The merger of AMP and Axa Asia Pacific combined with several strategic changes at a global company level has led to a significant reduction in the size of AllianceBernstein's Australian operations in the past two years.

But the local operations have now entered calmer waters and AllianceBernstein Australia and New Zealand chief executive Ross Kent, who took over the reins in March, is carefully adding investment research staff again.

AllianceBernstein would continue to invest in its research team and was in the process of adding another analyst to the Bernstein value equities team, Kent said in an interview with Investor Weekly.

"You are right to point out that we had some departures from the firm, but for the most part we have deliberately sought to invest in that core research capability of our investment teams," he said.

"The Australian business is seen as having as much investment strength as their global peers, both in equities and fixed income."

After the global financial crisis, AllianceBernstein has faced a number of strong headwinds that affected its assets under management (AUM) and its headcount.

The merger of AMP and Axa Asia Pacific in March last year, in particular, had a dramatic impact on the local operations of AllianceBernstein.

It meant the end of the joint venture between Axa and AllianceBernstein in Australia and saw AMP taking over the management of a large chunk of assets, including almost $6 billion in fixed-income mandates.

"We have definitely lost AUM; I am unable to give you a hard and fast figure, but certainly AMP has taken internally some of the domestic assets that we previously managed on behalf of Axa," Kent said.

"But so too we have a relationship with AMP that predated this transaction; it goes back nearly 10 years and we now have a bigger relationship with them in the sense that we continue to manage a sizeable proportion of the assets that we managed on behalf of Axa, and that includes the retail equity funds."

AllianceBernstein also closed its Australian equities growth strategies in March as a result of the departure of the majority of the team in 2010 to set up Alphinity Asset Management and a shifting focus at a global level.

"Globally, the growth business has retreated from regional services," Kent said.

"The decision was that the growth style was not one where the market was demanding regional exposure, whether that was in Australia, Japan or the UK.

"We no longer have the regional-focused growth services, with the exception of US growth, which, given the scale of the market and the criticality of that proposition to the private client business in the US, continues."

The overall headcount at the domestic operation has fallen from 100 in 2008 to 45.

This decrease was largely due to AllianceBernstein's decision to outsource its global investment administration and operation activities to State Street in November last year.

"The firm globally outsourced the middle-office accounting and investment administration to State Street; that was a significant decline in staff. We did our bit in Australia as well," Kent said.

But he made it clear AllianceBernstein had no plans to abandon its investment research capabilities in Australia, but instead was looking to grow the team further.

"The Australian value equity team and the Australia-based fixed-income group are both now larger than they were before we went into the global financial crisis," he said.

Excluding the Australian growth equity team, the number of investment professionals in the company has increased from about 16 in 2007 to 20 currently.
 
"The point that remains is that we continue to hire into that core investment research skill in the local value equity team," Kent said.

"That team is continuing to innovate in a product development sense as well. We have, in the last 12 months, seeded and promoted the alternative Australian value strategy, which is very income focused and specifically targets a higher net of tax income return. 

"And, equally, the team has been party to mandates that we have been winning in Europe, where investors want to make allocations to Asia-Pacific specifically. They try to diversify more to this region.

"That is an important part of our business; we are fully integrated into the global platform."

The company was also actively participating in efforts with superannuation funds to develop glide-path strategies for fund options, drawing on its experience in the US, he said.

"The Australian investor has historically been quite comfortable with their asset allocation, but we are finding super funds are now more focused on outcomes," he said.

"The question used to be whether the member, whether in a retail fund or super fund, had 'more'. It was just growth; return was the focus.

"The focus driven by the massive volatility that the markets have experienced over the last four years is less on 'more', and more on having 'enough'.

"The difference there is that 'more' is pretty much a similar answer for most people, whereas 'enough' is much more personalised.

"You have to take into account risk preference as well, because the stress that comes with seeking great returns is frankly something that many people are not willing to bear.

"It is going to be much more specific to the individual and, therefore, if you are running a large business and you need to be able to trade off the ability to customise things for people and at the same time manage that, embedded advice ideas are becoming much more interesting."

The search for an appropriate product was likely to require a high level of customisation, he said.

"It is not something that there is an off-the-shelf product for, because every client is different and has a different member base, but we are actively involved in those discussions," he said.