Noel Archard has been in position as the global head of ETFs at AllianceBernstein for just over a year and brings us news of ETF launches and a conversion planned for the coming weeks.
Last September, the firm launched its first active ETFs.
AllianceBernstein launches active ETFs
Archard reports that the funds have seen good liquidity and have USD400 million in assets between them. The tax harvest period saw the fund based on municipal bonds enjoy high activity, while the ultra-short ETF has become what Archard calls “a healthy portfolio utility” for investors who wanted to pull back on the duration in their portfolios.
Within the next few weeks, Archard reports that the firm will be launching three equity ETFs and has also filed to convert a high yield mutual fund to an ETF following regulatory review.
On that conversion, Archard explains that the mutual fund was USD60-70 million in assets. “Our bar for conversions is pretty high for many reasons,” Archard says. “What we look for in potential candidates are funds with both a strong team and performance, but that haven’t grown in size.”
Active high yield in mutual funds is a crowded space, he says, and not so crowded in ETFs.
“It’s all about getting the benefits of the ETF structure for the existing shareholders and then the opportunity to promote to a broader audience.” This is the firm’s first conversion and has been an interesting experience. “It has to be done primarily for the benefit of the shareholder,” Archard says. “So, if you have a fund with a big footprint in the retirement space, that might not make as much sense, as the features of an ETF might be less attractive. You also have to think through the dynamics for your distribution partners as it can be a heavy lift for them as well.
“You have to ask whether it works for their operational framework, as there are a lot of moving parts involved. It’s been great learning how it works and if anything, it might have affirmed our belief that conversion is a tool – a potential tool – but not a mainstream strategy.”
The pending launches are all active – a high dividend ETF, a low volatility ETF and a disruption ETF – which looks at macro trends across industries in companies who are leaders in innovation or changing the way an industry works.
The disruption ETF will be multi-sector and multi-industry with a global remit and a portfolio that has 80–120 securities.
The firm’s commitment to active ETFs is supported by the figures that show that last year, active ETFs represented just 4 per cent of ETF assets and 14 per cent in flows, while in January this year, they were up to 20 per cent of flows. “ETF investors are embracing the fact that they have a new set of tools,” Archard says.
The low volatility ETF is aimed at clients who are focused on the risk dynamic in the marketplace. “This product focuses on the quality of companies and the stability of cash flows and the cushion on the downside while maintaining upside potential. Given the confusion in the market today, low volatility will be a timely product,” he says.