2012 10-25&26 low volatility high yield ab citywire italy ic2012671

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2012 10-25&26 low volatility high yield ab citywire italy ic2012671

  1. 1. Calvagese della Riviera, 25-26th October AllianceBernstein: Lower Volatility High Yield How a Conservative High-Yield Strategy Can Help Investors in Uncertain Markets Jeremy Cunningham, CFA Senior Portfolio Manager—Fixed Income Nicola Meotti Best Large Bond Group 2012 Director—Financial Institutions Massimo Dalla Vedova Director—Financial InstitutionsThis information is issued by AllianceBernstein Limited, 50 Berkeley Street, London W1J 8HA, a company registered in England under company number 2551144. AllianceBernstein Limited isauthorised and regulated in the UK by the Financial Services Authority (FSA – Reference Number 147956). This information is directed at Professional Clients only. It is provided for informationalpurposes only and is not intended to be an offer or solicitation, or the basis for any contract to purchase or sell any security, product or other instrument, or for AllianceBernstein to enter into or arrangeany type of transaction as a consequence of any information contained herein. The views and opinions expressed in this document are based on AllianceBernsteins internal forecasts and should notbe relied upon as an indication of future market performance. Past performance is no guarantee of future returns. This information is not intended for public use.©2012 AllianceBernstein
  2. 2. Interest Rates Are at Historical Lows 10-Year Yields Investment-Grade Corporate Yields 12 16 14 10 12 8 10 Percent Percent 8 6 6 4 4 2 2 0 0 55 69 83 97 11 88 92 96 00 04 08 12 Current 10-Year Yields Current Spreads Bunds Gilts US Treasury US Corporates Euro Corporates 1.33% 1.46% 1.55% 289 b.p. 268 b.p.Through August 31, 2012Source: Barclays Capital, Bloomberg and AllianceBernstein AllianceBernstein.com Low Volatility High Yield 1
  3. 3. Uncover Opportunities in a Low-Rate Environment by Investing in… Short Duration Emerging Market Less Liquid Credit High Yield Corporates Shorter duration + higher Gain yield pickup versus both Earn above-market returns onquality credit leads to high-yield developed-market corporates investments in large, well- returns with less downside risk and emerging-market known companies sovereigns • Supply-chain finance • Trade finance • Infrastructure finance AllianceBernstein.com Low Volatility High Yield 2
  4. 4. Our View: A Delicate Balancing Act will Lead to Continued Volatility Which Way for Governments? Inaction Inflation Growth Austerity DefaultSource: AllianceBernstein AllianceBernstein.com Low Volatility High Yield 3
  5. 5. Uncover Opportunities in a Low-Rate Environment by Investing in… Short Duration Emerging Market Less Liquid Credit High Yield Corporates Shorter duration + higher Gain yield pickup versus both Earn above-market returns onquality credit leads to high-yield developed-market corporates investments in large, well- returns with less downside risk and emerging-market known companies sovereigns • Supply-chain finance • Trade finance • Infrastructure financeAllianceBernstein Short Duration High Yield Portfolio: designed to capture majority of upside of global high yield market whilst seeking to limit the volatility and downside. AllianceBernstein.com Low Volatility High Yield 4
  6. 6. High Yield: Exceptional Returns Since the CrisisHigh Yield Bonds: Attractive Post Crisis Cumulative Returns (%) Low Volatility High Yield vs. High Yield vs. Equities Dec 31, 2008–June 30, 2012 1993–2011 15.3% 109 Cumulative Returns (%) 9.0% 7.7% 7.9% 7.8% 6.2% 41 19 Global High Global Equities Global Low Volatility High Yield US Equity Yield Investment High Yield Corporates Grade Bonds Annualized Return Annualized VolatilityPast performance does not guarantee future results.High Yield Index Spreads: High Yield represented by the Barclays US High Yield Corporates Index . (US High Yield data is used as Global Index history is only available from December 2000onward).Cumulative Returns: Global High Yield Corporates are represented by the Barclays Global High Yield Corporates Index; Equities are represented by the MSCI World (net dividend reinvested)index; Global Investment Grade Bonds are represented by the Barclays Global Aggregate index. All index returns are expressed in USD hedged terms.Source: Barclays Capital, Standard & Poor’s and AllianceBernstein AllianceBernstein.com Low Volatility High Yield 5
  7. 7. High Yield Fundamentals: Remain in Good Shape High Yield Corporates Have Continued to Deleverage* 5 4 3Ratio (×) 2 1 0 99 01 03 05 07 09 11 Historical analysis and current forecasts do not guarantee future results. Historical information provided for illustrative purposes only. *High Yield Corporate Leverage Data as of 31 December 2011; universe is Citigroup High Yield Index ex Financials. **Default Rates are par-weighted default rates. Recession scenario assumes that every bond trading below 70 cents on the dollar defaults. Forecasts are as of 1 March 2012. Source: Citigroup, J.P. Morgan, Moody’s Analytics, and AllianceBernstein AllianceBernstein.com Low Volatility High Yield 6
  8. 8. Companies Continue to Remain Conservative, as Shown in Quality ofIssuance and Use of Proceeds…Composition US HY Index Used of Proceeds (by Volume) 100% 100% 90% 90% 80% 80% (% of Total New Issuance) 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 11 YTD 12 YTD 03 04 05 06 07 08 09 10 11 General Corporate Refinancing CCC and lower-rated B BB Acquisition Finance / LBOAs of July 27, 2012Sources: Barclays POINT, Capital IQ and J.P. Morgan AllianceBernstein.com Low Volatility High Yield 7
  9. 9. …All of Which Will Help Limit the Rise in Defaults Estimated Default Rate—One Year Ahead 18% •AllianceBernstein One Year Ahead Default Rate: 2.5% 16% 14% 12% 10% 8% 6% 4% 2% 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Combined % Index $Px<70 C&I Standards ObservedAs of June 30, 2012. Historical information provided for illustrative purposes onlySources: J.P. Morgan and AllianceBernstein Fixed Income Research AllianceBernstein.com Low Volatility High Yield 8
  10. 10. Technicals Are Positive for Spread Products……as net issuance is expected to fall Net Issuance by Spread Product 1,750 1,551 1,554 1,250 1,173 2012 coupons = $770 803 (USD Billions) 750 462 229 250 211 263 222 (250) (750) 2004 2005 2006 2007 2008 2009 2010 2011 F2012 IG HY EM Corps EM Sovereign MBS, CMBS, ABS, CLOs Total Net IssuanceAs of July 18, 2012ABS includes Card, Auto, Student Loan and MH ABS.Source: J.P. Morgan AllianceBernstein.com Low Volatility High Yield 9
  11. 11. Why Now for AllianceBernstein Short Duration High Yield Portfolio? Global High Yield Spreads (OAS) Global Risk Aversion Indicator* Jan 1995 – June 2012 5.0 2,000 1,600 3.5 1,200B.p. 2.0 800 Average 0.5 400 0 (1.0) 00 02 04 06 08 10 12 Jan 95 Jan 99 Jan 03 Jan 07 Jan 11 High Yield Opportunity Remains Attractive Amid Highly Volatile Market ConditionsThrough June 30, 2012. Historical information provided for illustrative purposes only.*Incorporates equity index–implied volatilities, bond spreads, currency index–implied volatilities and equity mutual fund flowsSource: Bloomberg and AllianceBernstein AllianceBernstein.com Low Volatility High Yield 10
  12. 12. AllianceBernstein Short Duration High Yield PortfolioHigher Rated Shorter Duration HY Bonds Have Generated AllianceBernstein Short Duration High YieldHigher Returns with Lower Volatility: Focuses on Less Volatile High Yield StrategiesJanuary 1993–December 2011 10 9 BB HY Emphasize Focus on 1-5Y HY Shorter Higher 8 US HY Duration Credit Quality Short Return Emphasize 5-10Y HY Duration High 7 B HY Yield De-emphasize 6 Implement Dynamic Hedging CCC HY To Manage Volatility 5 0 5 10 15 20 RiskHistorical information provided for illustrative purpose onlyThe 1–5 HY is represented by the Barclays US High Yield 2% Issuer Cap 1–5 Yr. index; US HY is represented by the Barclays US High Yield 2% Issuer Cap index; 5–10 HY is represented by theBarclays US High Yield 2% Issuer Cap 5–1 0 Yr. index; BB HY is represented by the Barclays US High Yield 2% Issuer Cap Ba Component; B HY is represented by the Barclays US High Yield2% Issuer Cap B Component; and CCC HY is represented by the Barclays US High Yield 2% Issuer Cap Ca—D Component.Source: Barclays Capital AllianceBernstein.com Low Volatility High Yield 11
  13. 13. Focus on Higher Credit Quality Higher rated high-yield bonds have outperformed lower-rated bonds over a High Yield vs. BB High Yield: Performance market cycle Average Monthly Returns, 1993–2011 1.7 1.5 Emphasize Focus on Shorter Higher Duration Credit Quality Short Duration High Yield (1.5) Portfolio (2.2) Implement Dynamic Hedging When High Yield When High Yield To Manage Volatility is Down is Up High Yield Market BB High YieldHistorical information provided for illustrative purpose onlyAs of 31 December 2011HY represented by Barclays Capital US High Yield 2% Issuer Constrained Index. BB High Yield represented by Barclays Capital US High Yield 2% Issuer Constrained Index members with a BBcredit quality.Source: Barclays Capital and AllianceBernstein AllianceBernstein.com Low Volatility High Yield 12
  14. 14. Emphasize Shorter Duration The lower the duration of a bond, the less sensitive its price is to High Yield vs. Short Duration High Yield: Performance changes in its yield Average Monthly Returns, 1993–2011 1.7 1.5 Emphasize Focus on Shorter Higher Duration Credit Quality Short Duration High Yield (1.4) Portfolio (2.2) Implement Dynamic Hedging When High Yield When High Yield To Manage Volatility is Down is Up High Yield High Yield 1–5YrHistorical information provided for illustrative purpose onlyAs of 31 December 2011HY represented by Barclays Capital US High Yield 2% Issuer Constrained Index. Short Duration represented by Barclays Capital US High Yield 2% Issuer Constrained Index members with anOption Adjusted Duration of 1–5 years.Source: Barclays Capital and AllianceBernstein AllianceBernstein.com Low Volatility High Yield 13
  15. 15. Implement Dynamic Hedging to Manage Volatility We apply hedging strategies designed to mitigate volatility and buffer the AllianceBernstein Short Duration High Yield Portfolio portfolio during extreme market stress Can Access a Range of Hedging Strategies Equity Put Options Emphasize Focus on Bond Credit Shorter Higher Futures/ Default Duration Credit Quality Swaps Swaps Short Duration Portfolio High Yield Currency Credit Portfolio Options Tranches Implement Dynamic Hedging To Manage Volatility 14Source: AllianceBernstein AllianceBernstein.com Low Volatility High Yield 14
  16. 16. AllianceBernstein Short Duration High Yield Portfolio:Delivering on Performance Expectations Since Inception: Performing as expected Aug 2011–Sep 2012 Outperforming the HY market in negative months (net of fees) (Percent) Lagging the HY market in positive months (net of fees) 6.3 10.0 9.5 4.7 3.7 2.7 2.8 6.9 2.6 2.1 Returns (percent) 6.4 2.0 1.6 1.6 1.5 1.6 1.2 1.2 0.9 1.0 0.9 0.8 0.2 (0.2) (0.8) (1.4) (1.6) (2.3) (2.8) (3.5) (3.7) Annualized Annualized (4.5) Returns Volatility Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Short Duration HY Portfolio (Net) Global HY Market (Gross) AB Short Duration HY Portfolio Global HY Corporate MarketPast performance does not guarantee future results.In USD as of 30 September 2012.Short Duration High Yield Portfolio returns and volatility are for the A2 share class, net of fees.Global High Yield Market is represented by the Barclays Capital Global High Yield Corporates index, USD hedged AllianceBernstein.com Low Volatility High Yield 15
  17. 17. AllianceBernstein Short Duration High Yield Portfolio - How to Use It Harvest Profits from US High Yield We advocate deploying assets to the Short Duration High Yield Fund because lower volatility high yield bonds are in a “sweet-spot” of risk/return Maintain income in an environment where high quality bonds offer very little yield/return potential ‘Upgrade’ credit quality relative to traditional high yield portfoliosLimited Duration High Income to equities and more aggressive high yield portfolios Keep volatility in check relative (ALHAX) Offer better risk/return characteristics than bank loans Attractive Yield With an Eye on Volatility Higher Yields than Investment Emphasize higher quality high yield Grade Corporates bonds Emphasize shorter duration Implement hedging strategies to manage downside risk Historical analysis do not guarantee future results. As of 30 June 2012 Source: Lipper, AllianceBernstein AllianceBernstein.com Low Volatility High Yield 16
  18. 18. AppendixAllianceBernstein.com Low Volatility High Yield 17
  19. 19. AllianceBernstein’s High Yield Credentials Manager of the largest High Yield fund in Luxembourg: AllianceBernstein Global High Yield Portfolio 40-year track record in managing fixed income strategies (Since 1971) 24-year track record in managing high yield strategies (Since 1987) $219 billion client assets under management in fixed income strategies $26 billion client assets under management in high yield assets* We have delivered consistent strong performance in our high yield portfolios: Our Global High Yield Portfolio and Global High Income composite are 1st quartile performers over the last 3, 5 and 10 years Our US High Yield composite performance is 1st quartile over the last 3 and 5 years Our European Income Portfolio is a 1st quartile performer over the last 3, 5 and 10 yearsPerformance figures are as of 30 June 2012. AUM figures are as of 30 June 2012.* Includes only dedicated high yield portfolios and the high yield component of multi-sector portfolios.Past performance does not guarantee future results.Note that although peer rankings are high, absolute performance over some periods may be negative.Source:Global High Yield Portfolio performance ranking refers to the A share class and the Lipper Global Bond Global High Yield Peer Group.Global High Income composite ranking refers to the eVestment Global High Yield Peer Group.US High Yield composite performance ranking refers to the eVestment US High Yield Peer Group.European Income Portfolio performance ranking refers to the A share class and the Lipper Global Bond EUR High Yield Peer Group. AllianceBernstein.com Low Volatility High Yield 18
  20. 20. Why AllianceBernstein Short Duration High Yield Portfolio? Stable, Experienced, Well Resourced Investment Team More than 20 years experience managing US$ 23 billion in high yield strategies * With 43 credit analysts around the world, we are able to carefully analyse credit issuers and securities to differentiate good quality investments from poor credit risks Well resourced with 7 economists, 9 quantitative analysts, 43 credit analysts and 49 portfolio managers focused on our fixed income clients Flexibility to Invest in Bonds with Maturity over 3 years allows for better diversification and a broader opportunity set Excludes CCC and lower rated bonds avoids unnecessary volatility Additional Portfolio Protection hedging strategies are key to managing downside volatility Successfully Delivering a Low Volatility High Yield Corporate Bond Portfolio* Includes dedicated high yield portfolios and the high yield component of multi-sector portfolios.As of 31 March 2012.Source: AllianceBernstein AllianceBernstein.com Low Volatility High Yield 19
  21. 21. Dynamic Hedging: Process of Implementation of Hedging StrategiesAllianceBernstein Short Duration High Yield PortfolioCan Access a Range of Hedging Strategies Evaluate effectiveness of hedging strategy vs. Global High Yield Market Correlation analysis Dispersion analysis Equity Put Options Evaluate cost of implementation Bond Credit Volatility level Futures/ Default Swaps Swaps Yield curve shape Portfolio Basis Absolute level/valuation Currency Credit Options Tranches Active management of level and optimal mix of hedging strategies Hedging strategies vs. beta reduction Strategy effectiveness Reduce strategies that are overvalued Increase/implement strategies that are undervaluedSource: AllianceBernstein AllianceBernstein.com Low Volatility High Yield 20
  22. 22. An example of Dynamic Hedging: Buy AUD Put Options vs USD Evaluate effectiveness of hedging strategy Rolling Correlation Analysis AUD vs. Global High Yield Australian Dollar (AUD) correlation with Global High Yield Market = 0.72* 100% The hedge provides some protection against the negative 80% impact of a falling high yield market 60% 40% Evaluate cost of implementation 20% 15th May 2012: Buy 5% out-of-the-money 1 month 0% AUD put option: Cost = 0.01% of portfolio value Mar 99 Mar 01 Mar 03 Mar 05 Mar 07 Mar 09 Mar 11 Ongoing active management Option Volatility: A$ vs. US$ Reduced position gradually as AUD fell, and volatility $25 increased (Point A to B) (Value of option increased) $20 B $15 $10 Multi-year lows A $5 $0 01/01/2010 03/10/2010 05/17/2010 07/22/2010 09/28/2010 12/03/2010 02/09/2011 04/18/2011 06/23/2011 08/30/2011 11/04/2011 01/11/2012 03/19/2012Historical analysis do not guarantee future results.*Rolling 3 month returns of A$ vs. US$ and Barclays Global High Yield Index US$ Hedged from 31.12.1998 to 30.4.2012Source: AllianceBernstein, Bloomberg, Barclays Capital AllianceBernstein.com Low Volatility High Yield 21
  23. 23. AllianceBernstein Short Duration High Yield Portfolio We aim to achieve high risk-adjusted returns through investing in a diversified portfolio of predominantly high yielding Objective securities with an average duration at portfolio level of less than four years Relative to the broader high yield market, this fund emphasises a shorter average duration, a focus on higher quality high Investment Strategy yield issues, and hedging strategies to limit downside volatility Benchmark Barclays Capital Global High Yield 1–5 year Ba/B, USD hedged Morningstar Peer Group Bond Global High Yield Base Currency USD Hedged Share Classes EUR hedged, GBP hedged, other currencies can be made available Liquidity Daily Distributions Distribution share classes pay a variable monthly dividend Maximum 4 years portfolio duration No CCC or lower rated securities Investment Policy* Minimum 80% exposure to corporate bond issuers Minimum 90% hedged to base currency Fixed income securities; convertible securities; zero coupon treasury securities; structured securities and basket securities; variable, floating and inverse floating rate securities; inflation-protected securities; equities Derivatives may be used for both hedging and investment purposes Investment Universe Max 20% in structured investments, including MBS, ARMS, CMOs, ABS, CMBS and CDOs Max 10% in other UCITS or UCIs Max 10% in illiquid securitiesAs of 31 March 2012*Includes internal investment guidelines, beyond those described in the fund prospectus, which may be changed at the portfolio manager’s discretion without notification to investors. AllianceBernstein.com Low Volatility High Yield 22
  24. 24. Implement Dynamic Hedging to Manage Volatility We apply hedging strategies designed to mitigate volatility and buffer the AllianceBernstein Short Duration High Yield Portfolio portfolio during extreme market stress Can Access a Range of Hedging Strategies Equity Put Options Emphasize Focus on Bond Credit Shorter Higher Futures/ Default Duration Credit Quality Swaps Swaps Short Duration Portfolio High Yield Currency Credit Portfolio Options Tranches Implement Dynamic Hedging To Manage Volatility 23Source: AllianceBernstein AllianceBernstein.com Low Volatility High Yield 23
  25. 25. Hedging Strategies to Offset or Reduce Risk in Portfolio: Example Trades Hedge Idea Implementation Impact Long 7-year and Short 5-year treasuries (curve flattener) Gains on yield curve If growth is anaemic inflation risk will fall (deflation risk flattener offset losses Yield Curve increase). Longer dated bond yields fall as credit from credit spread spreads widen Cost: zero cash outlay at the time of widening implementation Long AUD put/USD call Gains on currency put If growth is anaemic commodity prices likely to fall, option should offset with a knock-on effect on commodity currencies Cost: currency option cheaper to buy than high losses on high yield yield index option at time of implementation portfolio Currency Long EUR put/USD call Gains on currency put If the Eurozone sovereign debt crisis escalates, this option should offset may lead to a weaker Euro and be the likely catalyst for further sell-off of risky assets, including high yield Cost: currency option cheaper to buy than high losses on high yield yield index option at time of implementation portfolio If risk aversion increases, spreads on all credit markets Buy Protection on Investment Grade Corporate will widen further. Downside risk would see EM and and Emerging Market Indices Gains on CDS protection Investment Grade Credit markets sell off as well. We should partially offset CDS evaluate the cost of buying protection on all sectors – Cost: lower cost versus buying protection on losses in high yield i.e. which sectors are the most resilient and not yet high yield indices at time of implementation portfolio pricing in a negative outlook, and buy protection on those Long put options on S&P equity index, short If the market environment is negative for companies, put option on HY CDX Index equity markets, both high yield and equity markets will Gains on equity index put Equity Options sell off. We evaluate the cost of buying puts on both options will offset losses equity and high yield sectors to see where the hedge Cost: zero cash outlay at time of on high yield sell-off can be implemented most cost effectively implementation, as sale of HY puts funded purchase of equity putsPast performance does not guarantee future resultsExamples listed include all hedging trades initiated between 1 August 2011 and 14 November 2011. Subsequent to initiation, hedge positions may have been increased or closed. AllianceBernstein.com Low Volatility High Yield 24
  26. 26. SDHY Investible Universe*1100+ Issuers with Over $900 Billion Nominal of Bonds OutstandingAverage Rating of Global High Yield Universe: B Average Duration of Global High Yield Universe: 4.4 Years CC C NR 1% 0.4% 0.3% CCC 11% 0–3 5+ 27% 36% BB 48% B 40% 3-5 37%Historical information provided for illustrative purpose onlyAs of 31 December 2011Based on the Barclays Capital Global High Yield Index*Calculated using all bonds in the index with an option adjusted duration of 5 years and lessNumbers may not sum due to rounding. AllianceBernstein.com Low Volatility High Yield 25
  27. 27. Portfolio Exposures and Characteristics: Distribution Share ClassDuration and Yield Credit Exposures by Sector * Commercial MortgagePortfolio Duration 2.9 years Backed Secs (CMBS) 3.2%Net Distribution Yield Corporate Utilities 3.7% AT Share Class 3.73% Emerging Market Quasi-Sovereign Bank Loans BT Share Class 2.75% 1.5% 5.6% Emerging Market Corporate AT Share Class EUR hedged 3.40% Sovereigns Financials 1.8% 6.6% AT Share Class GBP hedged 3.82% Preferred Shares Corporate Industrials 1.3% 76.2% High Yield & Equity Options 0.1% Credit Exposure by Rating*: Average Rating BB- Investment Non Credit Grade 0.1% 6.9% BB 29.7% B 63.4%As of 30 June 2012. All data is subject to change.*Credit exposures by sector and by rating covers credit holdings within the portfolio only, and excludes from consideration any holdings in cash, currency forwards, currency options, interest rateswaps and any AA- or higher rated government bond holdings.**Fixed income exposures by country of risk excludes from consideration any holdings in cash, currency forwards and currency options.Source: AllianceBernstein AllianceBernstein.com Low Volatility High Yield 26
  28. 28. Portfolio Exposures and Characteristics: Accumulation Share ClassDuration and Yield Credit Exposures by Sector * Commercial MortgagePortfolio Duration 2.9 years Backed Secs (CMBS) 3.2%Gross Yield to Worst: Corporate Utilities 3.7% Short Duration High Yield Bond Fund 5.30% Emerging Market Quasi-Sovereign Bank Loans Barclays Global Corporate High Yield Bond Index 7.75% 1.5% 5.6% Emerging Market Corporate Barclays Global Investment Grade Corporate Bond Index 4.07% Sovereigns Financials 1.8% 6.6% Barclays Global Treasuries Index 1.51% Preferred Shares Corporate Industrials 1.3% 76.2% High Yield & Equity Options 0.1% Credit Exposure by Rating*: Average Rating BB- Investment Non Credit Grade 0.1% 6.9% BB 29.7% B 63.4%As of 30 June 2012. All data is subject to change.*Credit exposures by sector and by rating covers credit holdings within the portfolio only, and excludes from consideration any holdings in cash, currency forwards, currency options, interest rateswaps and any AA- or higher rated government bond holdings.**Fixed income exposures by country of risk excludes from consideration any holdings in cash, currency forwards and currency options.Source: AllianceBernstein and Barclays AllianceBernstein.com Low Volatility High Yield 27
  29. 29. AllianceBernstein: A Leader in Fixed Income Investing Fixed-Income Assets Under Management: $220 Billion Global Multi- Emerging Mkts/ Credit US Tax-Exempt Sector* High Income $80 billion $29 billion $61 billion $49 billion Global Research Analysts Portfolio Managers TradersResources 55 47 16As of 30 June 2012*Includes global and regional single and multi-sector mandatesStrategy AUM totals will not sum due to rounding AllianceBernstein.com Low Volatility High Yield 28
  30. 30. Our Award-Winning Fixed Income PlatformAllianceBernstein has been named best large bond manager in Europe by Lipper, the mutual fundrating agency. We ranked #1 in the following categories of Lipper 2012 fund awards: Best Large Bond Group 2012 Further Recognition for our In Europe, Austria, France, Germany, Fixed Income Services Spain and Switzerland €uro Fund Awards 2012 Fund Awards 2012 American Income Portfolio Best Global High Yield Bond Fund European Income Portfolio Best Global Emerging Markets Bond Fund Feri Fund Awards Best European Bond Fund RMB Income Plus Portfolio Best US Dollar Bond Fund Most Innovative Fund of 2012 For more information on AllianceBernstein Fixed Income, visit www.alliancebernstein.com/solution/fixed-income-eu AllianceBernstein.com Low Volatility High Yield 29
  31. 31. Our Award-Winning Fixed Income Platform6 Awards For Best Large Bond Manager 34 European Fund AwardsAllianceBernstein American Income Portfolio Lipper Fund Awards 2012 Europe, Austria, France, Germany, Spain, €uro Fund Awards 2012 Germany: Bonds USD over 3 and 10 Years Switzerland: Bond Large over 3 Years Emerging Markets Debt Portfolio Lipper Fund Awards 2012 Europe, Austria, France, Germany, Spain,3 Gulf Country Fund Awards Switzerland: Bond Emerging Markets Global over 5 YearsAmerican Income Portfolio European Income Portfolio Lipper Fund Awards 2012 Gulf: €uro Fund Awards 2012 Germany: Bonds European Currencies over 3 Years Bond USD over 3 Years Lipper Fund Awards 2012 Europe, Austria, France, Germany, Spain,Emerging Markets Debt Portfolio Switzerland: Bond Europe over 3 Years Lipper Fund Awards 2012 Gulf: Global High Yield Portfolio Bond Emerging Markets Global over 5 Years Lipper Fund Awards 2012 Europe: Bond GlobalEuropean Income Portfolio —High Yield over 5 and 10 Years Lipper Fund Awards 2012 Gulf: Lipper Fund Awards 2012 Germany, UK: Bond Global Bond Europe over 3 Years —High Yield over 5 and 10 Years Lipper Fund Awards 2012 Austria, France, Switzerland: Bond Global—High Yield over 3, 5 and 10 Years Lipper Fund Awards 2012 Spain: Bond Global —High Yield over 3 and 10 Years RMB Income Plus Portfolio Feri Euro Ratings Award 2012: Best Fund—Fund Innovations Fondmarknaden Award 2011: Best Fund Launch of the Year AllianceBernstein.com Low Volatility High Yield 30
  32. 32. AllianceBernstein Product Range June 2012 AllianceBernstein.com Low Volatility High Yield 31
  33. 33. AllianceBernstein Product Range June 2012 AllianceBernstein.com Low Volatility High Yield 32
  34. 34. DisclosuresAllianceBernstein.com Low Volatility High Yield 33
  35. 35. A Word About RiskA WORD ABOUT RISKMarket Risk: The market values of the investments may rise and fall from day to day, so investments may lose 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. Ifthe 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. Theserisks 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 thecurrency 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. TheMSCI 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 orproduced by MSCI.The value of an investment can go up or down and past performance is neither indicative of, nor a guarantee of, future results. The sale of AllianceBernsteinfunds may be restricted or subject to adverse tax consequences in certain jurisdictions. This information is directed solely at persons in jurisdictionswhere the funds and relevant share class are registered or who may otherwise lawfully receive it. Before investing in AllianceBernstein funds, investors shouldreview the funds full prospectus, together with the fund’s Key Investor Information Document and the most recent financial statements. Copies of thesedocuments, including the latest annual report and, if issued thereafter, the latest semi-annual report, may be obtained free of charge from AllianceBernstein(Luxembourg) S.A.R.L., by visiting www.alliancebernstein.com or by contacting the local distributor in the jurisdictions in which the funds are authorised fordistribution.AllianceBernstein® and the AB logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P.©2012 AllianceBernstein L.P. www.alliancebernstein.com AllianceBernstein.com Low Volatility High Yield 34

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