AllianceBernstein has launched five actively managed ETFs, including four new fixed-income products, as well as its first ever buffer ETF.

Among the new funds are the AB Conservative Buffer ETF (BUFC), the AB Tax-Aware Intermediate Municipal ETF (TAFM), the AB Tax-Aware Long Municipal ETF (TAFL), the AB Corporate Bond ETF (EYEG) and the AB Core Plus Bond ETF (CPLS).

“The launch of our five new ETFs is a lineup expansion that both complements existing funds we have previously brought to market while also addressing client appetite for strategies,” said Brett Sheely, head of ETF specialists at AllianceBernstein.

The buffer ETF is the firm’s first and seeks a conservative level of capital appreciation while offering downside protection against market declines, Sheely said. A buffer ETF uses options to protect investors against downside volatility in exchange for a cap on the upside return potential of the reference asset, often a broad index, the firm said. The fund aims to protect investors against the first 15% of a market decline.

Traditionally, in a buffered ETF the options mature every 12 months. However, AllianceBernstein’s ETF has options that reset every three months.

“This means investors do not need to ladder their ETFs and will have more control over when they choose to sell their position versus having the ETF mature,” Sheely said.

The ETF includes a so-called “ratchet” feature that allows the fund to change its cap so that an investor is not stuck at the same level all the time during strong equity markets. The strategy “ratchets” upward by purchasing a new set of options to maintain upside participation, Sheely explained.

“The buffered or defined outcome ETF space has exploded over the last half-decade,” Sheely said. “The benefits of providing a non-correlated strategy to fixed income and equities while providing meaningful risk management and the opportunity for growth continue to attract clients of all risk profiles.”

Meanwhile, the AB Tax-Aware Intermediate Municipal ETF is an intermediate municipal bond ETF and the AB Tax-Aware Long Municipal ETF is a long-duration one. Both have enhanced flexibility to search for asset stability with attractive after-tax returns

Both use an inventive structure to balance three specific return sources, which helps increase returns. Those sources are high-grade municipal bonds, municipal credit, and taxable bonds, the firm said.

The corporate bond ETF and the core-plus bond ETF are built off strategies the firm previously ran exclusively for institutional clients.

They use a bottom-up security selected style and look to avoid the wrong bonds as underlying investments as much as selecting the correct ones, Sheely said.

“We believe the demand for actively managed fixed income within the benefits of an ETF vehicle has increased substantially in recent years and will continue to be a driver of yield and stability within well-balanced portfolios,” he said. “Adding corporate bond, core-plus bond, and two additional municipal ETFs to our fixed-income ETF lineup helps complete the suites we have available and service our fixed-income-seeking clients.”

The funds are designed to be used in different ways in an investor’s portfolio.

The intermediate municipal and long municipal ETFs are part of the firm’s “Tax Aware” brand of strategies.

“Tax Aware ensures maximum portfolio flexibility in being able to seek opportunities within the high-quality municipal bond market, while also opportunistically allocating to municipal credit and taxables,” Sheely said. 

Meanwhile, the corporate bond and core bond plus ETFs generate excess returns relative to their benchmark, while maintaining similar levels of volatility.

Finally, the buffer-cap strategy is the most versatile, and advisors can use it in a variety of ways. First, it can replace core equity exposure for those looking to reduce equity drawdown risk. Second, for those with substantial conversative assets looking to shift some to equity growth, they can instead shift it to the ETF.

Finally, ETFs such as the buffer ETF can act as an alternative to other funds that are more expensive and illiquid, Sheely said.

The total expense ratio for the buffer ETF is 69 basis points, while it’s 28 basis points for the Tax Aware ETFs. The expense ratio is 30 basis points for the corporate bond ETF and 33 basis points for the core plus bond ETF. All five are available on the platforms of Fidelity, Schwab, Pershing, Envestnet, Truist and Voya, Sheely said.

The funds can appeal to a variety of audiences both retail and institutional. They also have diverse strategies, meaning they will satisfy a variety of investor needs, Sheely said.

“As an issuer dedicated to the active ETF space, we believe that expanding both our fixed-income capabilities within ETFs and entering the risk-managed buffer-cap space will allow us to better service our clients’ needs and serve as a holistic partner within their practices,” he said.