Exploring Finer Points of Active Non-Transparent ETFs | ETF Trends

A new ETF ‘wrapper’ that facilitates management of actively managed portfolio strategies within an ETF rather than in a traditional mutual fund is here.

Active non-transparent ETFs, colloquially known as ANTs, aren’t quite traditional ETFs. Nor are these new products exactly like old school active mutual funds.

With ANTs rapidly proliferating and evidence that advisors are curious about the new asset class, exploring some of the finer points of these new funds is vital.

One way of looking at ANTs is that this category is new fund “technology.” ANTs represent the best of both world’s 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 ETFs that share one major characteristic with mutual funds: They disclose their holdings with a lag, unlike traditional ETFs, which disclose holdings daily. The delayed disclosure allows portfolio managers to keep their so-called secret sauce secret for a time to prevent copycats,” reports Bernice Napach for ThinkAdvisor.

Details Matter

The new type of ETF funds, which are often referred to as “semi-transparent” or “non-transparent ETFs”, is an investment vehicle that allows active asset managers to capitalize on the benefits of the ETF structure, including more-liquid trading and tax advantages while keeping their strategy hidden to protect shareholders.

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.

For their part, issuers believe the fund industry is excited to have an additional choice with respect to novel wrappers for facilitating active portfolio strategies within an ETF.

ANTs could be useful “for investors who want to invest with a particular fund manager, but they also involve tradeoffs. In exchange for easy access, lower fees, and the potential to be more tax-efficient than retail shares of mutual funds. limitations on portfolio managers can make ANTs less tax-efficient and more costly than traditional ETFs,” reports ThinkAdvisor.

For more on active strategies, visit our Active ETFs Channel.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.