The Evolution of ETFs and How They’re Reshaping Investment Strategies

Exchange-traded funds, or ETFs, have become a linchpin in modern investing, offering both novice and seasoned investors diversified and accessible tools for portfolio building. But where did they originate, and how have they evolved to meet the needs of today’s financial landscape?

These were key topics discussed by Noel Archard, Global Head of ETFs at AllianceBernstein. Noel breaks down the evolution of ETFs, trends redefining investment approaches, and provides actionable takeaways for financial advisors.

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Noel Archard’s journey into the financial world is a testament to the unpredictable paths that often lead to success. Initially pursuing a degree in journalism at Northwestern University, Noel’s early career took a sharp turn when he found himself working part-time at a bank. Naturally, Noel pivoted toward finance, eventually landing a position at a Philadelphia-based investment advisory firm. From there, he was introduced to the world of ETFs, mutual funds, and investment management, developing a passion for the industry. Throughout his career, he has been known for his innovative approach to investment strategies, which has consistently focused on maximizing client outcomes through tailored solutions. 

As the Global Head of ETFs and Portfolio Solutions at AllianceBernstein, Noel’s expertise helps drive the firm’s strategic initiatives for a diverse clientele. His dedication to client success continues to fuel his contributions to the financial community. 

In discussing the evolution of the ETF space, it’s remarkable to witness the transformative changes over the past decade. Since 2014, the market has expanded rapidly with innovations that were once unimaginable. Back then, the focus was primarily on equity and fixed-income indexes, but today, the landscape encompasses a more diverse array of products. The emergence of thematic ETFs and ESG-focused funds reflects a significant departure from traditional offerings, highlighting the growing appetite for tailored investment solutions that resonate with individual values and interests. 

In 2024, the ETF market is characterized by its complexity and breadth. Advisors are tasked with the dual responsibility of staying informed about these developments while ensuring that investment strategies remain aligned with client goals amidst increasing market volatility. 

ETFs have come a long way since their inception. Noel shared his perspective on their evolution, focusing on simplicity and democratization.  

“The beauty of ETFs, is that they seamlessly fit into existing brokerage ecosystems, making them universally compatible for a range of clients—whether they’re individuals or institutions.” Noel explains. 

Key milestones in ETF history highlight their flexibility and increasing popularity as a financial vehicle. The adaptability of these tools has driven their widespread adoption. Noel likened ETFs to a “USB port—compatible, efficient, and adaptable,” making them indispensable for portfolio management.

A notable shift in the ETF market has been the acceptance of active ETFs, which, as Noel mentioned, were once seen as contradictory to the ETF ethos of passive investing. He noted active ETFs have gained serious traction over the last two to three years.   

The driving forces behind this shift include growing investor demand for more tailored investment solutions and an increased emphasis on transparency and lower costs. Investors have become more discerning, seeking vehicles that offer both active management benefits and the inherent advantages of ETFs, such as liquidity and tax efficiency. This convergence has created fertile ground for active ETFs to flourish. 

“This surge wasn’t just a trend—it was driven by transparency, innovation, and investor demand,” said Noel. There’s a growing interest in ETFs as active management becomes more accessible and affordable. With fees often ranging between 25 to 55 basis points for actively managed ETFs, they balance cost efficiency and specialized management, providing advisors more choice in tailoring portfolios to client goals.

A critical strength is how ETFs perform during volatile market conditions. Noel noted that every major market disruption—from the financial crisis to the 2020 COVID-19 pandemic—has reinforced confidence in ETFs. He explained, “These products consistently do what they promise to do, even under stress.” This reliability has solidified their role as tactical tools and cornerstones of long-term strategic portfolios.

While ETFs have garnered much attention, other investment “wrappers” like Separately Managed Accounts or SMAs and interval funds are also gaining traction. Noel touched on the growing demand for private market assets among advisors and investors. Products in private credit are emerging as complements to traditional equity and fixed-income portfolios.   

Interval funds often emerge as a preferred solution for this challenge, offering a blend of liquidity and access to private markets. Their structured redemption schedules maintain some investor flexibility while accommodating the illiquid characteristics of private assets. 

“When considering options like ETFs, SMAs, or interval funds, it’s essential to ask—what’s the problem we’re solving, and which vehicle best meets the need?” 

Ultimately, the decision hinges on the investor’s specific needs, with interval funds frequently standing out due to their ability to seamlessly integrate private asset exposure into a broader investment strategy, thus ensuring they align with the client’s long-term goals and preferences. 

Effective advisor engagement becomes crucial as the investment toolkit expands with innovative products and diverse strategies. Noel shared that AllianceBernstein’s approach to advisor engagement focuses on being an educational partner and strategic ally. This model combines comprehensive resources with personalized support to assist advisors in navigating these complexities effectively. He emphasized creating a dialogue that delivers information and facilitates understanding and application. 

Advisors looking to integrate ETFs or adjust their use of them in client portfolios should consider the following takeaways from Noel’s insights: 

• ETFs are versatile. Use them strategically for buy-and-hold positions or tactically for short-term allocations in response to market events.   

• For clients seeking exposure to private credit or other alternative assets, interval funds may offer an ideal balance between access and liquidity management.   

• Time saved managing portfolios is time gained for client engagement. Products that streamline rebalancing and tax efficiency—whether in an ETF or SMA—are valuable additions to any toolkit.   

• Given the growing complexity of investment vehicles and strategies, advisors need tools to quickly sift through data, analyze market trends, and make informed decisions for their clients.