OREANDA-NEWS. Fitch Ratings has affirmed AllianceBernstein European Income Portfolio's (EIP), AllianceBernstein American Income Portfolio's (AIP) and AllianceBernstein High Yield Portfolio's (EHY) 'Strong' Fund Quality Ratings. The funds are all managed by AllianceBernstein L.P (AB).

The 'Strong' rating reflects the funds' robust and well-balanced investment process that combines the independent inputs of credit, quantitative and macro-economic research in a disciplined and formalised approach. The fund benefits from the depth of AllianceBernstein's fixed income and support resources, and from a robust IT platform.

KEY RATING DRIVERS

Investment Process
The well-balanced investment process of the funds combines the independent inputs of credit, economic and quantitative research to determine the overall portfolio positioning, while allowing portfolio managers (PM) sufficient flexibility in credit selection. Research recommendations are challenged in formal review meetings and consensus is sought on portfolio investment decisions.

AIP and EIP use a flexible, barbell approach to build a diversified portfolio of typically 65% investment grade (IG) and 35% high yield (HY), aimed at generating stable, high income and at preserving capital. EHY uses a primarily bottom-up investment process to build a diversified European HY portfolio, aimed at outperforming its Barclays Euro High Yield benchmark.

Resources
The funds are managed by several senior Portfolio Managers (PMs) based in New York and London, all averaging over 20-year investment experience and belonging to AB's 58-strong fixed income team. PMs are supported by a global credit research team of 39, an economic team of eight, a quantitative research team of 10, a structured asset team of 12 and a fixed income trading desk of 21. There is effective communication and co-operation among the teams. The IT platform is built around integrated proprietary and third-party systems and risk analytics.

Fund Manager
AB. is a diversified asset manager with USD485bn assets under management (AUM) in June 2015. It has a strong fixed income franchise, representing 49% of AUM.

Track Record
The three funds have delivered a first or second quintile performance relative to their categories over the last three and five years. AIP and EIP are sensitive to interest rate rises and spread widening, particularly in an environment where government bonds do not provide an effective hedge for high-yield bonds.

RATING SENSITIVITIES

The ratings may be sensitive to material changes in the investment or operational processes or resources dedicated to the funds. A material adverse deviation from Fitch's guidelines for any key rating driver could result in a downgrade. For example, this may be manifested in significant structural deterioration in the fund's performance or excessive risk-taking. Fitch sees limited key person dependency given the depth of the fixed income team.

Conversely, an upgrade of the funds could result from demonstrated outperformance relative to peers and the benchmark in a sustained period of unfavourable market conditions, such as that characterised by a bond sell-off exacerbated by poor liquidity and high correlation between credit sub-asset classes.