In this episode of “ETF 360,” VettaFi’s head of research, Todd Rosenbluth, spoke with Jordan Farris, managing director and head of global equities and ETF product development at Nuveen about semi-transparent ETFs and how Nuveen utilizes this vehicle type.
Nuveen launched its first actively managed, semi-transparent ETF a year ago, bringing the total number of funds offered to 19 products with roughly $7 billion in AUM.
“We view the launch of our active semi-transparent ETFs as very much aligned with our overall ETF strategy, and that’s bringing our best capabilities to market in the wrapper in which clients are really looking to purchase these days, really meeting them where they want to be met,” Farris said.
Farris goes on to explain that semi-transparent ETFs are the same overall structure as more traditional ETFs with the cost benefits, tax efficiency, and tradability that ETFs offer. The difference lies in its ability to allow the active manager of the semi-transparent fund to pursue its strategy without being front run by competition, similar to a mutual fund but with all the benefits of an ETF.
“For those strategies that we have, three of them, that replicate existing strategies that exist either in the mutual fund or the SMA wrapper, due diligence can look at the strategy in addition to the actual wrapper, so they have a longer history to be able to look at,” explained Farris.
ETFs continue to make waves, bringing in record-setting flows year after year, while mutual funds, especially the active U.S. equity space, are experiencing outflows. Farris sees it as investors looking for a modern approach to investing by utilizing the ETF wrapper to access some of the more traditional mutual fund strategies.
Semi-Transparent Fund Reporting and NDVG
The Nuveen active semi-transparent funds have had a lot of interest and positive action in the secondary market and have maintained relatively tight spreads between 15-50 basis points, with no major discounts or premiums. For advisors and investors that might be concerned about the semi-transparent nature of the fund, there is a wide range of data that is available.
“Active semi-transparent ETFs are required to track and report on a variety of items, including things like tracking error, spread information, premium discounts, and to stay within a certain set of parameters that are determined by our exemptive relief — or our permission by the SEC to actually list these products,” Farris said.
The Nuveen Dividend Growth ETF (NDVG) is an actively managed semi-transparent ETF that invests in mid- and large-cap companies that have proven their ability to grow their dividends over time. The fund seeks to provide income and total return for investors with less volatility than traditional large-cap benchmarks such as the S&P 500.
“The theory behind dividend growth is exposure to companies with persistent and growing dividends over time has led to the opportunity to preserve capital while also managing risks — including, and I think this is important right now and very topical — during periods of elevated market volatility, of rising interest rates, and of high inflation,” Farris explained.
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