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.”