AllianceBernstein enters ETF arena with its first set of active ETFs

AllianceBernstein enters ETF arena with its first set of active ETFs
The asset manager's initial lineup includes the Ultra Short Income and Tax-Aware Short Duration Municipal ETFs.
SEP 14, 2022

AllianceBernstein Holding LP is launching two actively managed exchange-traded funds Wednesday, becoming the latest large asset manager to leap into the $6.6 trillion ETF industry despite a brutal rout in markets.

The AB Ultra-Short Income ETF (YEAR) will invest in U.S. government and investment-grade corporate bonds that will typically have an average duration of less than one year. The AB Tax-Aware Short-Duration Municipal ETF (TAFI) will invest in municipal bonds that pay interest exempt from federal income tax. While YEAR has an expense ratio of 0.25%, TAFI’s is 0.27%.

AllianceBernstein follows major holdouts — such as Capital Group and Neuberger Berman — that have caved into the ETF rush this year. More ETFs have debuted in the first eight months of this year than during the same period in previous years. Money managers continue to see opportunity in the investment vehicle, undeterred by the slump in markets that has wiped out more than $500 billion of the industry’s assets this year.

The ETF industry “is maturing, but it’s by no means mature,” said Noel Archard, global head of ETFs at AllianceBernstein. “There’s still a lot of room for the transition to happen from client portfolios.”

Investors have been seeking short-duration assets as they anticipate the Federal Reserve will continue to raise interest rates aggressively after a strong-than-expected inflation print Tuesday. The $21.9 billion JPMorgan Ultra-Short Income ETF (JPST) has been seeing weekly inflows in 12 out of the last 14 weeks.

As AllianceBernstein geared up to launch its first ETFs, it “anticipated it was going to be a bit of a volatile year with some potential for rate increase,” Archard said.

“That has come true far more than we thought,” he said.

The asset manager, which oversaw $667 billion as of the end of last month, is looking to eventually offer equity ETFs as well, Archard said. While a handful of issuers that have launched active equity ETFs have started to use a structure that partially shields the fund’s holdings, AllianceBernstein plans to offer transparent ETFs where possible, he said.

The firm has been tapping industry veterans as it delves into the ETF industry. After hiring Archard from State Street Global Advisors earlier this year, the firm also hired Jason Thalmann from JPMorgan as its head of ETF product delivery and Brett Sheely from BlackRock Inc. to be its head of ETF specialists.

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