Presented by Syntax Advisors.
Margareta Hricova Welcome to ETF TV – your insight into the world of exchange traded funds, issuers and investments. I am Margareta Hricova and joining me today is Noel Archard, Global Head of ETFs and Portfolio Solutions, and Anita Rausch, Global Head of ETF Capital Markets, from AllianceBernstein, and Deborah Fuhr, ETFGI.
Anita Rausch Thank you for having us.
Noel Archard Thanks so much.
Deborah Fuhr Thank you.
Noel, it’s great to see you. AllianceBernstein has just become the most recent provider of ETFs in the US. Can you share with us your backstory in the ETF industry and where you see opportunities for AllianceBernstein in the ETFs industry?
Noel Archard So I’ve had more years than I care to admit within this industry. I had the opportunity over the span of 25 years to work for some really great companies; Vanguard, BlackRock, State Street. A lot of different roles over those years put a lot of focus on ETFs, and it’s a vehicle and part of the industry that I find really fascinating. So when I heard that AllianceBernstein was wanting to build a team to really focus on how they could enter this space, marrying some of their great strategies with all the benefits of the ETF vehicle and integrating that across the AllianceBernstein platform, that was really interesting to me.
AllianceBernstein has a multi-asset footprint, a global footprint. So lots of interesting ideas out there, and we want to think about ways that we can take our strategies that either complement existing offerings that we have or possibly complement what other investors might be using and ways that our strategies help them reach their goals in a more efficient manner.
Margareta Hricova Anita, AllianceBernstein has just listed two active fixed income ETFs on the New York Stock Exchange. Can you share the backstory of your ETF experience and talk about which types of investors do you expect to use the new ETFs and how will they use them?
Anita Rausch I started in the ETF industry over 20 years ago on the-sell side at the big banks where I helped manage the creation and redemption of the ETFs. Then I moved over to trading the ETFs, managing risk and pricing ETFs for large clients. So I was actually an ETF market maker back in the day.
And then I moved over to the ETF manufacturing side or the issuer side and have been running capital markets. And recently I joined Noel, to help build out the ETF franchise, as he mentioned, under the tremendous brand and opportunities that exist at AllianceBernstein.
We’ve launched our first two transparent active ETFs last week: TAFI (AB Tax-Aware Short Duration Municipal ETF), and YEAR (AB Ultra Short Income ETF). Both of them demonstrate the intellectual and technological prowess of AliianceBernstein in the muni-space respectively, in the ultra short fixed income space.
So both of these ETFs are attractive to a wide array of clients, and we’re seeing interest from all manners of ETFs as well as from institutions. So YEAR has an ultra short duration and a high credit quality that is helping buffer the volatility that we’re seeing in the marketplace right now. And we’re seeing it used as a cash-like instrument with an attractive yield.
And TAFI is our muni ETF that’s piggybacking off of our many years of expertize and proprietary technology that we built in the space to run very large SMAs. It’s shorter in duration and it seeks asset stability and attractive after tax returns, but what we’re seeing here is large clients use TAFI as a liquidity sleeve alongside their SMAs. But as well, all other manners of clients use it as a portal to actively manage expertize in this area that they haven’t been able to access before.
Deborah Fuhr Seth Bernstein, the president and CEO of AllianceBernstein, said these new ETFs would be the first of many. Can you share with us what types of products we can expect you to launch in the future?
Noel Archard So we started with fixed income. When we looked at this marketplace, we said, okay, probably going to be a volatile year, probably a rising rate year. Turned out it was far in excess of what we thought on that front. Fixed income felt like it would lend itself nicely to that. But we’re not going to focus just on fixed income. We’ve got plans for equities coming in the next roll out as well as some additional fixed income offerings.
We’re really thinking about this across the large investor themes. Really, it doesn’t matter what market you’re in, most investors are focused on income generation, on volatility controls in some way in the portfolio, and sustainability. So we’re really going to look at those broad themes and then figure out what could add to a client portfolio. And then if it’s best delivered in fixed income or equities or even in some type of an alternative allocation, we’ll go down that path. And I think importantly, we want to make sure that these are integrated across the complex. So we’ll be starting with the concept and then thinking, you know, an ETF structure might work better here, possibly a mutual fund there, possibly a separately managed account structure there. And then how do all of them operate together to create better investment outcomes for the clients?
Margareta Hricova What do you see as the key drivers of growth for ETFs in 2023 and beyond?
Anita Rausch ETFs have established themselves as a valid tool in the toolbox, but there’s still a lot of growth left. So the last 30 years, ETFs have entrenched themselves in passive and rightfully so, but right now, I see the future as courting over those relevant active strategies globally that really will round out the ETF offering, and I really think making them even more of an access tool than ever before.
Margareta Hricova Thank you so much for joining us today.
Anita Rausch Thank you for having us.
Noel Archard Thanks. It was great to be here.
Margareta Hricova Debbie, can you share with us some of the other news from the ETF industry?
Deborah Fuhr We’ve now had 39 months of consecutive net inflows. So for the month of August, we saw $54 billion going into the ETF industry. So year-to-date, we’ve seen 560 billion of net inflows. Not the highest on record, but just behind last year in terms of the second highest at this point. So I do believe that this year will be the second best year in terms of net inflows.
When we look at the US, we also saw net inflows of 43 billion. There’s now $6.4 trillion sitting in ETFs domiciled in the US. Out of that 9.1 trillion in assets globally, we have seen that the market move has caused the assets overall to go down, even though we have seen consecutive months of net inflows.
If we look around the world, every region except Japan had some net inflows this month. So it’s actually been a good story for the ETF industry and users of ETFs where we’ve seen that those consecutive net inflows are a definite difference than what you see in the active mutual fund space where we’ve seen net outflows many months over the past year. So I think the ETF industry is going from strength to strength and we will be celebrating the 30th anniversary of the first ETF in the US in January.
In March, it will be the 33rd anniversary of the first ETF anywhere, which of course, was done in Canada.
Margareta Hricova Thank you to Anita and Noel for joining us today. And to our sponsors, Syntax Advisors and of course to all of you for watching, to watch prior episodes and to see news from the ETF industry visit us at ETFTV.NET.
Thank you.
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