Vident Financial, the firm behind ETFs, such as the U.S. Diversified Real Estate ETF (NYSE Arca: PPTY) and the Vident Core US Equity ETF (NasdaqGS: VUSE), is getting into the realm of active non-transparent ETFs (ANTs).
“VIA has entered into a license agreement with New York City-based Blue Tractor Group, LLC (Blue Tractor), permitting VIA to now offer its best-in-class ETF sub-advisory portfolio management and trading capabilities to Advisors wishing to launch proprietary actively managed strategies using Blue Tractor’s Shielded Alpha℠ non-transparent ETF wrapper,” according to a statement.
The Shielded Alpha℠ structure is a ‘wrapper’ has many benefits to advisors and investors alike, including lower cost, greater tax efficiency, and intra-day liquidity.
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.
The Shielded Alpha℠ ETF wrapper is differentiated from other competing non-transparent and/or semi-transparent wrappers, including:
- Shielded Alpha℠ is a highly transparent ETF;
- All workflow to generate the creation basket is hosted in the Blue Tractor cloud;
- The investable universe for a Shielded Alpha℠ ETF may include foreign securities; and
- Using the cloud software, advisors can manage the daily creation basket to lower trading costs, enhance capital gains tax efficiency and fully obfuscate trading execution when building or exiting portfolio positions.
Vident’s “push into actively managed non-transparent ETFs through its license with Blue Tractor recognizes the exciting growth potential of this burgeoning new space. VIA’s flexible business model means it can work directly with Advisors or in cooperation with white-label firms bringing Advisors to market,” according to the statement.
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.