MutualFundWire.com: Will a Kraus-less AB Still Follow Kraus' Path?

MutualFundWire.com

The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication

Thursday, May 18, 2017

Will a Kraus-less AB Still Follow Kraus' Path?

A post-Kraus AB may look and act a lot like Kraus' AB.

Seth Bernstein
AllianceBernstein
President and CEO

"Both AXA executives and the AllianceBernstein CEO, Seth Bernstein, have indicated they're inclined to keep Kraus's strategies," Bradley Keoun of TheStreet writes. "In fact, they've praised him for helping to stanch massive investor outflows from AllianceBernstein following the 2008 financial crisis, as well as for devising innovative fee arrangements designed to retain investors who were considering a shift to index-based funds."

That take is echoed by Emory Zink of Morningstar, who writes that new AB CEO Seth Bernstein "has been adamant that he believes the firm's strategy is not broken and intends to continue the efforts begun under Kraus."

"In our discussions ... Bernstein indicated there are no plans to reallocate resources, replace investment management personnel, or abandon previously announced initiatives, such as the forthcoming introduction of AB's 'performance' series of funds," M* writes.

Earlier this month Bernstein himself, on a conference call after his ascension following the abrupt weekend ouster of Kraus and most of the AB board, said that AB "has a very sound strategy and foundation." (M* seems encouraged by this.)

"The goals that this management team and Peter have set are both ambitious and achievable," Bernstein told analysts on the call. "And so, we intend to build some of these foundations from here."

So, if Axa and Bernstein plan to stick to Kraus' plans, why is Kraus not the one doing it? TheStreet reports that analysts who follow AB say "that AXA executives simply didn't like [Kraus] very much." Moody's analyst Dean Ungar reportedly says that there's a "long-simmering personality issue" between Kraus and the folks at Axa.

Fundsters have also whispered that succession planning drove the shakeup, given that 64-year-old Kraus would be looking for his successor. Indeed, last week Axa CEO Thomas Buberl lent credence to that theory by telling the WSJ that "none of the internal candidates presented to us [to replace Kraus] were up to the mark."

Yet it's still not clear how either of these factors triggered such a sudden leadership change, as opposed to a longer transition. Kraus was expected to retire when his contract expires in January 2019, more than a year and a half from now. And Ungar did use the phrase "long-simmering" to describe the personality clash.

"This wasn't a planned, nice, timed-out, telegraphed change," Jefferies analyst Surinder Thind tells TheStreet. "This was a coup done over the weekend."

Printed from: MFWire.com/story.asp?s=56285

Copyright 2017, InvestmentWires, Inc.
All Rights Reserved