017, we had funded $6.2 million of this commitment.
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See Note 1213 for discussion of contingencies.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 from those disclosed in “Management’s Discussion and Analysis of Financial Condition”Condition” in our Form 10-K for the fiscal year ended December 31, 2016.2022.


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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-managedseparately managed accounts, general economic conditions, industry trends, future acquisitions, integration of acquired companies, competitive conditions and government regulations, including changes in tax regulations and rates and the manner in which the earnings of publicly-traded partnerships are taxed. We caution readers to carefully consider such factors. Further, these forward-looking statements speak only as of the date on which such statements are made; we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. For further information regarding these forward-looking statements and the factors that could cause actual results to differ,see “Risk Factors” in Part I, Item 1A of our Form 10-K for the year ended December 31, 2016 2022 and Part II, Item 1Ain 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 could affect adversely impact our revenues, financial condition, results of operations and business prospects.


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


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


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


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


•The possibility that we will engage in open market purchases of AB Holding Units to help fund anticipated obligations under our incentive compensation award program: The number of AB Holding Units AB may decide to buy in future periods, if any, to help fund incentive compensation awards depends on various factors, some of which are beyond our control, including the fluctuation in the price of an AB Holding Unit (NYSE: AB) and the availability of cash to make these purchases.
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•Our determination that adjusted employee compensation expense, excluding the impact of performance-based fees, generally should not exceed 50% of our adjusted net revenues: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.


45
Item 3.Quantitative and Qualitative Disclosures About Market Risk

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in AB’s market risk from the information provided under “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of AB's Form 10-K for the year ended December 31, 2016.2022.
Item 4.Controls and Procedures

Item 4.     Controls and Procedures

Disclosure Controls and Procedures


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


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


Changes in Internal Control over Financial Reporting


No change in our internal control over financial reporting occurred during the thirdfirst quarter of 20172023 that materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.



Part II


OTHER INFORMATION


Item 1.Legal Proceedings

Item 1.     Legal Proceedings

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


Item 1A.Risk Factors

Item 1A.     Risk Factors

There have been no material changes in ourto the risk factors from those disclosedappearing in AB'sour Annual Report on Form 10-K ("AB 10-K") for the fiscal year ended December 31, 2016.2022.


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

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds
There were no AB Units sold by AB in the period covered by this report that were not registered under the Securities Act.

The following table provides information relating to any AB Units bought by AB inus or one of our affiliates during the first quarter covered by this report:of 2023 are as follows:


ISSUER PURCHASES OF EQUITY SECURITIES
PeriodTotal Number
of AB Units
Purchased
Average Price
Paid Per
AB Unit, net of
Commissions
Total Number of
AB Units Purchased as
Part of Publicly
Announced Plans
or Programs		Maximum Number
(or Approximate
Dollar Value) of
AB Units that May Yet
Be Purchased Under
the Plans or
Programs
1/1/23 - 1/31/23— $— — — 
2/1/23 - 2/28/23— — — — 
3/1/23 - 3/31/23(1)
600 38.62 — — 
Total600 $38.62 — — 

(1)During March 2022, AB purchased 600 AB Units in private transactions and retired them.
46
Period 
Total Number
of AB Holding Units
Purchased
 
Average Price
Paid Per
AB Holding Unit, net of
Commissions
 
Total Number of
AB Holding Units Purchased as
Part of Publicly
Announced Plans
or Programs
 
Maximum Number
(or Approximate
Dollar Value) of
AB Holding Units that May Yet
Be Purchased Under
the Plans or
Programs
7/1/17 - 7/31/17 —
 $—
 —
 —
8/1/17 - 8/31/17 —
 —
 —
 —
9/1/17 - 9/30/17(1)
 13,200
 23.41
 —
 —
Total 13,200
 $23.41
 —
 —


(1)
During September 2017, AB purchased 13,200 AB Units in private transactions.


Item 3.Defaults Upon Senior Securities

Item 3.     Defaults Upon Senior Securities

None.


Item 4.Mine Safety Disclosures

Item 4.     Mine Safety Disclosures

None.
Index





Item 5.Other Information

Item 5.     Other Information
Submission of Matters to a Vote of Security Holders

A special meeting (“Special Meeting”) of Unitholders of AB Holding was held at 9:30 a.m. (NY time) on September 29, 2017 pursuant to due notice. At the Special Meeting, AB Holding Unitholders voted to adopt the AB 2017 Long Term Incentive Plan, which was the sole proposal considered at the Special Meeting. The final voting results from the Special Meeting are as follows:None.
47
ForAgainst/WithheldAbstainBroker Non-Votes
41,451,54315,286,131997,1000

Iran Threat Reduction and Syria Human Rights Act

AB Holding, AB and their global subsidiaries had no transactions or activities requiring disclosure under the Iran Threat Reduction and Syria Human Rights Act, nor were they involved in the AXA Group matters described immediately below.

The non-U.S.-based subsidiaries of AXA operate in compliance with applicable laws and regulations of the various jurisdictions in which they operate, including applicable international (United Nations and European Union) laws and regulations. While AXA Group companies based and operating outside the United States generally are not subject to U.S. law, as an international group, AXA has in place policies and standards (including the AXA Group International Sanctions Policy) that apply to all AXA Group companies worldwide and often impose requirements that go well beyond local law. For additional information regarding AXA, see Note 1 to the condensed financial statements in Part 1, Item 1.

AXA has informed us that AXA Konzern AG, an AXA insurance subsidiary organized under the laws of Germany, provides car, accident and health insurance to diplomats based at the Iranian Embassy in Berlin, Germany. The total annual premium of these policies is approximately $176,000 before tax and the annual net profit arising from these policies, which is difficult to calculate with precision, is estimated to be $26,400. These policies were underwritten by a broker who specializes in providing insurance coverage for diplomats. Provision of motor vehicle insurance is mandatory in Germany and cannot be cancelled until the policy expires.

In addition, AXA has informed us that AXA Insurance Ireland, an AXA insurance subsidiary, provides statutorily required car insurance under four separate policies to the Iranian Embassy in Dublin, Ireland. AXA has informed us that compliance with the Declined Cases Agreement of the Irish Government prohibits the cancellation of these policies unless another insurer is willing to assume the coverage. The total annual premium for these policies is approximately $6,094 and the annual net profit arising from these policies, which is difficult to calculate with precision, is estimated to be $914.

Also, AXA has informed us that AXA Sigorta, a subsidiary of AXA organized under the laws of Turkey, provides car insurance coverage for vehicle pools of the Iranian General Consulate and the Iranian Embassy in Istanbul, Turkey. Motor liability insurance coverage is mandatory in Turkey and cannot be cancelled unilaterally. The total annual premium in respect of these policies is approximately $3,150 and the annual net profit, which is difficult to calculate with precision, is estimated to be $473.

Additionally, AXA has informed us that AXA Ukraine, an AXA insurance subsidiary, provides car insurance for the Attaché of the Iranian Embassy in Ukraine. Motor liability insurance coverage cannot be cancelled under Ukrainian law. The total annual premium in respect of this policy is approximately $1,000 and the annual net profit, which is difficult to calculate with precision, is estimated to be $150.

Lastly, AXA has informed us that AXA Winterthur, an AXA insurance subsidiary organized under the laws of Switzerland, provides Naftiran Intertrade, a wholly-owned subsidiary of the Iranian state-owned National Iranian Oil Company, with life, disability and accident coverage for its employees. The provision of these forms of coverage is mandatory for employees in Switzerland. The total annual premium of these policies is approximately $373,668 and the annual net profit arising from these policies, which is difficult to calculate with precision, is estimated to be $56,000.

The aggregate annual premium for the above-referenced insurance policies is approximately $559,912, representing approximately 0.0004% of AXA’s 2016 consolidated revenues, which exceed $100 billion. The related net profit, which is difficult to calculate with precision, is estimated to be $83,937, representing approximately 0.0008% of AXA’s 2016 aggregate net profit.

Index


Item 6.     Exhibits

Item 6.Exhibits


31.1
Certification of Mr. Bernstein furnished pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Mr. WeisenseelMs. Burke furnished pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Mr. Bernstein furnished for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Mr. WeisenseelMs. Burke furnished for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSXBRL Instance Document.Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema.
101.CALXBRL Taxonomy Extension Calculation Linkbase.
101.LABXBRL Taxonomy Extension Label Linkbase.
101.PREXBRL Taxonomy Extension Presentation Linkbase.
101.DEFXBRL Taxonomy Extension Definition Linkbase.
104The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in Inline XBRL (included in Exhibit 101).
48

SIGNATURE


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


Date:April 26, 2023
ALLIANCEBERNSTEINL.P.
By:/s/ Kate Burke
Kate Burke
Date: October 25, 2017
ALLIANCEBERNSTEINL.P.
By:/s/ John C. Weisenseel
John C. Weisenseel
Chief Operating Officer & Chief Financial Officer
By:By:/s/ Edward J. FarrellBill Siemers
Edward J. FarrellBill Siemers
Controller & Chief Accounting Officer







55
49