With its expertise and dominant perches in both the actively managed mutual funds and passively managed exchange traded funds arenas, Invesco makes for a logical entrant into the world of active non-transparent ETFs (ANTs) and it looks like the firm will be entering this space.
A recent Securities and Exchange Commission (SEC) filing indicates Invesco could launch an ANT version of the Invesco Oppenheimer Discovery Mid Cap Growth Fund (OEGAX), a well-known, actively managed mid-cap mutual fund.
“The Fund seeks capital appreciation. The strategy typically invests in mid-cap U.S. growth stocks,” according to Invesco.
The issuer joins a growing list of fund issuers that are filing plans for ANT equivalents of popular actively managed mutual funds. Last week, it was revealed that Fidelity could launch an ANT version of its famed Fidelity Magellan Fund, an actively managed mutual fund with $21.7 billion in assets under management.
ANTs’ Captive Audience
Invesco’s OEGAX is nearly 20 years old and has $5.4 billion in assets under management, indicating it’s got a captive audience – one that could grow via advisors that are embracing 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.
With more traditional mutual funds eyeing the ETF space but remaining reluctant to give up their secret sauce under the transparency of the ETF investment vehicle, many are looking into non-transparent exchange traded products as a way to combine the best of two worlds.
Plus, an OEGAX ANT could be appealing for end users because the mid-cap growth arena is often a minefield for stock pickers.
Mid-cap companies are slightly more diversified than their small-cap peers, which allows many mid-sized companies to generate more consistent revenue and cash flow, along with providing more stable stock prices. Additionally, they are not so big that their size would slow down growth. Increased mergers and acquisitions activity could be just what mid-caps need to catch up to large- and small-cap stocks.
The mid-cap category has also outperformed their larger peers, but with lower volatility than small caps. Moreover, the returns of mid-cap stocks have also beaten those of small-cap stocks during the trailing three-, five-, and 10-year periods, with lower volatility.
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