As the new kid on the fund industry block, active non-transparent ETFs have some ground to make up against traditional mutual funds and index funds. Part of that journey includes showing advisors that ANTs can legitimately transact like traditional ETFs.
It’s still early, but signs are emerging to that effect with ANTs spreads proving to be tight, reports the Financial Times, citing FactSet research. How ANTs transact and deliver tight spread is a notable trait for end users.
Precidian’s ActiveShares functions in a similar fashion to existing ETFs by quoting a consistent intraday price to the market (called a “VIIV” or verified intra-day indicative value). While all other ETFs publish an IIV/IOPV every 15 seconds, ActiveShares will take it a step further and publish the VIIV every second.
The VIIV is based on the current market value of the securities in the fund’s portfolio on that day. The VIIV is intended to provide investors and other market participants with a highly correlated per share value of the underlying portfolio that can be compared to the current market price.
ANTs’ Spreads Matter
Integral to the success of any new financial product is just how captive an audience that product is serving. Active non-transparent ETFs (ANTs) are capitalizing in attention from advisors, but that growth is in the early innings and could be spurred along by more education.
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.
ANTs spreads are relevant and that’s something that’s been seen over the evolution of the ETF industry. Advisors and investors are often reluctant to embrace thinly traded trade products, regardless of underlying liquidity, because a lack of onscreen volume can portend wide spreads, which drive up the total cost of ownership.
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.
