ETF Rule Key to AllianceBernstein’s Market Entry

The issuer’s global head of ETFs says the rule leveled the playing field for entering the ETF market.

Reviewed by: Heather Bell
Edited by: Heather Bell

Shortly after AllianceBernstein rolled out its first three equity exchange-traded fund, its global head of ETFs Noel Archard appeared on’s Exchange-Traded Fridays podcast last week to discuss his firm’s foray into ETFs, which started with the launch of two actively managed fixed income ETFs last September. 

“They looked at it for a while. This was a very thoughtful decision on the part of the firm,” Archard said of AllianceBernstein’s entry to the ETF market. 

The ETF Rule was key in his firm’s decision-making process, he said. The rule, which the SEC passed in September 2019, leveled the playing field for active managers by allowing custom baskets for actively managed ETFs, an obstacle that had kept many active managers out of the ETF arena. That change means it’s much easier for active funds to benefit from the tax advantages of ETFs. 

“The ETF has continued over 30 years now in the U.S. to be a vehicle of choice for more and more clients for a whole number of factors, [such as] the features of the product set, the convenience, the ongoing lowering of the frictional costs of owning the vehicles—not just the [total expense ratio] but commissions—the ability to own fractional shares, the tax efficiency of the vehicles,” Archard commented, noting that AllianceBernstein wants to provide its strategies in the vehicles its clients prefer, including separately managed accounts, mutual funds and ETFs. 

Although the firm is primarily an active manager and its ETF lineup is entirely actively managed funds, it has thus far opted to launch only fully transparent ETFs. The approval of that structure a few years ago spurred a round of speculation about how mutual fund issuers with active strategies would enter the ETF market in droves.  

Three years after the launch of the first semitransparent actively managed ETF debuted, only about 1% of the 3,000-plus U.S.-listed ETFs have that capability, and only a few of those have significant assets under management. 

“We’ve stuck with a transparent active structure. The simple answer is because we could,” Archard said. “As we looked at the strategies we were coming out with, we didn't feel there was any reason we needed to shield the holdings on those particular products.” 

However, he doesn’t rule out the possibility of using that structure in the future.  

“If we ever came up with a strategy that we felt was really going to be good for end investors and required some shielding of the of the holdings, it's great that we have options out there in the marketplace we can utilize,” he added, noting that AllianceBernstein consulted with the strategies’ portfolio managers and others at the firm to make that decision.  


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.