More and more active non-transparent exchange traded funds (ANTs) are coming to market, indicating fund issuers like this new structure. Now, ANTs issuers need to lure investors, which some are already doing.
New on the fund scene, active non-transparent ETFs (ANTs) can fill voids created by both mutual funds and traditional ETFs and there’s some evidence to suggest ANTs are coming to market at just the right time.
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.
“Active non-transparent ETFs (ANTs) are set to go marching one by one onto US exchanges, thanks to relaxed regulations around transparency,” reports David Tuckwell for ETF Stream. “Last year, the Securities and Exchange Commission (SEC) watered down its ETF transparency requirements. In so doing, the regulator paved the way for mutual fund managers to enter the ETF industry. Historically, mutual fund managers have hesitated to list ETFs in fear that daily transparency would require giving away their best investment ideas.”
Assessing New ANTs
ANTs could be just the refresher active management needs to regain lost luster in this new era of funds investing.
Mutual fund companies wanting to get into the ETF game now have the ability to offer their brand of active management in an ETF wrapper without having to lift up the hood every day to show the intricacies of their strategy.
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.
“The SEC’s relaxations were particularly helpful to mutual funds that invest in small companies. This is because predatory traders – sometimes called ‘front runners’ – can more easily gobble up all of a small company’s shares after learning that a mutual fund is interested in them,” according to ETF Stream.
The semi-transparent nature 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 will feel more open to adapting traditional fund strategies into the more efficient ETF wrapper, potentially opening the start of a greater transformation in the fund industry as more active managers consider 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.
