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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thank you for standing by, and welcome to the AllianceBernstein Fourth Quarter 2021 Earnings Review. At this time, all participants are in a listen-only mode. After the remarks, there will be a question-and-answer session, and I will give you instructions on how to ask questions at that time. As a reminder, this conference is being recorded, and will be available for replay for two weeks.
I would now like to turn the conference over to your host for this call, Head of Investor Relations for AB, Mr. Mark Griffin. Please go ahead.
Thank you, Natalia. Good morning, everyone, and welcome to our fourth quarter 2021 earnings review. This conference call is being webcast and accompanied by a slide presentation that's posted in the Investor Relations section of our site of our Web site, www.alliancebernstein.com.
With us today to discuss the Company's results for the quarter are Seth Bernstein, our President and CEO; and Ali Dibadj, CFO and Head of Strategy. Kate Burke, our COO, will join us for questions after our prepared remarks.
Some of the information we'll present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. So, I'd like to point out the safe harbor language on slide two of our presentation. You can also find our safe harbor language in the MD&A of our 10-K, which we filed earlier this morning.
Under Regulation FD, management may only address questions of material nature from the investment community in a public forum. So, please ask all such questions during this call.
Now, I'll turn it over to Seth.
Good morning and thank you for joining us today. We are pleased to report 2021 results that showed a substantial progress. We accelerated our full-year organic revenue growth to 5%, including a 1% fee rate increase, marking our third year in a row of active organic growth, and fourth out of the last five. Active equities, including ESG, municipals, and alternatives/multi-asset, each grew organically at double-digit rates this year. Investment performance strengthened, with 89% of fixed income and 72% of active equity AUM outperforming in 2021. Our institutional pipeline's annualized fee base exceeded $65 million, and we launched a diverse set of new client-focused offerings, at the same time strengthening our strategic partnership with Equitable Holdings.
For the year, our adjusted operating margin expanded 350 basis points to 33.6%. We delivered 34% growth in both earnings and distributions to unit holders. Let's get into the specifics, starting with a firm-wide overview on slide four. Fourth quarter gross sales accelerated to $39.4 billion, up 8% or 26% from a year ago, and up 22% sequentially, resulting in a record full-year gross sales of $150 billion, up 21% from the prior year. Fourth quarter firm-wide active net inflows were $6.4 billion; a 4% annualized organic growth rate, and a full-year active net inflows of $26.3 billion, also grew 4% organically or 5% including a 1% free rate improvement.
Year-end assets under management, of $779 billion, rose 14% year-over-year. And full-year AUM, of $731 billion, increased 18% versus the prior year.
Slide five shows our quarterly flow trend by channel. Firm-wide fourth quarter net inflows, of $7.4 billion, represented 4% annualized organic growth. Net inflows were positive in each channel for the fourth quarter in a row, and the sixth of the last -- fifth of the last six. Retail generated its strongest growth sales ever, leading to net inflows of $6.3 billion. Active equities and continued strength of munis helped to offset outflows in taxable fixed income. Institutional sales, of $6.6 billion, led to net inflows of $400 million, driven by active equities. In Private Wealth, gross sales increased 40% over the prior year period, with net inflows, $700 million, as we continued to grow engagement in the ultra-high-net-worth cohort, supported by our focus on pre-liquidity planning, coupled with an innovative product suite.
Slide six shows the annual net flows' trends. The firm's strongest growth sales year ever led to firm-wide net inflows of $26.1 billion. Retail reached a record $100 billion in gross sales, active inflows of $20.8 billion were driven by 20% organic growth in active equities, and 23% growth in municipals which offset continued outflows from global high income service. Institutional sales declined year-over-year net of a one-time benefit from the Venerable sale. We posted net inflows for the year of $2.3 billion. And Private Wealth had its strongest sales year I more than 20 years, with inflows of $3 billion positive in each quarter of 2021.
Investment performance is shown on slide seven. Starting with fixed income, the fourth quarter concluded a [bolo] [Ph] year for fixed income markets, with yield curves in developed markets flattening, and longer-term yields mixed as central bank monetary policies diverged. For the year, yields rose in all major developed markets as the recovery in economic growth solidified, and inflation surged. Risk assets were mixed, with most credit sectors outperforming governments, let by U.S. and pan-European high yield. Our fixed income performance remained strong, with 89% of our fixed income assets outperforming over the one-year period, and 72% and 70% of assets outperforming over the three and five-year periods, respectively.
In tax exempt, six of our 10 retain municipal funds remained in the top decile of their Morningstar peer group across all time periods, with all 10 in the top quartile across all periods. Our muni bond inflation strategy was in the top 1% across all periods, and our tax-aware vehicles, including SMA, grew by 25% organically.
Turning to equities, despite bouts of volatility, 2021 was another strong year for equities globally as the MSCI World Index advanced by 24.2%. U.S. large caps led the way, with S&P 500 up 28.7%, and developed markets outperforming emerging markets. [Sales] [Ph] returns flipped repeatedly, with value stocks rallying through May, and gross stocks regaining leadership until December. In equities, our percentage of assets outperforming remained healthy, with 73% of AUM outperforming for the one-year period, 48% for the three-year period, and 75% for the five-year period. Three-year performance dipped sequentially as our U.S. large cap growth composite trailed the Russell 1000 growth benchmark, which is highly concentrated, with five companies comprising 38% weight at the year-end.
The strategy did however outperform relative to its Morningstar peer group for the three-year period. Our focus remains on identifying high-quality companies with strong fundamentals and reasonable valuations, characteristics which can help reduce risk in down markets while participating in a market recovery. We are paying close attention to pricing power as well as how distortions that may have inflated or compressed earnings over the past two years will play out as business conditions normalize.
Now I would like to review our client channels beginning with retail on slide eight. Record annual sales of $100 billion were up $21 billion or 27% from the prior year high. Active equities sales grew by $23 billion with net flows up 20% organically driven by Japan, U.S., and sub-advisory. And muni sales grew by over 40%. Fourth quarter net inflows were $6.3 billion, up 9% annualized organically with full-year net inflows of $20.8 billion, up 8% organically.
As shown on the upper left, 2021 was our fifth straight year of active equity inflows with organic growth averaging 11% over that period. U.S. large cap growth led the way among 10 different equity products that each exceeded $250 million of net inflows. Once again, municipals grew by over 20% annualized led by our SMA, tax aware, and muni bond inflation strategies helping to offset continued taxable fixed income outflows.
ESG Portfolios with Purpose grew to $31.5 billion, up 16% sequentially and 91% year-over-year driven by our U.S. and global sustainable thematic strategies. In the fourth quarter, Sustainable Global Thematic won the Green Fund Award and the Financial Services Awards of Excellence published by the Hong Kong Economic Journal.
Turning to institutional on slide nine, fourth quarter gross sales was $6.5 billion, declined 34% from year ago while rebounding from a slower third quarter. Full-year sales were $31.7 billion including the Venerable sale. We drove net inflows of $4 million in the fourth quarter and $2.3 billion for the year; our third consecutive year of organic growth. Inflows in Customized Retirement Solutions or CRS, Commercial Real Estate Debt or CRED, European CRED and active equities offset outflows in taxable fixed income and passive equities.
Our middle market lending business was awarded to institutional mandates to consultants successfully competing against larger better known alternative managers. Our institutional pipeline grew to a record $21.5 billion at quarter-end led by $1.5 billion global core equity mandate. The annualized fee base reached $65 million. The majority of which was from alternatives. Our pipeline included a $9.7 billion low-fee CRS mandate which funded in January 22.
While pipeline AUM will be significantly reduced for the foreseeable future, the annualized fee base excluding this mandate remains above $60 million with an active fee rate more than three times the channel average. With respect to AXA for whom we currently manage $20 billion in AUM, we continue to expect $5 billion of low-fee retail redemptions in the first-half of 2022.
Moving to private wealth management on slide 10, fourth quarter and full-year gross sales grew by 40% and 27% respectively versus the year-ago period driven by strong advisor productivity. Net inflows were $700 million in the fourth quarter, positive in each quarter of 2021 and five of the last six quarters. For the year, we grew net inflows by $3 billion or 3% organically.
We continue to see our mix shift towards our ultra high net worth $20 million and over clients influenced by a pre-liquidity event planning efforts. From which, gross sales more than doubled in 2021. In 2021, we launched nine innovative product offerings including Real Estate Equity Plus, ABLSV Partners One [Ph], which is our new secondary's offering, global disrupters fund and sustainable intermediate duration to name a few.
In the fourth quarter, we closed on our commercial U.S. real estate debt private debt fund with over $200 million in capital commitments. And for the full-year, commitments to private alternative products more than doubled versus the prior year. Our proprietary separately managed equity tax loss harvesting product grew by 32% sequentially while muni impact in the ESG portfolio continued to grow strongly.
I'll finish our business overview with the sell side on slide 11. Fourth quarter Bernstein Research revenues decreased by 4% year-over-year and full-year net revenues decreased by 2% year-over-year. We experienced a fourth quarter slowdown in Asia trading volumes reflecting caution on the part of investors measuring the spillover effect of the Chinese property market among other events.
Full-year trading volumes reflected less volatility in 2021 as compared to 2020 when the COVID sell off and ensuing recovery lifted volumes. For the full-year, Asia trading commissions increased in the high teens while research check posted mid single-digit growth, reflecting our premium research franchise. In November, we held our second virtual operational decisions conference with an impressive lineup of senior executives from over 51 companies in various sector. And we launched coverage on three new sectors this past quarter; two in China, one in Europe.
I'll now review progress against our growth initiatives on slide 12. Our investment performance strengthened in 2021 with 70% more of our both fixed income and equity outperforming over the one and five year period. We drove organic growth across each channel all four quarters last year and five of the last six quarters with retail positive 12 of the last 14 quarters, and institutional positive, 10 of the last 11.
Active's equities remained the standout performer. Private wealth grew by 3% positive in each quarter of 2021 and five of the last six quarters with active client engagement and nine diverse new product offering. Our ESG Portfolios with Purpose now stand at $31.5 billion and AUM of 91% year-over-year. In alternatives, we launched our Climate-Focused 1.5 degree long short equity strategy and closed on our commercial real estate debt private debt fund.
Financially, we delivered on our commitments posting incremental margins of 53% above our long-term target range of 45 to 50%. Full-year adjusted operating margin of 33.6% was up 350 basis points year-over-year with adjusted earnings unit holder distributions up 34% versus the prior year. I'll return to share thoughts on our growth strategy.
But before that, I'll turn it over to Ali to review the financials. Ali?
Thanks, Seth. Let's start with a GAAP income statement on slide 14. Fourth quarter GAAP net revenues of $1.3 billion increased 19% from the prior year period. Operating income of $393 million increased 30%, and operating margin of 30.8% increased by 240 basis points. GAAP EPU of $1.27 in the quarter increased by 31% year-over-year. For the full-year, GAAP net revenues of $4.4 billion increased 20%. Operating income of $1.2 billion rose 34%. And, operating margin of 27.3% increased to 170 basis points.
Full-year GAAP EPU of $3.88 increased by 34% year-over-year. As always, I'll focus my remarks from here on our adjusted results which remove the effect of certain items that are not considered part of our core operating business. We base our distribution to unit holders on adjusted results which we provide in addition to and not as a substitute for our GAAP results. Our standard GAAP reporting and a reconciliation of GAAP to adjusted results in our presentation appendix, press release, and 10-K.
Our adjusted financial highlights are shown on slide 15. We shall touch on as we talk through the P&L shown on slide 16. On slide 16 beginning with revenues; net revenues increased 16% for the fourth quarter and 18% for the full-year versus the same prior year period.
Base fees increased 19% for the fourth quarter and 20% for the full-year at higher average AUM across all three distribution channel was driven by both market and organic growth in each channel. Fee rates for both periods increased with a fourth quarter fee rate of 39.4 basis points, up 0.7 basis points or 2% year-over-year. And the full-year fee rate of 38.9 basis points, up 0.5 basis points or 1%.
We continue to believe that although our fee rate may be volatile from time to time given large mandates that could skew averages such as the $10 billion low-fee CRS addition in January, the long-term trend should be grinding higher. Fourth quarter performance fees of $134 million increased by $25 million over the prior year period driven by our financial services opportunity fund and real estate offerings offset by lower fees as compared with prior year at Arya Partners.
Full-year performance fees up $222 million were up $92 million, compared to $130 million for the prior-year, reflecting a solid year for alpha generation, and more diversified across public and private alternative strategies, middle market lending of $55 million, financial services $41 million, and U.S. select equity long short $32 million with the largest generators of performance fees.
2021 was quite an anomalous year for performance fees, both in terms of source, magnitude and benefit to the bottom line. Although difficult to predict, a reasonable run rate for 2022 would likely be somewhere between 2019 and 2020 levels. Fourth quarter revenues for Bernstein Research Services decreased 4% from the prior-year period, driven by lower trading volumes in Asia, reflecting a shift in Asian investor sentiment around risk. Full-year revenues declined by 2%, reflecting higher COVID-driven market volatility in the prior-year. We incurred investment losses of $1 million in the fourth quarter similar to the prior-year period, and for the full-year a gain of $1 million as compared to a loss in the prior-year of $7 million.
Moving to adjusted expenses, all-in our total fourth quarter operating expense of $630 million increased 9% year-over-year, while full-year operating expense of $2.4 billion increased 12% from the prior-year. Total compensation and benefits expense increased 4% in the fourth quarter versus the prior-year period, primarily due to higher base compensation and commission offset by lower incentive compensation.
In the fourth quarter, some compensation expense move to G&A, reflecting investment as well as increased usage of outside consultants which can accelerate strategic initiatives and improves our flexibility as these represent variable as opposed to fixed comp expenses.
Compensation was 41.7% of adjusted net revenues for the fourth quarter versus 46.7% in the prior-year period. Full-year 2021 revenues crystallize at a higher level than we had anticipated earlier in the year, allowing us to leverage down the fourth quarter compensation ratio relative to prior-periods. For the full-year, compensation and benefits increased by 15% driven primarily by higher incentive compensation, reflecting both higher markets and increased performance fees and base compensation.
Full-year base compensation increased by 9%. Average headcount rose by 4% as compared with the prior-year average. The full-year 2021 compensation ratio was 46.5%, 140 basis points below the prior-year. While our 2021 compensation ratio benefited from favorable market conditions, 2022 has clearly brought more volatile markets given current market conditions as we plan to accrue compensation at a 48.0% ratio in the first quarter of 2022 and may adjust throughout the year if market conditions change.
Should markets pull back further, this ratio could go up as we plan to pay competitively given our people our most important asset. As a reminder, the compensation ratio is also sensitive to variability in the year-end mix of performance fee eligible funds and impact from the possibly increasing post-COVID fringe benefit.
Promotion and servicing costs rose 24% in the fourth quarter, and were up 7% for the full-year reflecting lower T&E and meeting costs last year owing to the COVID-19 pandemic. Going forward while we still strive to realize some portion of ongoing efficiencies, we would expect promotion and servicing spend levels to increase meaningfully as the pandemic stages subside.
G&A expenses increased 20% in the fourth quarter versus the prior-year period or 15% excluding Nashville and related relocation expenses. This increase is split roughly evenly into three areas. One, growth related technology and efficiency projects, as well as new product launch support, two inflationary impact from areas such as market data and professional services, and three core G&A necessary to support the organic growth of our business.
For the full-year, G&A rose 11% or 9% excluding Nashville and related relocation expenses. This 9% growth was also split relatively evenly between the same three categories, growth and efficiency projects, as we opportunistically invested in the future at an accelerated pace to take advantage of our strong performance in a year, inflation impact and core G&A including FX adding 1%.
Looking forward, we expect the rate of G&A growth to moderate from 2021s rate though remaining above our historical average to somewhere in the mid to high single digits. We'll continue to invest in return generating growth and efficiency projects, including the use of outsource consultants where appropriate and we expect inflation to remain persistent. Core G&A growth is necessary to support our organic growth. Intangible expenses were flat in the fourth quarter and declined by $16 million for the full-year as a quarterly amortization chart associated with our acquisition of Bernstein 20 years ago, and in the third quarter of 2020.
Fourth quarter operating income of $394 million increased by 31% and full-year 2021 operating income of $1.2 billion increased by 32% versus the prior year periods as revenue growth outpaced expense increases. Fourth quarter operating margin of 38.5% was up 430 basis points year-on-year reflecting the operating leverage of our business. The incremental fourth quarter margin was 64% as compared to the prior year period.
Our full-year 2021 operating margin of 33.6% increased 350 basis points from 2020. For the full-year, we delivered incremental margin of 53% above the high-end of our long-term targeted 45% to 50% range. 2021 margins reflected strong markets, a robust level of beneficial mix of performance fees, and continued low T&E expenses due to COVID.
Absent improvement in markets from today's level, we would expect 2022 margins to be impacted, reflecting continued higher inflation in our investments to both deliver our services to our clients more efficiently and grow for our clients through diversification and expansion, as outlined in the appendix of our presentation, fourth quarter and full-year adjusted earnings include certain items, which are not part of our core business operation.
In the fourth quarter, adjusted operating earnings were $2 million or $0.02 per unit above GAAP operating earnings due to the net impact of acquisition related expenses and contingent payments. For the full-year, adjusted operating income was $2 million below GAAP due to the net impact of acquisition related credits, offset by real-estate and contingent payments, but EPU is $0.02 higher when excluding the impact of netting minority interest in operating income.
The full-year 2021 effective tax rate for AllianceBernstein L.P. was 5.2% about as expected. Going forward, we expect an effective tax rate for 2022 of approximately 5.0% to 5.5%. I'll finish with an update on our corporate relocation to Nashville. We're enjoying use of a new fifth in commerce location, which we moved into last July. At year-end, we had 974 Nashville based employees up 23% from a year ago and more than three-fourth of the way to our target of 1,250 colleagues.
For the fourth quarter, estimated expense savings related to our national corporate headquarters relocation sold $12 million compared to transition cost of $6 million, resulting in a net $6 million increase in operating income or net $0.02 accretion to EPU. Of the net $6 million, approximately $10 million is compensation offset by $4 million to increase occupancy costs.
For the full-year 2021 expense savings of $43 million were greater than transition costs of $27 million, resulting in a $16 million contribution to operating income for net increase of $0.06 per unit. Of the net $16 million, approximately $33 million in compensation related savings, offset by $17 million of increased occupancy costs. For 2022, we expect the natural relocation to remain accretive. We continue to estimate ongoing annual expense savings in 2025 once the transition period is over to be in the range of $75 million to $80 million per year.
With that, I'll turn it back to Seth for some closing remarks before we take your questions.
Thank you, Ali. Turning to slide 18, last year under Ali's leadership we undertook a fresh look at our strategy with the resulting five part strategy statement now guiding our path forward. Deliver, diversify and expand responsibly with Equitable.
In 2021, we made great progress in this regard. We delivered improved investment performance and accelerated our organic growth. Included in 2021's banner year, our active equity platform has grown organically by 5% annually over the last 5 years well above the industry. We diversified our global product offerings with innovative offerings across all channels.
For example on alternatives, we grew our commercial real-estate debt and middle market lending offerings and onboarded climate focus long short to 1.5 degrees. We successfully expanded our global distribution footprint driving over 40% sales growth in U.S. retail SMA assets, accelerating our advisor hiring and private wealth and we're progressing in channel. Having received formal acceptance of our application in the fourth quarter, a key milestone in the FMC license application process. Our Responsible Investing platform continued to grow strongly as we added two new strategies that align with the UN Sustainable Development Goals, sustainable income and sustainable U.S. thematic credit, as well as climate solutions and sustainable emerging markets debt, to name a few. And we announced, earlier in 2021, Equitable's commitment to allocate $10 billion of permanent capital to our Private Alternatives and Private Placement platform.
We're pleased with progress, including recent commitments from Equitable for our CRED Core Plus, both fixed and floating, and our construction to permanent strategies. In response to client demand, we continue to assess inorganic growth opportunities to fill out our product gaps, with focus on the private credit side, including asset-based infrastructure and renewables, to name a few.
In summary, we had a strong 2021. Entering a more volatile 2022, our teams remain focused on pursuing insight that unlocks opportunity for our clients, unit holders, and other stakeholders.
With that, we welcome your questions. Operator?
[Operator Instructions] Your first question is from the line of Bill Katz with Citigroup.
Okay, thank you very much for that detail, and taking the questions this morning. So maybe, Seth, one for you, where you still left off with equitable, maybe the bigger picture question is where are you with Equitable in terms of some of that advancement of the $10 billion? Does it sound like there's a few things going on? And then, is there an opportunity to broaden that suite, beyond Equitable, to other players organically?
Thank you, Bill. Let me take them in turns. We are already utilizing a portion of that $10 billion on our existing strategies, whether it's middle markets lending, CLO, and our commercial real estate debt business, they were the initial investor in our Europe commercial real estate business which, as you know, we launched last year. Look, it'll take time to deploy that, but commitments have been made. It is our absolute expectation that we will be able to commercialize those products and new services and teams we bring on beyond just Equitable or our existing base of insurance and clients. The world continues to have a very strong demand for private debt. Generally, that has been the focus to date of our efforts, and so I feel pretty good about it. But let me leave it there.
Okay. Maybe one more big-picture for you, just as you think about the opportunities in the retail democratization theme, which large numbers no matter who you speak with. Can you talk about, a little bit, what the incremental plans are within your existing bulk of the private client business, and then how you might tap into sort of the market outside of your own footprint? Thank you.
Sorry, from a private wealth basis, Bill, or?
Right. So, I guess, A, what are you doing with your existing book, and then B, how do you sort of go after the mass affluent in non AB distribution channels?
I'm going to actually answer the second part of that first, and I'm going to hand it over to Kate Burke to answer with respect to our private wealth business, she's on the phone, and runs that business. But more broadly, that's exactly who we've been attacking through our distribution partners, both in the United States and globally, whether it's the very strong receptivity to our large cap growth service, in Japan, or increasing interest in equities in Greater Asia. Our sustainable suite of products, which has really been driving strong interest, is principally retail in terms of those flows that we were talking about earlier in our presentation. And I really think we'd look to our retail growth strategies, both in the U.S., a bit in Europe, but more, in particular, in Asia to really drive that growth further in coming years.
But, Kate, why don't you chip in with respect to private wealth management?
Sure, thank you. So, the focus with Bernstein Private Wealth continues to be moving up market into the ultra high net-worth cohort, and we've seen a lot of success in that area growing the net AUM or the net flows higher than our average flows. But we are recognizing that there is a real opportunity also in this emerging wealth cohort that you talk about, but for us in a very specific area. And you see that in the success of the growth of our pre-liquidity and transactional events, where we are partnering with early-venture entrepreneurs and new -- and private business owners, looking at how we can provide them with agnostic wealth advice separate from the transaction about how they want to be positioning their portfolios longer-term.
And we're seeing that pre-transaction planning really be a nice driver of that emerging wealth cohort. And we continue to invest in making sure our wealth advice meets those client needs, and are looking to continue to kind of expand that offering, but in a very curated and specific audience of that emerging wealth, versus going after it broadly.
Hey, Bill, can you just clarify something. Were you [talking] [Ph] about alts in particular or were you talking more broadly about into the affluent marketplace?
Well, I was speaking directly to the alts, and that seems to be the incremental theme at the margin. So, I was just hoping to get your thoughts there.
I apologize, I misunderstood.
I apologize if I was not clear. Thank you.
Actually, it's been an important source of growth. Kate's business has been a large driver of that, and she can add more color there. But our Select platform is already seeing interest and was a strong contributor in 2021. And we also intend to sort of move into expand into retail our private credit capabilities through partnerships with others. So, watch this space.
Kate, did anything specific?
No, I would just add that alternatives continue to be an attractive area for our clientele.
Thank you.
Your next question is from the line of Dan Fannon with Jefferies & Company.
Thanks, good morning. I guess to start, just in terms of performance fees, appreciate the kind of forward-looking commentary. But as we think about the fourth quarter and the magnitude was there something different about the makeup of these performance fees as the comp ratio obviously came in a lot lower. And so, just thinking about payout or how we should think about the compensation associated with performance fees going forward as well?
Thanks for the question. So, yes, I would say that the performance fees in the year and in the quarter were a little bit anomalous, both in terms of the size for the year, the 222 number was larger than we would expect, and to your point in on the mix of where they came from. Now, to mention a couple of the funds that you probably hadn't heard a lot of over the past several years, Financial Services Opportunity Fund, from our real estate platform, those come in quite strong, more strongly than we saw it in any one year. It's hard to predict, as you can imagine what happens in one year versus another year. We do expect these funds to perform, but sometimes things come in a little bit earlier or less spread out than you would think, but does impact certainly the impact to the bottom line as well, depending on the mix.
The way we would think about performance fee, just to give you a guide going forward, in a more normalized manner, it's somewhere between 2019 and 2020 levels, that's kind of a more normalized level to think about the performance fees, going forward.
Understood. And then just as a follow-up here, you talked about promotion and servicing increasing significantly. So, maybe put some numbers around that, if you could or how to kind of frame that in terms of historical or other periods? And then also, the comp ratio discussion for the first quarter, that, I think, you said is up-to-date for kind of current AUM levels. So, just want to see kind of what the starting point of that comp ratio in terms of year-to-date market performances within that? Thank you.
Sure. So, on the promotion servicing elements, remember the two biggest buckets of that that have vacillated, given COVID, our T&E, and for meetings. What we said, in 2020 versus 2019, holds true actually for 2021, which is effectively say across both of those roughly $50 million worth appealing for meetings across those -- across those two relative 2019. So, essentially flat 2021 versus 2020 as a way to think about it.
If you want a sense of where we are on that, we're probably around a quarter of the span of 2019 right now; we expect that to go up significantly. We hope for all of our steaks that that goes up significantly because we also get to be in front of our clients and say the pace of that is your guests as best as our guests. I would say that we do expect savings over the long-term relative to our 2019 numbers. We've talked on these calls before to something like 75%, 80%. Hopefully, from a run rate basis, but we would expect those costs to go up in the short-term. Certainly as people get back on the road and there's some pent up demand.
Hopefully that gives you some context around that. On the comp ratio as we said, 48% in the comp ratio we're starting to accrue at in Q1. Obviously, if the markets go down since then, or if there's a big change in the markets that may change, we'll have to see how things play out, but we've been historically very balanced and thinking about investing in the short-term of our business as well as importantly for the long-term of our business. And we have balanced that through all of our expenses, obviously including cleaning comp ratio. We understand its competitive market and our people are our asset, and we are going to make sure we're competitive in that marketplace as well.
Thank you.
Your next question is from the line of Robert Lee with KBW.
Great, thanks. Good morning. Thanks for taking my questions. I was just curious I mean the looking at the U.S. retail SMA. I mean, you highlighted on page 18, the 40% increase in sales, I'm just kind of curious, it's possible to what would you attribute that obviously performance, but were there some specific new strategies that you introduced whether product-wise or on the distribution, on the sales side, just trying to get a sense of kind of what drove that dramatic increase and how maybe broad-based it was?
Rob it's Seth. It was -- look, tax, tax exempt SMAs have really been an important driver for us. We were an early mover there. And we've offered a considerable degree of flexibility in how we structured them and this is for our clients. And it resonated with distributors as well as in our private wealth business, more generally word cornerstone element of our offerings. But it's not just in the equities business. I'm sorry, in the fixed income business -- specifically, you've also seen I think, along with the industry more broadly increasing demand for more affluent investors, for SMAs over ETFs, or mutual funds for that matter, and so we think that demand will continue to grow as people become more tax sensitive, and I want to understand what's going on in the underlying -- [technical difficulty]…
Great. And I know you don't want to focus too much on one month or one or two months, but the January obviously was on a flow front, in addition to the CRS and it was a strong start to the year I mean, can you put any kind of flesh out a bit, I mean, willing to say, kind of, here's what flows were in January outside of CRS, or give us some sense of that?
But we don't disclose specific flows, but what I will tell you we've seen the continuation of the trends we've elucidated in the past pretty strong, continuing interest in equities, and continuing with them actual fixed income principally from Asia. So, the momentum is okay, but look, there are headwinds in the marketplace. We recognize and then as Ali said earlier, I think we're anticipating more volatile markets generally with more rapid changes in investor interest.
Great, thanks. Thanks for taking my questions.
[Operator Instructions] Your next question is from the line of John Dunn with Evercore ISI.
All right. Maybe just on you mentioned Asia, any initial outlook for maybe getting a shift back in demand for retail and fixed income in Asia sometime in '22 and maybe how is this pattern kind of played out in prior cycles?
Thanks for the question. So, look generally, the strength of our business historically although it's beginning to change today, it was really very much an income oriented fixed income, that continues to be a important part of that business. And investors in Asia tend to be much more market sensitive than performance sensitive and that's been our experience to-date. Our relative performance is reasonably good. I think what we're seeing is what we frankly see, every time the Fed is engaged and goes into tightening mode, a general lack of interest in fixed income assets generally and reallocations elsewhere. And so we face that, what I would tell you is, every time in the past, it's happened. And it's been from so far from a relative perspective more modest today and in 2021 than we saw in prior periods of disruption.
We typically come back with pretty strong results and the enthusiasm for the services pick up. Look as high yield sort of top up over 5%, we think that is an important point where investors start to take more notice and begin to weigh carefully back into the market. But I think, more broadly, Asian investors are tending to be more interested in equities and multi-asset than they were in the past. And we continue to see interest in both of those as well.
Got it. And then maybe on the institutional side, it's a different environment on a bunch of fronts this year, are the questions, the institutional consultants asking, are they changing, are they looking at different stuff? Maybe a sense of how those conversations may have shifted?
Yes, I would say there's certainly been over the last several years, much more focus on responsibility ESG, how it's integrated into our processes, we have a good story to tell. But in terms of interest in markets, look I think it continues to be driven by interest in alternatives. But in traditional markets, much less activity in fixed income although we've seen some of the participating and in equities, certainly we've seen more interest and have benefited from some businesses, people begin to rotate into value. Beyond that, I guess less clear to me after there has been changes.
Got it. Thank you.
We do have a question from the line of Bill Katz with Citigroup.
Okay, thanks so much for follow-up. So, Seth, you mentioned that there might be some inorganic opportunities to build out the platform, A, I wonder if you could dive into a little bit more and then B, there's been some pretty big multiples being paid out there, how are you thinking about the sort of the gap between bid ask in terms of trying to affect the transaction. Thank you.
Yes, I'm going to take them in turn. And I may ask Ali to jump in, as well. As I've told you and others all along, we continue to look at teams, our philosophy has been, I think fairly clear, which our interest is in teams, where we see an edge, where we see a culture, where we see a track record of excellence, where we think we can actually grow them faster than they can grow themselves and get them to scale.
People know we're the right kind of home for active managers, we understand how to manage teams, giving them their space, but also realizing the benefits of integrating and unifying those services that they need, whether it's distribution, technology, operations, and core functions. And so we've had a very good track record to date of finding onboarding and getting teams to scout doesn't always work, but for the most part, it's done well, I'd say the activity levels remained fairly high at what we look at, Bill. So, there's nothing to report there. But let me make a couple of comments with respect to the valuation gap between traditional and alternative matters because we certainly recognize it. And our approach has been frankly to really focus on smaller teams, or teams that don't have significant assets under management and to help them get to scale because if we're going to have to pay a relatively higher multiple, we'd much rather get the benefit for our unit holders by benefiting from the scaling of that business. So, I think we would shy away from buying a larger firm for that reason. But we continue to be focused on that area.
Ali, would you like to jump in?
Sure, just to add a little bit. The question, Bill, one is we're certainly in the flow, everything that you read, and that you see. So, we've deliberately stayed away from some of the actions that you might have seen. And the context of why we stay away from them is really exactly as Seth said, because we're not looking for things that are at scale. We're looking for things that we can grow, and that we have competency in and as Seth described of the team to grow. That is our number one thing we need to believe in the team to grow. And look, there's a lot of interesting stuff out there that we are again in the flow. From a -- if it's not scaling, what is it to grow bucket, we're very focused on alternatives, five alternatives in particular, we've built a very sizable business of $23 billion in overall alternatives for us so far, you've heard us mention that on past earnings calls, we believe there's a lot more growth in that to deliver for our clients who are asking for these types of products.
And we see some interesting opportunities to partner with firms and grow those firms. And we can grow them in particular because we have a distribution channel that is very well honed. You mentioned retail just a moment ago, which is just opening up to all for us. But we have a very well honed private wealth channel that is looking for alternative, institutional of course we're hearing that more and more. Seth mentioned that a moment ago and let's not forget our partner with Equitable, who is not just a $10 billion number, but just more broadly is a great partner to build private credit. So, again, it's busy out there. We have been fortunate to bring on some great teams and we look forward to bringing on some more teams that we can grow in the future.
Many thanks.
There are no further questions at this time. Mr. Griffin, I will turn the call back over to you.
Thank you, Natalia. Thank you everyone for participating in today's conference call. Feel free to reach out to Investor Relations with any additional questions and have a great day.