AB Tax-Aware Short Duration Municipal ETF

AB Tax-Aware Short Duration Municipal ETF (TAFI) is an actively managed AllianceBernstein fund. It holds mostly municipal bonds, whose interest is generally exempt from federal income tax, and keeps a short average duration. Its managers can also buy taxable bonds when those are expected to pay more after tax. That flexibility sets it apart from its closest match, SPDR Nuveen Bloomberg Short Term Municipal Bond ETF (SHM). But its 0.27% expense ratio is higher than SHM's 0.20%.

• Over the year to Oct 27, 2026, TAFI returned +1.6%, 4th of 8 among similar funds.
• Its worst full calendar year was 2024 (+2.5%); its best was 2025 (+4.4%).
• The deepest fall in its price history was 2.4% (Jul 6, 2026 to Sep 29, 2026), not yet recovered.

As of Aug 31, 2026, the fund held 692 securities; the ten largest made up 9.99% of assets, and 2.49% sat in cash and money-market holdings.

The bonds mature in 8.7 years on average (weighted by size), with an average coupon of 4.59%.

• Over the three months to Aug 31, 2026, investors added a net $123.4M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +0.37%, -0.44%, +0.31%.

TAFI does not track an index. AllianceBernstein's managers choose the bonds. At least 80% of assets go into municipal bonds, which are debts of states, cities, hospitals and other public bodies whose interest is exempt from federal income tax. Some of that interest may count toward the alternative minimum tax (AMT) for certain taxpayers. The managers can also buy taxable bonds. They weigh credit quality, maturity, diversification and the expected after-tax return. They use federal tax rates only, not state or local taxes.

The fund keeps its dollar-weighted average duration below three years. Duration measures how much a bond's price reacts to interest rate changes: the lower it is, the smaller the swing. Individual bonds can run longer. As of August 31, 2026, the average years to maturity was 8.7. The fund held 692 holdings, and the top 10 made up about 10% of assets. The largest were a Pennsylvania Economic Development Financing Authority bond backed by UPMC revenue (1.5%) and an Arizona Health Facilities Authority bond (1.4%). It may own junk bonds and Puerto Rico debt.

The fund can use derivatives, mainly swaps. As of August 31, 2026, it held 10 derivative positions, including inflation swaps, with a net weight of about -0.02% of assets. The managers consider taxable gains when they trade, and turnover was 35%. Because of the taxable bonds and the trading, holders may owe more tax than they would in a fund that holds only municipal bonds.

• TAFI charges 0.27% a year, versus an average of 0.2% for the similar funds below (6th of 8, cheapest first).
• Using the prospectus's standard example, $10,000 invested would cost about $28 in the first year and $343 over 10 years (assuming a 5% annual return).

Its short average duration and small price swings, with volatility of about 2% a year over three years, may make it a steady place for money needed within a few years.

TAFI launched in September 2022, so its record does not cover the 2008 or 2020 crashes or the 2022 bear market. It made money in each of its three full calendar years. Its weakest was 2024, at 2.65%. Its deepest drop was 2.4%, from July 6 to September 29, 2026, and it had not recovered as of October 27, 2026. Dips that small matter less to someone who has to sell shares in a bad year than the sharper losses longer-term bond funds can take when rates rise. The yield over the 12 months to October 27, 2026 was 3.09%, paid monthly and mostly free of federal income tax. Costs are 0.27% a year. In the SEC's standard example, that is $28 in the first year on a $10,000 investment. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.

Matched by bond funds with the closest average maturity and issuer mix (N-PORT).