AllianceBernstein partners with Vestmark for digital SMA platform

AllianceBernstein has partnered with Vestmark, Inc., to provide a digital separately managed account platform that allows registered investment advisors to create more bespoke muni portfolios within a matter of days.

The Custom Municipal SMA Solutions platform combines AllianceBernstein’s fixed-income trading tool, AbbieOptimizer, with Vestmark’s ability to access timely and accurate fixed-income tax-lot data from custodians to allow advisors to tailor portfolios that have characteristics ranging from state-specific credits, ESG considerations, duration targets, to other criteria.

AllianceBernstein’s AbbieOptimizer is a tool that integrates credit research, pricing, trading, and portfolio construction into one system that streamlines the design of customized muni strategies. It allows AB to more efficiently source and engage municipal bond liquidity, “resulting in faster funding times, better pricing, and the ability to continuously tax optimize portfolios through SMAs.”

The VestmarkONE platform connects major custodians and their RIA clients to get timely and accurate tax-lot data for efficient trading and optimization.

“The Vestmark integration has facilitated a brand new digital account opening process where advisors can use the AB Custom SMA Design Center to open and customize client accounts,” said Gavin Romm, senior vice president and head of fixed income SMA Solutions at AllianceBernstein.

“The municipal market is highly fragmented and historically hasn’t embraced technological innovation,” Romm said. “We saw this as an opportunity to combat many of the challenges in the municipal market to more efficiently deliver customized separately managed accounts to advisors and their clients.”

Vestmark’s Corporate Strategy Officer Rob Klapprodt said the partnership democratizes muni investing, allowing RIAs to better personalize portfolios for retail investors and broadens the scope of investors.

The new tool allows advisors to automate tax-optimized trades for clients at scale. Its focus is on retail investors to get the benefits of personalization and tax optimization for muni SMA portfolios with the same market connectivity that institutional investors already have.

Portfolios can be created in days with the technology and the platform increases the time spent on monitoring and managing the portfolio from once every few months to as much as a few times per day through automation. It also decreases the minimum entry point to as low as $150,000 versus the typical $250,000, Klapprodt and Gromm said.

The firms would not disclose the fees associated with the platform but said they were “competitive.”

As environmental, social and governance factors have peaked investor interest in municipals, the platform also parses ESG data, including air quality, clean energy, income equality, quality healthcare, sustainable transportation and women’s empowerment.

Better data aggregation, optimization and market connectivity are key tenets of the platform, Romm said.

Romm said their Custom SMAs use big data infused optimization techniques that they believe are increasingly important sources of return. The process delivers tech-powered alphas such as Speed Alpha, Trading Alpha and Tax Alpha, that can add up to 100 basis points of additional performance through faster funding times, better execution and tax savings, he said.

“This platform allows advisors to access these tech alphas and institutional capabilities through Custom SMAs,” Romm said. “Embracing data and electronic trading has created scale and capacity in our municipal business. Without speed and efficiency it’s impossible to offer highly customized solutions to clients.”