Active managers have been reluctant to switch into a transparent exchange traded fund structure, but Precidian Investments has filed with the Securities and Exchange Commission for a nontransparent active ETF.
Precidian’s filing outlines the mechanics of how a fund might work and specifics on its design, reports Murray Coleman for the Wall Street Journal.
The filing shows a two-tiered process that shield trades in which a custodian acts as a middleman dealing through a blind trust on behalf of large investors redeeming shares in-kind – currently, institutional investors directly trade with fund providers. Additionally, the net asset values of each ETF would be revealed every 15 seconds, but the NAV would not include actual components. Instead, individual component weights will be disclosed on a quarterly basis.
“A lot of fund companies have made general requests for nontransparent ETFs, but this signals a significant step forward,” Samuel Lee, a Morningstar analyst, said in the article.
For instance, BlackRock, State Sreet, Eaton Vance and T. Rowe Price have all shown interest in a nontransparent ETF structure for actively managed strategies. [Non-Transparent Active ETFs are not a Slam-Dunk]