The securities world is constantly in flux and with the latest changes to the market comes what are known as non-transparent ETFs. These new non-transparent ETFs attempt to find a middle ground that allows active managers to mask their strategies while maintaining the pricing of the fund liquid enough that it can be traded throughout the day.
American Century Companies, a privately controlled and independent investment management firm is now the first company to launch a suite of non-transparent ETFs. Ed Rosenberg, senior vice president and head of exchange-traded funds at the American Century discussed how they were doing on CNBC.
The Focused Dynamic Growth ETF (FDG) and Focused Large Cap Value ETF (FLV) are two of the latest entrants from the company.
“Yeah so let me jump into how they are trading first. I mean they’ve been trading well quite honestly, right off the bat. If you look at the products themselves looking about the first day they each traded, over 100,000 shares each…The nice part about this is that spreads have maintained, there’s been investor interest as it slowly gets up on platforms, and so we’ve been buying people have been buying. For focused dynamic growth, it’s a concentrated large cap portfolio… It’s looking for stocks that can lean towards a higher alpha portfolio while they’re concentrated,” said Rosenberg.
American Century’s dynamic growth fund has many familiar names in its holdings such as Amazon, Google, MasterCard
, and Facebook
. And because it is non-transparent, some analysts see mutual funds potentially transitioning into the ETF space, given that non-transparency is a key part of mutual funds, but having an ETF provides the flexibility to trade a liquid fund throughout the day.
“I think a lot of those mutual funds that were bought years and years ago are not sitting on embedded gains anymore, most likely, so I think now would be the opportunity for a financial advisor to sell there, you know actively managed funds to buy let’s say an ANT product. And kudos to the American Century for being first to market. That’s usually what you wanna do. I think that for my money we prefer a little bit more transparency than less in thenAnd kudos for the two American century for being first to market. That’s usually what you want to do,” explained John Davi, founder and chief investment officer of Astoria Portfolio Advisors on the same segment.
Davi sees a lot of potential for the new ETF given the history of wide acceptance that ETFs have enjoyed over the years.
“I think that for my money we prefer a little bit more transparency than less in general, but I’m always amazed about The ETF product. I’ve been working in the ETF ecosystem for 20 years. You know I remember when I shares first launch 25 ETFs in one day. People were like why do you need a single country, why do you need a sub-sector ETF. And sure enough, we have an entire industry now. So there’s always a market… we are pulling for Ed and his team,” said Davi.