One big advancement in the ETF industry in 2020 is the debut of actively managed exchange traded funds that don’t disclose holdings on a daily basis.
These new funds represent the best of both worlds’ ideas: the advantages of active management with the liquidity and tradability of ETFs, something that has long eluded the actively managed mutual fund industry.
With more traditional mutual funds eyeing the ETF space but remaining reluctant to give up their secret sauce, many are looking into non-transparent exchange traded products as a way to combine the best of two worlds. Market observers are forecasting growth in 2021 for the new fund structure.
“Assets in the active non-transparent category — known as ANTs — could reach $3 billion by the end of next year, Bloomberg Intelligence predicts. The funds have only attracted about $800 million so far, but companies that license the methodology hold a collective $1 trillion in assets, indicating a huge potential for growth,” reports Claire Ballenting for Advisor Perspectives. “Since launching in April as the coronavirus upended global markets, many of the ANT funds have outperformed peers, showcasing active managers who offer their strategies in an ETF wrapper without revealing all their secrets. They’ve had to overcome investors’ desire for transparency, varied performance records and, of course, a global pandemic.”
Semi- and Non-Transparent Disclosure Can Lead to Big Gains
The non-disclosure element should help issuers protect their managers’ investment style from potential front-runners that would seek to undercut the more transparent nature of the ETF investment structure.
Through these semi-transparent or non-transparent ETF structures, money managers can feel more open to adapting traditional fund strategies into the more efficient ETF wrapper, potentially leading to greater transformation within the industry at large.
Thus far, performance of these products is, broadly speaking, impressive.
“Out the 15 ANTs on the market, 10 are surpassing their benchmarks, Bloomberg Intelligence analysts Athanasios Psarofagis and Morgan Barna wrote in their report earlier this month. The current products represent just 0.3% of the amount held by their firms’ similar mutual funds,” according to Advisor Perspectives.
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.
