AllianceBernstein (NYSE:AB) reported record assets under management during the second quarter of 2026, alongside its strongest quarterly sales in five years. The firm's adjusted earnings were $0.82 per unit, up 8% from a year earlier, while adjusted net revenue rose 5% to $888 million. Operating income increased 7% to $293 million, and the adjusted operating margin expanded 70 basis points year over year to 33%.
Fixed income was the largest contributor to flows during the quarter. The funded a $9 billion passive fixed-income mandate from Equitable. Demand for tax-efficient income added roughly $3 billion of inflows in the municipal business. Alternatives and multi-asset strategies generated more than $4 billion of net inflows, marking a sixth consecutive quarter of positive organic growth in that category. However, active-equity outflows were nearly $11 billion, and taxable fixed-income outflows exceeded $4 billion, largely reflecting retail redemptions in Asia-Pacific.
Retail gross sales reached $31 billion, the highest quarterly level in five years, producing $900 million of net inflows. Excluding the Equitable mandate, retail gross sales were $22 billion, up 14% from the comparable 2025 period. The firm ended the quarter with $91 billion in private-market AUM, surpassing the low end of its $90-to-$100 billion Investor Day target more than a year before its 2027 goal. Subsequently, AllianceBernstein onboarded approximately $11.8 billion of commercial mortgage loans from Equitable in July, ahead of schedule. Including those, private-market AUM exceeded the upper end of the original target range. The commercial mortgage assets are expected to begin generating management fees in the fourth quarter at a high-single-digit fee rate.
The third-party insurance business managed $61 billion across roughly 100 clients at quarter-end, including $34 billion in general-account assets, up more than 30% from a year earlier. During the first half, the firm began seven new insurance relationships and deployed nearly $3 billion of third-party insurance capital on a gross basis. AllianceBernstein expects to add at least $100 billion of Corebridge assets over time following the close of the Equitable-Corebridge combination, expected around year-end.
President Onur Erzan said the combined Equitable-Corebridge entity is expected to have about $350 billion in general-account assets and roughly $200 billion in separate-account assets. He noted that while initial asset transitions may include lower-fee core fixed-income mandates, the assets should carry attractive incremental margins because they can be supported through existing infrastructure.
Bernstein Private Wealth ended the quarter with $167 billion in assets and accounted for nearly 40% of firmwide revenue. It recorded $700 million of net outflows during the quarter, attributed to seasonal tax-related selling, but net new assets grew at a 6% annualized rate over the prior 12 months. Erzan said alternatives represent nearly 10% of private-wealth client allocations and could rise to the mid-teens over time. The private wealth unit raised approximately $900 million for alternatives during the quarter.
AllianceBernstein's separately managed account platform reached $69 billion in AUM and posted 17% annualized organic growth over the prior year. The customized retirement platform grew to $117 billion in assets. The active ETF platform included 31 strategies and more than $20 billion in AUM, with assets growing 73% organically over the past year and generating approximately $100 million in annualized management-fee revenue.
Base fees increased 7% year over year. The second-quarter fee rate was 37.7 basis points, affected by the June 30 timing of the $9 billion Equitable mandate. Total operating expenses rose 4% to $595 million. Compensation and benefits increased 5%, while the compensation ratio remained 48.5% of adjusted net revenue. The firm lowered its full-year non-compensation expense outlook to $620 million to $640 million from a prior range of $625 million to $650 million.
AllianceBernstein raised its outlook for 2026 performance fees to $115 million to $135 million, from $95 million to $115 million previously, reflecting stronger expected public-market performance fees. The outlook for private-market performance fees was reduced to $55 million to $65 million from $70 million to $80 million. CFO Tom Simeone said the private-market revision reflected unrealized portfolio marks and tax events at the investor level, rather than credit events. The firm also lowered its expected full-year tax rate to 5% to 6%, from 6% to 7%.