Presentation to Chicago Quantitative Alliance In Search of a Breakthrough Business Strategy Issues in Investment Managemen...
<ul><li>Why am I here? (after lunch, 2 nd  day, in Sin City!!) </li></ul><ul><li>What value can I possibly add to a group ...
<ul><li>Introduction </li></ul><ul><ul><li>Who are we, what do we do </li></ul></ul><ul><li>In Search of a Breakthrough </...
Sanford C. Bernstein & Co., LLC ,  a subsidiary of Alliance Capital Management L.P. A Unique Firm <ul><li>As a firm, it pr...
Sanford C. Bernstein & Co., LLC ,  a subsidiary of Alliance Capital Management L.P. <ul><li>Fundamental Equity Research </...
Business Strategy Issues in Investment Management Mission   “To identify and analyze issues that could potentially reshape...
<ul><li>Introduction </li></ul><ul><ul><li>Who are we, what do we do </li></ul></ul><ul><li>In Search of a Breakthrough </...
In Search of a Breakthrough – Project objective and methodology <ul><li>Objective </li></ul><ul><li>Identify and discuss a...
In Search of a Breakthrough – Findings & Conclusions <ul><li>The highest opportunities for a true breakthrough in investme...
In Search of a Breakthrough – Findings & Conclusions (cont.) <ul><li>We believe this is changing, mainly because of increa...
<ul><li>Introduction </li></ul><ul><ul><li>Who are we, what do we do </li></ul></ul><ul><li>In Search of a Breakthrough </...
<ul><li>Simplified Generic Version of A Supply Chain of Investment Products/Services –  </li></ul><ul><li>Participants alo...
<ul><li>Simplified Generic Version of A Supply Chain of Investment Products/Services – </li></ul><ul><li>Potential Weak Li...
<ul><li>More Realistic Generic Version of A Supply Chain of Investment Products/Services – </li></ul><ul><li>Participants ...
<ul><li>Various Perspectives About Weak Links or Discontinuities Along the Supply Chain of </li></ul><ul><li>Investment Pr...
<ul><li>Dollars spent by Individuals on Lottery vs. Mutual Funds* </li></ul>Source:  US Census Bureau, Federal Reserve Boa...
<ul><li>Introduction </li></ul><ul><ul><li>Who are we, what do we do </li></ul></ul><ul><li>In Search of a Breakthrough </...
<ul><li>Real Case 1:  Cell Phone Vendor </li></ul><ul><li>Real Case 2:  Credit Card Company </li></ul><ul><li>Hypothetical...
<ul><li>Investors' Expectations of a Mutual Fund Portfolio Manager </li></ul>Source:  Bernstein Research investor and 401(...
<ul><li>Investors' Worst-Case Scenario 12-month Return Expectations  </li></ul>Source:  Bernstein Research investor survey...
<ul><li>401(k) Participants Basic Understanding of a 401(k) Plan </li></ul>Source:  Bernstein Research 401(k) participant ...
<ul><li>A Measure of Investors' Basic Market Knowledge </li></ul>Source:  NASD investor literacy research, NASD Investor K...
<ul><li>Investors' Sentiment Regarding Information Load </li></ul>Source:  Bernstein Research investor and 401(k) particip...
<ul><li>Investors' Opinion About the Value Added of Mutual Fund Prospectuses </li></ul>Source:  Bernstein Research investo...
<ul><li>Investors' Opinion About the Value Added of Disclosure of a Mutual Fund's  </li></ul><ul><li>Portfolio Manager's N...
<ul><li>Investors' Sentiment Regarding &quot;Suitability&quot; of Their Investments </li></ul>Source:  Bernstein Research ...
<ul><li>Investors' Self-Evaluation Regarding How Their Investments Are Organized </li></ul>Source:  Bernstein Research inv...
<ul><li>If Einstein, Goethe and Beethoven had been born during the Stone Age, wouldn’t they likewise have had only the cul...
<ul><li>EM Testing Process </li></ul>Source:  Bernstein Research
Value in Seamless Client Education <ul><li>Clients want it </li></ul><ul><li>The value proposition to them is compelling <...
<ul><li>Introduction </li></ul><ul><ul><li>Who are we, what do we do </li></ul></ul><ul><li>In Search of a Breakthrough </...
<ul><li>Grown ups are like that…Fortunately, however, for the reputation of Asteroid B-612, a Turkish dictator made a law ...
<ul><li>Real Case 1:  The Acupuncturist </li></ul>
<ul><li>Financial Advisors' Self Described Influence on their Clients' Investment Portfolio </li></ul>Source:  Bernstein R...
<ul><li>A Measure of Intended/Unintended Consequences of Style Purity Constraints </li></ul>Source:  Bernstein analysis
<ul><li>Financial Advisors' Self Described Alignment of Interests with that of their Clients </li></ul>Source:  Bernstein ...
<ul><li>Financial Advisors' Quiz About the Concept of &quot;Correlation&quot; </li></ul>Source:  Bernstein Research Financ...
<ul><li>Individuals' Assessment of Their Doctors' Competence </li></ul>Source:  Bernstein Research Adult Population survey...
<ul><li>Individuals' Most Desired Information About Prospective Surgeon Prior to Surgery </li></ul>Source:  Bernstein Rese...
<ul><li>Demand for Most Desired Information About Prospective Surgeon </li></ul>Source:  Bernstein Research estimates
<ul><li>eBay Buyers' Opinion About Seller Information </li></ul>Source:  Bernstein Research survey (300 respondents)
<ul><li>Amazon Marketplace Buyers' Opinion About Sellers' Rating Information </li></ul>Source:  Bernstein Research survey ...
<ul><li>Price Sensitivity of Amazon Seller &quot;Quality&quot; Characteristics </li></ul>Source:  Bernstein Research surve...
Value in engineering a better Proxy for Trust <ul><li>Clients want it </li></ul><ul><li>The value proposition to them is c...
<ul><li>Introduction </li></ul><ul><ul><li>Who are we, what do we do </li></ul></ul><ul><li>In Search of a Breakthrough </...
<ul><li>What we are recommending:  </li></ul><ul><ul><li>“ Integrate” R&D and “own” the chain, even if virtually </li></ul...
<ul><li>He hypothesized that the Earth was borne around the Sun…Yet philosophers completely abandoned this largely accurat...
<ul><li>Total Household Assets and Selected Financial Assets* as a Share of Total  </li></ul><ul><li>(Q1:52 Through Q2:04)...
<ul><li>Market Value of Corporate Equities: Level and a Share of GDP  </li></ul><ul><li>(Q1:52 Through Q2:04) </li></ul>So...
<ul><li>Market Share Concentration of Investment Managers in Nelson Database </li></ul>Source:  Nelson Marketplace, Bernst...
<ul><li>Product Proliferation:  The Expansion of Mutual Fund Offerings (1985 - 2004) </li></ul>Source:  Strategic Insight,...
<ul><li>M&A Deals Where Target or Acquirer Was a U.S. Investment Management or  </li></ul><ul><li>Investment Banking Firm ...
Conclusion <ul><li>As far-fetched as they seem, and although status of first-mover is uncertain we believe their implement...
<ul><li>[THIS PAGE IS INTENTIONALLY BLANK] </li></ul>
Guillermo MacLean, Senior Research Analyst Mr. MacLean is a senior research analyst at Sanford C. Bernstein & Co., LLC.  T...
<ul><li>SRO REQUIRED DISCLOSURES </li></ul><ul><li>References to &quot;Bernstein&quot; relate to Sanford C. Bernstein & Co...
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  • Presentation to Chicago Quantitative Alliance

    1. 1. Presentation to Chicago Quantitative Alliance In Search of a Breakthrough Business Strategy Issues in Investment Management Guillermo MacLean Senior Research Analyst Sanford C. Bernstein & Co., LLC April 14, 2005 Copyright 2003, Sanford C. Bernstein & Co., LLC, a subsidiary of Alliance Capital Management L.P. ~ 1345 Avenue of the Americas ~ NY, NY 10105 ~ 212/486-5800. All rights reserved. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited or any of their subsidiaries or affiliates to any registration or licensing requirement within such jurisdiction. This report is based upon public sources we believe to be reliable, but no representation is made by us that the report is accurate or complete. We do not undertake to advise you of any change in the reported information or in the opinions herein. This research was prepared and issued by Sanford C. Bernstein & Co., LLC and/or Sanford C. Bernstein Limited for distribution to market counterparties or intermediate or professional customers. This report is not an offer to buy or sell any security, and it does not constitute investment, legal or tax advice. The investments referred to herein may not be suitable for you. Investors must make their own investment decisions in consultation with their professional advisors in light of their specific circumstances. The value of investments may fluctuate, and investments that are denominated in foreign currencies may fluctuate in value as a result of exposure to exchange rate movements. Information about past performance of an investment is not necessarily a guide to, indicator of, or assurance of, future performance. Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, or one or more of its or their officers, directors, members, affiliates or employees, or accounts over which they have discretion, may at any time hold, increase or decrease positions in securities of any company mentioned herein. Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, or its or their affiliates may provide investment management or other services for such companies or employees of such companies or their pension or profit sharing plans, and may give advice to others as to investments in such companies. These entities may effect transactions that are similar to or different from those mentioned herein. To our readers in the United States: Sanford C. Bernstein & Co., LLC is distributing this report in the United States and accepts responsibility for its contents. Any U.S. person receiving this report and wishing to effect securities transactions in any security discussed herein should do so only through Sanford C. Bernstein & Co., LLC. To our readers in the United Kingdom: This report has been issued or approved for issue in the United Kingdom by Sanford C. Bernstein Limited, regulated by the Financial Services Authority and located at Devonshire House, 1 Mayfair Place, London W1J 8SB, +44 (0)20-7170-5000. To our readers in member states of the EEA: This report is being distributed in the EEA by Sanford C. Bernstein Limited, which is regulated in the United Kingdom by the Financial Services Authority and holds a passport under the Investment Services Directive. See disclosure appendix of this report for analyst certifications and important disclosures.
    2. 2. <ul><li>Why am I here? (after lunch, 2 nd day, in Sin City!!) </li></ul><ul><li>What value can I possibly add to a group of Quants? </li></ul>
    3. 3. <ul><li>Introduction </li></ul><ul><ul><li>Who are we, what do we do </li></ul></ul><ul><li>In Search of a Breakthrough </li></ul><ul><ul><li>Two Innovative Ideas </li></ul></ul><ul><ul><ul><li>Expectation-matching Testing </li></ul></ul></ul><ul><ul><ul><li>Client/Advisor Two-way Relationship Management Service </li></ul></ul></ul><ul><ul><li>Outlook </li></ul></ul>
    4. 4. Sanford C. Bernstein & Co., LLC , a subsidiary of Alliance Capital Management L.P. A Unique Firm <ul><li>As a firm, it practices a lot of what it preaches to others: </li></ul><ul><ul><ul><li>Claims “industrial strength” research: Hires analysts with industry track records </li></ul></ul></ul><ul><ul><ul><li>Focuses on the long-term: Long analyst incubating periods </li></ul></ul></ul><ul><ul><ul><li>Is independent: No investment banking and acts solely as an agent </li></ul></ul></ul><ul><ul><ul><li>Is innovative and cutting edge: It remains competitive in an increasingly electronic trading world </li></ul></ul></ul>
    5. 5. Sanford C. Bernstein & Co., LLC , a subsidiary of Alliance Capital Management L.P. <ul><li>Fundamental Equity Research </li></ul><ul><li>46 Senior Analysts </li></ul><ul><li>Over 250 stocks </li></ul><ul><li>In 40 industries </li></ul><ul><li>Bernstein Disciplined Strategies Monitor </li></ul><ul><li>Bernstein Quantitative Handbook </li></ul><ul><li>Technology Sector Strategy </li></ul><ul><li>Business Strategy Issues in Investment Management </li></ul><ul><li>Stock recommendations </li></ul><ul><li>Industry “Blackbooks” </li></ul><ul><li>Strategy & Quant Team </li></ul><ul><li>U.S. equity </li></ul><ul><li>U.S. & global quantitative </li></ul><ul><li>Technology </li></ul>We provide investment research to institutional investors
    6. 6. Business Strategy Issues in Investment Management Mission “To identify and analyze issues that could potentially reshape the dynamics and/or economics of the asset management industry” <ul><li>Relevance </li></ul><ul><li>Issues that affect our clients and/or the markets in which we operate </li></ul><ul><li>Abstract issues are becoming predominant </li></ul><ul><li>Potential value of early-mover advantage </li></ul><ul><li>Opportunities may require long-lead times and/or high resource commitment </li></ul><ul><li>As flip side to gaining scale, many players have inherited huge franchise risks that need to be guarded closely and permanently </li></ul><ul><li>Process </li></ul><ul><li>Analytical : Quantitative & qualitative </li></ul><ul><li>Holistic : Investment, marketing, operations, and other considerations </li></ul><ul><li>Practical : Research complimented with exhaustive interviews and surveys </li></ul><ul><li>Topics : Hedge fund industry, individual investors, corporate governance, innovation, real estate, and others </li></ul>
    7. 7. <ul><li>Introduction </li></ul><ul><ul><li>Who are we, what do we do </li></ul></ul><ul><li>In Search of a Breakthrough </li></ul><ul><ul><li>Two Innovative Ideas </li></ul></ul><ul><ul><ul><li>Expectation-matching Testing </li></ul></ul></ul><ul><ul><ul><li>Client/Advisor Two-way Relationship Management Service </li></ul></ul></ul><ul><ul><li>Outlook </li></ul></ul>
    8. 8. In Search of a Breakthrough – Project objective and methodology <ul><li>Objective </li></ul><ul><li>Identify and discuss a few innovative ideas that may, in the long term, revolutionize the industry </li></ul><ul><li>By “revolutionize”, we refer to the potential to generate drastic and far reaching changes in the ways of thinking and behaving </li></ul><ul><li>Methodology </li></ul><ul><li>A sociological mapping out of relationships in the business </li></ul><ul><li>Extensive one-on-one interviews with constituents </li></ul><ul><li>Anonymous surveys (individual investors, 401(k) participants, financial advisors, regular individuals) </li></ul>
    9. 9. In Search of a Breakthrough – Findings & Conclusions <ul><li>The highest opportunities for a true breakthrough in investment management may lie less in “sexy” areas such as financial engineering and more in creatively readdressing mundane social relationships in the business </li></ul><ul><li>For all the money that investment organizations spend in the pursuit of alpha generation “inside their shops”, they spend very little resources tracking its fate “outside” of it </li></ul><ul><li>Ironically, on one end investment organizations use individual’s decision making flaws as a source of alpha to the benefit of their clients, but on the other end they exploit those flaws in order to “distribute” it to them, frequently to their clients’ detriment </li></ul><ul><li>Traditionally, the incentive has been for firms to partially (sometimes completely) detach themselves from this responsibility </li></ul>
    10. 10. In Search of a Breakthrough – Findings & Conclusions (cont.) <ul><li>We believe this is changing, mainly because of increasing progress in information technology applications and a creep in regulatory reach </li></ul><ul><li>We have developed the business case for three innovative solutions (only two discussed today conceptually). We believe value propositions are compelling </li></ul><ul><li>Although she source of first mover is still uncertain, we expect two of them to be implemented at an observable scale within two to three years </li></ul>
    11. 11. <ul><li>Introduction </li></ul><ul><ul><li>Who are we, what do we do </li></ul></ul><ul><li>In Search of a Breakthrough </li></ul><ul><ul><li>Two Innovative Ideas </li></ul></ul><ul><ul><ul><li>Expectation-matching Testing </li></ul></ul></ul><ul><ul><ul><li>Client/Advisor Two-way Relationship Management Service </li></ul></ul></ul><ul><ul><li>Outlook </li></ul></ul>
    12. 12. <ul><li>Simplified Generic Version of A Supply Chain of Investment Products/Services – </li></ul><ul><li>Participants along the Chain </li></ul>Source: Bernstein Research
    13. 13. <ul><li>Simplified Generic Version of A Supply Chain of Investment Products/Services – </li></ul><ul><li>Potential Weak Links or Discontinuities </li></ul>Source: Bernstein Research
    14. 14. <ul><li>More Realistic Generic Version of A Supply Chain of Investment Products/Services – </li></ul><ul><li>Participants along the Chain </li></ul>Source: Bernstein Research
    15. 15. <ul><li>Various Perspectives About Weak Links or Discontinuities Along the Supply Chain of </li></ul><ul><li>Investment Products/Services </li></ul>Source: Bernstein Research
    16. 16. <ul><li>Dollars spent by Individuals on Lottery vs. Mutual Funds* </li></ul>Source: US Census Bureau, Federal Reserve Board, Bernstein Research
    17. 17. <ul><li>Introduction </li></ul><ul><ul><li>Who are we, what do we do </li></ul></ul><ul><li>In Search of a Breakthrough </li></ul><ul><ul><li>Two Innovative Ideas </li></ul></ul><ul><ul><ul><li>Expectation-matching Testing </li></ul></ul></ul><ul><ul><ul><li>Client/Advisor Two-way Relationship Management Service </li></ul></ul></ul><ul><ul><li>Outlook </li></ul></ul>
    18. 18. <ul><li>Real Case 1: Cell Phone Vendor </li></ul><ul><li>Real Case 2: Credit Card Company </li></ul><ul><li>Hypothetical Case 1: Gym Owner </li></ul>
    19. 19. <ul><li>Investors' Expectations of a Mutual Fund Portfolio Manager </li></ul>Source: Bernstein Research investor and 401(k) participant surveys (400 pre-qualified respondents)
    20. 20. <ul><li>Investors' Worst-Case Scenario 12-month Return Expectations </li></ul>Source: Bernstein Research investor survey (400 respondents)
    21. 21. <ul><li>401(k) Participants Basic Understanding of a 401(k) Plan </li></ul>Source: Bernstein Research 401(k) participant survey (515 respondents)
    22. 22. <ul><li>A Measure of Investors' Basic Market Knowledge </li></ul>Source: NASD investor literacy research, NASD Investor Knowledge Quiz (1,086 respondents)
    23. 23. <ul><li>Investors' Sentiment Regarding Information Load </li></ul>Source: Bernstein Research investor and 401(k) participant surveys (400 pre-qualified respondents)
    24. 24. <ul><li>Investors' Opinion About the Value Added of Mutual Fund Prospectuses </li></ul>Source: Bernstein Research investor and 401(k) participant surveys (400 pre-qualified respondents)
    25. 25. <ul><li>Investors' Opinion About the Value Added of Disclosure of a Mutual Fund's </li></ul><ul><li>Portfolio Manager's Name </li></ul>Source: Bernstein Research investor and 401(k) participant surveys (400 pre-qualified respondents)
    26. 26. <ul><li>Investors' Sentiment Regarding &quot;Suitability&quot; of Their Investments </li></ul>Source: Bernstein Research investor and 401(k) participant surveys (400 pre-qualified respondents)
    27. 27. <ul><li>Investors' Self-Evaluation Regarding How Their Investments Are Organized </li></ul>Source: Bernstein Research investor survey (400 respondents)
    28. 28. <ul><li>If Einstein, Goethe and Beethoven had been born during the Stone Age, wouldn’t they likewise have had only the cultural ability and education of men of the Stone Age? The converse is also true… </li></ul><ul><li>Oh – Why, Japanese children can all speak Japanese!...At my excitement, half of my listeners were startled, and others just thought me absurd. Nevertheless, my discovery actually had great significance; it made me realize that any child is able to display superior abilities if only correct methods are used in training… </li></ul><ul><li>Nurtured by Love, Shinichi Suzuki </li></ul>
    29. 29. <ul><li>EM Testing Process </li></ul>Source: Bernstein Research
    30. 30. Value in Seamless Client Education <ul><li>Clients want it </li></ul><ul><li>The value proposition to them is compelling </li></ul><ul><li>It’s a fiduciary responsibility </li></ul><ul><li>It may have high ROI </li></ul>
    31. 31. <ul><li>Introduction </li></ul><ul><ul><li>Who are we, what do we do </li></ul></ul><ul><li>In Search of a Breakthrough </li></ul><ul><ul><li>Two Innovative Ideas </li></ul></ul><ul><ul><ul><li>Expectation-matching Testing </li></ul></ul></ul><ul><ul><ul><li>Client/Advisor Two-way Relationship Management Service </li></ul></ul></ul><ul><ul><li>Outlook </li></ul></ul>
    32. 32. <ul><li>Grown ups are like that…Fortunately, however, for the reputation of Asteroid B-612, a Turkish dictator made a law that his subjects, under pain of death, should change to European costume. So in 1920 the astronomer gave his demonstration all over again, dressed with impressive style and elegance. And this time everybody accepted his report. </li></ul><ul><li>The Little Prince, Antoine St. Exupery </li></ul>
    33. 33. <ul><li>Real Case 1: The Acupuncturist </li></ul>
    34. 34. <ul><li>Financial Advisors' Self Described Influence on their Clients' Investment Portfolio </li></ul>Source: Bernstein Research Financial Advisor survey (100 pre-qualified panel members)
    35. 35. <ul><li>A Measure of Intended/Unintended Consequences of Style Purity Constraints </li></ul>Source: Bernstein analysis
    36. 36. <ul><li>Financial Advisors' Self Described Alignment of Interests with that of their Clients </li></ul>Source: Bernstein Research Financial Advisor survey (100 pre-qualified panel members)
    37. 37. <ul><li>Financial Advisors' Quiz About the Concept of &quot;Correlation&quot; </li></ul>Source: Bernstein Research Financial Advisor survey (100 pre-qualified panel members)
    38. 38. <ul><li>Individuals' Assessment of Their Doctors' Competence </li></ul>Source: Bernstein Research Adult Population survey (300 respondents)
    39. 39. <ul><li>Individuals' Most Desired Information About Prospective Surgeon Prior to Surgery </li></ul>Source: Bernstein Research Adult Population survey (300 respondents)
    40. 40. <ul><li>Demand for Most Desired Information About Prospective Surgeon </li></ul>Source: Bernstein Research estimates
    41. 41. <ul><li>eBay Buyers' Opinion About Seller Information </li></ul>Source: Bernstein Research survey (300 respondents)
    42. 42. <ul><li>Amazon Marketplace Buyers' Opinion About Sellers' Rating Information </li></ul>Source: Bernstein Research survey (300 respondents)
    43. 43. <ul><li>Price Sensitivity of Amazon Seller &quot;Quality&quot; Characteristics </li></ul>Source: Bernstein Research survey (300 respondents)
    44. 44. Value in engineering a better Proxy for Trust <ul><li>Clients want it </li></ul><ul><li>The value proposition to them is compelling </li></ul><ul><li>It’s a fiduciary responsibility (?) </li></ul><ul><li>It may have high ROI </li></ul>
    45. 45. <ul><li>Introduction </li></ul><ul><ul><li>Who are we, what do we do </li></ul></ul><ul><li>In Search of a Breakthrough </li></ul><ul><ul><li>Two Innovative Ideas </li></ul></ul><ul><ul><ul><li>Expectation-matching Testing </li></ul></ul></ul><ul><ul><ul><li>Client/Advisor Two-way Relationship Management Service </li></ul></ul></ul><ul><ul><li>Outlook </li></ul></ul>
    46. 46. <ul><li>What we are recommending: </li></ul><ul><ul><li>“ Integrate” R&D and “own” the chain, even if virtually </li></ul></ul><ul><li>vs. What holds many firms back </li></ul><ul><ul><li>History (externalities, slow mover advantage) </li></ul></ul><ul><li>vs. What’s going to happen </li></ul><ul><ul><li>Technology, entrepreneurship, regulation </li></ul></ul>
    47. 47. <ul><li>He hypothesized that the Earth was borne around the Sun…Yet philosophers completely abandoned this largely accurate vision of the Solar System, and the idea of a Sun-centered world disappeared for the next fifteen hundred years…Their traditional model was perfectly sensible, rational and self-consistent. They were content with their vision of the universe and their place within it… </li></ul><ul><li>Big Bang, Simon Singh </li></ul>
    48. 48. <ul><li>Total Household Assets and Selected Financial Assets* as a Share of Total </li></ul><ul><li>(Q1:52 Through Q2:04) </li></ul>Source: Federal Reserve Board, Bernstein Research
    49. 49. <ul><li>Market Value of Corporate Equities: Level and a Share of GDP </li></ul><ul><li>(Q1:52 Through Q2:04) </li></ul>Source: BEA, Federal Reserve Board, Bernstein Research
    50. 50. <ul><li>Market Share Concentration of Investment Managers in Nelson Database </li></ul>Source: Nelson Marketplace, Bernstein Research
    51. 51. <ul><li>Product Proliferation: The Expansion of Mutual Fund Offerings (1985 - 2004) </li></ul>Source: Strategic Insight, Bernstein Analysis
    52. 52. <ul><li>M&A Deals Where Target or Acquirer Was a U.S. Investment Management or </li></ul><ul><li>Investment Banking Firm (1993 Through 2004) </li></ul>Source: Dealogic, Bernstein analysis
    53. 53. Conclusion <ul><li>As far-fetched as they seem, and although status of first-mover is uncertain we believe their implementation is in the works </li></ul><ul><li>We expect significant visibility within two to three years </li></ul><ul><li>We believe there is tremendous opportunity in them, and tremendous risk in not embracing them </li></ul><ul><li>We believe senior business managers should allocate some time and resources in exploring these issues for their firms, today </li></ul>
    54. 54. <ul><li>[THIS PAGE IS INTENTIONALLY BLANK] </li></ul>
    55. 55. Guillermo MacLean, Senior Research Analyst Mr. MacLean is a senior research analyst at Sanford C. Bernstein & Co., LLC. Together with Chief Investment Strategist, Vadim Zlotnikov, he focuses on business strategy issues affecting the investment management industry. This, with the purpose of serving not only as investment advisors to their clients (portfolio managers in investment management organizations), but also as business strategy consultants to those clients who may also have corporate strategy responsibilities. Their occasional research publications on the topic include “Hedge Fund Industry: Products, Services, or Capabilities?”, May 2003, “Reengineering Investment Management & Advice to the Individual”, March 2004, and “In Search of a Breakthrough”, January 2005. Prior to joining Bernstein in 2003, Mr. MacLean worked as a business analyst in Putnam Investment's corporate development group. Prior to Putnam, he was a research analyst and assistant portfolio manager in Credit Suisse Asset Management's emerging markets team. He has also held various positions in equity research and corporate finance at Merrill Lynch, Morgan Stanley and the International Finance Corporation of The World Bank Group, focusing on a variety of industries including telecommunications, media, and electric utilities. During each of his years in equity research he was ranked among the top in his field according to Institutional Investor Magazine yearly surveys. Mr. MacLean holds a BA in Economics from Georgetown University and an MBA from The Tuck School of Business at Dartmouth College.
    56. 56. <ul><li>SRO REQUIRED DISCLOSURES </li></ul><ul><li>References to &quot;Bernstein&quot; relate to Sanford C. Bernstein & Co., LLC and Sanford C. Bernstein Limited, collectively. </li></ul><ul><li>Bernstein analysts are compensated based on aggregate contributions to the research franchise as measured by account penetration, productivity and proactivity of investment ideas. No analysts are compensated based on performance in, or contributions to, generating investment banking revenues. </li></ul><ul><li>Bernstein rates stocks based on forecasts of relative performance for the next 6-12 months versus the S&P 500 for U.S. listed stocks and versus the MSCI Pan Europe Index for stocks listed on the European exchanges — unless otherwise specified. We have three categories of ratings: </li></ul><ul><li>Outperform: Stock will outpace the market index by more than 15 pp in the year ahead. </li></ul><ul><li>Market-Perform: Stock will perform in line with the market index to within +/-15 pp in the year ahead. </li></ul><ul><li>Underperform: Stock will trail the performance of the market index by more than 15 pp in the year ahead. </li></ul><ul><li>As of 09/03/04, our ratings were distributed as follows: Outperform/Buy - 51.0%; Market-Perform/Hold - 45.2%; Underperform/Sell - 3.8%. </li></ul><ul><li>OTHER DISCLOSURES </li></ul><ul><li>To our readers in the United States : Sanford C. Bernstein & Co., LLC is distributing this report in the United States and accepts responsibility for its contents. Any U.S. person receiving this report and wishing to effect securities transactions in any security discussed herein should do so only through Sanford C. Bernstein & Co., LLC. </li></ul><ul><li>To our readers in the United Kingdom : This report has been issued or approved for issue in the United Kingdom by Sanford C. Bernstein Limited, regulated by the Financial Services Authority and located at Devonshire House, 1 Mayfair Place, London W1J 8SB, +44 (0)20-7170-5000. </li></ul><ul><li>To our readers in member states of the EEA : This report is being distributed in the EEA by Sanford C. Bernstein Limited, which is regulated in the United Kingdom by the Financial Services Authority and holds a passport under the Investment Services Directive. </li></ul><ul><li>To our readers in Australia: Sanford C. Bernstein & Co., LLC and Sanford C. Bernstein Limited are exempt from the requirement to hold an Australian financial services license under the Corporations Act 2001 in respect of the provision of the following financial services to wholesale clients: </li></ul><ul><li>providing financial product advice; </li></ul><ul><li>dealing in a financial product; </li></ul><ul><li>making a market for a financial product; and </li></ul><ul><li>providing a custodial or depository service. </li></ul><ul><li>Sanford C. Bernstein & Co., LLC and Sanford C. Bernstein Limited are regulated by the Securities and Exchange Commission under US laws and by the Financial Services Authority under UK laws, respectively, which differ from Australian laws. </li></ul><ul><li>One or more of the officers, directors, or employees of Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited and/or its affiliates may at any time hold, increase or decrease positions in securities of any company mentioned herein. </li></ul><ul><li>Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, or its or their affiliates may provide investment management or other services to the pension or profit sharing plans, or employees of any company mentioned herein , and may give advice to others as to investments in such companies. These entities may effect transactions that are similar to or different from those recommended herein. </li></ul><ul><li>CERTIFICATIONS </li></ul><ul><li>I/(we), Vadim Zlotnikov, certify that all of the views expressed in this report accurately reflect my/(our) personal views about any and all of the subject securities or issuers and that no part of my/(our) compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views in this report. </li></ul>

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