AllianceBernstein (AB) LP, the money manager that has lost about $200 billion to client redemptions since the end of 2008, was removed as adviser to three Vanguard mutual funds, according to a statement today from Valley Forge, Pennsylvania-based Vanguard.
Vanguard, the biggest U.S. mutual fund company, dropped AllianceBernstein from its $12.1 billion Windsor Fund (VWNDX), the $6.2 billion International Value Fund and the $3.7 billion Global Equity Fund. Alliance Bernstein managed $5.2 billion for Vanguard, spokesman John Woerth wrote in an e-mail.
“Vanguard gives managers a lot of rope, but in this case they decided they had had enough and sacked them,” Daniel Wiener, editor of the New York-based newsletter Independent Adviser for Vanguard Investors said in a telephone interview today. Alliance Bernstein had been an adviser to Vanguard for more than 10 years, Vanguard said in its statement.
New York-based AllianceBernstein has been plagued by redemptions from its equity funds, a problem Chief Executive Officer Peter Kraus has attributed to underperformance. Alliance had $2.8 billion in withdrawals in the second quarter of 2012, the lowest level of redemptions since the first quarter of 2008. Kraus said today the financial impact of Vanguard’s decision will be “immaterial.”
Pzena Investment Management LLC was added as a manager to the Windsor Fund. ARGA Investment Management LP was given a portion of the assets of the International Value Fund. Baillie Gifford Overseas Ltd., already one of the managers on Global Equity, was given more money to oversee, Vanguard said.
AllianceBernstein Holding LP, which is publicly traded, fell rose 0.4 percent to $12.17 at 2:07 p.m. in New York, after losing as much as 2.6 percent earlier.
The company today reported a 40 percent decline in second quarter net income to $21.3 million, and said it would take a non-cash charge of $225 to $250, most of it in the second half of this year, to cover the cost of cutting back on the real estate it occupies. The move will translate into annual savings of $38 to $43 million, AllianceBernstein said in its earnings announcement.
AllianceBernstein in June extended Kraus’s contract, which would have expired in 2014, an additional five years.
“They showed some improvements in their flows which may be a reflection of positive momentum,” Macrae Sykes, an analyst at Rye, New York-based Gabelli & Co., said in a telephone interview. Gamco Asset Management, Gabelli’s money-management arm, and Gabelli Funds LLC, held a combined 1.3 million shares of Alliance Bernstein as of March 31, according to data compiled by Bloomberg.
The three Vanguard equity funds underperformed a majority of peers over five years, according to data compiled by Bloomberg. Windsor trailed 65 percent of rivals; International Value trailed 51 percent and Global Equity trailed 73 percent. All three funds are actively managed and have multiple managers.
About 40 percent of Vanguard’s $1.8 trillion in assets is actively managed. The rest is in index funds and exchange-traded funds.
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