Can AllianceBernstein Regain Its Magic Touch?

Since joining investment manager AllianceBernstein (AB) as chairman and chief executive officer in December 2008, Peter Kraus has worked diligently to stem client defections. He recruited money managers, tied compensation more closely to stock performance, and rolled out new products in areas such as inflation protection and asset allocation. The measures haven't worked so far.

Clients, mainly institutions, pulled $126 billion from the company's funds in 2009 and 2010. That's 28 percent of assets and represents the highest withdrawal rate for any publicly traded U.S. mutual-fund manager during the same period. In February, AllianceBernstein ranked last among 23 rivals in an institutional investor brand-loyalty survey by Cogent Research, a research and consulting firm in Cambridge, Mass. "Their clients are walking out the door, and a lot of institutional investors don't have a positive impression of them," says Christy White, a principal at Cogent. "It doesn't bode well."