Long/short strategies are often ideally suited for active management, and a new one is coming to the semi-transparent exchange traded funds landscape.
“Blue Tractor, one of the handful of ETF issuers with a proprietary semitransparent methodology, has submitted a filing with the Securities and Exchange Commission (SEC) for the first long/short semitransparent ETF,” reports CityWire. “The Blue Tractor ETF Trust would trade equities long and short using Blue Tractor’s shielded alpha semitransparent methodology, which provides information about what the fund is invested in but not the exact weights or entry and exit points. Any short selling in the fund would not use margin or options, but would be physical short selling.”
Periods of volatility can create headwinds, which is when alternative strategies begin to differentiate themselves from the pack. Individual equity short positions, which stand to profit as stock prices decline, require particular investing expertise.
Shielded Alpha Generation
Blue Tractor pioneered the Shielded Alpha wrapper.
Similar to a fully transparent active ETF, the Shielded Alpha℠ wrapper is a highly transparent structure designed to ensure efficient primary and secondary market trading.
However, unlike a transparent active ETF that publishes its full portfolio daily, the Shielded Alpha℠ structure uses proprietary math to generate a published daily creation basket, based upon all the security names, that allows an advisor’s alpha generation strategy and portfolio trading execution to remain fully opaque to predatory traders, fully eliminating the risk of reverse engineering and associated front-running and free-riding. Implementation of a Shielded Alpha℠ ETF is streamlined and efficient because all workflow to generate the daily creation basket is done using Blue Tractor’s cloud-hosted platform.
“Currently, active nontransparent (ANT) ETFs are limited to large-cap long-only equities strategies. Firms have also filed for the inclusion of fixed income strategies, which regulators have yet to approve,” added CityWire. “In the filing, Blue Tractor said its current methodology would be able to include the same shielded information about short positions as it does for long positions. With custom baskets the fund could handle short positions as it would any other investment.”
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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.