Demand has been strong for short-term fixed income ETFs in 2023. That helped AllianceBernstein (AB) pass $1 billion invested in ETFs assets in early November. AB brought its first products to market at the end of the third quarter of 2023. We think as advisors further embrace actively managed ETFs and learn about new strategies, firms with a strong pedigree and growing lineup like AB will benefit.
“Teams across all of AB have worked hard to make this an integrated part of the AB offering,” explained Noel Archard, global head of ETFs and portfolio solutions for AllianceBernstein in an exclusive interview with VettaFi. “AB has strong management teams across asset classes. We want our lineup to reflect not only our capability across these strategies, but our deep and integrated understanding of how clients use active ETFs.”
Leading With Short-Term Fixed Income ETFs
In September 2022, the firm’s first, the AB Ultra Short Income ETF (YEAR ) and the AB Tax-Aware Short Duration Municipal ETF (TAFI ), began trading. As of mid-November 2023, YEAR and TAFI had $545 million and $275 million in assets, respectively. The pair provide actively managed fixed income exposure to risk-averse investors.
YEAR is a mix of investment-grade corporate bonds, asset-backed securities and cash equivalents. The taxable ETF recently had a 5.7% 30-day SEC yield and an effective duration of 0.9 years. Year to date through November 15, YEAR climbed 4.6%.
Meanwhile, TAFI invests primarily in AA- and A-rated municipal bonds issued in Illinois, New York, New Jersey, and Pennsylvania. The muni ETF recently had a 4.1% tax-free 30-day SEC yield and an effective duration of 2.6 years. Year to date through November 15, TAFI rose 1.9%.
Adding Value With Active Thematic
In 2023, the firm has added five new actively managed ETFs. It expects to add more equity and fixed income products in 2024. In March of this year, three active equity ETFs were listed. VettaFi had the portfolio manager of one of these ETFs, the AB Disruptors ETF (FWD ), as a speaker at the VettaFi AI Symposium in the summer.
“Thematic investing is really focusing on identifying some of the transformational changes across industries and across society,” said Lei Qiu, portfolio manager, disruptive innovation equities, for AB. “Identifying a big theme does not necessarily translate into creating a portfolio that will generate superior returns. It takes an active manager to dig through the themes to determine which opportunities are mature enough, with a large enough total addressable market."
FWD is now a $170 million ETF, with top-10 recent positions in Adobe, Advanced Micro Devices, and Intuitive Surgical.
The AllianceBernstein Lineup Further Expands
The AB Low Volatility Equity ETF (LOWV ) and the AB US High Dividend ETF (HIDV ) also launched in March. These actively managed ETFs take a more conservative approach.
In May 2023, the AB High Yield ETF (HYFI ) came to the ETF market as a risk-on alternative to YEAR via a mutual fund conversion. Despite initial trading on an exchange this spring, HYFI is a Morningstar four-star rated fund with a long-term record. The ETF primarily invests in BB- and B-rated bonds but has 20% exposure to investment-grade securities due to its active management.
The latest of the AB ETFs is the AB U.S. Large Cap Strategic Equities ETF LGRC. The fund began trading in September 2023 focused on high-quality companies with enduring business models and competitive positions. Recent holdings included UnitedHealth Group and Visa.
“We recognize our clients are using ETFs as stand-alone investment tools, but also as complements to their existing investments, and we’ve built accordingly,” added Archard. “Our partners across the ETF ecosystem have been incredibly supportive as we’ve added these vehicles into the AB offering.
Congratulations to AllianceBernstein for crossing the $1 billion ETF assets milestone. We think the future is bright as you further embrace ETFs and educate advisors.
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