While the disclosure rules for actively managed exchange traded funds (ETFs) might benefit the investor who still craves transparency, the rules could inadvertently hurt small-company stocks.

The Securities and Exchange Commission (SEC) rules mandate that active ETFs must disclose their holdings each day, while mutual funds typically only make those disclosures once a month or even once a quarter.

The rules could wind up hurting smaller companies. Unlike the large- and mid-caps, who often see huge trading volume every day, the situation is a bit different for smaller companies. Their shares trade relatively rarely, making it a challenge for large funds to buy big stakes without causing a spike in market demand, which pushes up prices, reports Ian Salisbury for the Wall Street Journal.

As a result, active ETFs have so far stuck to primarily large-caps and short-term bonds. And those small-caps have been one area where active managers have found the most bargains, helping them beat index funds.

If you’re looking for some small-caps with your active management, PowerShares does offer a fund with some small-company holdings: PowerShares Active Alpha Multi-Cap Fund (PQZ). They’re 17% of the fund. If you want more than that, patience is a virtue.

As managers get used to the concept of active ETFs, perhaps we’ll see some funds focused exclusively on the small-caps.

Tags | Large Caps, Microcap, Mid-Caps, Small-Caps