AllianceBernstein is continuing its push into the ETF space with the conversion of two of its longstanding mutual funds into actively managed ETFs.
The firm has converted its AB Short Duration High Yield Portfolio, which has more than $680 million in assets, into the AB Short Duration High Yield ETF (SYFI), and its AB Short Duration Income Portfolio, which has more than $101 million in assets under management, into the AB Short Duration Income ETF (SDFI). The original funds were launched in 2011 and 2018, respectively.
The move is part of the firm’s overall strategy to expand its presence in the ETF market, according to Noel Archard, global head of ETFs and portfolio solutions at AllianceBernstein.
“We are positioning AB’s investments in a different wrapper to meet growing investor demand for active ETFs,” he said in an email. “We believe that the active ETF structure may offer our shareholders lower net expenses, additional trading flexibility, increased transparency, and enhanced tax efficiency.”
Only 7% of the overall ETF market is actively managed, according to Morningstar, though Archard believes the tide is turning, since about a third of year-to-date ETF flows have gone into active strategies, he said.
The short-duration income ETF is a multisector bond ETF. It seeks high income while protecting capital. The other fund is a short duration high-yield bond product. Its objective is to obtain the best possible income without assuming any undue risk to principal, the firm said.
Given the short-duration income ETF’s objective, it is ideally suited to a portfolio for those investors seeking income, while also being positive about credit, which usually performs well during strong economic growth periods, Archard said. It is also an ideal fund for investors who want to limit their exposure to interest rates and the volatility that comes from greater duration, he added.
Meanwhile, the diversification of the short-duration high-yield ETF can help reduce risk since the performance of names within this asset classes can vary, according to Archard.
He said the firm sees tremendous potential within the actively managed ETF space.
“Broadly speaking, we believe that actively managed fixed income and equity ETFs can offer more alpha opportunities and additional diversification opportunities than passive ETFs,” he said. “There is a nascent opportunity within actively managed ETFs, and we believe our approach offers notable potential for becoming a market leader in the space.”
The firm has plans to convert more of its mutual funds to ETFs starting this July, when it will convert its AB International Low Volatility Equity Portfolio into the AB International Low Volatility Equity ETF (ILOW), Archard said.
With the recent conversions, AllianceBernstein now has 14 total ETFs in its lineup, all of which are actively managed, according to a spokeswoman.
The two new ETFs are currently live and trading on the New York Stock Exchange, according to the firm. They are also available through most of the major custodians along with many large national and independent broker-dealers and wirehouses, Archard said.
As for expenses, the short-duration income ETF’s is 0.30% while the short-duration high-yield ETF’s is 0.40%, Archard said.