Citigroup Reaffirms Buy Rating on Alliance Bernstein (AB)

Citigroup is out with a research report this morning, where they reiterate their Buy rating on shares of Alliance Bernstein Holding LP AB; they have a price target of $32.00 on the stock. Citi analysts noted, “Following the recently announced Dynamic Asset Allocation (DAA) sub-advisory variable annuity (VA) win and conversation with product specialists including Mr. Seth Masters, CIO for Blend and Defined Contribution Services, and Mr. Robert Keith, EMD & Co-Head of Institutional & Retail Distribution. Positively, the mandate and scope of DAA extends and diversifies the company's footprint, and could be catalyst for future growth. The DAA win extends the product into the VA market, following successful launches into the Private Client and retail target-date retirement markets.” They also said, “Though management was not specific, they did indicate such wins will be both accretive to fee rates and margins. In separate disclosure, Transamerica noted that such products will have fee rates over 80bps. And while AB is likely to share in the economics, we believe the specialization of the product will ensure relatively high fees. We see AB developing both AUM and overlay wins with Transamerica, and likely other insurance providers.” Citi analysts closed by saying, “We see two positives. First, it appears activity in the sub-advisor channel is percolating. Second, it also appears appetite for risk adjusted return products could gain share, boding well for AB, and thus provide a tailwind for volumes in the retail channel. Importantly, our EPU forecasts do not explicitly model potential wins. Lastly, the CEO’s strong insurance company relationships plus leverage with France-based and parent, AXA, could represent incremental growth opportunities.”