Alliance Capital Management Holding L.P

International Directory of Company Histories, Volume 63 (1992) by Kathleen Peippo

Alliance Capital Management Holding L.P.

1345 Avenue of the Americas New York, New York 10105 U.S.A. Telephone: (212) 969-1000 Fax: (212) 969-2229 Web site: http://www.alliancecapital.com

Public Company Founded: 1971 Employees: 4,100 Total Assets: $1.16 billion (2003) Stock Exchanges: New York Ticker Symbol: AC NAIC: 551112 Offices of Other Holding Companies

Alliance Capital Management Holding L.P., a publicly traded limited partnership, holds about 30 percent ownership of Alliance Capital Management L.P. Alliance Capital is a leading global investment management firm with about $489 billion in assets under management. AXA Financial, Inc., a subsidiary of the global French insurer AXA, holds about 55 percent. The company serves both the retail and institutional markets. The Bernstein unit focuses on high-net-worth individuals.

Establishing a Presence: 1960s–80s

William H. Donaldson, Dan W. Lufkin, and Richard H. Jenrette established a partnership in 1959, buying a seat on the New York Stock Exchange and opening up a small office. In 1962 Donaldson took over the investment banking area, marking the beginning of the firm's asset management department. Donaldson, Lufkin & Jenrette's (DLJ) pension fund business flourished, and Alliance Capital Management L.P. began operating as a subsidiary in 1971.

During the first half of the decade, two of DLJ's principals left the company. Jenrette, now at the helm, faced a challenging economic environment. During a period of restructuring, DLJ announced that it would sell off Alliance Capital for $7 million. The sale did not materialize and the subsidiary remained in the fold.

Alliance Capital continued to grow its offerings and geographic reach. In 1978, its first money market fund was introduced. That same year a London office opened—its first overseas. Beginning in 1983, a load mutual fund was offered to the public. The company also expanded through the purchases of other companies.

In 1984, the company had $18 billion under management, according to American Banker. The bulk of the assets were for corporate employee benefits plans, endowment funds, foundations, and public employee retirement systems. As a DLJ subsidiary, Alliance Capital had grown into one of the largest pension fund managers on Wall Street. Moreover, it provided its parent company with its chief source of income.

Jenrette agreed, in late 1984, to sell majority control of DLJ to The Equitable Life Assurance Society of the United States, the third largest insurer in the country. The next year, Alliance Capital was split off from DLJ and began operating as an independent subsidiary of The Equitable. In 1987, Alliance opened an office in Tokyo. The company was taken public on the New York Stock Exchange, in 1988, as a master limited partnership, a structure that yielded tax and liquidity advantages.

Building Worth: 1990–2000

In the spring of 1993, Alliance acquired the business of Equitable Capital Management Corporation, a wholly owned subsidiary of The Equitable. The deal put Alliance Capital among the top three money management companies in the country, with assets under management approaching $100 billion. Prior to the deal, Alliance had about $62 billion in assets under management.

Alliance planned on keeping half of Equitable Capital's ten mutual funds—those that added diversity to the company's offerings. The remaining five would be rolled into other Alliance funds. Alliance, ranked 20th in mutual fund assets, had been positioning itself to expand mutual fund sales made through banks. Alliance had been an early player in bank sales, beginning them in 1987.

Alliance also pitched mutual funds in developing markets. A joint venture in Hong Kong was entered into in 1997 to offer funds owning both local and U.S. stock. During the year, similar operations were established in Brazil, Russia, South Africa, and South Korea. Meanwhile, the Alliance Japanese operation had begun to flourish, thanks to a combination of economic conditions and regulatory changes. Investors held $1.6 billion in Alliance funds, up from just $100 million the prior year. Conversely, a four-year-old joint venture in Bombay had only $40 million in assets under management. "That's less than Alliance collects in a single day from U.S. investors," observed Jon Birger in Crain's New York Business.

Emerging markets looked good to Alliance in light of a number of factors, according to Crain's. The U.S. mutual fund market was maturing and was unlikely to sustain its decade-long 18 to 25 percent growth rate. Capital investment to start a new business in these markets was relatively low. The demographics in countries such as India and Brazil held positive indications, such as high rates of savings. In addition, early entry in emerging markets gave Alliance first crack at developing local financial management partners. On the down side, evaluation of local stock was more difficult due to accounting practices. But Alliance felt that its solid research capabilities were up to the task.