Fitch Resolves 'Under Review' & Affs 'Satisfactory' on AllianceBernstein Thematic Research Portfolio

Fitch Ratings has removed from 'under review' and affirmed the 'Satisfactory' rating assigned to the AllianceBernstein Thematic Research Portfolio. The fund is managed by AllianceBernstein L.P. (AB; rated 'A+'/ 'F1' with a Stable Outlook by Fitch).

KEY RATING DRIVERS

Fund Presentation

AllianceBernstein Thematic Research Portfolio is a UCITS compliant, Luxembourg-domiciled fund, with USD92.3 million of assets under management (AUM) as of December 30, 2013. The fund originally launched as a technology sector fund in August 1996, was subsequently restructured to a short-term macro-focused thematic portfolio in Nov 2009 under Cathie Wood, and more recently shifted towards a thematic growth-oriented portfolio in June of 2013 under Daniel Roarty. As part of the latter, the fund's macro focus was removed, duration of themes shortened, and the volatility of themes reduced.

Daniel Roarty assumed a leadership role over AB's Thematic strategy as part of reorganization within the firm in an effort to reduce volatility and increase alpha. The Thematic strategy ($3.9 billion in AUM as of Dec. 31, 2013) was merged with the Global Growth equities group ($3.9 billion in AUM as of Dec. 31, 2013) already headed by Roarty, and rebranded under the title Global Growth and Thematic Equities.

Investment Process

Investment process has grown more disciplined under Roarty with the introduction of standardized fundamental analysis across holdings, detailed Excel models to analyze valuation, risks and buy/sell targets, and metrics review at the theme and portfolio level.

Resources

Roarty joined the firm in May 2011 and was named sector head for the technology sector on the Global/International Research Growth team on July 1, 2011, and team leader for that team in early 2012. Roarty previously spent nine years at Nuveen Investments, where he co-managed a large-cap growth strategy and a multi-cap growth strategy. His research experience includes coverage of technology, industrials and financial stocks. Also joining the team was Tassos Stassopoulous, with 22 years of experience and AB sector head of consumer staples.

Track Record

Flows have stabilized in the fund and the broader strategy. Performance has also improved. The fund's Lipper ranking on both performance and volatility (standard deviation) in 2013 have increased to a 2nd quartile among peer funds also tracking the MSCI AC World USD index. However, the Lipper three-year consistent return score remains at a 1 (lowest out of five) given the fund's significant underperformance in 2011 under the previous strategy.

Asset Manager

AB is a global, diversified asset manager (USD451 billion AUM at Dec. 31, 2013), approximately 64% owned by AXA S.A. (rated 'A'/'F1' with a Negative Outlook). Equities represented 32% of AUM.

Rating Sensitivities

The rating may be sensitive to material changes in the investment or operational processes, or resources dedicated to the fund. A material adverse deviation from Fitch's guidelines for any key rating drivers could result in a downgrade of the rating. For example, this may be manifested in the departure of key investment professionals or in significant deterioration in the fund's performance relative to its benchmark and peers, resulting from stock-picking errors on large holdings.

Fitch's Fund Quality Ratings combine Fitch's experience in qualitative fund analysis with rankings and performance data from Lipper, a Thomson Reuters company. Fitch's Fund Quality Ratings offer an independent, forward-looking assessment of a fund's key performance and risk attributes and consistency of longer-term returns, relative to peer group or benchmarks. The ratings focus on the fund manager's investment process, key fund performance drivers, risk management, and the quality of the fund's operational infrastructure.

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Applicable criteria, 'Fund Quality Rating Criteria', dated 19 September 2011, is available at www.fitchratings.com

Applicable Criteria and Related Research:

Fund Quality Ratings - Frequently Asked Questions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646829

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=816034

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Fitch Ratings
Primary Analyst
Yuriy Layvand, CFA, [phone]
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Manuel Arrive, CFA, [phone]
Senior Director
or
Committee Chairperson
Ralph Aurora
Senior Director
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Media Relations
Brian Bertsch, [phone] (New York)
[e-mail]