Indexing Detractor Closes ETFs

After its attack on passive management, Sanford Bernstein launched two index-based ETFs that incorporated the firm’s stock recommendations.

Reviewed by: Heather Bell
Edited by: Heather Bell

In 2016, Sanford Bernstein published a report titled “The Silent Road to Serfdom: Why Passive Investing is Worse Than Marxism” by Inigo Fraser-Jenkins et al.

Ironically, a little more than a year later, the firm launched its only ETFs, the Bernstein U.S. Research Fund (BERN) and the Bernstein Global Research Fund (BRGL), both tracking indexes based on Sanford’s stock recommendations.

Those funds shut down yesterday, never having gathered much in the way of assets. Although they initially outperformed after their launches, in recent months, BERN, the large cap U.S. ETF, underperformed the SPDR S&P 500 ETF Trust (SPY) by a significant margin, while BRGL trailed the Vanguard Total World Stock ETF (VT).

Indexing Bernstein Pick

Despite the firm’s denouncement of index-based investing, the two funds tracked indexes—albeit ones comprising Sanford Bernstein’s top rated stock picks. All components were rated “Outperform” by the company and fell within the top three quintiles of the firm’s quantitative alpha model.

However, investors didn’t seem excited about the two ETFs, perhaps because the funds didn’t really pick a stance. While they definitely had an active element in that they reflected the opinions of Sanford Bernstein’s analysts, they were still index products.

More than 75 ETFs have shut down so far this year, fewer than the year-to-date closure count of roughly 100 in the same time a year ago. Keep in mind, though, that last year’s count was somewhat distorted due to the unprecedented closure of 50 Barclays iPath ETNs that April.

Contact Heather Bell at [email protected]

Heather Bell is a former managing editor of She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.