One of the marquee developments in the fund industry in recent memory are the launches of active non-transparent ETFs, or ANTs.
One way of looking at ANTs is that this category is new fund “technology.” ANTs represent the best of both worlds ideas: the advantages of active management with the liquidity and tradability of ETFs, something that long eluded the actively managed mutual fund industry.
ANTs “are actively managed exchange-traded funds that disclose their holdings quarterly instead of daily. This gives portfolio managers a chance to use their strategies in cheaper alternatives to mutual funds without running the risk of being copied or front-run,” according to ETFdb.com.
Currently, 10 ANTs with approximately $330 million in combined assets under management are listed in the U.S. with several more on the way soon. American Century, Fidelity, Clearbridge and T. Rowe Price are the current players in the space.
In April, American Century launched the Focused Dynamic Growth ETF (FDG) and Focused Large Cap Value ETF (FLV), which are now the two largest ANTs. FDG has over $182 million in assets, an impressive for any new ETF, let alone one testing structure advisors aren’t accustomed to.
In June, Fidelity launched three ANTs of its own: the Fidelity Blue Chip Growth ETF (FBCG), Fidelity Blue Chip Value ETF (FBCV) and the Fidelity New Millennium ETF (FMIL).
Fidelity’s ANTs use a proxy basket methodology, allowing for seamless implementation that uses existing infrastructure and requires very little operational build-out, adding the methodology helps to protect the firm’s insights and research while providing sufficient information to efficiently affect a trade.
Fidelity’s active equity ETFs will employ an innovative tracking basket methodology, which maintains the benefits of the ETF structure, provides information to market participants to promote efficient trading of shares, and preserves the ability to add value through active management.
Integral to the success of ANTs are mechanics, such as the verified intraday indicative value (VIIV), which is calculated and disseminated every second throughout the trading day by the exchange the ANT trades on.
The VIIV is based on the current market value of the securities in the fund’s portfolio on that day. The VIIV is intended to provide investors and other market participants with a highly correlated per-share value of the underlying portfolio that can be compared to the current market price.
T. Rowe Price launched four active ETFs in the space on Aug. 5: the Blue Chip Growth ETF (TCHP), the Dividend Growth ETF (TDVG), the Equity Income ETF (TEQI), and the Growth Stock ETF (TGRW).
Constructed similarly to flagship investment strategies that have served T. Rowe Price clients well for decades, the active ETFs use the same portfolio managers as their corresponding mutual funds and employ the firm’s long-standing strategic investing approach, characterized by rigorous research, risk awareness, and independent decision making.
T. Rowe Price active ETFs complement the firm’s traditional mutual fund offerings and deliver the key features associated with existing ETFs that some investors may prefer, including continuous daily trading, real-time market determined pricing, and tax efficiency. Over time, T. Rowe Price plans to deliver a robust ETF product lineup covering investments in various asset classes.
All T. Rowe Price active ETFs feature a proprietary portfolio disclosure process that ensures market makers have enough information to quote prices with a high degree of confidence, while it also protects the intellectual property of the firm’s investment professionals and the interests of its mutual fund shareholders.
For more news and strategy on active ETFs, visit our Active ETF Channel.