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26-27th February 2019
INSTITUTIONAL MONEY KONGRESS, FRANKFURT
EUROPEAN EQUITIES
This presentation has been provided to you for use in a private and confidential meeting to discuss a potential or existing investment advisory relationship. This presentation is not an advertisement and is not intended for public use or distribution beyond our private meeting. This presentation is provided for informational purposes only and is not intended to be an offer, or the basis for any contract to purchase or sell any security or other instrument, or for AllianceBernstein to enter into or arrange any type of transaction as a consequence of any information contained herein. AllianceBernstein and its business units do not provide tax, legal or accounting advice and you should consult your professional advisors with respect to such matters. This presentation is not intended for public use or distribution. Neither this presentation nor any of its contents may be used for any other purpose without the express consent of AllianceBernstein. © 2019 AllianceBernstein
Andrew Birse Portfolio Manager—European Value Equities
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 1 | AB European Equities
As of January 31, 2019 Source: AB
Our European Equity Platform: High Conviction Long-Established Strategies
Our Investment Philosophy
We approach investing as business owners, developing a differentiated perspective on companies’ future cash flows and buying them at prices that offer attractive returns
Distinctive Investment Process
Thinking Like Business Owners Bringing a private equity mind-set to the public markets by applying internal rate-of-return techniques
Strong Global Collaboration Adding a global perspective to our European research through intense collaboration among analysts across regions
Broader Perspectives on Risk Directly engaging with short sellers and extensive use of quantitative risk models
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 2 | AB European Equities
As of December 31, 2018. Past performance does not guarantee future results. † Data are preliminary. Data shown are Gross of fees. Market style environments over the past seven years based on the following factor indices: MSCI Europe Value Index for value environment; MSCI Europe Index for core environment; and MSCI Europe Growth Index for growth environment. *Category: eVestment Pan-Europe All Cap Equity Periods of more than one year are annualized. Numbers may not sum due to rounding. Past performance is no guarantee of future results. This is supplemental information to the GIPS-compliant performance and disclosure page. The returns presented above are gross of fees. See Disclosures and Important Information. Source: eVestment, MSCI and AB; see Performance Disclosures.
Performance Characteristics vs. the MSCI Europe Index AB European Value: Consistent Long-Term Performance
Winning Percentage in Different Market Style Environments (Percent)†
Upside and Downside Capture Ratios (Percent)* Ratios over past five years
100%
113,8 101,2
Up Capture Downside Capture
100%
94.8 92.8
AB European Value Category Median
AB ranks 6th %ile
AB ranks 54th %ile
70
50
68
When ValueOutperforms
Core Environment When GrowthOutperforms
Excess Returns +4.0% +2.3% +2.5%
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 3 | AB European Equities
We Exploit Multiple Themes…
Positive Change Operating performance improvement Corporate restructuring Balance sheet restructuring
Underappreciated Advantage Superior business model Intellectual property protection
Strong/Improving Dynamics Favorable supply/demand characteristics Positive industry structure trends Positive regulatory environment
…to Deliver in Different Ways
Cashflow/earnings growth
Balance sheet restructuring/return to shareholders
Market re-valuation of cashflows/earnings
Our Investment Approach
There can be no assurances that investment objectives will be achieved. Source: AB; please see A Word About Risk in the Appendix.
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 4 | AB European Equities
High Conviction in Our Differentiated Research Insights AB European Value: Company Examples
Positive Change
As of December 31, 2018 The companies identified above represent a portion of the holdings of a representative European Value account. Logos, brands and other trademarks in this presentation are the property of their respective trademark holders. They are used for illustrative purposes only, and are not intended to convey any endorsement or sponsorship by, or association or affiliation with, the trademark holders. Holdings are subject to change. Source: AB; see A Word about Risk and Important Information.
Underappreciated Advantage Strong/Improving Dynamics
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 5 | AB European Equities
We Follow a Disciplined Investment Process
Generate Ideas
Fundamental insights from our industry analysts
Proprietary quantitative return model
Universe of 1000 companies
Select Highest-Conviction Ideas
Extensive fundamental research on key drivers of company earnings and cash-flows
Management due diligence
Assess the bear case
Generate Internal Rates of Return (IRRs) from earnings and cash-flow forecast: Free cash-flow generation Sustainability of returns Balance sheet strength
300-400 companies
Construct Portfolio
Analyse portfolio using proprietary and external risk models
Assess fundamental exposures to country, industry and macro risks
Size positions to maximise exposure to idiosyncratic returns and minimise exposure to unintended sources of risk
40-60 companies
AB European Value
For illustrative purposes only. There can be no assurance that any investment objectives will be achieved.
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 6 | AB European Equities
Expected Return Model: Helps Identify Opportunities
Hig
hest
Exp
ecte
d R
etur
n Lo
wes
t Exp
ecte
d R
etur
n
Most Attractive
Least Attractive
Research Focus
Insight Metric Company Selection
Industry Selection
Country Selection
Valuation
Price to Tangible Book × ×
Enterprise Value to Sales ×
Price to Free Cash Flow × × ×
Price to Forecast Earnings × × ×
Quality Free Cash Flow to Assets × ×
Current Operating Accruals ×
Corporate Behavior
Net Equity Issuance × × ×
Net Debt Issuance ×
Asset Growth ×
Investor Behavior
Price Momentum × × ×
Short Interest ×
Option Skew ×
Macro 10-Year Bond Yield ×
Current analysis does not guarantee future results. Source: AB
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 7 | AB European Equities
Fundamental Analysts’ Cash Earnings Forecasts The Basis of Stock Selection
Company Analysis
Management strategy
Competitive position
Balance-sheet strength
Financial forecasts
Evaluate ESG issues
Industry Analysis
Supply and demand
Structural change
Innovation
Insights from Many Sources Fixed income and other internal research External sources
Analysts’ Cash Earnings Forecasts
Fundamental Research
Broad Perspective
For illustrative purposes only. There can be no assurance that any investment objectives will be achieved.
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 8 | AB European Equities
Comprehensive Examination of Analysts’ Research and Forecasts Research Review
Key Questions Key Participants
What is the investment controversy? Research analysts
Does management have a viable strategy? Tawhid Ali, Andrew Birse
What are the risks to the forecast?
Other relevant investment professionals
What is the level of earnings quality?
What if sellers are right?
Outcomes
Return forecast
Risk assessment
Investment decision
For illustrative purposes only. Source: AB
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 9 | AB European Equities
As of June 30, 2018 Past performance and historical analysis does not guarantee future results. Source: Company reports and AB; see Disclosures and Important Information.
Under-appreciated Opportunity for Servicing Airbus A320 Engines
The Fleet of V2500 Engines in the Window for Spares and Repairs Is Growing at a 11% CAGR for the Next Five Years
MTU Is a Tier 1 Supplier to Pratt & Whitney Whose Engines Power the Airbus A320ceo (V2500) and A320neo (PW1000)
MTU: Powering One of the World’s Most Popular Aircraft
These Engines Power Around 50% of All A320s Flying Today
Pratt & Whitney PW1000
MTU’s largest engine program has seen significant growth over the last decade. Engines are often sold to airlines at an initial loss
With lower relative investment requirements going forwards, MTU is set to move into a significantly higher cash generation phase
MTU’s management team is strong, it has a pristine balance sheet and conservative accounting practices in an industry often plagued by opaque financial reporting
Pratt & Whitney V2500
0
500
1000
1500
2000
2500
3000
3500
2014 2015 2016 2017 2018E2019E2020E2021E2022E2023E
CAGR ’15–’20
V2500 Aircraft with Engines over Six Years Old
11%
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 10 | AB European Equities
MTU: Our IRR-Based Approach An Example of Research-Based Return Forecasting (EUR Millions)
As of June 30, 2018 Historical information and forecasts provided for illustrative purposes only. It should not be assumed that investments in any specific security was or will be profitable. It does not represent all of the securities purchased, sold or recommended for clients in this product. A listing of all recommendations made during the prior one-year period is available upon request. Net debt, Enterprise Value and Market Cap are as of 31 December of each year. Thesis and model based on end of year 2017 and AB forecasts as of 2018. *FCF (free cash flow) = EBITDA – change in NWC (net working capital) – interest – taxes – capital expenditure (capex) – other cash charges (before dividends to minorities) †Based on 2023E EBITDA of €1,288m Note: There is no guarantee that MTU will be owned in the portfolio. Source: Company reports and AB; see Disclosures and Important Information.
2017 2018E 2019E 2020E 2021E 2022E EBITDA 747 771 830 938 1,074 1,213 Our actual forecasts
for MTU, based on our fundamental research. We assume the company delevers
FCF* 154 299 342 457 555 652
Net Debt 1,017 836 619 290 (119) (569)
Dividends 98 118 123 129 148 200
EV/EBITDA 10.7× 10.0× Our conservative approach assumes a lower exit multiple than entry multiple
Enterprise Value 8,213 12,880†
Market Cap 7,196 13,450
Investment Cashflow (7,196) 118 123 129 148 13,650 = 15.0% IRR Potential
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 11 | AB European Equities
Size Positions Based On
For illustrative purposes only. Source: AB
Return Conviction Downside risks Contribution to portfolio’s factor and macro risk
exposures Liquidity
Understand Changing Portfolio Risk Exposures
Informed by Fundamental and Quantitative Perspectives Disciplined Portfolio Construction
Other Factors Cluster Risk
Market cap
Beta
Concentration Industry
Country
Return Factors Valuation
Momentum
Ensure that company-specific risks are the primary source of tracking error
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 12 | AB European Equities
Helping to identify unintended risks Cluster Analysis
As of June 1, 2018. Based on a representative European Value account and MSCI Europe Index. Clustered according to six-month intra-stock correlations. Analysis for illustrative purposes only. The companies identified above represent a portion of the holdings of the AB European Equity fund at a point in time. Holdings are subject to change. Source: AB
Clusters are groups of companies that are most closely correlated to each other
Clusters are grouped according to their correlation with each other 1
2
3
4
5
6
7
8
9
10
Relative Benchmark
Weight
Boliden Glencore… +0.7% 2.8%
Repsol Royal Dutch Shell… +2.4 7.8
Cluster of companies… +8.7 12.3
Cluster of companies… –2.6 2.6
Cluster of companies… –2.4 9.1
Cluster of companies… –3.3 5.5
Cluster of companies… –0.3 2.2
Cluster of companies… +0.9 2.7
Cluster of companies… +6.6 6.1
EDP Orkla Pandora…
+1.5 5.9
Cluster of companies… –8.8 14.3
Cluster of companies… +0.6 7.5
Anlagen Henkel… –6.9 15.0
Enel… –3.7 5.6
11
12
13
14
Relative Benchmark
–5.1% 19.5%
Relative Benchmark
–10.6% 20.6%
Relative Benchmark
+9.2% 25.5%
Relative Benchmark
–0.1% 33.8%
Relative Benchmark
+4.0% 45.0%
Relative Benchmark
–10.7% 54.4%
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 13 | AB European Equities
For illustrative purposes only. Source: AB
Sell Discipline: Constant Reevaluation of Return Potential
Most Attractive
Least Attractive
Opportunities Buy
Sell
Stocks become sell candidates as:
Expected returns falls
Research conclusion changes
Risk increases Reinvest proceeds in more attractive
opportunities
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 14 | AB European Equities
Our Approach to ESG in European Equity Portfolios
14
Portfolio managers and analysts engage regularly with boards and management on material ESG issues
We take a disciplined approach to proxy voting following well-established AB policies
Active Ownership
+ AB signed the UN PRI in 2011 and publishes an annual Corporate Responsibility Report
+ We have a dedicated Head of Responsible Investing and two ESG/Proxy analysts
AB Firmwide Commitment to ESG
Analysis of material ESG risks and opportunities is integrated into our company research
External ESG research is accessible via core investment IT systems
ESG Integration into the Investment Process
For illustrative purposes only. Source: AB
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 15 | AB European Equities
Past performance is no guarantee of future returns.
European macro backdrop is strong Company balance sheets are solid Companies are delivering good earnings growth
Why European Equities?
Valuations look attractive relative to other regions Political risks are driving investor anxiety and accentuating mispricing The opportunity for active stock selection is even larger than in most other regions
Why Now?
Disciplined process focused on cashflow and IRR, implemented with a private equity approach Differentiated research insights with global capabilities Experienced team A historically proven track record of success across different market environments
Why AB?
Why AB European Value?
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 16 | AB European Equities
PORTFOLIO REVIEW
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 17 | AB European Equities
AB European Value: Performance Summary
Past performance does not guarantee future results. Data are preliminary. Data shown are Gross of fees Inception dates: European Value—June 30, 1997 Periods of more than one year are annualized. Numbers may not sum due to rounding. Past performance is no guarantee of future results. This is supplemental information to the GIPS-compliant performance and disclosure page. The returns presented above are gross of fees. The results do not reflect the deduction of investment-management fees; the client’s return will be reduced by the management fees and any other expenses incurred in the management of its account. For example, a US$100 million account paying a 0.50% annual fee with a given rate of 10% compounded over a 10-year period would result in a net-of-fee return of 9.5%. Investment advisory fees are described in Part 2A of AB’s Form ADV. See Disclosures and Important Information. Source: MSCI and AB; see Performance Disclosures.
Periods Ending January 31, 2019
January 2019
One Year
Three Years
Five Years
Ten Years
Since Inception
European Value 8.6% (7.5)% 7.5% 8.0% 10.7% 6.2%
MSCI Europe 6.2 (6.5) 4.6 4.8 9.3 4.8
Relative Performance +2.4% (0.9)% +2.9% +3.2% +1.5% +1.4%
In Euros
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 18 | AB European Equities
As of December 31, 2018 Holdings are subject to change. Numbers may not sum due to rounding. Based on a representative European Value account. Source: MSCI and AB
AB European Value Positioning
Sector Overweights and Underweights (Percent)
Top 5 Country Overweights and Underweights (Percent)
Technology Healthcare Financial Communication Services Consumer Staples
5,2 4,2
4,0 3,4 3,3
(2,9) (4,2)
(6,5) (9,0)
(11,2)
NorwayFinlandAustria
SwedenItaly
Germany Netherlands France Switzerland United Kingdom
Top 10 Holdings
Portfolio Weight %
Royal Dutch Shell 5.1%
Amer Sports 3.4
Roche 3.1
Novo Nordisk 3.0
Airbus 2.8
Allianz 2.7
Aroundtown 2.6
Repsol 2.6
UCB 2.6
Anlagen 2.5
–6,1 –3,9
–3,1 –1,8
–0,9 0,5
1,4 2,3
3,2 3,7
4,6 Materials Real Estate
Industrials Consumer Discretionary
Energy Utilities
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 19 | AB European Equities
As of December 31, 2018 Past performance does not guarantee future results. Holdings are subject to change. Based on a representative account; measured against MSCI Europe, in EUR. Attribution calculated gross of fees. Numbers may not sum due to rounding. Currency effects excluded from display. †Explicit and implicit currency exposures Source: MSCI and AB
AB European Value: One-Year Attribution As of 31 December 2018 vs. MSCI Europe (Basis Points)
Largest Detractors
Sector Contribution
Relative Performance
–48
-195
-235
Stock Selection
93
86
67
–92
–153
–180 Consumer Staples
Materials
Company Sector Attribution Pandora Consumer Discretionary –94
Valeo Consumer Discretionary –63
British American Tobacco Consumer Staples –52
Signify Industrials –48
Norsk Hydro Materials –47
Sector Selection
Real Estate
Consumer Discretionary
Financials
+9 Currency Exposures†
Industrials
Largest Contributors
Company Sector Attribution Amer Sports Consumer Discretionary +140
GKN Consumer Discretionary +62
TDC Communication Services +52
Nokia Technology +50
Burford Capital Financials +48
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 20 | AB European Equities
Style Research: Risk Attribution vs. Peers
As of December 31, 2018. Past performance does not guarantee future results. For illustrative purposes only. Logos, brands and other trademarks in this presentation are the property of their respective trademark holders. They are used for illustrative purposes only, and are not intended to convey any endorsement or sponsorship by, or association or affiliation with, the trademark holders. Style Research chart shows the breakdown of five-year ex-ante tracking error (annualized) attributed to currency, market, sector, style and equity risk versus peers in the Morningstar EAA Fund Europe Large-Cap Value Equity category, relative to MSCI Europe, divided into quartiles. A higher stock-specific risk attribution means the strategy generates more stock-specific risk than peers. Source: Style Research and AB
Stock-Specific Risk Has Been the Main Source of Tracking Error
0
1
2
3
4
5
6
7
Ex-A
nte
Trac
king
Erro
r (Pe
rcen
t)
Tracking Error Currency Risk Market Risk Sector Risk Style Risk Stock-Specific Risk
AB European Equity Portfolio
0
20
40
60
80
100
Ris
k At
tribu
tion
(Per
cent
)
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 21 | AB European Equities
As of December 31, 2018 Holdings are subject to change. Numbers may not sum due to rounding. Based on a representative European Value account. Source: MSCI and AB
Attractive Valuations & Strong Returns
Price/Forward Earnings Next 12 Months (Est.)
Return on Equity Next 12 Months (Est.)
Price/Cash Flow
Portfolio Characteristics
7,0× 8,5×
EuropeanValue
MSCIEurope
14,1% 15,6%
EuropeanValue
MSCIEurope
Price/Book
1,4× 1,6×
EuropeanValue
MSCIEurope
10,0× 10,3×
EuropeanValue
MSCIEurope
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 22 | AB European Equities
AB Eurozone Strategic Value: Performance Summary
Past performance does not guarantee future results. Data are preliminary. Data shown are Gross of fees Inception dates: Eurozone Strategic Value—June 30, 2002 Periods of more than one year are annualized. Numbers may not sum due to rounding. Past performance is no guarantee of future results. This is supplemental information to the GIPS-compliant performance and disclosure page. The returns presented above are gross of fees. The results do not reflect the deduction of investment-management fees; the client’s return will be reduced by the management fees and any other expenses incurred in the management of its account. For example, a US$100 million account paying a 0.50% annual fee with a given rate of 10% compounded over a 10-year period would result in a net-of-fee return of 9.5%. Investment advisory fees are described in Part 2A of AB’s Form ADV. See Disclosures and Important Information. Source: MSCI and AB; see Performance Disclosures.
Periods Ending January 31, 2019
January 2019
One Year
Three Years
Five Years
Ten Years
Since Inception
Eurozone Strategic Value 7.2% (7.6)% 9.7% 8.9% 10.6% 6.9%
MSCI EMU 6.3 (10.1) 5.2 5.0 8.1 4.0
Relative Performance +0.9% +2.5% +4.6% +3.9% +2.5% +2.8%
In Euros
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 23 | AB European Equities
As of December 31, 2018 Holdings are subject to change. Numbers may not sum due to rounding. Based on a representative Eurozone Strategic Value account Source: MSCI and AB
AB Eurozone Strategic Value Positioning
Sector Overweights and Underweights (Percent)
Top 5 Country Overweights and Underweights (Percent)
4,5 3,4
2,5 1,6
1,3 1,0
(0,1) (2,5)
(2,6) (3,4)
(6,1)
Real EstateIndustrialsFinancials
EnergyHealthcare
MaterialsUtilities Consumer Discretionary Technology Consumer Staples Communication Services
4,3 2,9 2,8 2,8
2,5 1,3
(0,6) (5,3)
(6,5) (8,2)
IrelandItaly
AustriaFinland
BelgiumLuxembourg
Spain Netherlands France Germany
Top 10 Holdings
Portfolio Weight %
Sanofi 4.7%
Airbus 4.3
Total 4.1
Enel 3.4
Pernod-Ricard 3.3
Repsol 3.3
Amer Sports 3.3
Allianz 3.3
UCB 3.1
Henkel 2.9
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For Investment Professional use only. Not for inspection by, distribution or quotation to, the general public. 24 | AB European Equities
As of December 31, 2018 Past performance does not guarantee future results. Holdings are subject to change. Based on a representative account; measured against MSCI EMU, in EUR. Attribution calculated gross of fees. Numbers may not sum due to rounding. Currency effects excluded from display. *Contributors or detractors not held Source: MSCI and AB
AB Eurozone Strategic Value: One-Year Attribution As of 31 December 2018 vs. MSCI EMU (Basis Points)
Largest Contributors
Largest Detractors Sector Contribution
Relative Performance
–86
275
190
Stock Selection
135
106
72
–29
–61
–97 Materials
Industrials
Company Sector Attribution Amer Sports Consumer Discretionary +151
Bayer* Healthcare +61
Nokia Technology +58
MTU Aero Engines Industrials +50
UCB Healthcare +47
Company Sector Attribution Valeo Consumer Discretionary –84
Duerr Industrials –50
Signify Industrials –45
British American Tobacco Consumer Staples –38
Leonardo Industrials –35
Sector Selection
Real Estate
Healthcare
Financials
Technology
+1 Currency Exposures*
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0
20
40
60
80
100
Ris
k At
tribu
tion
(Per
cent
)
Stock-Specific Risk Has Been the Main Source of Tracking Error Style Research: Risk Attribution vs. Peers
0
1
2
3
4
5
6
7
Ex-A
nte
Trac
king
Erro
r (Pe
rcen
t)
Currency Risk Market Risk Sector Risk Style Risk
As of December 31, 2018. Past performance does not guarantee future results. For illustrative purposes only. Logos, brands and other trademarks in this presentation are the property of their respective trademark holders. They are used for illustrative purposes only, and are not intended to convey any endorsement or sponsorship by, or association or affiliation with, the trademark holders. Style Research chart shows the breakdown of five-year ex-ante tracking error (annualized) attributed to currency, market, sector, style and equity risk versus peers in the Morningstar EAA Fund Eurozone Large-Cap Equity category, relative to MSCI EMU, divided into quartiles. A higher stock-specific risk attribution means the strategy generates more stock-specific risk than peers. Source: Style Research and AB
AB Eurozone Equity Portfolio
Tracking Error Stock-Specific Risk
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As of December 31, 2018 Holdings are subject to change. Numbers may not sum due to rounding. Based on a representative Eurozone Strategic Value account. Source: MSCI and AB
Attractive Valuations & Strong Returns
Price/Forward Earnings Next 12 Months (Est.)
Return on Equity Next 12 Months (Est.)
Price/Cash Flow
Portfolio Characteristics
6,3× 7,8×
EurozoneStrategic
Value
MSCIEMU
12,8% 14,5%
EurozoneStrategic
Value
MSCIEMU
Price/Book
1,2× 1,4×
EurozoneStrategic
Value
MSCIEMU
9,6× 9,9×
EurozoneStrategic
Value
MSCIEMU
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APPENDIX
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Performance Characteristics vs. the MSCI EMU Index AB Eurozone Strategic Value: Consistent Long-Term Performance
Winning Percentage in Different Market Style Environments (Percent)†
Upside and Downside Capture Ratios (Percent)* Ratios over past five years
100%
107,4 95,5
Up Capture Downside Capture
100%
86.8 92.4
AB Eurozone Strategic Value Category Median
AB ranks 15th %ile
AB ranks 38th %ile
64
45
62
When ValueOutperforms
Core Environment When GrowthOutperforms
Excess Returns +4.8% +2.3% +3.7%
As of December 31, 2018. Past performance does not guarantee future results. † Data are preliminary. Data shown are Gross of fees. Market style environments over the past seven years based on the following factor indices: MSCI EMU Value Index for value environment; MSCI EMU Index for core environment; and MSCI EMU Growth Index for growth environment. *Category: eVestment Eurozone All Cap Equity Periods of more than one year are annualized. Numbers may not sum due to rounding. Past performance is no guarantee of future results. This is supplemental information to the GIPS-compliant performance and disclosure page. The returns presented above are gross of fees. See Disclosures and Important Information. Source: eVestment, MSCI and AB; see Performance Disclosures.
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Europe: Still Positive Growth But Moving Towards Trend and Firm Inflation
Wage Growth Starting to Pick Up
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
00 02 04 06 08 10 12 14 16 18Yo
Y %
Chg
.
Compensation per Employee
Negotiated Wages
Europe Growth to Move Back Toward Trend Real GDP Growth
–0,6
–0,3
0,0
0,3
0,6
0,9
1,2
10 11 12 12 13 14 15 16 17
QoQ
Per
cent
Cha
nge
Slowdown In Growth Would Reduce the Ability of the ECB To Increase Rates in 2019
As of December 31, 2018 Past performance does not guarantee future results. Source: Bloomberg, Citigroup, Haver Analytics and IHS Markit
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As of December 31, 2018 Current forecasts do not guarantee future results. Based on MSCI US, MSCI Europe ex-UK, MSCI UK, MSCI Japan and MSCI Emerging Markets. Price/forward earnings ratios are based on earnings estimates for the next 12 months. *Historical percentile ranks based on data from March 1996 to December 2018. Source: Bloomberg, FactSet, MSCI and AB
Equity Valuations Are Now More Attractive
Valuations Contracted Meaningfully During 2018 Price/Forward Earnings
18,7×
15,3× 14,3× 14,6×
12,2×
14,6×
12,4×
11,2× 11,6×
10,5×
US Europe ex-UK
UK Japan EmergingMarkets
Europe and EM Expected to Deliver Strongest Earnings Growth in 2019 EPS Percentage Change vs. Previous Year (Consensus)
2,0
3,5
22,2
12,7
9,8
9,2
8,1
7,7
5,0
2,6
Europe ex-UK
Emerging Markets
US
UK
Japan
2018 2019 Percentile* 28 30 24 3 23
Dec 2017 Dec 2018
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Relative Price/Book Valuations of High and Low-Beta Developed Europe Stocks Europe Valuation Dislocation
As of December 31, 2018 Historical analysis does not guarantee future results. Historical information provided for illustrative purposes only and are subject to change. Price/book ratios of the highest and lowest quintiles of monthly beta within the AB European universe of stocks versus the universe average This presentation is not approved, reviewed or produced by MSCI. Please see Index Descriptions in the Appendix. Source: Bloomberg, Center for Research in Security Prices (CRSP), FactSet, MSCI and AB
–60
–30
0
30
60
90
120
150
1985 1989 1993 1997 2001 2005 2009 2013 2017
Low Beta
High Beta
Investors Are Paying an Unusually High
Premium for Perceived Safety
31
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As of January 2019 †As of December 31, 2018 *Based in New York
Investment Team AB European Equities
Tawhid Ali Chief Investment Officer— European Value Equities 16 years with firm, 26 years in industry
Andrew Birse Portfolio Manager & Senior Research Analyst— European Value Equities Industrials 9 years with firm, 17 years in industry
Jeremy Taylor Commodities/ Energy/Utilities 14 years with firm 25 years in industry
Mark Underwood* Consumer 16 years with firm 29 years in industry
Jane Bleeg Healthcare 3 years with firm 15 years in industry
Cem Inal* Technology 16 years with firm 28 years in industry
Philippos Philippides Financials 16 years with firm 31 years in industry
Anu Venkataraman* Financials 26 years with firm 26 years in industry
Justin Moreau* Telecom/Media 6 years with firm 9 years in industry
Peter Chocian Quantitative Research 13 years with firm 19 years in industry
AB Global Equity: Value Research†
37 Fundamental Analysts 9 Quantitative Analysts
Carl Harris Industrials Joined the firm 20 years in industry
Grayden Reece-Smith Industrials Joined the firm 8 years in industry
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AB Value Analysts: Extensive Research Resources
As of January 2019 Analysts may cover multiple sectors.
Value Equities
Jonathan Berkow Peter Chocian Jacopo Coletto Eric Demoiseau Henry Huang
Serdar Kalaycioglu Itay Moshenberg Daniel Terry Liang Zhu
Fundamental Research
Shared Research Resources
Quantitative Research Currency
Fixed Income Quantitative Research Team
Commodities Consumer Financials Industrials Technology/Telecom
Michelle Dunstan Akhil Kapoor Luke Pryor James Robertson Zhiyuan Tao Jeremy Taylor Ian McNaugher
Gayle Baldwin Jane Bleeg Rajeev Eyunni Snezhana Otto Mark Underwood Stephen Wei
Hamish FitzSimons Ajit Ketkar John Lin Vivian Lubrano Katsuhiko Mano Philippos Philippides Shri Singhvi Anu Venkataraman Jonathan Wing
Andrew Birse Carl Harris Aiko Hemmi Taro Hirano Gates Moss Grayden Reece-Smith Erik Turenchalk Lily Zheng
Vivian Chen Brian Holland Cem Inal Justin Moreau David Sun Min Zhou Frontier Markets Generalists
Slava Breusov Vlad Byalik Ted Mann Christine Phillpotts
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Disclosures and Important Information
Disclosure on Security Examples References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered recommendations by AllianceBernstein. The specific securities identified and described in this presentation do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that investments in the securities identified were or will be profitable. Upon request, we will furnish a listing of all investments made during the prior one-year period. Past performance is not a guide to future performance. Additional Information The value of investments and the income from them can fall as well as rise and you may not get back the original amount invested. The value of non-domestic securities may be subject to exchange-rate fluctuations. The views and opinions expressed in this presentation are based on AllianceBernstein’s internal forecasts and should not be relied upon as an indication of future market performance or any guarantee of return from an investment in any AllianceBernstein services. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
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Disclosures and Important Information
A WORD ABOUT RISK Market Risk: The market values of the investments may rise and fall from day to day, so investments may lose value. Concentration Risk: The portfolio is highly concentrated and, as compared to a more diversified portfolio, bears higher risk of a significant market decline in the event that any one security declines in value. Interest Rate Risk: Bonds may lose value if interest rates rise or fall—long-duration bonds tend to rise and fall more than short-duration bonds. Credit Risk: A bond’s credit rating reflects the issuer’s ability to make timely payments of interest or capital—the lower the rating, the higher the risk of default. If the issuer’s financial strength deteriorates, the issuer’s rating may be lowered and the bond’s value may decline. Allocation Risk: Allocating to different types of assets may have a large impact on returns if one of these asset classes significantly underperforms the others. Foreign Risk: Investing in overseas assets may be more volatile because of political, regulatory, market and economic uncertainties associated with them. These risks are magnified in assets of emerging or developing markets. Currency Risk: currency fluctuations may have a large impact on returns and the value of an investment may be negatively affected when translated into the currency in which the initial investment was made. Capitalization Size Risk: Holdings in smaller companies are often more volatile than holdings in larger ones. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI. References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered recommendations by AllianceBernstein. The specific securities identified and described in this presentation do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that investments in the securities identified were or will be profitable.
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