The universe of actively managed exchange traded funds is growing – both in terms of population and assets under management. One driver of this rise is a new breed of active ETFs that doesn’t disclose holdings on a daily basis.
If there’s one thing active fund managers don’t like, it’s having to contend with front-runners, or those traders that make the same moves as the fund manager before that manager gets around to doing so.
This situation is often pinned on the transparent nature of many fund structures. Actively managed ETFs that don’t disclose holdings on a daily basis can help issuers and managers vanquish front-running.
The State of Actively Managed ETFs
“Portfolio managers have to make active decisions to figure out which bonds they should buy, how the duration impacts the yield and how it matches up against the index,” reports Ellen Chang for US News & World Report. “The amount of assets in actively managed ETFs is now only $137 billion, which is a small portion of the overall ETF industry. The first semi-transparent ETF using both the NYSE Active Proxy Structure and T. Rowe Price’s proxy model went public during the third quarter of this year.”
Some of the biggest financial players are already dabbling with the nontransparent ETF idea. For example, BlackRock Inc. has filed to use the structure after the funds debuted in April. JPMorgan Chase & Co. is also working on its own active non-transparent ETFs and projects the non-transparent ETF industry could ultimately command over $7 trillion in assets as more traditional fund managers transition over to the efficient ETF structure.
“New strategies have launched recently in equity ETFs, including the semi-transparent ETFs in 2020. The largest difference between a semi-transparent and transparent ETF, which also launched in 2020, is limiting the timing of the disclosure of the holdings,” according to US News. “For instance, American Century shows the holdings quarterly with a 15-day lag for semi-transparent ETFs and reveals the top 10 holdings monthly with a 10-day lag for transparent ETFs.”
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.
