Index

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20202021
OR
☐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, NY10105501 Commerce Street, Nashville, TN  37203
(Address of principal executive offices)
(Zip Code)
(212) (212) 969-1000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes☒No☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes☒No☐
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☐
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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes☐No☒

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 June 30, 20202021 was 268,620,187.271,994,122.


Index
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
76
Notes to Condensed Consolidated Financial Statements
98
Item 2.
3128
Item 3.
5552
Item 4.
5552
Part II
OTHER INFORMATION
Item 1.
5653
Item 1A.
5653
Item 2.
5653
Item 3.
5653
Item 4.
5653
Item 5.
5753
Item 6.
5854
5955


Index
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)
 June 30,
2021		December 31,
2020
ASSETS
Cash and cash equivalents$1,093,097 $1,037,400 
Cash and securities segregated, at fair value (cost: $1,072,523 and $1,752,483)1,073,082 1,753,478 
Receivables, net:  
Brokers and dealers107,851 92,638 
Brokerage clients2,011,409 1,713,377 
AB funds fees253,740 325,407 
Other fees156,157 148,746 
Investments:  
Long-term incentive compensation-related61,513 60,114 
Other167,133 193,261 
Assets of consolidated company-sponsored investment funds:
   Cash and cash equivalents30,456 36,506 
   Investments166,940 302,582 
   Other assets8,288 12,244 
Furniture, equipment and leasehold improvements, net154,201 147,874 
Goodwill3,091,767 3,082,778 
Intangible assets, net44,981 44,496 
Deferred sales commissions, net68,414 64,066 
Right-of-use assets408,990 418,455 
Other assets338,115 264,418 
Total assets$9,236,134 $9,697,840 
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND CAPITAL
Liabilities:  
Payables:  
Brokers and dealers$251,725 $216,403 
Securities sold not yet purchased12,709 17,791 
Brokerage clients2,912,175 3,440,266 
AB mutual funds82,826 65,550 
Accounts payable and accrued expenses228,294 197,657 
Lease liabilities485,843 505,549 
Liabilities of consolidated company-sponsored investment funds11,317 30,620 
Accrued compensation and benefits601,222 335,122 
Debt590,000 675,000 
Total liabilities5,176,111 5,483,958 
1
Index
 June 30,
2020		 December 31,
2019
ASSETS
Cash and cash equivalents$824,837
 $679,738
Cash and securities segregated, at fair value (cost: $1,877,798 and $1,090,443)1,882,188
 1,094,866
Receivables, net: 
  
Brokers and dealers165,776
 97,966
Brokerage clients1,563,333
 1,536,674
AB funds fees200,233
 261,588
Other fees134,645
 148,744
Investments: 
  
Long-term incentive compensation-related53,611
 50,902
Other241,055
 215,892
Assets of consolidated company-sponsored investment funds:   
   Cash and cash equivalents33,076
 11,433
   Investments234,096
 581,004
   Other assets7,897
 19,810
Furniture, equipment and leasehold improvements, net131,633
 145,251
Goodwill3,082,778
 3,076,926
Intangible assets, net54,489
 55,366
Deferred sales commissions, net58,583
 36,296
Right-of-use assets317,723
 362,693
Other assets341,821
 330,943
Total assets$9,327,774
 $8,706,092
    
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND CAPITAL
Liabilities: 
  
Payables: 
  
Brokers and dealers$280,019
 $201,778
Securities sold not yet purchased15,920
 30,157
Brokerage clients3,203,222
 2,531,946
AB mutual funds65,879
 71,142
Accounts payable and accrued expenses209,431
 192,110
Lease liabilities416,477
 468,451
Liabilities of consolidated company-sponsored investment funds26,422
 31,017
Accrued compensation and benefits479,717
 276,829
Debt685,000
 560,000
Total liabilities5,382,087
 4,363,430
    
Commitments and contingencies (See Note 12)


 


 June 30,
2021		December 31,
2020
Commitments and contingencies (See Note 12)
00
Redeemable non-controlling interest17,803 102,359 
Capital:  
General Partner41,953 41,776 
Limited partners: 271,994,122 and 270,509,658 units issued and outstanding4,247,060 4,229,485 
Receivables from affiliates(7,799)(8,316)
AB Holding Units held for long-term incentive compensation plans(140,204)(57,219)
Accumulated other comprehensive loss(98,790)(94,203)
Partners’ capital attributable to AB Unitholders4,042,220 4,111,523 
Total liabilities, redeemable non-controlling interest and capital$9,236,134 $9,697,840 
Index

 June 30,
2020		 December 31,
2019
Redeemable non-controlling interest51,081
 325,561
Capital: 
  
General Partner38,647
 41,225
Limited partners: 268,620,187 and 270,380,314 units issued and outstanding4,066,211
 4,174,201
Receivables from affiliates(9,167) (9,011)
AB Holding Units held for long-term incentive compensation plans(73,726) (76,310)
Accumulated other comprehensive loss(127,359) (113,004)
Partners’ capital attributable to AB Unitholders3,894,606
 4,017,101
Total liabilities, redeemable non-controlling interest and capital$9,327,774
 $8,706,092

See Accompanying Notes to Condensed Consolidated Financial Statements.
Index2

Index
ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(in thousands, except per unit amounts)
(unaudited)
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Revenues:
Investment advisory and services fees$777,624 $578,203 $1,481,090 $1,199,928 
Bernstein research services105,655 113,609 224,676 242,832 
Distribution revenues155,538 120,099 303,138 250,956 
Dividend and interest income8,658 12,692 17,342 33,157 
Investment gains (losses)4,181 24,189 6,109 (20,117)
Other revenues25,900 26,092 53,611 51,603 
Total revenues1,077,556 874,884 2,085,966 1,758,359 
Less: Interest expense734 3,435 1,878 12,754 
Net revenues1,076,822 871,449 2,084,088 1,745,605 
Expenses:    
Employee compensation and benefits435,707 349,638 841,766 711,910 
Promotion and servicing:  
Distribution-related payments167,761 125,678 330,015 265,823 
Amortization of deferred sales commissions8,236 6,622 16,135 12,148 
Trade execution, marketing, T&E and other46,571 44,288 93,249 99,898 
General and administrative:
General and administrative131,324 121,424 251,547 243,691 
Real estate charges0 5,526 0 5,526 
Contingent payment arrangements838 807 1,634 1,600 
Interest on borrowings1,241 1,096 2,535 3,930 
Amortization of intangible assets1,521 6,723 3,000 13,209 
Total expenses793,199 661,802 1,539,881 1,357,735 
Operating income283,623 209,647 544,207 387,870 
Income taxes12,480 11,386 29,225 20,860 
Net income271,143 198,261 514,982 367,010 
Net income (loss) of consolidated entities attributable to non-controlling interests3,573 20,940 3,281 (4,631)
Net income attributable to AB Unitholders$267,570 $177,321 $511,701 $371,641 
Net income per AB Unit:    
Basic$0.97 $0.65 $1.86 $1.36 
Diluted$0.97 $0.65 $1.86 $1.36 
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
Revenues:        
Investment advisory and services fees $578,203
 $596,364
 $1,199,928
 $1,152,958
Bernstein research services 113,609
 105,991
 242,832
 196,226
Distribution revenues 120,099
 108,347
 250,956
 208,856
Dividend and interest income 12,692
 27,654
 33,157
 55,000
Investment gains (losses) 24,189
 10,949
 (20,117) 26,684
Other revenues 26,092
 24,796
 51,603
 47,002
Total revenues 874,884
 874,101
 1,758,359
 1,686,726
Less: Interest expense 3,435
 16,302
 12,754
 33,465
Net revenues 871,449
 857,799
 1,745,605
 1,653,261
         
Expenses:  
  
  
  
Employee compensation and benefits 349,638
 363,702
 711,910
 703,011
Promotion and servicing:      
  
Distribution-related payments 125,678
 116,254
 265,823
 222,247
Amortization of deferred sales commissions 6,622
 3,241
 12,148
 6,743
Trade execution, marketing, T&E and other 44,288
 57,550
 99,898
 107,198
General and administrative:      
  
General and administrative 121,424
 120,180
 243,691
 238,028
Real estate charges 5,526
 548
 5,526
 548
Contingent payment arrangements 807
 829
 1,600
 883
Interest on borrowings 1,096
 3,990
 3,930
 7,973
Amortization of intangible assets 6,723
 7,285
 13,209
 14,259
Total expenses 661,802
 673,579
 1,357,735
 1,300,890
         
Operating income 209,647
 184,220
 387,870
 352,371
         
Income taxes 11,386
 10,211
 20,860
 19,132
         
Net income 198,261
 174,009
 367,010
 333,239
         
Net income (loss) of consolidated entities attributable to non-controlling interests 20,940
 7,757
 (4,631) 17,873
         
Net income attributable to AB Unitholders $177,321
 $166,252
 $371,641
 $315,366
         
Net income per AB Unit:  
  
  
  
Basic $0.65
 $0.61
 $1.36
 $1.17
Diluted $0.65
 $0.61
 $1.36
 $1.17

See Accompanying Notes to Condensed Consolidated Financial Statements.
Index3

Index
ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
 
 Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30,Six Months Ended June 30,
 2020 2019 2020 2019 2021202020212020
        
Net income $198,261
 $174,009
 $367,010
 $333,239
Net income$271,143 $198,261 $514,982 $367,010 
Other comprehensive income (loss):  
  
    Other comprehensive income (loss):  
Foreign currency translation adjustments, before tax 6,317
 (2,178) (15,079) 452
Foreign currency translation adjustments, before tax2,088 6,317 (5,050)(15,079)
Income tax benefit (expense) 67
 (73) 140
 (150)
Income tax benefitIncome tax benefit26 67 48 140 
Foreign currency translation adjustments, net of tax 6,384
 (2,251) (14,939) 302
Foreign currency translation adjustments, net of tax2,114 6,384 (5,002)(14,939)
Changes in employee benefit related items:  
  
    Changes in employee benefit related items:  
Amortization of prior service cost 6
 6
 12
 12
Amortization of prior service cost6 6 12 12 
Recognized actuarial gain 325
 285
 650
 552
Recognized actuarial gain324 325 405 650 
Changes in employee benefit related items 331
 291
 662
 564
Changes in employee benefit related items330 331 417 662 
Income tax (expense) benefit (1) 25
 (78) 35
Income tax (expense)Income tax (expense)(2)(1)(2)(78)
Employee benefit related items, net of tax 330
 316
 584
 599
Employee benefit related items, net of tax328 330 415 584 
Other comprehensive income (loss) 6,714
 (1,935) (14,355) 901
Other comprehensive income (loss)2,442 6,714 (4,587)(14,355)
Less: Comprehensive income (loss) in consolidated entities attributable to non-controlling interests 20,940
 7,774
 (4,631) 17,870
Less: Comprehensive income (loss) in consolidated entities attributable to non-controlling interests3,573 20,940 3,281 (4,631)
Comprehensive income attributable to AB Unitholders $184,035
 $164,300
 $357,286
 $316,270
Comprehensive income attributable to AB Unitholders$270,012 $184,035 $507,114 $357,286 
 
See Accompanying Notes to Condensed Consolidated Financial Statements.

Index
4

Index
ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Partners' Capital
(in thousands)
(unaudited)
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
General Partner’s Capital       
Balance, beginning of period$40,571
 $39,403
 $41,225
 $40,240
Net income1,774
 1,663
 3,717
 3,154
Cash distributions to General Partner(3,396) (1,521) (5,938) (3,438)
Long-term incentive compensation plans activity3
 12
 5
 185
(Retirement) issuance of AB Units, net(305) 459
 (362) (125)
Balance, end of period38,647
 40,016
 38,647
 40,016
Limited Partners' Capital       
Balance, beginning of period4,109,946
 3,992,590
 4,174,201
 4,075,306
Net income175,547
 164,589
 367,924
 312,212
Cash distributions to Unitholders(189,425) (150,465) (440,686) (340,033)
Long-term incentive compensation plans activity293
 1,270
 628
 18,255
(Retirement) issuance of AB Units, net(30,150) 45,376
 (35,856) (12,380)
Balance, end of period4,066,211
 4,053,360
 4,066,211
 4,053,360
Receivables from Affiliates       
Balance, beginning of period(9,279) (11,666) (9,011) (11,430)
Long-term incentive compensation awards expense209
 227
 393
 692
Capital contributions from AB Holding(97) 1,600
 (549) 899
Balance, end of period(9,167) (9,839) (9,167) (9,839)
AB Holding Units held for Long-term Incentive Compensation Plans       
Balance, beginning of period(81,314) (69,503) (76,310) (77,990)
Purchases of AB Holding Units to fund long-term compensation plans, net(29,665) 94
 (47,415) (58,358)
Retirement (issuance) of AB Units, net30,455
 (45,860) 36,218
 12,480
Long-term incentive compensation awards expense7,268
 8,011
 14,675
 26,615
Re-valuation of AB Holding Units held in rabbi trust(473) 113
 (909) (9,892)
Other3
 6,692
 15
 6,692
Balance, end of period(73,726) (100,453) (73,726) (100,453)
Accumulated Other Comprehensive Income (Loss)       
Balance, beginning of period(134,073) (108,012) (113,004) (110,866)
Foreign currency translation adjustment, net of tax6,384
 (2,267) (14,939) 304
Changes in employee benefit related items, net of tax330
 316
 584
 599
Balance, end of period(127,359) (109,963) (127,359) (109,963)
Index

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
General Partner’s CapitalGeneral Partner’s Capital
Balance, beginning of periodBalance, beginning of period$42,022 $40,571 $41,776 $41,225 
Net incomeNet income2,676 1,774 5,117 3,717 
Cash distributions to General PartnerCash distributions to General Partner(2,421)(3,396)(5,319)(5,938)
Long-term incentive compensation plans activityLong-term incentive compensation plans activity18 3 11 5 
(Retirement) issuance of AB Units, net(Retirement) issuance of AB Units, net(342)(305)368 (362)
Balance, end of periodBalance, end of period41,953 38,647 41,953 38,647 
Limited Partners' CapitalLimited Partners' Capital
Balance, beginning of periodBalance, beginning of period4,253,904 4,109,946 4,229,485 4,174,201 
Net incomeNet income264,894 175,547 506,584 367,924 
Cash distributions to UnitholdersCash distributions to Unitholders(239,678)(189,425)(526,491)(440,686)
Long-term incentive compensation plans activityLong-term incentive compensation plans activity1,859 293 1,151 628 
(Retirement) issuance of AB Units, net(Retirement) issuance of AB Units, net(33,919)(30,150)36,331 (35,856)
Balance, end of periodBalance, end of period4,247,060 4,066,211 4,247,060 4,066,211 
Receivables from AffiliatesReceivables from Affiliates
Balance, beginning of periodBalance, beginning of period(1,725)(9,279)(8,316)(9,011)
Long-term incentive compensation awards expenseLong-term incentive compensation awards expense17 209 159 393 
Capital contributions (to) from AB HoldingCapital contributions (to) from AB Holding(6,091)(97)358 (549)
Balance, end of periodBalance, end of period(7,799)(9,167)(7,799)(9,167)
AB Holding Units held for Long-term Incentive Compensation PlansAB Holding Units held for Long-term Incentive Compensation Plans
Balance, beginning of periodBalance, beginning of period(143,807)(81,314)(57,219)(76,310)
Purchases of AB Holding Units to fund long-term compensation plans, netPurchases of AB Holding Units to fund long-term compensation plans, net(39,614)(29,665)(75,468)(47,415)
Retirement (issuance) of AB Units, netRetirement (issuance) of AB Units, net34,515 30,455 (36,498)36,218 
Long-term incentive compensation awards expenseLong-term incentive compensation awards expense9,505 7,268 27,507 14,675 
Re-valuation of AB Holding Units held in rabbi trustRe-valuation of AB Holding Units held in rabbi trust(803)(473)1,474 (909)
OtherOther0 3 0 15 
Balance, end of periodBalance, end of period(140,204)(73,726)(140,204)(73,726)
Accumulated Other Comprehensive Income (Loss)Accumulated Other Comprehensive Income (Loss)
Balance, beginning of periodBalance, beginning of period(101,232)(134,073)(94,203)(113,004)
Foreign currency translation adjustment, net of taxForeign currency translation adjustment, net of tax2,114 6,384 (5,002)(14,939)
Changes in employee benefit related items, net of taxChanges in employee benefit related items, net of tax328 330 415 584 
Balance, end of periodBalance, end of period(98,790)(127,359)(98,790)(127,359)
Total Partners' Capital attributable to AB UnitholdersTotal Partners' Capital attributable to AB Unitholders4,042,220 3,894,606 4,042,220 3,894,606 
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Total Partners' Capital attributable to AB Unitholders3,894,606
 3,873,121
 3,894,606
 3,873,121
Non-redeemable Non-controlling Interests in Consolidated Entities 
  
    
Balance, beginning of period—
 945
 —
 949
Net income—
 58
 —
 74
Foreign currency translation adjustment—
 17
 —
 (3)
Balance, end of period—
 1,020
 —
 1,020
Total Capital$3,894,606
 $3,874,141
 $3,894,606
 $3,874,141
See Accompanying Notes to Condensed Consolidated Financial Statements.
Index5

Index

ALLIANCEBERNSTEIN L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Six Months Ended June 30,
 20212020
Cash flows from operating activities:
Net income$514,982 $367,010 
Adjustments to reconcile net income to net cash provided by operating activities:  
Amortization of deferred sales commissions16,135 12,148 
Non-cash long-term incentive compensation expense27,666 15,068 
Depreciation and other amortization64,505 72,034 
Unrealized losses on investments4,269 13,637 
Unrealized (gains) losses on investments of consolidated company-sponsored investment funds(936)11,938 
Other, net10,064 154 
Changes in assets and liabilities:  
Decrease (increase) in securities, segregated680,396 (787,322)
(Increase) in receivables(222,721)(145,247)
Decrease (increase) in investments19,963 (42,626)
Decrease in investments of consolidated company-sponsored investment funds136,578 334,970 
(Increase) in deferred sales commissions(20,483)(34,435)
(Increase) decrease in right-of-use assets(33,369)5,278 
(Increase) in other assets(80,455)(9,909)
(Decrease) increase in other assets and liabilities of consolidated company-sponsored investment funds, net(15,347)7,318 
(Decrease) increase in payables(513,344)851,419 
(Decrease) in lease liabilities(18,415)(49,946)
Increase (decrease) in accounts payable and accrued expenses13,617 (3,895)
Increase in accrued compensation and benefits265,557 202,893 
Net cash provided by operating activities848,662 820,487 
Cash flows from investing activities:  
Purchases of furniture, equipment and leasehold improvements(25,914)(6,531)
Acquisition of business, net of cash acquired(3,793)(13,552)
Net cash used in investing activities(29,707)(20,083)
6
Index
 Six Months Ended June 30,
 2020 2019
    
Cash flows from operating activities:   
Net income$367,010
 $333,239
    
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Amortization of deferred sales commissions12,148
 6,743
Non-cash long-term incentive compensation expense15,068
 27,307
Depreciation and other amortization72,034
 83,997
Unrealized losses (gains) on investments13,637
 (16,724)
Unrealized losses (gains) on investments of consolidated company-sponsored investment funds11,938
 (32,173)
Other, net154
 11,537
Changes in assets and liabilities: 
  
(Increase) decrease in securities, segregated(787,322) 59,965
(Increase) decrease in receivables(145,247) 43,325
(Increase) decrease in investments(42,626) 506,061
Decrease (increase) in investments of consolidated company-sponsored investment funds334,970
 (86,566)
(Increase) in deferred sales commissions(34,435) (10,309)
Decrease (increase) in right-of-use assets5,278
 (1,150)
(Increase) in other assets(9,909) (4,515)
Increase in other assets and liabilities of consolidated company-sponsored investment funds, net7,318
 7,194
Increase (decrease) in payables851,419
 (440,029)
(Decrease) in lease liabilities(49,946) (59,924)
Increase (decrease) in accounts payable and accrued expenses(2,295) (61,705)
Increase in accrued compensation and benefits202,893
 180,701
Net cash provided by operating activities822,087
 546,974
    
Cash flows from investing activities: 
  
Purchases of furniture, equipment and leasehold improvements(6,531) (11,276)
Acquisition of businesses, net of cash acquired(13,552) 5,255
Net cash used in investing activities(20,083) (6,021)
    
 Six Months Ended June 30,
 20212020
Cash flows from financing activities:  
(Repayment) borrowings of debt, net(85,000)125,000 
Increase in overdrafts payable8,315 16,570 
Distributions to General Partner and Unitholders(531,810)(446,624)
(Redemptions) of non-controlling interest in consolidated company-sponsored investment funds, net(87,837)(269,849)
Capital contributions to affiliates(408)(971)
Additional investments by AB Holding with proceeds from exercise of compensatory options to buy AB Holding Units3,402 147 
Purchases of AB Holding Units to fund long-term incentive compensation plan awards, net(75,468)(47,415)
Other721 642 
Net cash used in financing activities(768,085)(622,500)
Effect of exchange rate changes on cash and cash equivalents(1,223)(11,162)
Net increase in cash and cash equivalents49,647 166,742 
Cash and cash equivalents as of beginning of the period1,073,906 691,171 
Cash and cash equivalents as of end of the period$1,123,553 $857,913 
Non-cash investing activities:
Fair value of assets acquired (less cash acquired of $2.8 million and $0.6 million, respectively)$13,235 $18,389 
Fair value of liabilities assumed$1,642 $437 
Non-cash financing activities:
Payables recorded under contingent payment arrangements$7,800 $4,400 
Index

 Six Months Ended June 30,
 2020 2019
Cash flows from financing activities: 
  
(Repayment) of commercial paper, net—
 (85,888)
Proceeds of EQH Facility125,000
 —
(Repayment) of bank loans—
 (25,000)
Increase (decrease) in overdrafts payable16,570
 (19,144)
Distributions to General Partner and Unitholders(446,624) (343,471)
(Redemptions) subscriptions of non-controlling interest in consolidated company-sponsored investment funds, net(269,849) 49,026
Capital contributions (to) from affiliates(971) 495
Additional investments by AB Holding with proceeds from exercise of compensatory options to buy AB Holding Units147
 8,951
Purchases of AB Holding Units to fund long-term incentive compensation plan awards, net(47,415) (58,358)
Other(958) 291
Net cash (used in) financing activities(624,100) (473,098)
Effect of exchange rate changes on cash and cash equivalents(11,162) (179)
Net increase (decrease) in cash and cash equivalents166,742
 67,676
Cash and cash equivalents as of beginning of the period691,171
 653,324
Cash and cash equivalents as of end of the period$857,913
 $721,000
    
Non-cash investing activities:   
Fair value of assets acquired (excluding cash acquired of $0.6 million and $11.8 million, respectively)$18,389
 $28,966
Fair value of liabilities assumed$437
 $16,837
    
Non-cash financing activities:   
Payables recorded under contingent payment arrangements$4,400
 $17,384

See Accompanying Notes to Condensed Consolidated Financial Statements.
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ALLIANCEBERNSTEIN L.P.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 20202021
(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, 2019.2020.

1. Business Description Organization and Basis of Presentation

Business Description

We provide 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 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. 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;

Alternative investments, including hedge funds, fund of funds, direct lending, real estate and private equity; and

•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,•Some passive management, including market capitalization (e.g., large-, mid-index and small-cap equities), term (enhanced index strategies.
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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Organization

During the second quarter of 2018, AXA S.A. ("AXA") completed the sale of a minority stake in EQH through an initial public offering ("IPO"). Since then, AXA has completed additional offerings and taken other steps, most recently during the fourth quarter of 2019. As a result, AXA owned less than 10% of the outstanding common stock of EQH as of June 30, 2020.

As of June 30, 2020,2021, EQH owned approximately 4.2%4.0% 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 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% general partnership interest in AB.

As of June 30, 2020,2021, the ownership structure of AB, including limited partnership units outstanding as well as the general partner's 1% interest, was as follows:

EQH and its subsidiaries63.762.9 %
AB Holding35.536.3 
Unaffiliated holders0.8
100.0%


Including both the general partnership and limited partnership interests in AB Holding and AB, EQH and its subsidiaries had an approximate 65.2%64.4% economic interest in AB as of June 30, 2020.2021.

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, 20192020 was derived from audited financial statements. Certain disclosures included in the annual financial statements but it 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 Securities and Exchange Commission.

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”) and voting interest entities (“VOEs”) in 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.

Reclassifications

During 2020,2021, prior period amounts for the changes in right-of-use assets and lease liabilities previously presented with amounts related to the adoptionas net issuance (repayment) of ASC 842 in our Condensed Consolidated Statementcommercial paper, proceeds (repayment) of Cash FlowsEQH facility and proceeds (repayment) of bank loans are now combined and presented as net repayments (borrowings) of debt in the adoption impactcondensed consolidated statements of ASU 842cash flows to conform to the current period's presentation.

Subsequent Events
We have evaluated subsequent events through the date that these financial statements were filed with the Securities and Exchange Commission.

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2.     Significant Accounting Policies

Significant Accounting Policies

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). This new guidance relates to the accounting for credit losses on financial instruments and introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. We adopted this standard prospectively on January 1, 2020. The adoption of this standard did not have a material impact on our financial condition or results of operations.

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 had required 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. We adopted this standard prospectively on January 1, 2020. The adoption of this standard did not have a material impact on our financial condition or results of operations.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to theDisclosure Requirements for Fair Value Measurement. The amendment modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. We adopted this standard prospectively on January 1, 2020. The adoption of this standard did not have a material impact on our financial condition or results of operations.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements that currently exist in GAAP for capitalizing implementation costs incurred to develop or obtain internal-use software. Implementation costs would either be capitalized or expensed as incurred depending on the project stage. All costs in the preliminary and post-implementation project stages are expensed as incurred, while certain costs within the application development stage are capitalized. We adopted this standard prospectively on January 1, 2020. 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 2020

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20). The amendment modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. We adopted this standard prospectively on January 1, 2021. The revised guidance is effective for financial statements issued for fiscal years beginning after December 15, 2020, with early adoption permitted. The revised guidance willof this standard did not have a material impact on our financial condition or results of operations.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify US GAAP for other areas of Topic 740 by clarifying and amending the existing guidance. We adopted this standard prospectively on January 1, 2021. The revised guidance is effective for financial statements issued for fiscal years beginning after December 15, 2020, with early adoption permitted. The revised guidance willof this standard did not have a material impact on our financial condition or results of operations.

Goodwill

Goodwill is tested annually, as of September 30, for impairment. Throughout the year, the carrying value of goodwill is also reviewed for impairment if certain events or changes in circumstances occur, and trigger whether an interim impairment test may be required. Such changes in circumstances may be, but not limited to, sustained decrease in AB Holding Unit price or declines in market capitalization that would suggest that the fair value of the reporting unit is less than the carrying amount; significant and unanticipated declines in assets under management, revenues, or lower than expected earnings in the current quarter, next quarter or year. Any of these changes in circumstances could suggest the possibility that goodwill is impaired, however, none of these events or circumstances by itself would indicate that it is more likely than not that goodwill is impaired, they are merely recognized as triggering events for the consideration of impairment and must be viewed in combination with any mitigating or positive factors. A holistic evaluation of all events since the most recent quantitative impairment test must be done to determine whether it is more likely than not that the reporting unit is impaired.
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As of January 1, 2020, we adopted ASU 2017-04,
Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which had required 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. Under this guidance, the goodwill impairment test no longer includes a determination by management of whether a decline in fair value is temporary; however, it is important to consider how the severity and anticipated duration of the current market conditions is reflected in management's determination of fair value. We have determined that AB has only 1 reporting segment and reporting unit.

3. Revenue Recognition

Revenues for the three and six months ended June 30, 20202021 and 20192020 consisted of the following:

Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(in thousands)
Subject to contracts with customers:
    Investment advisory and services fees
        Base fees$723,717 $569,296 $1,411,408 $1,182,883 
        Performance-based fees53,907 8,907 69,682 17,045 
    Bernstein research services105,655 113,609 224,676 242,832 
    Distribution revenues
        All-in-management fees86,073 75,828 171,255 162,185 
        12b-1 fees20,653 17,830 40,687 37,283 
        Other48,812 26,441 91,196 51,488 
    Other revenues
        Shareholder servicing fees22,383 19,694 44,078 40,537 
        Other2,933 5,790 8,616 10,462 
1,064,133 837,395 2,061,598 1,744,715 
Not subject to contracts with customers:
    Dividend and interest income, net of interest expense7,924 9,257 15,464 20,403 
    Investment gains (losses)4,181 24,189 6,109 (20,117)
    Other revenues584 608 917 604 
12,689 34,054 22,490 890 
Total net revenues$1,076,822 $871,449 $2,084,088 $1,745,605 
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
  (in thousands)
Subject to contracts with customers:        
    Investment advisory and services fees        
        Base fees $569,296
 $585,077
 $1,182,883
 $1,137,307
        Performance-based fees 8,907
 11,287
 17,045
 15,651
    Bernstein research services 113,609
 105,991
 242,832
 196,226
    Distribution revenues        
        All-in-management fees 75,828
 68,494
 162,185
 130,267
        12b-1 fees 17,830
 20,182
 37,283
 39,768
        Other 26,441
 19,671
 51,488
 38,821
    Other revenues        
        Shareholder servicing fees 19,694
 19,563
 40,537
 37,393
        Other 5,790
 4,496
 10,462
 8,514
  837,395
 834,761
 1,744,715
 1,603,947
Not subject to contracts with customers:        
    Dividend and interest income, net of interest expense 9,257
 11,352
 20,403
 21,535
    Investment (losses) gains 24,189
 10,949
 (20,117) 26,684
    Other revenues 608
 737
 604
 1,095
  34,054
 23,038
 890
 49,314
         
Total net revenues $871,449
 $857,799
 $1,745,605
 $1,653,261


4.    Long-term Incentive Compensation Plans
4.
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 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
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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.

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Repurchases of AB Holding Units for the three and six months ended June 30, 20202021 and 20192020 consisted of the following:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(in millions)
Total amount of AB Holding Units Purchased (1)
0.9 1.3 1.9 2.2 
Total Cash Paid for AB Holding Units Purchased (1)
$38.3 $27.8 $75.7 $47.6 
Open Market Purchases of AB Holding Units Purchased (2)
0.8 1.3 1.4 2.2 
Total Cash Paid for Open Market Purchases of AB Holding Units (2)
$34.6 $27.8 $58.8 $45.1 
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
  (in millions)
Total amount of AB Holding Units Purchased (1)
 1.3
 —
 2.2
 2.0
Total Cash Paid for AB Holding Units Purchased (1)
 $27.8
 $—
 $47.6
 $58.6
Open Market Purchases of AB Holding Units Purchased (2)
 1.3
 —
 2.2
 1.9
Total Cash Paid for Open Market Purchases of AB Holding Units (2)
 $27.8
 $—
 $45.1
 $55.2
(1) Purchased on a trade date basis.
(2) The remainder related to purchases of AB Holding Units from employees to fulfill statutory tax withholding requirements at the time of delivery of long-term incentive compensation award.
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 Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended ("Exchange Act"). A plan of this type allows a company to repurchase its shares at times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods or because it possesses material non-public information. Each broker we select has the authority 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 20202021 expired at the close of business on July 22, 2020.28, 2021. We may adopt additional 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 six months of 2021 and 2020, and 2019, we grantedawarded to employees and Eligible Directors 0.23.5 million and 1.70.2 million restricted AB Holding Unit awards, respectively. We used AB Holding Units repurchased during the applicable period and newly-issued AB Holding Units to fund these awards.

During the first six months of 20202021 and 2019,2020, AB Holding issued 5,1820.1 million and 0.4 million5,182 AB Holding Units, respectively, upon exercise of options to buy AB Holding Units. AB Holding used the proceeds of $0.1$3.4 million and $9.0$0.1 million, respectively, received from award recipients as payment in cash for the exercise price to purchase the equivalent number of newly-issued AB Units.

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5.     Net Income per Unit

5.
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 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 June 30,Six Months Ended June 30,
 2021202020212020
(in thousands, except per unit amounts)
Net income attributable to AB Unitholders$267,570 $177,321 $511,701 $371,641 
Weighted average limited partnership units outstanding – basic272,344 269,081 272,339 269,789 
Dilutive effect of compensatory options to buy AB Holding Units12 9 20 22 
Weighted average limited partnership units outstanding – diluted272,356 269,090 272,359 269,811 
Basic net income per AB Unit$0.97 $0.65 $1.86 $1.36 
Diluted net income per AB Unit$0.97 $0.65 $1.86 $1.36 
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
  (in thousands, except per unit amounts)
Net income attributable to AB Unitholders $177,321
 $166,252
 $371,641
 $315,366
         
Weighted average limited partnership units outstanding – basic 269,081
 268,475
 269,789
 267,909
Dilutive effect of compensatory options to buy AB Holding Units 9
 48
 22
 60
Weighted average limited partnership units outstanding – diluted 269,090
 268,523
 269,811
 267,969
Basic net income per AB Unit $0.65
 $0.61
 $1.36
 $1.17
Diluted net income per AB Unit $0.65
 $0.61
 $1.36
 $1.17


Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(amounts as shown)
Anti-dilutive options excluded from diluted net income0 44,877 0 44,877 
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
  (amounts as shown)
Anti-dilutive options excluded from diluted net income 44,877
 29,056
 44,877
 29,056


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 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.

On July 23, 2020,29, 2021, the General Partner declared a distribution of $0.68$0.97 per AB Unit, representing a distribution of Available Cash Flow for the three months ended June 30, 2020.2021. 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 August 20, 202019, 2021 to holders of record on August 3, 2020.9, 2021.

7.     Cash and Securities Segregated Under Federal Regulations and Other Requirements

Cash and Securities Segregated Under Federal Regulations and Other Requirements

As of June 30, 20202021 and December 31, 2019, $1.92020, $1.1 billion and $1.1$1.8 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.

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8.     Investments

8.
Investments

Investments consist of:
 June 30,
2021		December 31,
2020
 (in thousands)
Equity securities:
    Long-term incentive compensation-related$30,808 $34,351 
    Seed capital102,828 75,766 
    Other8,415 55,439 
Exchange-traded options2,165 7,527 
Investments in limited partnership hedge funds:  
Long-term incentive compensation-related30,705 25,762 
Seed capital20,100 16,646 
Time deposits18,120 18,602 
Other15,505 19,282 
Total investments$228,646 $253,375 
 June 30,
2020		 December 31,
2019
 (in thousands)
Equity securities:   
    Long-term incentive compensation-related$30,064
 $36,665
    Seed capital128,363
 70,464
    Other53,117
 73,202
Exchange-traded options12,151
 6,931
Investments in limited partnership hedge funds: 
  
Long-term incentive compensation-related23,547
 14,237
Seed capital16,463
 33,124
Time deposits17,418
 18,281
Other13,543
 13,890
Total investments$294,666
 $266,794


Total investments related to long-term incentive compensation obligations of $53.6$61.5 million and $50.9$60.1 million as of June 30, 20202021 and December 31, 2019,2020, 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.

We allocate seed capital to our investment teams to help develop new products and services for our clients. A 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. In regard toRegarding 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 financial interest in a VOE. See Note 14, Consolidated Company-Sponsored Investment Funds, for a description of the seed capital investments that we consolidate. As of June 30, 20202021 and December 31, 2019,2020, our total seed capital investments were $342.0$299.3 million and $358.1$310.3 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.

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

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The portion of unrealized gains (losses) related to equity securities, as defined by ASC 321-10, held as of June 30, 20202021 and 20192020 were as follows:

 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
 (in thousands)
Net gains (losses) recognized during the period$7,719 $14,386 $12,606 $(7,600)
Less: net gains recognized during the period on equity securities sold during the period12,156 7,471 16,721 6,076 
Unrealized (losses) gains recognized during the period on equity securities held$(4,437)$6,915 $(4,115)$(13,676)
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
  (in thousands)
Net gains (losses) recognized during the period $14,386
 $7,586
 $(7,600) $21,580
Less: net gains recognized during the period on equity securities sold during the period 7,471
 1,409
 6,076
 4,541
Unrealized gains (losses) recognized during the period on equity securities held $6,915
 $6,177
 $(13,676) $17,039


9.     Derivative Instruments
9.

Derivative Instruments

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

We implemententer 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 ASC 815-10, Derivatives and Hedging.

The notional value and fair value as of June 30, 20202021 and December 31, 20192020 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)
June 30, 2021:
Exchange-traded futures$128,533 $497 $758 
Currency forwards49,260 8,332 7,661 
Interest rate swaps13,483 372 441 
Credit default swaps121,176 7,275 7,180 
Total return swaps47,390 116 762 
Option swaps50,000 0 112 
Total derivatives$409,842 $16,592 $16,914 
December 31, 2020:
Exchange-traded futures$142,886 $118 $1,834 
Currency forwards63,906 8,576 8,451 
Interest rate swaps60,997 2,043 2,955 
Credit default swaps167,649 10,910 13,304 
Total return swaps52,061 94 1,847 
Option swaps2,486 0 2,146 
Total derivatives$489,985 $21,741 $30,537 
   Fair Value
 Notional Value Derivative Assets Derivative Liabilities
 (in thousands)
June 30, 2020:     
Exchange-traded futures$173,988
 $113
 $1,126
Currency forwards87,263
 8,339
 7,873
Interest rate swaps79,327
 2,512
 3,328
Credit default swaps217,575
 11,957
 10,793
Total return swaps86,431
 599
 2,143
Option swaps2,466
 704
 1,363
Total derivatives$647,050
 $24,224
 $26,626
      
December 31, 2019:     
Exchange-traded futures$171,112
 $939
 $871
Currency forwards60,809
 8,545
 8,633
Interest rate swaps92,756
 1,746
 2,254
Credit default swaps168,303
 2,151
 5,611
Total return swaps91,201
 110
 1,764
Option swaps354
 —
 126
Total derivatives$584,535
 $13,491
 $19,259


As of June 30, 20202021 and December 31, 2019,2020, the derivative assets and liabilities are included in both receivables and payables to brokers and dealers on our condensed consolidated statements of financial condition.

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14

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The gains and losses for derivative instruments (excluding our options desk trading activities discussed below) for the three and six months ended June 30, 20202021 and 20192020 recognized in investment gains (losses) in the condensed consolidated statements of income were as follows:

 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
 (in thousands)
Exchange-traded futures$(4,882)$(5,818)$(3,747)$(4,812)
Currency forwards(354)(212)827 446 
Interest rate swaps(111)225 (23)(387)
Credit default swaps(1,714)(4,311)(2,236)7,790 
Total return swaps(2,980)(18,966)(3,887)(3,851)
Option swaps(1,373)(1,831)(12)(533)
Net (losses) on derivative instruments$(11,414)$(30,913)$(9,078)$(1,347)
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
  
Exchange-traded futures$(5,818) $(3,436) $(4,812) $(8,551)
Currency forwards(212) (75) 446
 (115)
Interest rate swaps225
 (331) (387) (645)
Credit default swaps(4,311) (1,465) 7,790
 (3,805)
Total return swaps(18,966) (3,810) (3,851) (15,766)
Option swaps(1,831) —
 (533) —
Net (losses) on derivative instruments$(30,913) $(9,117) $(1,347) $(28,882)


We may be exposed to credit-related losses in the event of non-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 June 30, 20202021 and December 31, 2019,2020, we held $0.8$2.1 million and $0.3$0.4 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 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 June 30, 20202021 and December 31, 2019,2020, we delivered $5.9$4.4 million and $4.3$6.4 million, respectively, of cash collateral into brokerage accounts. We report this cash collateral in cash and cash equivalents in our condensed consolidated statements of financial condition.

As of June 30, 20202021 and December 31, 2019,2020, we held $12.2$2.2 million and $6.9$7.5 million, respectively, of long exchange-traded equity options, which are included in other investments on our condensed consolidated statements of financial condition. In addition, as of June 30, 20202021 and December 31, 2019,2020, we held $9.4$1.7 million and $12.3$12.5 million, respectively, of short exchange-traded equity options, which are included in securities sold not yet purchased on our condensed consolidated statements 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 six months ended June 30, 2020,2021, we recognized losses of $18.5$1.7 million and $0.1gains of $3.1 million, respectively, on equity optionoptions activity. For the three and six months ended June 30, 2019,2020, we recognized losses of $3.5$18.5 million and $11.1$0.1 million, respectively, on equity option activity. These gains and losses are recognized in investment gains (losses) in the condensed consolidated statements of income.



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10.     Offsetting Assets and Liabilities

10.
Offsetting Assets and Liabilities

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

Offsetting of assets as of June 30, 20202021 and December 31, 20192020 was as follows:
 
 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)
June 30, 2020:           
Securities borrowed$18,109
 $—
 $18,109
 $(17,539) $—
 $570
Derivatives$24,224
 $—
 $24,224
 $—
 $(810) $23,414
Long exchange-traded options$12,151
 $—
 $12,151
 $—
 $—
 $12,151
December 31, 2019: 
  
  
  
  
  
Securities borrowed$38,993
 $—
 $38,993
 $(38,993) $—
 $—
Derivatives$13,491
 $—
 $13,491
 $—
 $(251) $13,240
Long exchange-traded options$6,931
 $—
 $6,931
 $—
 $—
 $6,931

 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)
June 30, 2021:
Securities borrowed$26,081 $0 $26,081 $(14,712)$0 $11,369 
Derivatives$16,592 $0 $16,592 $0 $(2,102)$14,490 
Long exchange-traded options$2,165 $0 $2,165 $0 $0 $2,165 
December 31, 2020:      
Securities borrowed$7,808 $0 $7,808 $(7,344)$0 $464 
Derivatives$21,741 $0 $21,741 $0 $(380)$21,361 
Long exchange-traded options$7,527 $0 $7,527 $0 $0 $7,527 
Offsetting of liabilities as of June 30, 20202021 and December 31, 20192020 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)
June 30, 2021:
Derivatives$16,914 $0 $16,914 $0 $(4,379)$12,535 
Short exchange-traded options$1,706 $0 $1,706 $0 $0 $1,706 
December 31, 2020:      
Derivatives$30,537 $0 $30,537 $0 $(6,374)$24,163 
Short exchange-traded options$12,486 $0 $12,486 $0 $0 $12,486 
 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)
June 30, 2020:           
Securities loaned$16,369
 $—
 $16,369
 $(16,155) $—
 $214
Derivatives$26,626
 $—
 $26,626
 $—
 $(5,884) $20,742
Short exchange-traded options$9,379
 $—
 $9,379
 $—
 $—
 $9,379
December 31, 2019: 
  
  
  
  
  
Derivatives$19,259
 $—
 $19,259
 $—
 $(4,276) $14,983
Short exchange-traded options$12,348
 $—
 $12,348
 $—
 $—
 $12,348


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

11.
Fair Value

See Note 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.
Assets and Liabilities Measured at Fair Value on a Recurring Basis

Valuation of our financial instruments by pricing observability levels as of June 30, 20202021 and December 31, 20192020 was as follows (in thousands):
 Level 1Level 2Level 3
NAV Expedient(1)
OtherTotal
June 30, 2021:
Money markets$158,844 $0 $0 $— $— $158,844 
Securities segregated (U.S. Treasury Bills)0 1,072,928 0 — — 1,072,928 
Derivatives497 16,095 0 — — 16,592 
Investments:
  Equity securities123,315 18,450 126 160 — 142,051 
Long exchange-traded options2,165 0 0 — — 2,165 
   Limited partnership hedge funds(2)
— — — — 50,805 50,805 
   Time deposits(3)
— — — — 18,120 18,120 
   Other investments8,164 — — — 7,341 15,505 
Total investments133,644 18,450 126 160 76,266 228,646 
Total assets measured at fair value$292,985 $1,107,473 $126 $160 $76,266 $1,477,010 
Securities sold not yet purchased:    
Short equities – corporate$11,003 $0 $0 $— $— $11,003 
Short exchange-traded options1,706 0 0 — — 1,706 
Derivatives758 16,156 0 — — 16,914 
Contingent payment arrangements0 0 37,184 — — 37,184 
Total liabilities measured at fair value$13,467 $16,156 $37,184 $— $— $66,807 
 Level 1 Level 2 Level 3 
NAV Expedient(1)
 Other Total
June 30, 2020:           
Money markets$126,249
 $—
 $—
 $—
 $—
 $126,249
Securities segregated (U.S. Treasury Bills)—
 1,882,188
 —
 —
 —
 1,882,188
Derivatives113
 24,111
 —
 —
 —
 24,224
Investments           
  Equity securities191,831
 19,425
 114
 174
 —
 211,544
Long exchange-traded options12,151
 —
 —
 —
 —
 12,151
   Limited partnership hedge funds(2)
—
 —
 —
 —
 40,010
 40,010
   Time deposits(3)
—
 —
 —
 —
 17,418
 17,418
   Other investments5,675
 —
 —
 —
 7,868
 13,543
Total investments209,657
 19,425
 114
 174
 65,296
 294,666
Total assets measured at fair value$336,019
 $1,925,724
 $114
 $174
 $65,296
 $2,327,327
            
Securities sold not yet purchased 
  
  
      
Short equities – corporate$6,541
 $—
 $—
 $—
 $—
 $6,541
Short exchange-traded options9,379
 —
 —
 —
 —
 9,379
Derivatives1,126
 25,500
 —
 —
 —
 26,626
Contingent payment arrangements—
 —
 28,910
 —
 —
 28,910
Total liabilities measured at fair value$17,046
 $25,500
 $28,910
 $—
 $—
 $71,456
            
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Index
 Level 1Level 2Level 3
NAV Expedient(1)
OtherTotal
December 31, 2020:
Money markets$130,675 $0 $0 $— $— $130,675 
Securities segregated (U.S. Treasury Bills)0 1,752,906 0 — — 1,752,906 
Derivatives118 21,623 0 — — 21,741 
Investments:
  Equity securities147,705 17,565 125 161 — 165,556 
  Long exchange-traded options7,527 0 0 — — 7,527 
    Limited partnership hedge funds(2)
— — — — 42,408 42,408 
    Time deposits(3)
— — — — 18,602 18,602 
    Other investments7,011 — — — 12,271 19,282 
Total investments162,243 17,565 125 161 73,281 253,375 
Total assets measured at fair value$293,036 $1,792,094 $125 $161 $73,281 $2,158,697 
Securities sold not yet purchased:    
Short equities – corporate$5,305 $0 $0 $— $— $5,305 
Short exchange-traded options12,486 0 0 — — 12,486 
Derivatives1,834 28,703 0 — — 30,537 
Contingent payment arrangements0 0 27,750 — — 27,750 
Total liabilities measured at fair value$19,625 $28,703 $27,750 $— $— $76,078 

Index

 Level 1 Level 2 Level 3 
NAV Expedient(1)
 Other Total
December 31, 2019:           
Money markets$126,401
 $—
 $—
 $—
 $—
 $126,401
Securities segregated (U.S. Treasury Bills)—
 1,094,866
 —
 —
 —
 1,094,866
Derivatives939
 12,552
 —
 —
 —
 13,491
Investments           
  Equity securities170,946
 8,952
 119
 314
 —
 180,331
  Long exchange-traded options6,931
 —
 —
 —
 —
 6,931
    Limited partnership hedge funds(2)
—
 —
 —
 —
 47,361
 47,361
    Time deposits(3)
—
 —
 —
 —
 18,281
 18,281
    Other investments5,883
 —
 —
 —
 8,007
 13,890
Total investments183,760
 8,952
 119
 314
 73,649
 266,794
Total assets measured at fair value$311,100
 $1,116,370
 $119
 $314
 $73,649
 $1,501,552
            
Securities sold not yet purchased 
  
  
      
Short equities – corporate$17,809
 $—
 $—
 $—
 $—
 $17,809
Short exchange-traded options12,348
 —
 —
 —
 —
 12,348
Derivatives871
 18,388
 —
 —
 —
 19,259
Contingent payment arrangements—
 —
 22,911
 —
 —
 22,911
Total liabilities measured at fair value$31,028

$18,388

$22,911

$—
 $—
 $72,327


(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.

Other investments include (i) an investment in a software publishing company that does not have a readily available fair value ($2.02.2 million and $1.0$2.1 million as of June 30, 20202021 and December 31, 2019,2020, respectively), (ii) an investment in a start-up company that does not have a readily available fair value (this investment was 0 as of June 30, 2020 and was $0.9$0.3 million as of both June 30, 2021 and December 31, 2019)2020), (iii) an investmentinvestments in an equity method investeeinvestees that isare not measured at fair value in accordance with GAAP ($2.72.1 million and $6.5 million as of June 30, 20202021 and $2.9 million as of December 31, 2019)2020, respectively), and (iv) broker dealer exchange memberships that are not measured at fair value in accordance with GAAP ($3.22.8 million and $3.3 million as of both June 30, 20202021 and December 31, 2019)2020, 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 securities: Our equity securities consist principally of company-sponsored mutual funds with NAVs and various separately-managed portfolios consisting primarily of equity and fixed income mutual 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

•
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 securities: Our equity securities consist principally of company-sponsored mutual funds with NAVs and various separately-managed portfolios consisting primarily of equity and fixed income mutual 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.
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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.

•
•    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.

•    : 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.
During the six months ended June 30, 20202021 there were 0no transfers between Level 2 and Level 3 securities.
The change in carrying value associated with Level 3 financial instruments carried at fair value, classified as private equity and equity securities, is as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
 (in thousands)
Balance as of beginning of period$124 $118 $125 $119 
Purchases0 0 0 0 
Sales0 0 0 0 
Realized gains (losses), net0 0 0 0 
Unrealized gains (losses), net2 (4)1 (5)
Balance as of end of period$126 $114 $126 $114 
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
  (in thousands)
Balance as of beginning of period $118
 $115
 $119
 $142
Purchases —
 —
 —
 —
Sales —
 —
 —
 —
Realized gains (losses), net —
 —
 —
 —
Unrealized gains (losses), net (4) 2
 (5) (25)
Balance as of end of period $114
 $117
 $114
 $117


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 part of acquisitions made by the Company, we may enter into 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 June 30,Six Months Ended June 30,
 2021202020212020
 (in thousands)
Balance as of beginning of period$36,073 $23,704 $27,750 $22,911 
Addition274 4,400 7,800 4,400 
Accretion837 806 1,634 1,599 
Payments0 0 0 0 
Balance as of end of period$37,184 $28,910 $37,184 $28,910 
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
  (in thousands)
Balance as of beginning of period $23,704
 $7,390
 $22,911
 $7,336
Addition 4,400
 17,384
 4,400
 17,384
Accretion 806
 829
 1,599
 883
Payments —
 —
 —
 —
Balance as of end of period $28,910
 $25,603
 $28,910
 $25,603


As of June 30, 2020 and December 31, 2019, we have acquisition-related contingent liabilities remaining with a fair value of $28.9 million and $22.9 million, respectively.

The liabilities were valued using expected revenue growth rates and discount rates. TheAs of June 30, 2021, the expected revenue growth rates range from 0.7%2.0% to 50.0%83.9%, with a weighted average of 4.9%13.0%, calculated using cumulative revenues and range of revenue growth rates (excluding revenue growth from additional AUM contributed in year of acquisition). The discount rates ranged from existing clients).1.9% to 10.4%, with a weighted average of 6.6%, calculated using total contingent liabilities and range of discount rates. As of June 30, 2020 the expected revenue growth rates ranged from 0.7% to 50.0%, with a weighted average of 4.9%, calculated using cumulative revenues and a range of revenue growth rates. The discount rates ranged from 1.9% to 10.4%, with a weighted average of 8.0%, calculated using total contingent liabilities and range of discount rates.
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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 six months ended June 30, 20202021 or during the year ended December 31, 2019.2020.
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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 can determine an estimate of the possible loss or range of loss in excess of amounts already accrued, if any, we disclose that fact together with the estimate of the possible loss or range of loss. However, it is often difficult to predict the outcome or estimate a possible loss or range of loss because litigation is subject to inherent uncertainties, particularly when plaintiffs allege substantial or indeterminate damages. Such is also the case when the litigation is in its early stages or when the litigation is highly complex or broad in scope. In these cases, we disclose that we are unable to predict the outcome or estimate a possible loss or range of loss.

AB may be involved in various 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 matters, but we cannot currently estimate any such losses.

Management, after consultation with legal counsel, currently believes that the outcome of any 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 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.
13.
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 1115 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 1000000 square feet of office space. On January 1, 2019, the previously recorded liability relating to our global space consolidation initiatives of $85.8 million was offset as a reduction to our operating right-of-use assets.
Leases included in the condensed consolidated statement of financial condition as of June 30, 20202021 and December 31, 20192020 were as follows:
 Classification June 30, 2020 December 31, 2019
   (in thousands)
Operating Leases     
Operating lease right-of-use assetsRight-of-use assets $314,422
 $360,185
Operating lease liabilitiesLease liabilities 413,196
 465,907
      
Finance Leases     
Property and equipment, grossRight-of-use assets 5,167
 3,825
Amortization of right-of-use assetsRight-of-use assets (1,866) (1,317)
Property and equipment, net  3,301
 2,508
Finance lease liabilitiesLease liabilities 3,281
 2,544

ClassificationJune 30, 2021December 31, 2020
(in thousands)
Operating Leases
Operating lease right-of-use assetsRight-of-use assets$404,238 $416,007 
Operating lease liabilitiesLease liabilities481,046 503,174 
Finance Leases
Property and equipment, grossRight-of-use assets7,329 5,167 
Amortization of right-of-use assetsRight-of-use assets(2,577)(2,719)
Property and equipment, net4,752 2,448 
Finance lease liabilitiesLease liabilities4,797 2,375 
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20

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The components of lease expense included in the condensed consolidated statement of income as of June 30, 20202021 and June 30, 20192020 were as follows:
 Three Months Ended June 30, Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
Classification 2020 2019 2020 2019Classification2021202020212020
 (in thousands)(in thousands)
Operating lease costGeneral and administrative $22,411
 $26,506
 $45,415
 $53,648
Operating lease costGeneral and administrative$24,629 $22,411 $49,047 $45,415 
        
Financing lease cost:        Financing lease cost:
Amortization of right-of-use assetsGeneral and administrative 426
 291
 903
 577
Amortization of right-of-use assetsGeneral and administrative479 426 980 903 
Interest on lease liabilitiesInterest expense 23
 15
 49
 32
Interest on lease liabilitiesInterest expense21 23 43 49 
Total finance lease cost 449
 306
 952
 609
Total finance lease cost500 449 1,023 952 
Variable lease cost (1)
General and administrative 9,833
 9,876
 19,310
 19,749
Variable lease cost (1)
General and administrative10,344 9,833 19,890 19,310 
Sublease incomeGeneral and administrative (9,626) (13,988) (19,241) (28,451)Sublease incomeGeneral and administrative(9,506)(9,626)(19,313)(19,241)
Net lease cost $23,067
 $22,700
 $46,436
 $45,555
Net lease cost$25,967 $23,067 $50,647 $46,436 
(1) Variable lease expense includes operating expenses, real estate taxes and employee parking.
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. We derive most of our sub-tenant income 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)
2021 (excluding the six months ended June 30, 2021)$52,186 $903 $53,089 
2022102,262 1,552 103,814 
202394,902 1,289 96,191 
202491,698 722 92,420 
202526,818 426 27,244 
Thereafter163,857 24 163,881 
Total lease payments531,723 4,916 536,639 
Less interest(50,677)(119)
Present value of lease liabilities$481,046 $4,797 
 Operating Leases Financing Leases Total
Year ending December 31,(in thousands)
2020 (excluding the six months ended June 30, 2020)$51,618
 $942
 $52,560
2021103,752
 1,142
 104,894
202289,650
 757
 90,407
202382,532
 526
 83,058
202479,612
 23
 79,635
Thereafter43,017
 —
 43,017
Total lease payments450,181
 3,390
 453,571
Less interest(36,985) (109)  
Present value of lease liabilities$413,196
 $3,281
  
During October 2018, we signed a lease, which is scheduled to commence in the fourth quarter of 2020, relating to 218,976 square feet of space at our newly constructed Nashville headquarters. Our estimated total base rent obligation (excluding taxes, operating expenses and utilities) over the 15-year initial lease term is $134 million. During April 2019, weWe have signed a lease which commences in 2024, relating to approximately 190,000166,000 square feet of space at a newly constructed site in New York City. Our estimated total base rent obligation (excluding taxes, operating expenses and utilities) over the 20-year lease term is approximately $448$393.0 million.
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Lease term and discount rate:
Weighted average remaining lease term (years):
Operating leases4.94
7.42
Finance leases2.70
3.35
Weighted average discount raterate:
Operating leases3.513.01 %
Finance leases2.691.71 %
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Index
Supplemental cash flow information related to leases was as follows:
 Six Months Ended June 30,
 2020 2019
 (in thousands)
Cash paid for amounts included in the measurement of lease liabilities:   
Operating cash flows used for operating leases$58,107
 $69,309
Operating cash flows used for financing leases49
 32
Financing cash flows from finance leases959
 567
Right-of-use assets obtained in exchange for lease obligations(1):
   
Operating leases (2)
(1,223) 4,156
Finance leases1,695
 —

Six Months Ended June 30,
20212020
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases$57,353 $58,107 
Operating cash flows used for financing leases43 49 
Financing cash flows used for finance leases862 959 
Right-of-use assets obtained in exchange for lease obligations(1):
Operating leases (2)
29,333 (1,223)
Finance leases3,283 1,695 
(1) Represents non-cash activity and, accordingly, is not reflected in the condensed consolidated statements of cash flows.
(2) Represents net non-cash activity of new lease obligations, extensions and reductions of existing lease obligations.
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 regarding 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.
Index

The balances of consolidated VIEs and VOEs included in our condensed consolidated statements of financial condition were as follows:
  June 30, 2020 December 31, 2019
  (in thousands)
  VIEs VOEs Total VIEs VOEs Total
Cash and cash equivalents $28,657
 $4,419
 $33,076
 $9,623
 $1,810
 $11,433
Investments 128,941
 105,155
 234,096
 404,624
 176,380
 581,004
Other assets 3,779
 4,118
 7,897
 9,618
 10,192
 19,810
Total assets $161,377
 $113,692
 $275,069
 $423,865
 $188,382
 $612,247
             
Liabilities $6,438
 $19,984
 $26,422
 $12,147
 $18,870
 $31,017
Redeemable non-controlling interest 35,486
 15,595
 51,081
 273,219
 52,342
 325,561
Partners' capital attributable to AB Unitholders 119,453
 78,113
 197,566
 138,499
 117,170
 255,669
Total liabilities, redeemable non-controlling interest and partners' capital $161,377
 $113,692
 $275,069
 $423,865
 $188,382
 $612,247
             

June 30, 2021December 31, 2020
(in thousands)
VIEsVOEsTotalVIEsVOEsTotal
Cash and cash equivalents$30,456 $0 $30,456 $36,370 $136 $36,506 
Investments166,940 0 166,940 242,541 60,041 302,582 
Other assets8,288 0 8,288 4,859 7,385 12,244 
Total assets$205,684 $0 $205,684 $283,770 $67,562 $351,332 
Liabilities$11,317 $0 $11,317 $7,741 $22,879 $30,620 
Redeemable non-controlling interest17,803 0 17,803 82,753 19,606 102,359 
Partners' capital attributable to AB Unitholders176,564 0 176,564 193,276 25,077 218,353 
Total liabilities, redeemable non-controlling interest and partners' capital$205,684 $0 $205,684 $283,770 $67,562 $351,332 
During the second quarter of 2020,2021, we deconsolidated three2 funds in which we had a seed investment of approximately $59.0$86.1 million due to no longer having a controlling financial interest. These VIEs had significant consolidated assets and liabilities as of December 31, 2019.

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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.
Index


Valuation of consolidated company-sponsored investment funds' financial instruments by pricing observability levels as of June 30, 20202021 and December 31, 20192020 was as follows (in thousands):
 Level 1Level 2Level 3Total
June 30, 2021:
  Investments - VIEs$53,028 $113,702 $210 $166,940 
  Derivatives - VIEs240 1,711 0 1,951 
Total assets measured at fair value$53,268 $115,413 $210 $168,891 
Derivatives - VIEs2,927 1,422 0 4,349 
Total liabilities measured at fair value$2,927 $1,422 $0 $4,349 
December 31, 2020:
  Investments - VIEs$73,909 $168,114 $518 $242,541 
  Investments - VOEs0 59,940 101 60,041 
  Derivatives - VIEs442 2,782 0 3,224 
  Derivatives - VOEs0 464 0 464 
Total assets measured at fair value$74,351 $231,300 $619 $306,270 
Derivatives - VIEs$1,649 $5,244 $0 $6,893 
  Derivatives - VOEs0 664 0 664 
Total liabilities measured at fair value$1,649 $5,908 $0 $7,557 
 Level 1 Level 2 Level 3 Total
June 30, 2020:       
  Investments - VIEs$16,924
 $111,541
 $476
 $128,941
  Investments - VOEs3,185
 101,929
 41
 105,155
  Derivatives - VIEs245
 1,087
 —
 1,332
  Derivatives - VOEs48
 650
 —
 698
Total assets measured at fair value$20,402
 $215,207
 $517
 $236,126
        
Derivatives - VIEs133
 4,176
 —
 4,309
  Derivatives - VOEs58
 1,688
 —
 1,746
Total liabilities measured at fair value$191
 $5,864
 $—
 $6,055
        
December 31, 2019:       
  Investments - VIEs$28,270
 $375,559
 $795
 $404,624
  Investments - VOEs104,069
 72,252
 59
 176,380
  Derivatives - VIEs139
 4,694
 —
 4,833
  Derivatives - VOEs76
 4,263
 —
 4,339
Total assets measured at fair value$132,554
 $456,768
 $854
 $590,176
        
Derivatives - VIEs$835
 $3,724
 $—
 $4,559
  Derivatives - VOEs101
 4,982
 —
 5,083
Total liabilities measured at fair value$936
 $8,706
 $—
 $9,642


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.

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 June 30,Six Months Ended June 30,
 2021202020212020
 (in thousands)
Balance as of beginning of period$717 $534 $619 $854 
Deconsolidated funds(717)(135)(717)(135)
Transfers (out) in0 340 (10)571 
Purchases204 13 323 46 
Sales0 (82)(3)(444)
Realized gains (losses), net0 (14)3 (14)
Unrealized gains (losses), net6 (138)(5)(362)
Accrued discounts0 (1)0 1 
Balance as of end of period$210 $517 $210 $517 
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
  (in thousands)
Balance as of beginning of period $534
 $10,261
 $854
 $8,373
Deconsolidated funds (135) —
 (135) —
Transfers (out) in 340
 (89) 571
 (186)
Purchases 13
 5,680
 46
 7,791
Sales (82) (4,065) (444) (4,349)
Realized gains (losses), net (14) 21
 (14) 23
Unrealized gains (losses), net (138) 20
 (362) 169
Accrued discounts (1) 6
 1
 13
Balance as of end of period $517
 $11,834
 $517
 $11,834


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.

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23

Index
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 June 30, 20202021 and December 31, 2019,2020, the VIEs held $3.0$2.4 million and $0.3$3.7 million (net), respectively, of futures, forwards and swaps within their portfolios, respectively.portfolios. For the three and six months ended June 30, 2021, we recognized $1.8 million and $0.7 million of gains, respectively, on these derivatives. For the three and six months ended June 30, 2020, we recognized $1.0 million of gains and $0.7 million of losses, respectively, on these derivatives. For the three and six months ended June 30, 2019, we recognized $1.6 million and $2.7 million of gains, respectively, on these derivatives. These losses and gains are recognized in investment gains (losses) in the condensed consolidated statements of income.
As of June 30, 2020 and December 31, 2019, the VIEs held $0.3 million and $1.6 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 June 30, 2020 and December 31, 2019, the VIEs delivered $3.8 million and $3.2 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 June 30, 2020 and December 31, 2019, the VOEs held $1.0 million and $0.7 million, respectively, (net) of futures, forwards, options and swaps within their portfolios. For the three and six months ended June 30, 2020, we recognized $0.8 million and $0.9 million of losses, respectively, on these derivatives. For the three and six months ended June 30, 2019, we recognized $0.6 million and $0.5 million of losses, respectively, on these derivatives. These gains and losses are recognized in investment gains (losses) in the condensed consolidated statements of income.
As of June 30, 20202021 and December 31, 2019,2020, the VOEsVIEs held $0.9$0.4 million and $0.5 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 June 30, 20202021 and December 31, 2019,2020, the VIEs delivered $1.0 million and $4.2 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 June 30, 2021 and December 31, 2020, the VOEs held 0 and $0.2 million (net), respectively, of futures, forwards, options and swaps within their portfolios. For the three and six months ended June 30, 2021, we recognized zero and $0.9 million of gains, respectively, on these derivatives. For the three and six months ended June 30, 2020, we recognized $0.8 million and $0.9 million of losses, respectively, on these derivatives. These gains and losses are recognized in investment gains (losses) in the condensed consolidated statements of income.
As of both June 30, 2021 and December 31, 2020, the VOEs held 0 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 June 30, 2021 and December 31, 2020, the VOEs delivered $2.0 million0 and $1.2$0.1 million, respectively, of cash collateral in brokerage accounts. The VOEs report this cash collateral in the consolidated company-sponsored investment funds cash and cash equivalents in our condensed consolidated statements of financial condition.
Offsetting Assets and Liabilities
Offsetting of derivative assets of consolidated company-sponsored investment funds as of June 30, 20202021 and December 31, 20192020 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)
June 30, 2021:
Derivatives - VIEs$1,951 $0 $1,951 $0 $(442)$1,509 
December 31, 2020:     
Derivatives - VIEs$3,224 $0 $3,224 $0 $(513)$2,711 
Derivatives - VOEs$464 $0 $464 $0 $0 $464 
 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)
June 30, 2020:           
Derivatives - VIEs$1,332
 $—
 $1,332
 $—
 $(270) $1,062
Derivatives - VOEs$698
 $—
 $698
 $—
 $(698) $—
December 31, 2019: 
  
    
  
  
Derivatives - VIEs$4,833
 $—
 $4,833
 $—
 $(1,631) $3,202
Derivatives - VOEs$4,339
 $—
 $4,339
 $—
 $(534) $3,805


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Index
Offsetting of derivative liabilities of consolidated company-sponsored investment funds as of June 30, 20202021 and December 31, 20192020 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)
June 30, 2021:
Derivatives - VIEs$4,349 $0 $4,349 $0 $(989)$3,360 
December 31, 2020:     
Derivatives - VIEs$6,893 $0 $6,893 $0 $(4,201)$2,692 
Derivatives - VOEs$664 $0 $664 $0 $(138)$526 
 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)
June 30, 2020:           
Derivatives - VIEs$4,309
 $—
 $4,309
 $—
 $(3,800) $509
Derivatives - VOEs$1,746
 $—
 $1,746
 $—
 $(1,746) $—
December 31, 2019: 
  
    
  
  
Derivatives - VIEs$4,559
 $—
 $4,559
 $—
 $(3,155) $1,404
Derivatives - VOEs$5,083
 $—
 $5,083
 $—
 $(1,201) $3,882


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 June 30, 2020,2021, the net assets of company-sponsored investment products that are non-consolidated VIEs are approximately $63.5$73.3 billion, and our maximum risk of loss is our investment of $12.5$8.8 million in these VIEs and our advisory fee receivables from these VIEs which are not material.is $77.6 million.

15.     Units Outstanding

Units Outstanding

Changes in AB Units outstanding during the six-month period ended June 30, 20202021 were as follows:
 
Outstanding as of December 31, 20192020270,380,314270,509,658 
Options exercised5,182143,211 
Units issued408,0593,019,529 
Units retired(1)
(2,173,368(1,678,276))
Outstanding as of June 30, 20202021268,620,187271,994,122
(1) During the six-months ended June 30, 2021, we purchased 1,400 AB Units in private transactions and retired them.


16.     Debt
16.
Debt


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 September 27, 2023. 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 June 30, 2020,2021, 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.

25
Index

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: London Interbank Offered Rate; a floating base rate; or the Federal Funds rate.

As of June 30, 20202021 and December 31, 2019,2020, we had 0 amounts outstanding under the Credit Facility. DuringFurthermore, during the first six months of 20202021 and the full year 2019,2020, we did not draw upon the Credit Facility.

In addition to the Credit 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. 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.

As of June 30, 20202021 and December 31, 2019,2020, AB had $685.0$590.0 million and $560.0$675.0 million outstanding under the EQH Facility, in each case with an interest ratesrate of approximately 0.2% and 1.6%, respectively.. Average daily borrowings on the EQH Facility for the first six months of 2021 and the full year 2020 and for the 57 days it was available in 2019 were $591.0$551.2 million and $358.6$470.8 million, respectively, with weighted average interest rates of approximately 0.7%0.2% and 1.6%0.5%, respectively.

In addition to the EQH Facility, on September 1, 2020, AB established a new $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 Unsecured 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 June 30, 2021 and December 31, 2020, we had 0 amounts outstanding under the EQH Uncommitted Facility. Furthermore, during the first six months of 2021 and the full year 2020, we did not draw upon the EQH Uncommitted Facility.

As of June 30, 20202021 and December 31, 2019,2020, we had 0 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 six months of 2021 and full year 2020 and the 317 days commercial paper was outstanding in 2019 were $90.7$110.8 million and $438.6$83.2 million, respectively, with weighted average interest rates of approximately 0.7%0.2% and 2.6%0.4%, respectively.

AB has a $200.0 million committed, unsecured senior revolving credit facility (the "Revolver") with a leading international bank, which matures on November 16, 2021. 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. Borrowings under the Revolver 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: London Interbank Offered Rate; a floating base rate; or the Federal Funds rate. As of both June 30, 20202021 and December 31, 2019,2020, we had 0 amounts outstanding under the Revolver. Average daily borrowings under the Revolver during the first six months of 20202021 and full year 20192020 were $19.0$22.0 million and $23.5$16.5 million, respectively, with weighted average interest rates of approximately 1.7%1.1% and 3.2%1.6%, respectively.

In addition, SCB LLC currently has 3 uncommitted lines of credit with 3 financial institutions. NaN of these lines of credit permit us to borrow up to an aggregate of approximately $175.0$165.0 million, with AB named as an additional borrower,
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while the other line has no stated limit. As of June 30, 20202021 and December 31, 2019,2020, SCB LLC had 0 outstanding balance on these lines of credit. Average daily borrowingsWe did not draw on thethese lines of credit during the first six months of 2020 and2021. Average daily borrowings during the full year 20192020 were $1.8$0.9 million and $1.9 million, respectively, with a weighted average interest ratesrate of approximately 1.5% and 1.9%, respectively.1.6%.


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17.    Non-controlling Interests


17.
Non-controlling Interests

Non-controlling interest in net income for the three and six months ended June 30, 20202021 and 20192020 consisted of the following:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(in thousands)
Redeemable non-controlling interests:
    Consolidated company-sponsored investment funds3,573 20,940 $3,281 $(4,631)
Total non-controlling interest in net income$3,573 $20,940 $3,281 $(4,631)
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
  (in thousands)
Non-redeemable non-controlling interests:        
    Consolidated company-sponsored investment funds $—
 $—
 $—
 $—
    Other —
 58
 —
 74
Total non-redeemable non-controlling interests —
 58
 —
 74
Redeemable non-controlling interests:        
    Consolidated company-sponsored investment funds 20,940
 7,699
 (4,631) 17,799
Total non-controlling interest in net income $20,940
 $7,757
 $(4,631) $17,873


Redeemable non-controlling interest as of June 30, 20202021 and December 31, 20192020 consisted of the following:
 June 30, 2020 December 31, 2019
 (in thousands)
Consolidated company-sponsored investment funds$51,081
 $325,561
Total redeemable non-controlling interest$51,081
 $325,561

June 30, 2021December 31, 2020
(in thousands)
Consolidated company-sponsored investment funds$17,803 $102,359 
Total redeemable non-controlling interest$17,803 $102,359 
    
18. Related Party Master Repurchase Agreement

During April 2020, we provided a $125 million credit facility, through a Master Repurchase Agreement (“MRA”), to one of our sponsored private investment funds, of which $30 million was drawn upon as of April 28, 2020 and repaid in full in May 2020. NaN additional amounts were drawn during the second quarter of 2020. The amounts drawn upon the MRA, which are payable on demand, are collateralized by assets of the fund, can be repaid at any time prior to maturity and bear interest based upon the interest rate established at the time of each borrowing.
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Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations

Impact of COVID-19
General Economic Conditions
During the first quarter of 2020, the novel coronavirus global pandemic ("COVID-19")COVID-19 significantly impacted the global economy. The impact has been profound, has continued through the second quarterfirst six months of 20202021 and is likely tomay persist for months to come. While most businesses have re-opened, vaccinations are re-openingunderway (particularly in the U.S., the U.K., much of Europe, and Israel) and leading economic indicators are showing signs of improvement,have improved significantly, the overall extent and duration of COVID-19's impact on businesses and economic activity generally remains unclear. A severe recession in 2020 remains possible. Economic effects from COVID-19, which have impacted virtually all countries and industries, include:
Many small and large businesses being forced to interrupt their operations and as a result, lay off employees or even close;
The re-opening and subsequent shuttering again of certain businesses in various states across the country;
Temporary large-scale population lock-downs, domestic and international travel restrictions and social-distancing measures were implemented, driving sharp declines in consumer and business spending during the first quarter. Further, while businesses began their re-opening process during the second quarter and consumer spending increased, uncertainty remains; and
Significant declines and increased volatility impacted global financial markets during the first quarter, including 23.2% and 20.0% declines in the Dow Jones Industrial Average (“Dow”) and S&P 500 Index (“S&P”), respectively. Although the financial markets have recovered much of the first quarter losses during the second quarter, including approximate 22.2% and 23.6% increases in the Dow and S&P, respectively, the prospect of continued volatility remains (please see "Market Environment" below for additional details).

Governments around the world have responded to COVID-19 with economic stimulus measures, including a $2 trillion emergency relief bill passed in the U.SU.S. during the first quarter of 2020, an additional $900 billion in aid passed during the fourth quarter of 2020, and additionalthe most recent $1.9 trillion COVID-19 relief package passed in the first quarter of 2021. Similar fiscal stimulus is being considered.was passed by many governments around the world. These measures arewere intended to steady businesses and consumers until economic activity meaningfully recovers.recovered and were largely successful in doing so. The timingU.S. economy has experienced a strong recovery; however, the continuing strength of the recovery and magnitudethe possibility of any such recovery, however,a new downturn resulting from a possible resurgence of COVID-19 remains uncertain.
During June 2020
Various countries around the world, and over the past few weeks, several states, particularlycertain areas in the South and West,U.S., have experiencedcontinued to experience surges in the rates of COVID-19 infections. These surges are likelyinfections, which have resulted from the resultemergence and spread of virus variants (particularly the "delta variant"), greatly increased social interactions, including at colleges and universities and social venues, after these states began to re-open their economies. As a result, several states have paused their re-openings or re-imposed closing mandates on certain business,re-opening of economies, and decreased usage of mitigation techniques, such as bars. Although the partial re-openings in various states have alarmed health officials, governors, in many cases, have indicated a reluctance to re-impose broad lockdown requirements,mask wearing and it is not clear whether partial measures, including social distancing, will be adequate to address this rapid new spreadingin combination with large portions of the virus. Furthermore, it remains unclear whether states and municipalities acrosspopulation remaining unvaccinated. These ongoing circumstances surrounding the U.S. will be able to safely re-open schools in several weeks given the spread of the virus which may further complicate re-opening the economy. These circumstances may adversely affect consumer sentiment and the pacedurability of business re-openings, and they also may delay anyslow economic recovery.recovery and possibly cause additional market volatility and even a new downturn.

AB Impact
At the initial onset of COVID-19 during the first quarter of 2020, we quickly responded in the various jurisdictions where we operate, including the U.S., the U.K., Tokyo, Hong Kong, Shanghai, Singapore and Taiwan. We implemented business continuity measures, including travel restrictions and a work-from-home requirement for almost all personnel (other than a relatively small number of employees whose physical presence in our offices was considered critical), which hasgenerally have remained in place (except in our Asia offices, mostthroughout 2020 and the first six months of which have reopened) throughout the second quarter,2021 to ensure operating continuity for all critical functions. We also instituted a notification process, which persists today, for any employee who tests positive for COVID-19 or has been exposed to someone else who has tested positive. As the COVID-19 crisis has continued to evolve duringsince the secondlockdown in the first quarter of 2020, certain key functions of the business, such as Risk Management, Business Continuity, Finance and Human Capital, have maintained constant communication and monitored the evolution of the pandemic to keep our employees safe and advise ofdisseminate information regarding key developments. Additionally, we have continuedcontinue to communicate withmonitor communications from the World Health Organization and the U.S. Centers for Disease Control and Prevention to ensure we have current information.
Technology enhancementsWe have continued to evolve throughout the second quarter,enhance our technology, which havehas increased the successeffectiveness of our remote work force. We have also continued to enhance our virtual programs to support business functions, such as training on cybersecurity and enhancements to our existing technology platforms. There has been a heightened focus on the emotional well-being of our employees, and we have provided regular touch points with employees through virtual town halls and management communications. Additionally, we have maintained regular communications and updates on the virus and the Company's response, which are posted inon the Company's internal website, to ensure transparent communication with our employees. If any of our employees test positive for COVID-19 or interact with someone who has the virus, they are required to contact AB immediately for support.
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We have started to consider, and in some cases implement,are implementing return to the office programs for our U.S. and European offices.offices and are in the process of gradually bringing our workforce back into the office, across each of our U.S. and European locations, during the third quarter of 2021. However, we continue to monitor the daily evolution of the crisispandemic, including the spread of the delta variant, in order to ensure the health and safety of our employees remains our top priority. We will modify our return to office plans, as needed, to ensure the safety of our employees and to ensure that the highest safety and cleanliness protocols are followed. We believe that our business continuity plan and technology platform will continue to support the effectiveness of our employees working remotely.remotely to the extent that we continue that arrangement.
Asset managers, such as AB, rely heavily on the performance of the financial markets to largely determine assets under management (“AUM”) and revenues. Our results during the first quarter of 2020 remained strong, which was primarily a reflection of financial market conditions during January and February, which were not adversely affected by COVID-19. Market conditions deteriorated dramatically during March, which negatively impacted our performance in that month. Financial markets, and hence our performance, have rebounded during the second quarter, primarily due to a U.S. Federal Government stimulus package and U.S. Treasury programs, which were instituted during March 2020 and throughout the second quarter. These programs renewed confidence in the financial markets by introducing liquidity through government purchasing of financial instruments. As various states began to ease restrictions on business and lockdown protocols during the second quarter, increases in consumer spending, decreases in the unemployment rate and improvement in other leading economic indicators also stimulated financial market performance. As a result of these developments in the second quarter, our AUM has increased. However, as states continued to ease restrictions during June 2020, there was a resurgence in the spread of the virus, causing certain states to, among other things, shutter businesses again. As a result, markets continue to be volatile.
The economic impact of COVID-19 and any additional declines in the financial markets could have a significant adverse effect on our AUM and revenues, particularly if economic activity does not continue to recover. Although countries throughout the world arecontinue to grapple with re-opening their economies, this will continue to be a gradual process, and there is a significant risk that the opening process will have tomay be interrupted or reversed if infection rates increase. Also, there is the prospect that high levels ofalthough unemployment rates have declined, they are still considered
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elevated and any reluctance of consumers to resume spending willcould do long-term damage to the global economy, which would have an adverse effect on our business. Additionally, as most of our workforce iscontinues working remotely, at least part of the time, we are mindful of increased risk related to cybersecurity, which could significantly disrupt our business functions.
Ultimately, the return to normal business and economic activity will likely require the development and broad application of an effective vaccine. Althoughvaccines. The distribution of multiple safe, effective vaccines was initiated towards the end of the fourth quarter of 2020 and the distribution of such vaccines increased globally through the first six months of 2021. However, vaccination rates in the U.S. plateaued, and in some areas began to decrease, by the end of the second quarter of 2021. If global vaccination rates do not improve further, a number of companies have made encouraging progresssignificant risk will remain that COVID-19 and/or a variant thereof, could accelerate global health concerns and, in this regard, there is no certainty that they will be successful. Also, even if an effective vaccine is developed, it could be many months before it becomes broadly available.so doing, cause heightened market and economic turmoil in the future.

Executive Overview
Our total assets under management (“AUM”) as of June 30, 20202021 were $600.0$738.4 billion, up $58.2$41.2 billion, or 10.7%5.9%, compared to March 31, 2020,2021, and up $19.2$138.4 billion, or 3.3%23.1%, compared to June 30, 2019.2020. During the second quarter of 2020,2021, AUM increased as a result of market appreciation of $61.5$35.0 billion partially offset byand net outflowsinflows of $3.3$6.2 billion (Institutional(Retail net outflowsinflows of $6.4$5.2 billion, Institutional net inflows of $0.9 billion and Private Wealth Management net outflows of $0.7 billion were partially offset by Retail net inflows of $3.8$0.1 billion). Excluding AXA S.A. ("AXA") redemptions of low-fee fixed income mandates of $7.9$1.3 billion in the second quarter, the firm generated net inflows of $4.6$7.5 billion in the second quarter (see discussion below). During the twelve months ended June 30, 2020,2021, AUM increased primarily as a result of market appreciation of $13.2$120.7 billion and net inflows of $5.8$17.7 billion (Retail(Institutional net inflows of $11.0$8.7 billion, were partially offset by InstitutionalRetail net outflowsinflows of $3.1$7.9 billion and Private Wealth Management net outflowsinflows of $2.1$1.1 billion). Excluding AXA's redemption of low-fee fixed income mandates of $8.9$4.2 billion in the first half of 2020,(see discussion below), the firm generated net inflows of $14.7$21.9 billion during the twelve months ended June 30, 2020.2021. These AXA redemptions, which began in the first quarter of 2020, are now essentially complete.

Institutional AUM increased $19.5$14.4 billion, or 7.6%4.6%, to $276.2$329.1 billion during the second quarter of 2020,2021, due to market appreciation of $25.9$13.5 billion partially offset by net outflows of $6.4 billion. Excluding AXA's redemption of low-fee fixed income mandates of $7.9 billion, institutionaland net inflows were $1.5 billion in the second quarter.of $0.9 billion. Gross sales increased sequentially from $3.9$4.9 billion during the first quarter of 20202021 to $8.8$17.6 billion during the second quarter of 2020.2021. Redemptions and terminations increased sequentially from $2.9$2.8 billion to $12.7$13.7 billion. Additionally, AB experienced $8.7 billion in sales and $10.0 billion in redemptions associated with Equitable Holding’s sale to Venerable Holdings of its legacy variable annuity assets, for which AB remained the preferred investment manager. Our ending Institutional channel AUM reflects $1.3 billion in net outflows as a result of this transaction.

Retail AUM increased $30.9$21.4 billion, or 15.6%7.9%, to $229.5$293.7 billion during the second quarter of 2020, primarily2021, due to market appreciation of $26.9$16.2 billion and net inflows of $3.8$5.2 billion. Gross sales increased sequentially from $23.0 billion during the first quarter of 2021 to $23.8 billion during the second quarter of 2021. Redemptions and terminations decreased sequentially from $17.7 billion to $15.3 billion.

Private Wealth Management AUM increased $5.4 billion, or 4.9%, to $115.6 billion during the second quarter of 2021, due to market appreciation of $5.3 billion and net inflows of $0.1 billion. Gross sales decreased sequentially from $24.2$5.4 billion during the first quarter of 20202021 to $19.6$3.6 billion during the second quarter of 2020.2021. Redemptions and terminations decreased sequentially from $25.6$3.7 billion to $14.5$3.4 billion.

Private Wealth Management AUM increased $7.8 billion, or 9.0%, to $94.3 billion during the second quarter of 2020, primarily due to market appreciation of $8.7 billion, partially offset by net outflows of $0.7 billion. Gross sales decreased sequentially from $3.5 billion during the first quarter of 2020 to $3.4 billion during the second quarter of 2020. Redemptions and terminations were flat at $4.2 billion.

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Bernstein Research Services revenue for the second quarter of 20202021 was $113.6$105.7 million, up $7.6down $8.0 million, or 7.2%7.0%, compared to the second quarter of 20192020 due to higherreduced customer trading activity driven by decreased market volatility, which ledas compared to greater customer activity and more robustthe COVID-related significant surge in trading volumes acrossvolume experienced during the business.second quarter of 2020.

Net revenues for the second quarter of 20202021 increased $13.7$205.4 million, or 1.6%23.6%, to $871.4 million$1.1 billion from $857.8$871.4 million in the second quarter of 2019.2020. The increase was primarily due to higher investment gainsadvisory base fees of $13.2$154.4 million, higher performance-based fees of $45.0 million and higher distribution revenues of $11.8 million and higher Bernstein Research Services revenue of $7.6$35.4 million, partially offset by lower investment advisory base feesgains of $15.8$20.0 million and lower performance-based feesBernstein Research Services revenue of $2.4$8.0 million. Operating expenses for the second quarter of 2020 decreased $11.82021 increased $131.4 million, or 1.7%19.9%, to $661.8$793.2 million from $673.6$661.8 million in the second quarter of 2019.2020. The decreaseincrease was primarily due to lowerhigher employee compensation and benefits expenses of $14.1$86.1 million, higher promotion and lower interest on borrowingsservicing expense of $2.9$46.0 million partially offset byand higher general and administrative expenses (including real estate charges) of $6.2$4.4 million, partially offset by lower amortization of intangible assets of $5.2 million. Our operating income increased $25.4$74.0 million, or 13.8%35.3%, to $209.6$283.6 million from $184.2$209.6 million and our operating margin increased to 26.0% in the second quarter of 2021 from 21.7% in the second quarter of 2020 from 20.6% in2020.

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Market Environment
U.S. equity markets were strong during the second quarter, of 2019.

Market Environment
Whileas the first quarter experienced historically sharp declines in global markets in responseeconomy continued reopening and more people returned to the COVID-19 pandemic, the second quarter reversed much of those losses with some of the highest gains in decades.work. The S&P 500 reached a new all-time high in June, while the Dow Jones Industrial Average and Nasdaq each ralliedalso finished the quarter in positive territory. However, the combination of increased consumer demand and disrupted supply chains, a result of the ripple effects of the pandemic, have created inflationary pressures in the short-term. In response, the Federal Reserve raised its inflation projections but remains patient on increasing interest rates. In the U.K., economic outlook brightened as GDP forecasts were upgraded and the Bank of England indicated it would slow the pace of quantitative easing. In China, equities struggled during the second quarter as aggressive stimulusa result of increasing regulations on Chinese technology companies. However, growth for the year remains likely in China. Political tensions between China and vaccine optimism reduced concerns over COVID-19’s spread. Despite the strong stock market performanceU.S. continue to linger, with nothing substantial arising from a meeting between the administrations earlier in the second quarteryear. Lastly, continued spread of COVID-19, particularly the delta variant, among those who are unvaccinated remains concerning and July 2020, the state of the U.S. economy remains unsteady, as unemployment remainscould cause significant market disruption in double digits, much of the U.S. has been experiencing spikes in COVID-19 infection rates, civil unrest has emerged across the U.S. centered around racial equality, and concerns are growing (and being exacerbated by the foregoing three factors) over the upcoming U.S. elections. The U.S. Federal Reserve cut interest rates to near zero, committed to buy investment grade and high yield corporate bonds and announced substantial quantitative easing. The fiscal stimulus packages issued during the second quarter included an increase in unemployment benefits and forgivable loans to small businesses. More stimulus appears likely in the U.S., aimed at mitigating the long-term effects of the pandemic lockdowns; this could temper significant volatility in the second half of 2020.future periods.

In the U.K., uncertainties surrounding Brexit and the slow decline in COVID-19 cases continue to restrain the U.K. market. A trade deal between the European Union and the U.K. may be implemented by the end of 2020. China has emerged from its shutdown after being the first country to enter the COVID-19 crisis. The Chinese government announced further stimulus measures, while the People’s Bank of China is making monetary policy more accommodative.

MiFID II
In Europe, MiFID II, which becamehas been effective on January 3,since 2018, has made significant modifications tosignificantly modified how European broker-dealers can be compensated for research. These modifications are believed to have significantly reduced the overall research spend by many European buy-side firms, which has decreased the revenues we deriveearn from these clients. If this trend continues, the revenues we earn from our European clients. Our European clients may continue to reduce their research budgets, which could result in a significant decline in our sell-side revenues.would deplete further.

Also, while MiFID II isdoes not applicable to firms operatingapply outside of Europe, competitive and client pressures may force buy-side firms operating outside of Europe to pay for research from their own resources instead of through bundled trading commissions. If thatthis occurs, we would expect that research budgets from those clients, will decrease further, which could result in an additional significant decline inas well as our sell-side revenues.revenues, may decrease further. Additionally, these competitive and client pressures may result incould force our buy-side operation payingto pay for research out of our own resourcesrevenues instead of through bundled trading commissions, which could increase our firm'sfirm’s expenses and decrease our operating income.

The ultimateLastly, although the impact of MiFID II on payments for research globally, currently is largely known, the ultimate, global impact is still uncertain.
Relationship with Equitable Holdings and AXA
During the second quarter of 2018, AXA S.A.Prior to an initial public offering ("AXA"IPO") completed the sale of a minority stake inby Equitable Holdings, Inc. (“EQH”) through an initial public offering ("IPO").in May of 2018, EQH was a wholly-owned subsidiary of AXA. Since then,the IPO, AXA has completed additional offerings and taken other steps, most recently during the fourth quarter of 2019. As a result, AXA owned less than 10% of the outstanding common stock of EQH as of June 30, 2020.fully divested its ownership in EQH.

While we cannot at this time predict the fullThe impact on AB of this transaction, such impactAXA's divestment has included a reduction in the support AXA provided to AB in the past with respect to AB's investment management business, resulting in a modest decrease in our revenues and ability to initiate new investment services. Also, AB relies on AXA, including its subsidiary, AXA Business Services,
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for a number of significant services and AB has benefited from its affiliation with AXA in certain common vendor relationships. Some of these arrangements are expected to change with possible negative financial implications for AB.

Our ending AUM at June 30, 20202021, of which 2.8% remains investments by AXA, reflects $8.9$13.1 billion in outflows resulting from AXA's redemption of certain low-fee fixed income mandates, of which $7.9including $1.3 billion was redeemedin redemptions made during the second quarter. We expect thesethree months ended June 30, 2021. These redemptions, which began in the first quarter of 2020, are now essentially complete. Additional redemptions in future periods are possible and would be at the complete discretion of AXA.

AB and EQH are collaborating to total approximately $14 billion, witheach firm's expected mutual benefit to improve the majorityrisk adjusted yield for EQH's General Account by investing more assets at AB, including the utilization of the remaining redemptions expected to be completed during the second half of 2020. The revenue we earn from the management of these assets is not significant.AB's higher-fee, longer-duration alternative offerings.

Relocation Strategy
On May 2, 2018, weWe previously announced that we would establish our corporate headquarters in, and relocate approximately 1,0501,250 jobs located in the New York metro area to, Nashville, TN. Subsequently, on January 14, 2020, we announced our plans to relocate an additional 200 jobs to Nashville thereby increasing the total relocated jobs to 1,250. The decision to add the additional jobs was the result of the growth in our business, select investments we are making, and the insourcing of roles typically performed by consultants. Our Nashville headquarters will househouses Finance, IT, Operations, Legal, Compliance, Internal Audit, Human Capital, and Sales and Marketing. We have been actively relocating jobs (although COVID-19 has slowed our pace) and expect this transition to take several more years. We have begun the process of moving into our new headquarters office building located at 501 Commerce Street in downtown Nashville. We will continue to maintain a principal location in New York City, which will househouses our Portfolio Management, Sell-Side Research and Trading, and New York-based Private Wealth Management businesses.

We believe relocating our corporate headquarters to Nashville will affordaffords us the opportunity to provide an improved quality of life alternative for our employees and enable us to attract and recruit new talented employees to a highly desirable location while improving the long-term cost structure of the firm.

During the transition period, which began in 2018 and is expected to continue through 2024, we currently estimate that we will incur transition costs of approximately $155$145 million to $165$155 million. These costs include employee relocation, severance, recruitment, and overlapping compensation and occupancy costs. Over this same period, we expect to realize total expense savings of approximately $185$205 million to $195 million, an amount greater than$215 million. However, we did incur some transition costs before we began to realize
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expense savings. For the total transition costs. Throughperiod beginning in 2018 and ending in the end of the firstfourth quarter of 2020, we incurred $51$70 million of cumulative transition costs compared to $22$46 million of cumulative savings, resulting in an overall net cost of $29 million for the 2018 through the first quarter of 2020 periods.savings. In addition, we incurred $6$14 million of transition costs for the threesix months ended June 30, 20202021 compared to $7$19 million of expense savings, resulting in an overall net savings of $1$5 million for the period. We currently anticipate an EPU reductionincrease in 20202021 of approximately $0.02 resulting from our relocation strategy, which compares to the $0.06$0.01 EPU reductionincrease that occurred in 2019.2020. We also expect to achieve a slight accretion in EPU in 2021 and then achieve EPU accretion in each year thereafter. Beginning in 2025, once the transition period has been completed, we estimate ongoing annual expense savings towards the upper end of approximatelythe range of $75 million to $80 million, which will result from a combination of occupancy and compensation-related savings. Our estimates for both the transition costs and the corresponding expense savings are based on our current assumptions of employee relocation costs, severance, and overlapping compensation and occupancy costs. In addition, our estimates for both the timing of when we incur transition costs and realize the related expense savings are based on our current relocation implementation plan and the timing for execution of each phase. The actual total charges we eventually record, the related expense savings we realize, and timing and magnitude of EPU impact are expected tomay differ from our current estimates as we implement each phase of our headquarters relocation.

During October 2018, we signed a lease, which is scheduled to commencecommenced in the fourth quarter of 2020, relating to 218,976 square feet of space at our newly constructednew Nashville headquarters. Our estimated total base rent obligation (excluding taxes, operating expenses and utilities) over the 15-year initial lease term is $134 million.

Although we have presented our transition costs and annual expense savings with numerical specificity, and we believe these targets to be reasonable as of the date of this report, the uncertainties surrounding the assumptions we discuss above create a significant risk that these targets may not be achieved.  Accordingly, the expenses we actually incur and the savings we actually realize may differ from our targets, particularly if actual events adversely differ from one or more of our key assumptions.  The transition costs and expense savings, together with their underlying assumptions, are Forward-Looking Statements and can be affected by any of the factors discussed in “Risk Factors” and “Cautions Regarding Forward-Looking Statements” in this 10-Q and our 20192020 10-K. We strongly caution investors not to place undue reliance on any of these assumptions or our cost and expense targets.  Except as may be required by applicable securities laws, we are not under any obligation, and we expressly disclaim any obligation, to update or alter any assumptions, estimates, financial goals, targets, projections or other related statements that we may make.




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Adjusted Operating Margin Target

We previously adopted a goal of increasing our adjusted operating margin to a target of 30% by 2020 (the “2020 Margin Target”), subject to the assumptions, factors and contingencies described as part of the initial disclosure of this target. Our adjusted operating margin, which was 27.5% during 2019, increased to 27.8% during the first six months of 2020.

Our AUM and, therefore, our investment advisory revenues, including performance-based fee revenues, are heavily dependent on the level and volatility of the financial markets. Based upon our current revenue and expense projections, we do not believe that achieving the 2020 Margin Target is likely. However, we are taking additional actions to better align our expenses with our expected revenues. We remain committed to achieving an adjusted operating margin of 30% in years subsequent to 2020 and will take continued actions in this regard, subject to prevailing market conditions and the evolution of our business mix. Furthermore, our revenues may continue to be affected by the economic impact of COVID-19. Please refer to “Impact of COVID-19” above and "Risk Factors" below for additional information regarding the effect on our business COVID-19 has had and may continue to have.

Assets Under Management

Assets under management by distribution channel are as follows:
 As of June 30,
 20212020$ Change% Change
 (in billions)
Institutions$329.1 $276.2 $52.9 19.2 %
Retail293.7 229.5 64.2 28.0 
Private Wealth Management115.6 94.3 21.3 22.6 
Total$738.4 $600.0 $138.4 23.1 %

31
 As of June 30,    
 2020 2019 $ Change % Change
 (in billions)  
        
Institutions$276.2
 $269.1
 $7.1
 2.6 %
Retail229.5
 214.5
 15.0
 7.0
Private Wealth Management94.3
 97.2
 (2.9) (3.0)
Total$600.0
 $580.8
 $19.2
 3.3
Index

Assets under management by investment service are as follows:

 As of June 30,    
 2020 2019 $ Change % Change
 (in billions)  
Equity       
Actively Managed$173.1
 $161.8
 $11.3
 7.0 %
Passively Managed(1)
54.3
 57.4
 (3.1) (5.3)
Total Equity227.4
 219.2
 8.2
 3.7
        
Fixed Income 
  
  
  
Actively Managed 
  
  
  
Taxable247.9
 240.8
 7.1
 3.0
Tax–exempt47.1
 44.3
 2.8
 6.2
 295.0
 285.1
 9.9
 3.5
        
Passively Managed(1)
9.9
 9.5
 0.4
 4.1
Total Fixed Income304.9
 294.6
 10.3
 3.5
        
Other(2)
    

  
 Actively Managed65.9
 65.8
 0.1
 0.3
Passively Managed(1)
1.8
 1.2
 0.6
 46.0
Total Other67.7
 67.0
 0.7
 1.1
Total$600.0
 $580.8
 $19.2
 3.3
 As of June 30,
 20212020$ Change% Change
 (in billions)
Equity
Actively Managed$256.7 $173.1 $83.6 48.3 %
Passively Managed(1)
69.5 54.3 15.2 28.1 
Total Equity326.2 227.4 98.8 43.5 
Fixed Income   
Actively Managed   
Taxable252.3 247.9 4.4 1.7 
Tax–exempt54.0 47.1 6.9 14.8 
 306.3 295.0 11.3 3.8 
Passively Managed(1)
9.3 9.9 (0.6)(5.8)
Total Fixed Income315.6 304.9 10.7 3.5 
Alternatives/Multi-Asset Solutions(2)
 Actively Managed92.8 65.9 26.9 40.7 
Passively Managed(1)
3.8 1.8 2.0 110.6 
Total Alternatives/Multi-Asset Solutions96.6 67.7 28.9 42.5 
Total$738.4 $600.0 $138.4 23.1 %
(1)Includes index and enhanced index services.
(2)Includes certain multi-asset solutions and services not included in equity or fixed income services. Prior to December 31, 2020, this investment service line was disclosed as “Other.” In order to reflect the increasing significance of our Alternatives and certain alternative investments.Multi-Asset Solutions services, we updated the investment service line to “Alternatives and Multi-Asset Solutions."

Index
32

Index
Changes in assets under management for the three-month, six-month and twelve-month periods ended June 30, 20202021 are as follows:

 Distribution Channel
 Institutions Retail 
Private
Wealth Management
 Total
 (in billions)
Balance as of March 31, 2020$256.7
 $198.6
 $86.5
 $541.8
Long-term flows: 
  
  
  
Sales/new accounts8.8
 19.6
 3.4
 31.8
Redemptions/terminations(12.7) (14.5) (4.2) (31.4)
Cash flow/unreinvested dividends(2.5) (1.3) 0.1
 (3.7)
Net long-term (outflows) inflows(6.4) 3.8
 (0.7) (3.3)
Transfers—
 0.2
 (0.2) —
Market appreciation25.9
 26.9
 8.7
 61.5
Net change19.5
 30.9
 7.8
 58.2
Balance as of June 30, 2020$276.2
 $229.5
 $94.3
 $600.0
        
Balance as of December 31, 2019$282.7
 $239.2
 $101.0
 $622.9
Long-term flows: 
  
  
  
Sales/new accounts12.7
 43.8
 7.0
 63.5
Redemptions/terminations(15.6) (40.0) (8.5) (64.1)
Cash flow/unreinvested dividends(3.1) (5.4) 0.2
 (8.3)
Net long-term outflows(6.0) (1.6) (1.3) (8.9)
Acquisition—
 0.2
 —
 0.2
Transfers0.1
 0.1
 (0.2) —
Market depreciation(0.6) (8.4) (5.2) (14.2)
Net change(6.5) (9.7) (6.7) (22.9)
Balance as of June 30, 2020$276.2
 $229.5
 $94.3
 $600.0
        
Balance as of June 30, 2019$269.1
 $214.5
 $97.2
 $580.8
Long-term flows:       
Sales/new accounts20.9
 83.9
 12.0
 116.8
Redemptions/terminations(21.0) (62.9) (14.4) (98.3)
Cash flow/unreinvested dividends(3.0) (10.0) 0.3
 (12.7)
Net long-term (outflows) inflows(3.1) 11.0
 (2.1) 5.8
Transfers0.1
 0.1
 (0.2) —
Acquisition—
 0.2
 —
 0.2
Market appreciation (depreciation)10.1
 3.7
 (0.6) 13.2
Net change7.1
 15.0
 (2.9) 19.2
Balance as of June 30, 2020$276.2
 $229.5
 $94.3
 $600.0
        

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 March 31, 2020$141.5
 $47.2
 $236.1
 $45.9
 $10.3
 $60.8
 $541.8
Long-term flows: 
  
  
  
  
  
  
Sales/new accounts13.8
 —
 15.0
 2.3
 —
 0.7
 31.8
Redemptions/terminations(9.3) —
 (18.8) (2.6) (0.1) (0.6) (31.4)
Cash flow/unreinvested dividends(1.7) (1.5) (1.3) —
 (0.5) 1.3
 (3.7)
Net long-term inflows (outflows)2.8
 (1.5) (5.1) (0.3) (0.6) 1.4
 (3.3)
Market appreciation28.8
 8.6
 16.9
 1.5
 0.2
 5.5
 61.5
Net change31.6
 7.1
 11.8
 1.2
 (0.4) 6.9
 58.2
Balance as of June 30, 2020$173.1
 $54.3
 $247.9
 $47.1
 $9.9
 $67.7
 $600.0
              
Balance as of December 31, 2019$177.2
 $60.1
 $258.3
 $47.1
 $9.3
 $70.9
 $622.9
Long-term flows: 
  
  
  
  
  
  
Sales/new accounts25.9
 0.4
 29.7
 5.2
 0.1
 2.2
 63.5
Redemptions/terminations(18.4) (0.1) (38.5) (5.5) (0.2) (1.4) (64.1)
Cash flow/unreinvested dividends(3.3) (3.1) (2.7) —
 0.2
 0.6
 (8.3)
Net long-term inflows (outflows)4.2
 (2.8) (11.5) (0.3) 0.1
 1.4
 (8.9)
Acquisition—
 —
 —
 —
 —
 0.2
 0.2
Market (depreciation) appreciation(8.3) (3.0) 1.1
 0.3
 0.5
 (4.8) (14.2)
Net change(4.1) (5.8) (10.4) —
 0.6
 (3.2) (22.9)
Balance as of June 30, 2020$173.1
 $54.3
 $247.9
 $47.1
 $9.9
 $67.7
 $600.0
              
Balance as of June 30, 2019$161.8
 $57.4
 $240.8
 $44.3
 $9.5
 $67.0
 $580.8
Long-term flows:

 

 

 

 

 

  
Sales/new accounts43.8
 1.0
 58.1
 10.1
 —
 3.8
 116.8
Redemptions/terminations(31.9) (0.8) (54.4) (8.4) (0.4) (2.4) (98.3)
Cash flow/unreinvested dividends(5.8) (5.6) (2.7) —
 0.2
 1.2
 (12.7)
Net long-term inflows (outflows)6.1
 (5.4) 1.0
 1.7
 (0.2) 2.6
 5.8
Acquisition—
 —
 —
 —
 —
 0.2
 0.2
Market appreciation (depreciation)5.2
 2.3
 6.1
 1.1
 0.6
 (2.1) 13.2
Net change11.3
 (3.1) 7.1
 2.8
 0.4
 0.7
 19.2
Balance as of June 30, 2020$173.1
 $54.3
 $247.9
 $47.1
 $9.9
 $67.7
 $600.0
 Distribution Channel
 InstitutionsRetailPrivate
Wealth Management		Total
 (in billions)
Balance as of March 31, 2021$314.7 $272.3 $110.2 $697.2 
Long-term flows:    
Sales/new accounts17.6 23.8 3.6 45.0 
Redemptions/terminations(13.7)(15.3)(3.4)(32.4)
Cash flow/unreinvested dividends(3.0)(3.3)(0.1)(6.4)
Net long-term inflows(1)
0.9 5.2 0.1 6.2 
Transfers— — — — 
Market appreciation13.5 16.2 5.3 35.0 
Net change14.4 21.4 5.4 41.2 
Balance as of June 30, 2021$329.1 $293.7 $115.6 $738.4 
Balance as of December 31, 2020$315.6 $265.3 $105.0 $685.9 
Long-term flows:    
Sales/new accounts22.5 46.9 9.0 78.4 
Redemptions/terminations(16.5)(33.0)(7.1)(56.6)
Cash flow/unreinvested dividends(4.3)(6.0)— (10.3)
Net long-term inflows(1)
1.7 7.9 1.9 11.5 
Transfers(0.2)0.2 — — 
Market appreciation12.0 20.3 8.7 41.0 
Net change13.5 28.4 10.6 52.5 
Balance as of June 30, 2021$329.1 $293.7 $115.6 $738.4 
Balance as of June 30, 2020$276.2 $229.5 $94.3 $600.0 
Long-term flows:
Sales/new accounts40.6 82.0 16.3 138.9 
Redemptions/terminations(24.1)(62.5)(15.1)(101.7)
Cash flow/unreinvested dividends(7.8)(11.6)(0.1)(19.5)
Net long-term inflows(1)
8.7 7.9 1.1 17.7 
Transfers1.1 (0.5)(0.6)— 
Market appreciation43.1 56.8 20.8 120.7 
Net change52.9 64.2 21.3 138.4 
Balance as of June 30, 2021$329.1 $293.7 $115.6 $738.4 
(1)Institutional net flows include $1.3 billion, $1.3 billion and $4.2 billion of AXA's redemptions of certain low-fee fixed income mandates for the three-month, six-month and twelve-month periods ended June 30, 2021, respectively.
33
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)
Alternatives/ Multi-Asset Solutions(2)
Total
 (in billions)
Balance as of March 31, 2021$231.8 $66.3 $252.2 $51.8 $8.3 $86.8 $697.2 
Long-term flows:       
Sales/new accounts18.3 0.4 16.3 3.2 0.8 6.0 45.0 
Redemptions/terminations(9.8)(0.3)(19.9)(1.7)(0.1)(0.6)(32.4)
Cash flow/unreinvested dividends(2.9)(1.8)(1.7)— 0.2 (0.2)(6.4)
Net long-term inflows (outflows)(3)
5.6 (1.7)(5.3)1.5 0.9 5.2 6.2 
Market appreciation19.3 4.9 5.4 0.7 0.1 4.6 35.0 
Net change24.9 3.2 0.1 2.2 1.0 9.8 41.2 
Balance as of June 30, 2021$256.7 $69.5 $252.3 $54.0 $9.3 $96.6 $738.4 
Balance as of December 31, 2020$217.8 $64.5 $263.2 $50.3 $8.5 $81.6 $685.9 
Long-term flows:       
Sales/new accounts33.9 0.6 28.7 6.7 0.8 7.7 78.4 
Redemptions/terminations(19.1)(0.8)(32.1)(3.8)(0.2)(0.6)(56.6)
Cash flow/unreinvested dividends(5.5)(3.5)(2.6)0.2 0.5 0.6 (10.3)
Net long-term inflows (outflows)(3)
9.3 (3.7)(6.0)3.1 1.1 7.7 11.5 
Market appreciation (depreciation)29.6 8.7 (4.9)0.6 (0.3)7.3 41.0 
Net change38.9 5.0 (10.9)3.7 0.8 15.0 52.5 
Balance as of June 30, 2021$256.7 $69.5 $252.3 $54.0 $9.3 $96.6 $738.4 
Balance as of June 30, 2020$173.1 $54.3 $247.9 $47.1 $9.9 $67.7 $600.0 
Long-term flows:   
Sales/new accounts59.4 1.8 53.3 11.7 0.8 11.9 138.9 
Redemptions/terminations(37.4)(2.6)(51.9)(7.7)(0.3)(1.8)(101.7)
Cash flow/unreinvested dividends(9.6)(4.8)(5.7)0.4 (1.1)1.3 (19.5)
Net long-term inflows (outflows)(3)
12.4 (5.6)(4.3)4.4 (0.6)11.4 17.7 
Market appreciation71.2 20.8 8.7 2.5 — 17.5 120.7 
Net change83.6 15.2 4.4 6.9 (0.6)28.9 138.4 
Balance as of June 30, 2021$256.7 $69.5 $252.3 $54.0 $9.3 $96.6 $738.4 
(1)Includes index and enhanced index services.
(2)Includes certain multi-asset solutions and services not included in equity or fixed income services. Prior to December 31, 2020, this investment service line was disclosed as “Other.” In order to reflect the increasing significance of our Alternatives and certain alternative investments.Multi-Asset Solutions services, we updated the investment service line to “Alternatives and Multi-Asset Solutions."

(3)    Fixed income – taxable investment service net flows include $1.3 billion, $1.3 billion and $4.2 billion of AXA's redemptions of certain low-fee fixed income mandates for the three-month, six-month and twelve-month periods ended June 30, 2021, respectively.
34
Index


Net long-term inflows (outflows) for actively managed investment services as compared to passively managed investment services for the three-month, six-month and twelve-month periods ended June 30, 20202021 are as follows:
 Periods Ended June 30, 2021
 Three-monthsSix-monthsTwelve-months
 (in billions)
Actively Managed
  Equity$5.6 $9.3 $12.4 
 Fixed Income(3.8)(2.9)0.1 
Alternatives/Multi-Asset Solutions4.9 6.8 10.2 
6.7 13.2 22.7 
Passively Managed   
  Equity(1.7)(3.7)(5.6)
 Fixed Income0.9 1.1 (0.6)
Alternatives/Multi-Asset Solutions0.3 0.9 1.2 
 (0.5)(1.7)(5.0)
Total net long-term inflows$6.2 $11.5 $17.7 
 Periods Ended June 30, 2020
 Three-months Six-months Twelve-months
 (in billions)
Actively Managed     
  Equity$2.8
 $4.2
 $6.1
 Fixed Income(5.4) (11.8) 2.7
 Other1.3
 1.1
 2.0
 (1.3) (6.5) 10.8
Passively Managed 
  
  
  Equity(1.5) (2.8) (5.4)
 Fixed Income(0.6) 0.1
 (0.2)
 Other0.1
 0.3
 0.6
 (2.0) (2.4) (5.0)
Total net long-term inflows$(3.3) $(8.9) $5.8

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

  Three Months Ended June 30,     Six Months Ended June 30,    
  2020 2019 $ Change % Change 2020 2019 $ Change % Change
  (in billions)   (in billions)  
Distribution Channel:                
Institutions $271.5
 $262.1
 $9.4
 3.6 % $276.6
 $257.2
 $19.4
 7.5 %
Retail 215.8
 207.3
 8.5
 4.1
 225.8
 200.1
 25.7
 12.8
Private Wealth Management 91.2
 96.5
 (5.3) (5.5) 94.8
 94.9
 (0.1) (0.1)
Total $578.5
 $565.9
 $12.6
 2.2
 $597.2
 $552.2
 $45.0
 8.1
Investment Service:               

Equity Actively Managed $160.5
 $157.4
 $3.1
 2.0 % $165.7
 $152.6
 $13.1
 8.6 %
Equity Passively Managed(1)
 51.7
 56.1
 (4.4) (7.9) 54.5
 54.9
 (0.4) (0.7)
Fixed Income Actively Managed – Taxable 244.9
 233.5
 11.4
 4.9
 252.9
 228.6
 24.3
 10.6
Fixed Income Actively Managed – Tax-exempt 46.1
 44.1
 2.0
 4.6
 47.1
 43.3
 3.8
 8.8
Fixed Income Passively Managed(1)
 10.2
 9.4
 0.8
 8.3
 9.8
 9.4
 0.4
 4.7
Other (2)
 65.1
 65.4
 (0.3) (0.4) 67.2
 63.4
 3.8
 6.0
Total $578.5
 $565.9
 $12.6
 2.2
 $597.2
 $552.2
 $45.0
 8.1
 Three Months Ended June 30,Six Months Ended June 30,
 20212020$ Change% Change20212020$ Change% Change
 (in billions)(in billions)
Distribution Channel:
Institutions$324.9 $271.5 $53.4 19.7 %$319.7 $276.6 $43.1 15.6 %
Retail284.3 215.8 68.5 31.7 276.7 225.8 50.9 22.5 
Private Wealth Management113.4 91.2 22.2 24.4 110.3 94.8 15.5 16.3 
Total$722.6 $578.5 $144.1 24.9 %$706.7 $597.2 $109.5 18.3 %
Investment Service:
Equity Actively Managed$246.6 $160.5 $86.1 53.6 %$235.4 $165.7 $69.7 42.1 %
Equity Passively Managed(1)
68.5 51.7 16.8 32.4 66.6 54.5 12.1 22.3 
Fixed Income Actively Managed – Taxable253.2 244.9 8.3 3.4 255.7 252.9 2.8 1.1 
Fixed Income Actively Managed – Tax-exempt52.9 46.1 6.8 14.8 52.1 47.1 5.0 10.7 
Fixed Income Passively Managed(1)
8.7 10.2 (1.5)(14.6)8.5 9.8 (1.3)(13.3)
Alternatives/Multi-Asset Solutions(2)
92.7 65.1 27.6 42.4 88.4 67.2 21.2 31.5 
Total$722.6 $578.5 $144.1 24.9 %$706.7 $597.2 $109.5 18.3 %
(1)Includes index and enhanced index services.
(2)Includes certain multi-asset solutions and services not included in equity of fixed income services. Prior to December 31, 2020, this investment service line was disclosed as “Other.” In order to reflect the increasing significance of our Alternatives and certain alternative investments.Multi-Asset Solutions services, we updated the investment service line to “Alternatives and Multi-Asset Solutions."

Our Institutional channel second quarter average AUM of $271.5$324.9 billion increased $9.4$53.4 billion, or 3.6%19.7%, compared to the second quarter of 2019,2020, primarily due to this AUM increasing $7.1$52.9 billion, or 2.6%19.2%, to $276.2$329.1 billion over the last twelve months. The $7.1$52.9 billion increase primarily resulted from market appreciation of $10.1$43.1 billion partially offset byand net outflowsinflows of $3.1$8.7 billion.
35
Index
Our Retail channel second quarter average AUM of $215.8$284.3 billion increased $8.5$68.5 billion, or 4.1%31.7%, compared to the second quarter of 2019,2020, primarily due to this AUM increasing $15.0$64.2 billion, or 7.0%28.0%, to $229.5$293.7 billion over the last twelve months. The $15.0$64.2 billion increase primarily resulted from market appreciation of $56.8 billion and net inflows of $11.0 billion and market appreciation of $3.7$7.9 billion.
Index

Our Private Wealth Management channel second quarter average AUM of $91.2$113.4 billion decreased $5.3increased $22.2 billion, or 5.5%24.4%, compared to the second quarter of 2019,2020, primarily due to this AUM decreasing $2.9increasing $21.3 billion, or 3.0%22.6%, to $94.3$115.6 billion over the last twelve months. The $2.9$21.3 billion decreaseincrease primarily resulted from net outflowsmarket appreciation of $2.1$20.8 billion and market depreciationnet inflows of $0.6$1.1 billion.
Absolute investment composite returns, gross of fees, and relative performance as of June 30, 20202021 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 return17.6 %6.4 %6.8 %
Relative return (vs. Bloomberg Barclays Global High Yield Index - Hedged)4.0 (0.4)0.1 
Global Plus - Hedged (fixed income)
Absolute return2.5 5.1 3.6 
Relative return (vs. Bloomberg Barclays Global Aggregate Index - Hedged)2.4 0.5 0.6 
Intermediate Municipal Bonds (fixed income)
Absolute return4.7 4.3 2.8 
Relative return (vs. Lipper Short/Int. Blended Muni Fund Avg)1.6 1.0 0.7 
U.S. Strategic Core Plus (fixed income)
Absolute return1.7 5.8 3.8 
Relative return (vs. Bloomberg Barclays U.S. Aggregate Index)2.0 0.4 0.8 
Emerging Market Debt (fixed income)
Absolute return10.0 7.3 5.4 
Relative return (vs. JPM EMBI Global/JPM EMBI)3.2 0.8 1.0 
Sustainable Global Thematic (equity)
Absolute return44.9 22.8 21.4 
Relative return (vs. MSCI ACWI Index)5.7 8.2 6.8 
International Strategic Core Equity (equity)
Absolute return24.5 6.9 9.4 
Relative return (vs. MSCI EAFE Index)(7.8)(1.4)(0.9)
U.S. Small & Mid Cap Value (equity)
Absolute return72.2 10.3 13.5 
Relative return (vs. Russell 2500 Value Index)9.0 (0.3)1.2 
U.S. Strategic Value (equity)
Absolute return49.2 9.7 10.5 
Relative return (vs. Russell 1000 Value Index)5.5 (2.7)(1.4)
U.S. Small Cap Growth (equity)
Absolute return51.4 25.4 28.5 
Relative return (vs. Russell 2000 Growth Index)0.1 9.5 9.7 
U.S. Large Cap Growth (equity)
Absolute return39.6 25.8 24.9 
Relative return (vs. Russell 1000 Growth Index)(2.9)0.7 1.2 
36
Index
 1-Year 3-Year 5-Year
      
Global High Income - Hedged (fixed income)     
Absolute return(4.0)% 1.4 % 4.0 %
Relative return (vs. Bloomberg Barclays Global High Yield Index - Hedged)(2.6) (1.4) (0.9)
Global Fixed Income - Unhedged (fixed income)     
Absolute return3.5
 3.4
 3.4
Relative return (vs. Bloomberg Barclays Global Treasury Index)(0.3) (0.3) (0.1)
Global Plus - Hedged (fixed income)     
Absolute return4.7
 4.6
 4.7
Relative return (vs. Bloomberg Barclays Global Aggregate Index - Hedged)(1.4) (0.6) 0.2
Intermediate Municipal Bonds (fixed income)     
Absolute return2.6
 3.1
 2.9
Relative return (vs. Lipper Short/Int. Blended Muni Fund Avg)0.1
 0.5
 0.6
U.S. Strategic Core Plus (fixed income)     
Absolute return7.8
 5.3
 4.8
Relative return (vs. Bloomberg Barclays U.S. Aggregate Index)(0.9) —
 0.5
Emerging Market Debt (fixed income)     
Absolute return0.6
 2.7
 5.1
Relative return (vs. JPM EMBI Global/JPM EMBI)(0.9) (0.6) —
U.S. Relative Value     
Absolute return(8.5) 3.9
 6.3
Relative return (vs. Russell 1000 Value Index)0.4
 2.1
 1.6
International Strategic Core Equity     
Absolute return(3.0) 3.0
 5.7
Relative return (vs. MSCI EAFE Index)2.1
 2.2
 3.6
U.S. Small & Mid Cap Value     
Absolute return(18.2) (3.5) 1.4
Relative return (vs. Russell 2500 Value Index)(2.7) (0.9) (0.4)
U.S. Strategic Value     
Absolute return(10.0) (1.3) 0.4
Relative return (vs. Russell 1000 Value Index)(1.2) (3.1) (4.3)
U.S. Small Cap Growth     
Absolute return16.7
 21.2
 15.2
Relative return (vs. Russell 2000 Growth Index)13.2
 13.4
 8.3
U.S. Large Cap Growth     
Absolute return24.6
 20.7
 17.2
Relative return (vs. Russell 1000 Growth Index)1.3
 1.7
 1.4
 1-Year
3-Year(1)
5-Year(1)
U.S. Small & Mid Cap Growth (equity)
Absolute return44.5 22.3 25.0 
Relative return (vs. Russell 2500 Growth Index)(5.1)2.2 4.3 
Concentrated U.S. Growth (equity)
Absolute return46.4 24.9 23.3 
Relative return (vs. S&P 500 Index)5.6 6.2 5.7 
Select U.S. Equity (equity)
Absolute return44.6 18.8 18.0 
Relative return (vs. S&P 500 Index)3.8 0.1 0.4 
Strategic Equities (equity)
Absolute return42.4 17.1 15.9 
Relative return (vs. Russell 3000 Index)(1.8)(1.6)(2.0)
Global Core Equity (equity)
Absolute return39.7 16.0 16.5 
Relative return (vs. MSCI ACWI Index)0.5 1.4 1.9 
U.S. Strategic Core Equity (equity)
Absolute return31.6 16.0 13.3 
Relative return (vs. S&P 500 Index)(9.2)(2.6)(4.4)
Select U.S. Equity Long/Short (alternatives)
Absolute return27.1 12.7 12.0 
Relative return (vs. S&P 500 Index)(13.7)(5.9)(5.7)
(1)Reflects annualized returns.
Index
37

Index
 1-Year 3-Year 5-Year
U.S. Small & Mid Cap Growth     
Absolute return17.1
 19.0
 13.5
Relative return (vs. Russell 2500 Growth Index)7.9
 6.9
 3.9
Concentrated U.S. Growth     
Absolute return7.5
 14.9
 12.8
Relative return (vs. S&P 500 Index)—
 4.2
 2.1
Select U.S. Equity     
Absolute return5.3
 10.4
 10.1
Relative return (vs. S&P 500 Index)(2.3) (0.4) (0.6)
Strategic Equities     
Absolute return4.7
 9.9
 9.2
Relative return (vs. Russell 3000 Index)(1.8) (0.1) (0.8)
Global Core Equity     
Absolute return(0.5) 7.7
 8.4
Relative return (vs. MSCI ACWI Index)(1.6) 1.6
 2.0
U.S. Strategic Core Equity     
Absolute return2.0
 9.9
 10.3
Relative return (vs. S&P 500 Index)(5.5) (0.9) (0.4)
Select U.S. Equity Long/Short     
Absolute return4.6
 8.1
 7.1
Relative return (vs. S&P 500 Index)(2.9) (2.7) (3.7)
Our fixed income investment performance improved in the second quarter of 2020 as compared to performance in the first quarter, as several credit sectors to which our fixed income strategies have allocations rebounded from lows seen in March. The global high yield sector returned 12%, U.S. high yield returned 10%, emerging markets returned 12% and CRTs increased 26%. As a result, our relative performance improved from the first quarter 2020. While we continue to believe that performance will improve over time as liquidity pressures abate, it is possible that we will experience heightened redemptions in some of our fixed income strategies as a result of lagging performance in some strategies that were impacted in the first quarter. Performance may also adversely affect our future sales of these services.

Index

Consolidated Results of Operations
  Three Months Ended June 30,     Six Months Ended June 30,    
  2020 2019 $ Change % Change 2020 2019 $ Change % Change
  (in thousands, except per unit amounts)
Net revenues $871,449
 $857,799
 $13,650
 1.6 % $1,745,605
 $1,653,261
 $92,344
 5.6%
Expenses 661,802
 673,579
 (11,777) (1.7) 1,357,735
 1,300,890
 56,845
 4.4
Operating income 209,647
 184,220
 25,427
 13.8
 387,870
 352,371
 35,499
 10.1
Income taxes 11,386
 10,211
 1,175
 11.5
 20,860
 19,132
 1,728
 9.0
Net income 198,261
 174,009
 24,252
 13.9
 367,010
 333,239
 33,771
 10.1
Net income of consolidated entities attributable to non-controlling interests 20,940
 7,757
 13,183
 n/m
 (4,631) 17,873
 (22,504) n/m
Net income attributable to AB Unitholders $177,321
 $166,252
 $11,069
 6.7
 $371,641
 $315,366
 $56,275
 17.8
                 
Diluted net income per AB Unit $0.65
 $0.61
 $0.04
 6.6
 $1.36
 $1.17
 $0.19
 16.2
                 
Distributions per AB Unit $0.68
 $0.63
 $0.05
 7.9
 $1.39
 $1.19
 $0.20
 16.8
                 
Operating margin (1)
 21.7% 20.6%  
   22.5% 20.2%  
  
 Three Months Ended June 30,Six Months Ended June 30,
 20212020$ Change% Change20212020$ Change% Change
 (in thousands, except per unit amounts)
Net revenues$1,076,822 $871,449 $205,373 23.6 %$2,084,088 $1,745,605 $338,483 19.4 %
Expenses793,199 661,802 131,397 19.9 1,539,881 1,357,735 182,146 13.4 
Operating income283,623 209,647 73,976 35.3 544,207 387,870 156,337 40.3 
Income taxes12,480 11,386 1,094 9.6 29,225 20,860 8,365 40.1 
Net income271,143 198,261 72,882 36.8 514,982 367,010 147,972 40.3 
Net income (loss) of consolidated entities attributable to non-controlling interests3,573 20,940 (17,367)(82.9)3,281 (4,631)7,912 n/m
Net income attributable to AB Unitholders$267,570 $177,321 $90,249 50.9 $511,701 $371,641 $140,060 37.7 
Diluted net income per AB Unit$0.97 $0.65 $0.32 49.2 $1.86 $1.36 $0.50 36.8 
Distributions per AB Unit$0.97 $0.68 $0.29 42.6 $1.85 $1.39 $0.46 33.1 
Operating margin (1)
26.0 %21.7 % 26.0 %22.5 % 
(1)Operating income excluding net income (loss) attributable to non-controlling interests as a percentage of net revenues.

Net income attributable to AB Unitholders for the three months ended June 30, 20202021 increased $11.1$90.2 million, or 6.7%50.9%, from the three months ended June 30, 2019.2020. The increase primarily is due to (in millions):
Higher base advisory fees$154.4 
Higher performance-based fees45.0 
Higher distribution revenues35.4 
Lower net income of consolidated entities attributable to non-controlling interest17.4 
Lower amortization of intangible assets5.2 
Higher employee compensation and benefits expense(86.1)
Higher promotion and servicing expense(46.0)
Lower investment gains(20.0)
Lower Bernstein Research Services revenue(8.0)
Higher general and administrative expenses(4.4)
Higher income tax expense(1.1)
Other(1.6)
$90.2




38
Lower employee compensation and benefits expense$14.1
Higher investment gains13.2
Higher distribution revenues11.8
Higher Bernstein Research Services revenue7.6
Lower interest on borrowings2.9
Lower base advisory fees(15.8)
Higher net income of consolidated entities attributable to non-controlling interest(13.2)
Higher general and administrative expenses (including real estate charges)(6.2)
Lower performance-based fees(2.4)
Other(0.9)
 $11.1

Index

Net income attributable to AB Unitholders for the six months ended June 30, 20202021 increased $56.3$140.1 million, or 17.8%37.7%, from the six months ended June 30, 2019.2020. The increase primarily is due to (in millions):

Higher base advisory fees$228.5 
Higher performance-based fees52.6 
Higher distribution revenues52.2 
Higher investment gains26.2 
Lower amortization of intangible assets10.2 
Higher employee compensation and benefits expense(129.9)
Higher promotion and servicing expense(61.5)
Lower Bernstein Research Services revenue(18.2)
Higher income tax expense(8.4)
Higher net income of consolidated entities attributable to non-controlling interest(7.9)
Higher general and administrative expenses(2.3)
Other(1.4)
$140.1
Higher Bernstein Research Services revenue$46.6
Higher base advisory fees45.6
Higher distribution revenues42.1
Higher net loss of consolidated entities attributable to non-controlling interest22.5
Lower interest on borrowings4.0
Higher performance-based fees1.4
Higher investment losses(46.8)
Higher promotion and servicing expense(41.7)
Higher general and administrative expenses (including real estate charges)(10.6)
Higher employee compensation and benefits expense(8.9)
Other2.1
 $56.3

Units Outstanding

Each quarter, we consider whether to implement a plan to repurchase AB Holding Units pursuant to Rules 10b5-1 and 10b-18 under the Exchange Act. A plan of this type allows a company to repurchase its shares at times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods or because it possesses material non-public information. Each broker we select has the authority 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 20202021 expired at the close of business on July 22, 2020.28, 2021. We may adopt additional 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.

Cash Distributions

We are required to distribute all of our Available Cash Flow, as defined in the AB Partnership Agreement, to our Unitholders and the General Partner. Available Cash Flow typically is the adjusted 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 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 6 to our consolidated financial statements contained in Item 1 for a description of Available Cash Flow.

Management Operating Metrics

We are providing the non-GAAP measures “adjusted net revenues,” “adjusted operating income” and “adjusted operating margin” because they are 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 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 charges 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") 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.

39
Index

 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
 (in thousands, except per unit amounts)
Net revenues, US GAAP basis$1,076,822 $871,449 $2,084,088 $1,745,605 
Adjustments:    
Distribution-related adjustments:
Distribution revenues(155,538)(120,099)(303,138)(250,956)
Investment advisory services fees(20,459)(12,202)(43,012)(27,015)
Pass-through adjustments:
Investment advisory services fees(4,403)(3,331)(8,598)(10,393)
Other revenues(8,229)(10,195)(18,760)(19,802)
Impact of consolidated company-sponsored funds(4,286)(21,552)(4,597)2,583 
Long-term incentive compensation-related investment gains and dividend and interest(2,272)(5,345)(4,370)1,647 
Write-down of investment— — — 859 
Adjusted net revenues$881,635 $698,725 $1,701,613 $1,442,528 
Operating income, US GAAP basis$283,623 $209,647 $544,207 $387,870 
Adjustments:    
Real estate(985)5,188 (1,970)4,849 
Long-term incentive compensation-related items(91)104 (85)670 
CEO's EQH award compensation17 209 159 393 
Write-down of investment— — — 859 
Acquisition-related expenses180 805 202 1,331 
Sub-total of non-GAAP adjustments(879)6,306 (1,694)8,102 
Less: Net income (loss) of consolidated entities attributable to non-controlling interests3,573 20,940 3,281 (4,631)
Adjusted operating income279,171 195,013 539,232 400,603 
Adjusted income taxes12,284 10,589 28,957 21,552 
Adjusted net income$266,887 $184,424 $510,275 $379,051 
Diluted net income per AB Unit, GAAP basis$0.97 $0.65 $1.86 $1.36 
Impact of non-GAAP adjustments— 0.03 (0.01)0.03 
Adjusted diluted net income per AB Unit$0.97 $0.68 $1.85 $1.39 
Operating margin, GAAP basis26.0 %21.7 %26.0 %22.5 %
Impact of non-GAAP adjustments5.7 6.2 5.7 5.3 
Adjusted operating margin31.7 %27.9 %31.7 %27.8 %
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
  (in thousands, except per unit amounts)
Net revenues, US GAAP basis $871,449
 $857,799
 $1,745,605
 $1,653,261
Adjustments:  
  
  
  
Distribution-related adjustments:        
Distribution revenues (120,099) (108,347) (250,956) (208,856)
Investment advisory services fees (12,202) (11,148) (27,015) (20,134)
Pass-through adjustments:        
Investment advisory services fees (3,331) (4,356) (10,393) (9,078)
Other revenues (10,195) (9,160) (19,802) (16,919)
Impact of consolidated company-sponsored funds (21,552) (8,697) 2,583
 (19,657)
Long-term incentive compensation-related investment gains and dividend and interest (5,345) (1,525) 1,647
 (6,168)
Write-down of investment —
 —
 859
 —
Adjusted net revenues $698,725
 $714,566
 $1,442,528
 $1,372,449
         
Operating income, US GAAP basis $209,647
 $184,220
 $387,870
 $352,371
Adjustments:  
  
  
  
Real estate 5,188
 —
 4,849
 —
Acquisition-related expenses 805
 2,718
 1,331
 2,718
Long-term incentive compensation-related items 104
 277
 670
 635
CEO's EQH award compensation 209
 227
 393
 691
Write-down of investment —
 —
 859
 —
Sub-total of non-GAAP adjustments 6,306
 3,222
 8,102
 4,044
Less: Net (loss) income of consolidated entities attributable to non-controlling interests 20,940
 7,757
 (4,631) 17,873
Adjusted operating income 195,013
 179,685
 400,603
 338,542
Adjusted income taxes 10,589
 9,954
 21,552
 18,383
Adjusted net income $184,424
 $169,731
 $379,051
 $320,159
         
Diluted net income per AB Unit, GAAP basis $0.65
 $0.61
 $1.36
 $1.17
Impact of non-GAAP adjustments 0.03
 0.02
 0.03
 0.01
Adjusted diluted net income per AB Unit $0.68
 $0.63
 $1.39
 $1.18
         
Adjusted operating margin 27.9% 25.1% 27.8% 24.7%

Adjusted operating income for the three months ended June 30, 20202021 increased $15.3$84.2 million, or 8.5%43.2%, from the three months ended June 30, 2019,2020, primarily due to higher investment advisory base fees of $144.8 million, higher performance-based fees of $45.0 million and lower amortization of intangible assets of $5.2 million, partially offset by higher employee compensation and benefits expense (excluding the impact of long-term incentive compensation-related items) of $17.3 million, lower promotion and servicing expenses of $14.3 million and higher Bernstein Research Services revenues of $7.6 million, partially offset by lower investment advisory base fees of $15.6$89.7 million, higher general and administrative expenses of $4.0$9.8 million, lower Bernstein Research Services revenues of $8.0 million and lower net investment gainshigher promotion and servicing expenses of $3.9$4.3 million.

Adjusted operating income for the six months ended June 30, 20202021 increased $62.1$138.6 million, or 18.3%34.6%, from the six months ended June 30, 2019,2020, primarily due to higher Bernstein Research Services revenue of $46.6 million, higher investment advisory base fees of $39.9$211.3 million, higher performance-based fees of $55.3 million, lower amortization of intangible assets of $10.2 million, higher net investment gains of $7.9 million and lower promotion and servicing expenses of $10.1$5.6 million, partially offset by higher employee compensation and benefits expense (excluding the impact of long-term incentive compensation-related items) of $17.2$125.2 million, (see discussion below), higher net investment losseslower Bernstein Research Services revenues of $14.5$18.2 million and higher general and administrative expenses of $5.4$12.4 million.
40
Index

Adjusted Net Revenues

Net Revenue, as adjusted, is reduced to exclude all of the company's distribution revenues, which are recorded as a separate line
item on the consolidated statement of income, as well as a portion of investment advisory services fees received that is used to pay distribution and servicing costs. For certain products, based on the distinct arrangements, certain distribution fees are collected
Index

by us and passed-throughpassed through to third-party client intermediaries, while for certain other products, we collect investment advisory services fees and a portion is passed-throughpassed through to third-party client intermediaries. In both arrangements, the third-party client intermediary owns the relationship with the client and is responsible for performing services and distributing the product to the client on our behalf. We believe offsetting distribution revenues and certain investment advisory services fees is useful for our investors and other users of our financial statements because such presentation appropriately reflects the nature of these costs as pass-through payments to third parties that perform functions on behalf of our sponsored mutual funds and/or shareholders of these funds. Distribution-related adjustments fluctuate each period based on the type of investment products sold, as well as the average AUM over the period. Also, we adjust distribution revenues for the amortization of deferred sales commissions as these costs, over time, will offset such revenues.

Lastly, weWe adjust investment advisory and services fees and other revenues for pass through costs, primarily related to our transfer agent and shareholder servicing fees. These fees do not affect operating income, but they do affect our operating margin. As such, we exclude these fees from adjusted net revenues.

We adjust for the revenue impact of consolidating company-sponsored investment funds by eliminating the consolidated company-sponsored investment funds' revenues and including AB's fees from such consolidated company-sponsored investment funds and AB's investment gains and losses on its investments in such consolidated company-sponsored investment funds that were eliminated in consolidation.

AdjustedAlso, adjusted net revenues exclude investment gains and losses and dividends and interest on employee long-term incentive compensation-related investments.

DuringLastly, during the first quarter of 2020, we wrote-off an investment whichthat had been received in exchange for the sale of software technology, bringing the balance to zero. Previously, we had been excluding the value of this investment from adjusted net revenues.

Adjusted Operating Income

Adjusted operating income represents operating income on a US GAAP basis excluding (1) real estate charges (credits), (2) acquisition-related expenses, (3) 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, (4)(3) our CEO's EQH award compensation, as discussed below, (5)(4) the write-down of an investment (discussed immediately above), (5) acquisition-related expenses, and (6) the impact of consolidated company-sponsored investment funds.

Real estate charges (credits) incurred 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. However, beginning inReal estate charges (credits) incurred during the fourth quarter of 2019 real estate charges (credits),through the fourth quarter of 2020, while excluded in the period in which the charges (credits) arewere recorded, are included ratably over the remaining applicable lease term.

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.

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.

The board of directors of EQH granted to Seth P. Bernstein (“CEO”), our President and Chief Executive Officer, equity awards in connection with EQH's IPO and Mr. Bernstein's membership on the EQH Management Committee. Mr. Bernstein may receive additional equity or cash compensation from EQH in the future related to his service on the Management Committee.
41
Index
Any awards granted to Mr. Bernstein by EQH are recorded as compensation expense in AB’s consolidated statement of income. The compensation expense associated with these awards has been excluded from our non-GAAP measures because they are non-cash and are based upon EQH's, and not AB's, financial performance.
Index

The write-off of the investmentdiscussed above in Adjusted net revenues has been excluded due to its non-recurring nature and because it is not part of our core operating results.

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.
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.

































42
Index

Net Revenues

The components of net revenues are as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 20212020$ Change% Change20212020$ Change% Change
 (in thousands)(in thousands)
Investment advisory and services fees:
Institutions:
Base fees$136,067 $109,280 $26,787 24.5 %$265,497 $219,643 $45,854 20.9 %
Performance-based fees2,484 699 1,785 n/m6,914 2,988 3,926 n/m
 138,551 109,979 28,572 26.0 272,411 222,631 49,780 22.4 
Retail:       
Base fees348,193 271,844 76,349 28.1 678,590 568,215 110,375 19.4 
Performance-based fees31,511 7,180 24,331 n/m34,477 7,930 26,547 n/m
 379,704 279,024 100,680 36.1 713,067 576,145 136,922 23.8 
Private Wealth Management:       
Base fees239,457 188,172 51,285 27.3 467,321 395,025 72,296 18.3 
Performance-based fees19,912 1,028 18,884 n/m28,291 6,127 22,164 n/m
 259,369 189,200 70,169 37.1 495,612 401,152 94,460 23.5 
Total:       
Base fees723,717 569,296 154,421 27.1 1,411,408 1,182,883 228,525 19.3 
Performance-based fees53,907 8,907 45,000 n/m69,682 17,045 52,637 n/m
 777,624 578,203 199,421 34.5 1,481,090 1,199,928 281,162 23.4 
Bernstein Research Services105,655 113,609 (7,954)(7.0)224,676 242,832 (18,156)(7.5)
Distribution revenues155,538 120,099 35,439 29.5 303,138 250,956 52,182 20.8 
Dividend and interest income8,658 12,692 (4,034)(31.8)17,342 33,157 (15,815)(47.7)
Investment gains (losses)4,181 24,189 (20,008)(82.7)6,109 (20,117)26,226 n/m
Other revenues25,900 26,092 (192)(0.7)53,611 51,603 2,008 3.9 
Total revenues1,077,556 874,884 202,672 23.2 2,085,966 1,758,359 327,607 18.6 
Less: Interest expense734 3,435 (2,701)(78.6)1,878 12,754 (10,876)(85.3)
Net revenues$1,076,822 $871,449 $205,373 23.6 $2,084,088 $1,745,605 $338,483 19.4 
  Three Months Ended June 30,     Six Months Ended June 30,    
  2020 2019 $ Change % Change 2020 2019 $ Change % Change
  (in thousands)   (in thousands)  
Investment advisory and services fees:                
Institutions:                
Base fees $109,280
 $110,767
 $(1,487) (1.3)% $219,643
 $220,847
 $(1,204) (0.5)%
Performance-based fees 699
 2,351
 (1,652) (70.3) 2,988
 3,549
 (561) (15.8)
  109,979
 113,118
 (3,139) (2.8) 222,631
 224,396
 (1,765) (0.8)
Retail:  
  
  
  
  
  
  
  
Base fees 271,844
 260,923
 10,921
 4.2
 568,215
 502,908
 65,307
 13.0
Performance-based fees 7,180
 4,404
 2,776
 63.0
 7,930
 4,558
 3,372
 74.0
  279,024
 265,327
 13,697
 5.2
 576,145
 507,466
 68,679
 13.5
Private Wealth Management:  
  
  
  
  
  
  
  
Base fees 188,172
 213,387
 (25,215) (11.8) 395,025
 413,552
 (18,527) (4.5)
Performance-based fees 1,028
 4,532
 (3,504) (77.3) 6,127
 7,544
 (1,417) (18.8)
  189,200
 217,919
 (28,719) (13.2) 401,152
 421,096
 (19,944) (4.7)
Total:  
  
  
  
  
  
  
  
Base fees 569,296
 585,077
 (15,781) (2.7) 1,182,883
 1,137,307
 45,576
 4.0
Performance-based fees 8,907
 11,287
 (2,380) (21.1) 17,045
 15,651
 1,394
 8.9
  578,203
 596,364
 (18,161) (3.0) 1,199,928
 1,152,958
 46,970
 4.1
                 
Bernstein Research Services 113,609
 105,991
 7,618
 7.2
 242,832
 196,226
 46,606
 23.8
Distribution revenues 120,099
 108,347
 11,752
 10.8
 250,956
 208,856
 42,100
 20.2
Dividend and interest income 12,692
 27,654
 (14,962) (54.1) 33,157
 55,000
 (21,843) (39.7)
Investment (losses) gains 24,189
 10,949
 13,240
 n/m
 (20,117) 26,684
 (46,801) n/m
Other revenues 26,092
 24,796
 1,296
 5.2
 51,603
 47,002
 4,601
 9.8
Total revenues 874,884
 874,101
 783
 0.1
 1,758,359
 1,686,726
 71,633
 4.2
Less: Interest expense 3,435
 16,302
 (12,867) (78.9) 12,754
 33,465
 (20,711) (61.9)
Net revenues $871,449
 $857,799
 $13,650
 1.6
 $1,745,605
 $1,653,261
 $92,344
 5.6

Investment Advisory and Services Fees

Investment advisory and services fees are the largest component of our revenues. These fees generally are calculated as a percentage of the value of AUM as of a specified date, or as a percentage of the value of average AUM for the applicable billing period, and vary with the type of investment service, the size of account and the total amount of assets we manage for a particular client. Accordingly, fee income generally increases or decreases as AUM increase or decrease and is affected by market appreciation or depreciation, the addition of new client accounts or client contributions of additional assets to existing accounts, withdrawals of assets from and termination of client accounts, purchases and redemptions of mutual fund shares, shifts of assets between accounts
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or products with different fee structures, and acquisitions. Our average basis points realized (investment advisory and services fees divided by average AUM) generally approximate 3530 to 105 basis points for actively-managedactively-
43
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managed equity services, 10 to 70 basis points for actively-managed fixed income services and 2 to 20 basis points for passively-managed services. Average basis points realized for other services could range from 4 basis points for certain Institutional third party managed services to over 100 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 methods and fair valuation (non-observable market) methods. Market-based valuation methods include: last sale/settle prices from an exchange for actively-traded listed equities, options and futures; evaluated bid prices from recognized pricing vendors for fixed income, asset-backed or mortgage-backed issues; mid prices from recognized pricing vendors and brokers for credit default swaps; and quoted bids or spreads from pricing vendors and brokers for other derivative products. Fair valuation methods include: discounted cash flow models or any other methodology that is validated and approved by our Valuation Committee (see paragraph immediately below for more information regarding our Valuation Committee). Fair valuation methods are used only where AUM cannot be valued using market-based valuation methods, such as in the case of private equity or illiquid securities.

The Valuation Committee, 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 time period.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 6.1%6.3%, 7.6%8.6% and 0.7%0.8% of the assets we manage for institutional clients, private wealth clients and retail clients, respectively (in total, 4.3%4.5% of our AUM).

For the three months ended June 30, 2020,2021, our investment advisory and services fees decreasedincreased by $18.2$199.4 million, or 3.0%34.5%, from the three months ended June 30, 2019,2020, due to a $15.8$154.4 million, or 2.7%27.1%, decreaseincrease in base fees and a $2.4$45.0 million decreaseincrease in performance-based fees. The decreaseincrease in base fees is primarily due to a lower portfolio fee rate, partially offset by a 2.2%24.9% increase in average AUM. For the six months ended June 30, 2020,2021, our investment advisory and services fees increased by $47.0$281.2 million, or 4.1%23.4%, from the six months ended June 30, 2019,2020, due to a $45.6$228.5 million, or 4.0%19.3%, increase in base fees and a $1.4$52.6 million increase in performance-based fees. The increase in base fees is primarily due to an 8.1%18.3% increase in average AUM, partially offset by a lower portfolio fee rate. The portfolio fee rate of 38.4 basis points and 38.6 basis points (calculated net of distribution fees) for the three months and six months ended June 30, 2020 decreased 1.9 basis points and 1.7 basis points, respectively, from their comparative prior year periods. The portfolio fee rate was adversely affected by a product mix shift with high fee value equity strategies now representing a lower percentage of our total AUM than in the past, as well as a decline in certain fixed income product fees.AUM.

Institutional investment advisory and services fees for the three months ended June 30, 2020 decreased2021 increased by $3.1$28.6 million, or 2.8%26.0%, from the three months ended June 30, 2019,2020, due to a $1.6$26.8 million, decreaseor 24.5%, increase in performance-basedbase fees and a $1.5$1.8 million or 1.3%, decreaseincrease in baseperformance-based fees. The decreaseincrease in base fees is primarily due to the impact of a lower portfolio fee rate, partially offset by a 3.6%19.7% increase in average AUM.AUM, as well as a higher portfolio fee rate. Institutional investment advisory and servicesservice fees for the six months ended June 30, 2020 decreased2021 increased by $1.8$49.8 million, or 0.8%22.4%, from the six months ended June 30, 2019,2020, due to a $1.2$45.9 million, or 0.5%20.9%, decreaseincrease in base fees and a $0.6$3.9 million decreaseincrease in performance-based fees. The decreaseincrease in base fees is primarily due to a lower portfolio fee rate, partially offset by a 7.5%15.6% increase in average AUM.AUM, as well as a shift in product mix to active equities, which generally have higher fees.

Retail investment advisory and services fees for the three months ended June 30, 20202021 increased by $13.7$100.7 million, or 5.2%36.1%, from the three months ended June 30, 2019,2020, due to a $76.3 million, or 28.1% increase in base fees and a $24.3 million increase in performance-based fees. The increase in base fees is primarily due to a 31.7% increase in average AUM, partially offset by a lower portfolio fee rate. Retail investment advisory and service fees for the six months ended June 30, 2021 increased by $136.9 million, or 23.8%, from the six months ended June 30, 2020, primarily due to an increase in base fees of $10.9$110.4 million, or 4.2%, primarily resulting from19.4% and a 4.1%$26.5 million increase in average AUM. Additionally, performance-based fees increased $2.8 million. Retail investment advisory and services fees for the six months ended June 30, 2020 increased by $68.7 million, or 13.5%, from the six months ended June 30, 2019, primarily due to anfees. The increase in base fees of $65.3 million, or 13.0%,is primarily resulting fromdue to a 12.8%22.5% increase in average AUM. Additionally, performance-based fees increased $3.4 million.AUM, partially offset by a lower portfolio fee rate.

Private Wealth Management investment advisory and services fees for the three months ended June 30, 2020 decreased2021 increased by $28.7
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$70.2 million, or 13.2%37.1%, from the three months ended June 30, 2019,2020, due to a $25.2$51.3 million, or 11.8%27.3%, decreaseincrease in base fees and a $3.5$18.9 million decreaseincrease in performance-based fees. The decreaseincrease in base fees is primarily due to a 5.5% decrease24.4% increase in average AUM, and the impact ofas well as a lowerhigher portfolio fee rate. Private Wealth Management investment and advisory and services fees for the
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six months ended June 30, 2020 decreased2021 increased by $19.9$94.5 million, or 4.7%23.5%, from the six months ended June 30, 2019,2020, due to a decreasean increase in base fees of $18.5$72.3 million, or 4.5%18.3%, and a $1.4$22.2 million decreaseincrease in performance-based fees. The decreaseincrease in base fees is primarily due to the impact of a lower16.3% increase in average AUM, as well as a higher portfolio fee rate.

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.
Revenues from Bernstein Research Services for the three months ended June 30, 2020 increased $7.62021 decreased $8.0 million, or 7.2%7.0%, from the three months ended June 30, 2020, due to reduced customer trading activity driven by decreased market volatility, as compared to the corresponding periodsignificant COVID-related surge in 2019 due to higher market volatility, which led to greater customer activity and more robust trading volumes acrossvolume experienced during the business.three months ended June 30, 2020. For the six months ended June 30, 2020,2021, Bernstein Research Services revenue increased $46.6decreased $18.2 million, or 23.8%7.5%, compared to the corresponding period in 2019six months ended June 30, 2020 due to decreased customer trading activity driven by lower global market volatility as compared to the COVID-related surge in first quarter market volatility leading to higher customer activity and greater trading volumes, as well as the inclusion of revenues from our acquisition of Autonomous (which closed on April 1, 2019).six months ended June 30, 2020.

Distribution Revenues

Two of our subsidiaries act as distributors and/or placement agents of company-sponsored mutual funds and receive distribution services fees from certain of those funds as partial reimbursement of the distribution expenses they incur. Period-over-period fluctuations of distribution revenues typically are in line with fluctuations of the corresponding average AUM of these mutual funds.

Distribution revenues for the three months ended June 30, 20202021 increased $11.8$35.4 million, or 10.8%29.5%, compared tofrom the corresponding period in 2019,three months ended June 30, 2020, primarily due to the corresponding average AUM of these mutual funds increasing 7.5%22.8%. For the six months ended June 30, 20202021, distribution revenues increased $42.1$52.2 million, or 20.2%20.8%, compared to the corresponding period in 2019,six months ended June 30, 2020, primarily due to the corresponding average AUM of these mutual funds increasing 19.2%14.3%.

Dividend and Interest Income and 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 for the three months ended June 30, 20202021 decreased $15.0$4.0 million, or 54.1%31.8%, compared tofrom the corresponding period in 2019,three months ended June 30, 2020, primarily due to lower interest earned on customer margin balancesU.S Treasury Bills and U.S. Treasury Bills.lower dividend and interest income in our consolidated company-sponsored investment funds. Interest expense for the three months ended June 30, 20202021 decreased $12.9$2.7 million, or 78.9%78.6%, compared tofrom the corresponding period in 2019,three months ended June 30, 2020, due to lower interest paid on cash balances in customers' brokerage accounts. For the six months ended June 30, 2020,2021, dividend and interest income decreased $21.8$15.8 million, or 39.7%47.7%, compared to the corresponding period in 2019,six months ended June 30, 2020, primarily due to lower interest earned on U.S. Treasury bills and customer margin balances and U.S. Treasury Bills, offset by higherlower dividend and interest income in our consolidated company-sponsored investment funds. Interest expense for the six months ended June 30, 20202021 decreased $20.7$10.9 million, or 61.9%85.3%, compared to the corresponding period in 2019,six months ended June 30, 2020, due to lower interest paid on cash balances in 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. Investment gains (losses) also include equity in earnings of proprietary investments in limited partnership hedge funds that we sponsor and manage.

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Investment gains (losses) gains are as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
 (in thousands)
Long-term incentive compensation-related investments:
Realized gains (losses)$49 $(5)$2,100 $1,407 
Unrealized gains (losses)2,153 5,262 2,113 (3,249)
Investments held by consolidated company-sponsored investment funds:
  Realized gains (losses)317 1,792 1,659 (1,402)
  Unrealized gains (losses)7,877 40,177 936 (11,938)
Seed capital investments:
Realized gains (losses)
Seed capital and other12,126 7,541 14,683 4,889 
Derivatives(10,622)(32,073)(18,469)(890)
Unrealized gains (losses)
Seed capital and other(6,398)2,585 (5,830)(9,340)
Derivatives(790)1,155 9,376 (446)
Brokerage-related investments:
Realized (losses) gains(311)1,928 (189)1,475 
Unrealized (losses)(220)(4,173)(270)(623)
 $4,181 $24,189 $6,109 $(20,117)
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
  (in thousands)
Long-term incentive compensation-related investments        
Realized (losses) gains $(5) $834
 $1,407
 $1,630
Unrealized gains (losses) 5,262
 554
 (3,249) 4,255
         
Investments held by consolidated company-sponsored investment funds        
  Realized gains (losses) 1,792
 2,039
 (1,402) 1,935
  Unrealized gains (losses) 40,177
 10,243
 (11,938) 32,173
         
Seed capital investments        
Realized gains (losses)        
Seed capital and other 7,541
 806
 4,889
 3,436
Derivatives (32,073) (4,322) (890) (18,116)
Unrealized gains (losses)        
Seed capital and other 2,585
 5,345
 (9,340) 12,387
Derivatives 1,155
 (4,761) (446) (10,714)
         
Brokerage-related investments        
Realized gains (losses) 1,928
 (459) 1,475
 (1,106)
Unrealized (losses) gains (4,173) 670
 (623) 804
  $24,189
 $10,949
 $(20,117) $26,684

Other Revenues

Other revenues consist of fees earned for transfer agency services provided to company-sponsored mutual funds, fees earned for administration and recordkeeping services provided to company-sponsored mutual funds and the general accounts of EQH and its subsidiaries, and other miscellaneous revenues. Other revenues for the three months ended June 30, 2020 increased $1.32021 decreased $0.2 million, or 5.2%0.7%, compared to the corresponding period in 2019,three months ended June 30, 2020, primarily due to lower brokerage income and mutual fund reimbursements, partially offset by higher brokerage income.shareholder servicing fees. Other revenues for the six months ended June 30, 20202021 increased $4.6$2.0 million, or 9.8%3.9%, compared to the corresponding period in 2019,six months ended June 30, 2020, primarily due to higher shareholder servicing fees, and higherpartially offset by lower brokerage income.

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Expenses

The components of expenses are as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 20212020$ Change% Change20212020$ Change% Change
 (in thousands)(in thousands)
Employee compensation and benefits$435,707 $349,638 $86,069 24.6 %$841,766 $711,910 $129,856 18.2 %
Promotion and servicing:    
Distribution-related payments167,761 125,678 42,083 33.5 330,015 265,823 64,192 24.1 
Amortization of deferred sales commissions8,236 6,622 1,614 24.4 16,135 12,148 3,987 32.8 
Trade execution, marketing, T&E and other46,571 44,288 2,283 5.2 93,249 99,898 (6,649)(6.7)
 222,568 176,588 45,980 26.0 439,399 377,869 61,530 16.3 
General and administrative:      
General and administrative131,324 121,424 9,900 8.2 251,547 243,691 7,856 3.2 
Real estate charges— 5,526 (5,526)(100.0)— 5,526 (5,526)(100.0)
 131,324 126,950 4,374 3.4 251,547 249,217 2,330 0.9 
Contingent payment arrangements838 807 31 3.8 1,634 1,600 34 2.1 
Interest on borrowings1,241 1,096 145 13.2 2,535 3,930 (1,395)(35.5)
Amortization of intangible assets1,521 6,723 (5,202)(77.4)3,000 13,209 (10,209)(77.3)
Total$793,199 $661,802 $131,397 19.9 $1,539,881 $1,357,735 $182,146 13.4 
  Three Months Ended June 30,     Six Months Ended June 30,    
  2020 2019 $ Change % Change 2020 2019 $ Change % Change
  (in thousands)   (in thousands)  
Employee compensation and benefits $349,638
 $363,702
 $(14,064) (3.9)% $711,910
 $703,011
 $8,899
 1.3 %
Promotion and servicing:      
    
  
  
  
Distribution-related payments 125,678
 116,254
 9,424
 8.1
 265,823
 222,247
 43,576
 19.6
Amortization of deferred sales commissions 6,622
 3,241
 3,381
 n/m
 12,148
 6,743
 5,405
 80.2
Trade execution, marketing, T&E and other 44,288
 57,550
 (13,262) (23.0) 99,898
 107,198
 (7,300) (6.8)
  176,588
 177,045
 (457) (0.3) 377,869
 336,188
 41,681
 12.4
General and administrative:  
  
  
    
  
  
  
General and administrative 121,424
 120,180
 1,244
 1.0
 243,691
 238,028
 5,663
 2.4
Real estate charges 5,526
 548
 4,978
 n/m
 5,526
 548
 4,978
 n/m
  126,950
 120,728
 6,222
 5.2
 249,217
 238,576
 10,641
 4.5
Contingent payment arrangements 807
 829
 (22) (2.7) 1,600
 883
 717
 81.2
Interest on borrowings 1,096
 3,990
 (2,894) (72.5) 3,930
 7,973
 (4,043) (50.7)
Amortization of intangible assets 6,723
 7,285
 (562) (7.7) 13,209
 14,259
 (1,050) (7.4)
Total $661,802
 $673,579
 $(11,777) (1.7) $1,357,735
 $1,300,890
 $56,845
 4.4

Employee Compensation and Benefits

Employee compensation and benefits consist 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 40.1%40.5% and 42.4%40.1% for the three months ended June 30, 20202021 and 2019,2020, respectively. Compensation expense as a percentage of net revenues was 40.8%40.4% and 42.5%40.8% for the six months ended June 30, 20202021 and 2019,2020, 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 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 net revenues presented as a non-GAAP measure (discussed earlier in this Item 2). Adjusted employee compensation and benefits expense is total employee compensation and benefits expense minus other employment costs such as recruitment, training, temporary help and meals (which werewas 0.7% and 0.9%, respectively, of adjusted net revenues for the three and six months ended June 30, 2020 and 1.1% and 1.2%, respectively, of adjusted net revenues for the three and six months ended June 30, 2019)2021), 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 and the amortization expense associated with the awards issued by EQH to our firm's CEO relating to his role as a member of the EQH Management Committee.
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Senior management, with the approval of the Compensation Committee, has established as an objective that adjusted employee compensation and benefits expense generally should not exceed 50% of our adjusted net revenues, except in unexpected or unusual circumstances. Also, our adjusted
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compensation ratio reflects a balancing of the need to keep compensation levels competitive with industry peers in order to attract, motivate and retain highly-qualified talent with the need to maintain strong operating leverage in our business. The Compensation Committee works with management to help ensure both needs are sufficiently addressed. Our ratio of adjusted compensation expense as a percentage of adjusted net revenues was 48.5% for the three and six months ended June 30, 20202021 and 49.5% for the three and six months ended June 30, 2019.2020.

For the three months ended June 30, 2020,2021, employee compensation and benefits expense decreased $14.1increased $86.1 million, or 3.9%24.6%, compared to the three months ended June 30, 2019,2020, primarily due to lowerhigher incentive compensation of $59.2 million, higher base compensation of $13.8 million, higher commissions of $7.4$6.7 million lowerand higher fringes of $3.9 million and lower other employment costs of $2.9$5.5 million. For the six months ended June 30, 2020,2021, employee compensation and benefits expense increased $8.9$129.9 million, or 1.3%18.2%, compared to the six months ended June 30, 2019,2020, primarily due to higher incentive compensation of $11.0$98.4 million, and higher base compensation of $9.1$15.7 million, offset by lowerhigher fringes of $5.6 million, lower other employment costs of $3.3$9.7 million and lowerhigher commissions of $2.5$6.9 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 travel and entertainment, advertising and promotional materials.

Promotion and servicing expenses decreased $0.5increased $46.0 million, or 0.3%26.0%, during the three months ended June 30, 20202021 compared to the three months ended June 30, 2019. The decrease primarily was due to lower travel and entertainment expenses of $11.1 million and lower marketing and communication expenses of $5.3 million, partially offset by higher distribution-related payments of $9.4 million, higher amortization of deferred sales commissions of $3.4 million and higher trade execution expenses of $2.8 million. Promotion and servicing expenses increased $41.7 million, or 12.4%, during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.2020. The increase primarily was due to higher distribution-related payments of $43.6$42.0 million, higher trade executiontransfer fees of $3.1 million, higher marketing and clearing costscommunication expenses of $7.0$2.1 million, higher amortization of deferred sales commissions of $5.4$1.6 million and higher travel and entertainment expenses of $1.2 million, offset by lower trade execution expenses of $4.1 million. During the three months ended June 30, 2020, we experienced cost savings in travel and entertainment and marketing expense primarily driven by COVID-19. These expense items have since increased as business activity has started to normalize, and we expect business activity, and these expenses, to continue to normalize in the second half of 2021 and future periods, assuming the pandemic continues to recede.Promotion and servicing expenses increased $61.5 million, or 16.3%, during the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase primarily was due to higher distribution-related payments of $64.2 million, higher amortization of deferred sales commissions of $4.0 million, higher transfer fees of $3.3$3.8 million, partially offset by lower travel and entertainment expenses of $13.6$5.6 million and lower marketing and communicationtrade execution expenses of $4.0$4.1 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 12.2% and 14.6% (13.9% excluding real estate charges) and 14.1% (14.0% excluding real estate charges) for the three months ended June 30, 20202021 and 2019,2020, respectively. General and administrative expenses increased $6.2$4.4 million, or 5.2%3.4%, during the three months ended June 30, 20202021 compared to the corresponding period in 2019,2020, primarily due to higher real estate chargesportfolio servicing fees of $5.0$4.0 million, higher technologytrading errors of $1.8 million, higher professional fees of $1.9$1.4 million and higher portfolio services feesan unfavorable foreign exchange translation impact of $1.0$1.4 million, partially offset by lower professional feesoffice expenses of $2.6$3.9 million. General and administrative expenses as a percentage of net revenues were 12.1% and 14.3% (14.0% excluding real estate charges) and 14.4% for the six months ended June 30, 20202021 and 2019,2020, respectively. General and administrative expenses increased $10.6$2.3 million, or 4.5%0.9%, during the first six months of 20202021 compared to the same period in 2019,six months ended June 30, 2020, primarily due to an unfavorable foreign exchange translation impact of $2.2 million, higher portfolio servicesservicing fees of $5.7$1.9 million, higher real estate chargesprofessional fees of $5.0 million,$1.6, higher technology fees of $4.6$1.2 million and higher amortizationtrading errors of leasehold improvements of $2.0$1.2 million, partially offset by lower professional feesoffice expenses of $7.2$4.8 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. There were no changes in theour estimates during the first six months of 20202021 or 2019.2020.

Income Taxes

AB, a private limited partnership, is not subject to federal or state corporate income taxes. However, AB is subject to a 4.0% New York City unincorporated business tax (“UBT”). Our domestic corporate subsidiaries are subject to federal, state and local income taxes and generally are included in the filing of a consolidated federal income tax return. Separate state and local
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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 June 30, 20202021 increased $1.2$1.1 million, or 11.5%9.6%, compared to the three months ended June 30, 2019 as a result of an increase in foreign income as compared to domestic which carries a higher tax rate, partially offset by a $2.0 million benefit from the reversal of a FIN 48 reserve as a result of the settlement of the New York City UBT tax
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audit.2020. Income tax expense for the six months ended June 30, 20202021 increased $1.7$8.4 million, or 9.0%40.1%, compared to the six months ended June 30, 2019 as a result of an2020. The increase in foreign income as comparedtax expense is due to domestic which carries a higher pre-tax income in both the three and six months ended June 30, 2021. There were no material changes to uncertain tax rate.positions (FIN 48 reserves) or valuation allowances against deferred tax assets for the three and six months ended June 30, 2021.

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 six months of 2020,ended June 30, 2021, we had $4.6$3.3 million of net lossesgains of consolidated entities attributable to non-controlling interests compared to net gainslosses of $17.9$4.6 million duringfor the first six months of 2019.ended June 30, 2020. Fluctuations period-to-period result primarily from the number of consolidated company-sponsored investment funds and their respective market performance.

CAPITAL RESOURCES AND LIQUIDITY

Cash flows from operating activities primarily include the receipt of investment advisory and services fees and other revenues offset by the payment of operating expenses incurred in the normal course of business. Our cash flows from operating activities have historically been positive and sufficient in supporting our operations. We do not anticipate this to change in the foreseeable future. Cash flows from investing activities generally consist of small capital expenditures and, when applicable, business acquisitions. Cash flows from financing activities primarily consist of issuance and repayment of debt and the repurchase of AB Holding units 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 six months of 2020,2021, net cash provided by operating activities was $822.1$848.7 million, compared to $547.0$820.5 million during the corresponding 20192020 period. The change reflects higher earnings of $147.0 million, an increase in accrued compensation and benefits of $62.7 million and lower net purchases of broker-dealer investments of $62.2 million, partially offset by the net activity of our consolidated funds of $421.7 million, an increase in broker-dealer related payables (net of receivables and segregated U.S. Treasury bills activity) of $209.1 million, an increase in accounts payable and accrued expenses of $59.4 million and a decrease in fees receivable of $45.6 million, partially offset by higher net purchases of investments of $548.7 million.$222.9M.

During the first six months of 2020,2021, net cash used in investing activities was $20.1$29.7 million, compared to $6.0$20.1 million during the corresponding 20192020 period. The change is primarily due to $13.6higher purchases of furniture, equipment and leasehold improvements of $19.4 million, offset by lower cash paid for acquisitions net of cash acquired.$9.8 million.

During the first six months of 2020,2021, net cash used in financing activities was $624.1$768.1 million, compared to $473.1$622.5 million during the corresponding 20192020 period. The change reflects higher redemptionsnet repayments of non-controlling interestsdebt of consolidated company-sponsored investment funds of $318.9$210.0 million, and higher distributions to the General Partner and Unitholders of $103.2$85.2 million as a result of higher earnings (distributions on earnings are paid one quarter in arrears), and an increase in the net purchases of AB Holding Units to fund long-term incentive compensation plans of $28.1 million, partially offset by higher net proceeds from the EQH facilitylower redemptions of $125.0 million, lower net repaymentsnon-controlling interests of commercial paperconsolidated company-sponsored investment funds of $85.9 million, an increase in overdrafts payable of $35.7 million and lower repayments of bank loans of $25.0$182.0 million.

As of June 30, 2020,2021, AB had $824.8 million$1.1 billion of cash and cash equivalents (excluding cash and cash equivalents of consolidated company-sponsored investment funds), all of which is available for liquidity but consist primarily of cash on deposit for our broker-dealers related to various customer clearing activities, and cash held by foreign subsidiaries of $530.6$699.8 million.

Debt and Credit Facilities

See Note 16 to AB’s condensed consolidated financial statements contained in Item 1, for disclosures relating to our debt and credit facilities.

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.”



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COMMITMENTS AND CONTINGENCIES

AB’s capital commitments, which consist primarily of operating leases for office space, generally are funded from future operating cash flows.

During October 2018, we signed a lease, which is scheduled to commence in the fourth quarter of 2020, relating to 218,976 square feet of space at our newly constructed Nashville headquarters. Our estimated total base rent obligation (excluding taxes, operating expenses and utilities) over the 15-year initial lease term is $134 million. During April 2019, weWe have signed a lease which commences in 2024, relating to approximately 190,000166,000 square feet of newly constructed 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 $448$393.0 million.

During 2010, 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 June 30, 2020,2021, we had funded $22.4 million of this commitment. During 2014, as general partner of AllianceBernstein U.S. Real Estate II L.P. (“Real Estate Fund II”), we committed to invest $28.0$27.3 million, as amended in 2015,2020, in Real Estate Fund II. As of June 30, 2020,2021, we had funded $20.1$20.8 million of this commitment.

See Note 12 for discussion of 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.

With the exception of goodwill as discussed inNote 2 to AB’s condensed consolidated financial statements contained in Item 1, thereThere have been no updates to our critical accounting estimates from those disclosed in ““Management’s Discussion and Analysis of Financial ConditionCondition”” in our Form 10-K for the year ended December 31, 2019.2020.

ACCOUNTING PRONOUNCEMENTS

See Note 2 to AB’s condensed consolidated financial statements contained in Item 1.

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CAUTIONS REGARDING FORWARD-LOOKING STATEMENTS

Certain statements provided by management in this report and in the portion of AB’s Form 10-Q attached hereto as Exhibit 99.1 are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The most significant of these factors include, but are not limited to, the following: the performance of financial markets, the investment performance of sponsored investment products and separately-managed accounts, general economic conditions, 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, 20192020 and Part II, Item 1A in this Form 10-Q. Any or all of the forward-looking statements that we make in our Form 10-K, this Form 10-Q, other documents we file with or furnish to the SEC, and any other public statements we issue, may turn out to be wrong. It is important to remember that other factors besides those listed in “Risk Factors” and those listed below could also adversely impact our revenues, financial condition, results of operations and business prospects.

The forward-looking statements referred to in the preceding paragraph, most of which directly affect AB 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 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.

•Our determination that adjusted employee compensation expense should not exceed 50% of our adjusted net revenues:  Aggregate employee compensation reflects employee performance and competitive compensation levels. Fluctuations in our revenues and/or changes in competitive compensation levels could result in adjusted employee compensation expense exceeding 50% of our adjusted net revenues.

•Our Relocation Strategy: While the expenses, expense savings and EPU impact we expect will result from our Relocation Strategy are presented with numerical specificity, and we believe these figures to be reasonable as of the date of this report, the uncertainties surrounding the assumptions on which our estimates are based create a significant risk that our current estimates may not be realized. These assumptions include:
• AB Holding’s cash flow is dependent on the quarterly cash distributions it receives from AB. Accordingly, AB Holding’s ability to meet its financial obligations is dependent on AB’s cash flow from its operations, which is subject to the performance of the capital markets and other factors beyond our control.

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

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

•
The possibility that we will engage in open market purchases of AB Holding Units 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.

•
Our determination that adjusted employee compensation expense should not exceed 50% of our adjusted net revenues:  Aggregate employee compensation reflects employee performance and competitive compensation levels. Fluctuations in our revenues and/or changes in competitive compensation levels could result in adjusted employee compensation expense exceeding 50% of our adjusted net revenues.
•
Our Relocation Strategy: While the expenses, expense savings and EPU impact we expect will result from our Relocation Strategy are presented with numerical specificity, and we believe these figures to be reasonable as of the date of this report, the uncertainties surrounding the assumptions on which our estimates are based create a significant risk that our current estimates may not be realized. These assumptions include:

the amount and timing of employee relocation costs, severance and overlapping compensation and occupancy costs we experience; and
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the timing for execution of each phase of our relocation implementation plan.
•
Our 2020 Margin Target: We previously adopted a goal of increasing

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•The Adverse Impact of COVID-19: The severity of any possible adverse impact on our adjusted operating margin to a target of 30% by 2020, subject to the assumptions, factors and contingencies described as part of the initial disclosure of this target. Our adjusted operating margin, which was 27.5% during 2019, increased to 27.8% during the first six months of 2020.
Our AUM and therefore, our investment advisory revenues including performance-based fee revenues, are heavily dependentof any new economic downturn caused by a resurgence of the COVID-19 pandemic will depend on the leveldepth and volatilitylength of any such downturn and its impact on the financial markets. Based uponcompanies in which we invest. Our conclusions about the possible adverse impact on us is based on our current revenueassumptions that the recovery from any such new economic downturn will be gradual and expense projections, we do notthat there could again be significant, lasting high unemployment and economic damage. We believe that achieving the 2020 Margin Target is likely. However, wethese assumptions are taking additional actions to better alignreasonable, but they may not be correct and economic conditions likely will differ from our expenses with our expected revenues. We remain committed to achieving an adjusted operating margin of 30% in years subsequent to 2020 and will take continued actions in this regard, subject to prevailing market conditions and the evolution of our business mix. Furthermore, our revenues may continue to be adversely affected by the severe economic impact of the novel coronavirus global pandemic ("COVID-19"). Please refer to “Risk Factors” below for additional information regarding the effect on our business COVID-19 has had and may continue to have.
•
The Adverse Impact of COVID-19: The severity of the expected adverse impact on our AUM and revenues of the economic downturn caused by the COVID-19 pandemic will depend on the depth and length of the downturn and its impact on the companies in which we invest. Our conclusions about the possible continuing significant adverse impact on us is based on our assumptions that the recovery will be gradual and that there will be lasting high unemployment and economic damage. We believe that these assumptions are reasonable, but they may not be correct and economic conditions likely will differ from our assumptions.
•
Our fixed income investment performance: Our fixed income performance rebounded in the second quarter following poor relative performance of many of our funds during the first quarter of 2020. Still, we recognize that the impact on the one-, three- and five-year track records of some funds may cause heightened redemptions in some of our fixed income strategies. An increase in redemptions, absent an offsetting increase in sales, would adversely affect our AUM, revenues and net income.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

Item 3.     Quantitative and Qualitative Disclosures About Market Risk
With the exception of the updates regarding Market Risk discussed under
Risk Factors in Part II, Item 1A, thereThere 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, 2019.2020.
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 second quarter of 20202021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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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
We are including the below risk factor language regarding the market volatility that has resulted from COVID-19. Except for the update set forth below, there
There have been no material changes to the risk factors from those appearing in our Annual Report on Form 10-K ("AB 10-K") for the fiscal year ended December 31, 2019.

Market Risk

We indicated in the AB 10-K and Form 10-Q for the quarter ended March 31, 2020 that our revenues and results of operations depend on the market value and composition of our AUM, which can fluctuate significantly based on various factors, many of which are beyond our control. The dramatic securities market declines experienced during March 2020, which resulted from the global effects of COVID-19, caused a significant reduction in our AUM. Markets and AUM levels have since recovered, though we recognize that markets remain volatile and the risk remains of a significant reduction in our revenues and net income in 2020.
Global economies and financial markets are increasingly interconnected, which increases the probability that conditions in one country or region might adversely impact issuers in a different country or region. Conditions affecting the general economy, including political, social or economic instability at the local, regional or global level, such as the civil unrest centered around racial equality experienced across the U.S. in the second quarter, may also affect the market value of our AUM. Health crises, such as the COVID-19 pandemic, as well as other incidents that interrupt the expected course of events, such as natural disasters, war or civil disturbance, acts of terrorism, power outages and other unforeseeable and external events, and the public response to or fear of such diseases or events, have and may in the future have a significant adverse effect on financial markets and our AUM, revenues and net income. Furthermore, the preventative and protective health-related actions, such as business activity suspensions and population lock-downs, that governments have taken, and will continue to take, in response to COVID-19 have resulted, and may continue to result, in periods of business interruption, inability to obtain raw materials, supplies and component parts, and reduced or disrupted operations. These circumstances have caused, and may continue to cause, significant economic disruption and very high levels of unemployment, which will adversely affect the financial condition and results of operations of many of the companies in which we invest, and likely reduce the market value of their securities and thus our AUM and revenues. Furthermore, the significant market volatility and uncertainty, and reductions in the availability of margin financing, we experienced during the first quarter of 2020 severely limited the liquidity of certain asset backed and other securities, making it at times impossible to sell these securities at prices reflecting their true economic value. While liquidity conditions improved considerably in the second quarter following the stimulus programs announced by the U.S. Federal Reserve and U.S. Treasury, we recognize the possibility that conditions could deteriorate in the future. Lack of liquidity makes it more difficult for our funds to meet redemption requests. If liquidity were to worsen, this may have a significant adverse effect on our AUM, revenues and net income in 2020.
Please see additional discussion in Management Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2.

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

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

Item 3.Defaults Upon Senior Securities
Item 3.     Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures
Item 4.     Mine Safety Disclosures

None.

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Item 5.Other Information
Item 5.     Other Information

None.
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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. WeisenseelDibadj 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. WeisenseelDibadj 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 - 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 June 30, 2020,2021, formatted in Inline XBRL (included in Exhibit 101).
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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:July 23, 202029, 2021
ALLIANCEBERNSTEIN L.P.
By:/s/ John C. WeisenseelAli Dibadj
John C. WeisenseelAli Dibadj
Chief Financial Officer & Head of Strategy
By:/s/ William R. Siemers
William R. Siemers
Chief Accounting Officer




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