March 12, 2008 at 2:00 pm by Tom Lydon
Could the proposed Securities and Exchange Commission (SEC) rule that speeds up regulatory approval of index products, including actively managed exchange traded funds (ETFs), reduce the value of a manager’s intellectual capital by disclosing portfolio holdings?
Rule 6c-11 will reveal a manager’s intellectual capital, however, there is good reason for this requirement. In a way, managers owe clients transparency on what their holdings are, says Robert Ellis for Ignites. Transparency is one of the biggest things that makes an ETF an ETF, and it makes them extremely attractive to investors.
Owen Concannon on Ignites adds that a track record or manager determines an actively managed fund’s success. A fund’s ability to satisfy its stated objective and build a solid performance track record, and not simply disclosing the holdings, will ultimately measure the value of the intellectual capital.
The SEC approved actively managed funds with the contingency that they disclose their holdings once a day. By disclosing the holdings after any trades have been made, the fund managers prevent any front-running.
