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AllianceBernstein has progressed on its plans to launch its first ETFs, opting to debut two active fixed income strategies.
On Tuesday, the firm filed to launch the AB Ultra Short Income ETF and the AB Tax-Aware Short Duration ETF, building on its February announcement that it would unveil a set of active ETF offerings in the U.S. later this year.
“Advisors have increasingly turned to actively managed fixed income ETFs, particularly as the Federal Reserve has begun its rate hiking program,” Todd Rosenbluth, head of research at ETF Trends and ETF Database, said. “Active ETFs can sort through the universe of bonds to generate above-average income compared to index-based products. AllianceBernstein has a strong brand with advisors through mutual funds and is likely to garner interest once advisors learn more about the pending products.”
The ultra-short income offering will invest primarily in a mix of U.S. Government and investment-grade corporate fixed-income securities. The fund will maintain a dollar-weighted average duration of less than one year, although it may invest in securities of any duration or maturity. The fund may invest in mortgage-backed and other asset-backed securities, certificates of deposit, and commercial paper. The fund expects to invest a portion of its assets in the AB Government Money Market Portfolio to gain exposure to fixed-income securities with very short durations, according to regulatory filings.
The tax-aware short duration ETF will invest principally in a national portfolio of both municipal and taxable fixed-income securities. The fund will invest at least 80% of its total assets in municipal securities that pay interest that is exempt from federal income tax. These securities may pay interest subject to the federal alternative minimum tax for certain taxpayers. The income earned and distributed to shareholders on non-municipal securities would not be exempt from federal income tax. According to regulatory filings, the fund may invest in junk bonds, although such securities are not expected to be the fund’s primary focus.
The advisor selects securities for the fund based on various factors, including credit quality, maturity, diversification benefits, and the relative expected after-tax returns of taxable and municipal securities (considering federal tax rates and without regard to state and local income taxes), according to regulatory filings.
AllianceBernstein, in February, hired Noel Archard for the role of global head of ETFs and portfolio solutions. Archard, who joined the firm from State Street Global Advisors, is responsible for bringing AB’s set of investment capabilities to the active ETF marketplace.
The funds’ expense ratios and tickers have not yet been disclosed.
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