February 17, 2012 / 6:10 PM / 8 years ago

UPDATE 3-AllianceBernstein cuts hit portfolio managers

* AllianceBernstein battles outflows, sagging profit margin

* Company gets support from parent AXA

By Ross Kerber and Tim McLaughlin

Feb 17 (Reuters) - Struggling asset manager AllianceBernstein LP said on Friday that it cut about 90 jobs this week, including portfolio managers as the company battles outflows and a sagging profit margin.

The cuts, which represent about 2 percent of the New York company’s work force, come as Chief Executive Peter Kraus battles to reduce expenses and stop outflows in its U.S. equity products.

AllianceBernstein has $421 billion in assets under management, but its value equity strategies have been out of favor with investors seeking safety in fixed-income funds.

Last week, AllianceBernstein reported that net revenue in the fourth quarter dropped 20 percent to $625 million. Net outflows in the quarter were $13.2 billion.

Controlled by French insurer AXA, AllianceBernstein also will consolidate or close some of its smaller equity services, or investment strategies meant for institutions and other investors, company spokesman John Meyers said.

Meyers said about 30 of the workers cut were investment professionals, such as analysts and portfolio managers. The company will not take a special charge against earnings because of the cuts, he said.

Despite the cuts, AllianceBernstein will keep adding new products, Meyers said, citing the recent introduction of products like market-neutral and low-volatility funds.

AllianceBernstein reported it had 3,764 employees at the end of 2011, down from 4,256 at the end of 2010.

PARENTAL SUPPORT

AXA has stood by AllianceBernstein despite its troubles, most recently during a conference call with analysts to discuss AXA’s own 2011 earnings on Feb. 16.

Though acknowledging AllianceBernstein’s outflows, AXA Deputy Chief Executive Denis Duverne said the asset manager still provides a strategic benefit. “We believe it remains a very strong franchise, and there is a lot of upside,” he said.

Despite the problems with equities, Duverne said, AllianceBernstein’s bond products have done better. Also, AllianceBernstein “is developing rapidly in alternatives and liability driven strategies, and that’s where the future of the firm lies,” he said.

Other asset managers also have cut jobs recently. BlackRock Inc said last month that it had cut 3 percent of its workforce in the fourth quarter, and Legg Mason Inc also said last month it had finished a restructuring that cut 500 jobs overall.

Legg Mason’s cuts began in 2010, while BlackRock said it had hired a net 900 new people during all of 2011.

Shares of AllianceBernstein are down 40 percent over the past 12 months, underperforming the 16 percent decline on the Dow Jones U.S. Asset Managers Index.

CUTS PART OF STRATEGY

Meyers said the job cuts are in keeping with strategies the company has already outlined to reduce expenses and streamline operations. Kraus, for example, told investors and analysts on a conference call last week that he is attacking the company’s rent costs.

“We are going to continue to focus on taking rent down and it is a very large portion of our cost,” Kraus said on the call. “It is our intention to continue to improve the margin even if we weren’t growing.”

Since becoming chairman and chief executive in December 2008, Kraus, a former Goldman Sachs partner, has struggled to revive a company that was reeling when he arrived. At times he has been pressed by analysts to do more to shake up the company, including selling off some of its businesses.

Kraus has resisted such suggestions and argued that many of its institutional investor customers still want exposure to value stocks and other areas that AllianceBernstein can provide.

In December, Kraus oversaw a reorganization of executives that included the departure of David Steyn, who had been chief operating officer.

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