Invesco made a splash in the active non-transparent ETF space today, launching four ETFs that will leverage the unique perspective and specialized expertise of Invesco’s investment professionals in a structure that retains many of the characteristics that investors find attractive in an ETF structure, including an effective arbitrage mechanism, tax efficiency and intraday tradability.
Anna Paglia, Global Head of ETFs and Indexed Strategies at Invesco, said today’s announcement is more than a product launch, adding it is another step towards Invesco’s goal to offer a range of innovative investment products that help clients pursue their desired outcomes.
“Our four active non-transparent ETFs offer a bridge between traditional active and passive strategies, harnessing the strength of Invesco’s active managers within an ETF wrapper,” Paglia said.
The four new ETFs build on Invesco’s legacy of innovation and include the following active strategies in a cost-effective structure:
Invesco Focused Discovery Growth ETF (Ticker: IVDG)
IVDG is an actively managed ETF that seeks capital appreciation. The ETF seeks to achieve its investment objective by investing primarily in a concentrated portfolio of companies in the early growth phase of their business cycle, typically marked by above average growth rates. The ETF has a total expense ratio of 0.59%.
Invesco Select Growth ETF (Ticker: IVSG)
IVSG is an actively managed ETF that seeks long-term capital appreciation. The ETF seeks to achieve its investment objective by primarily investing in a concentrated portfolio of large and mid cap stocks with attractive growth outlooks relative to their valuation at the time of purchase. The ETF has a total expense ratio of 0.48%.
Invesco Real Assets ESG ETF (Ticker: IVRA)
IVRA is an actively managed ETF that seeks capital appreciation with a secondary objective of current income. The ETF seeks to achieve its investment objective by investing in real asset equities, including real estate, infrastructure, natural resources and timber that meet Invesco’s proprietary environmental, social and governance (ESG) standards. The ETF has a total expense ratio of 0.59%.
Invesco US Large Cap Core ESG ETF (Ticker: IVLC)
IVLC is an actively managed ETF that seeks capital appreciation. The ETF seeks to achieve its investment objective by mainly investing in larger-capitalization U.S. equities. Additionally, the ETF seeks to achieve its investment objective by investing mainly in U.S. companies that meet certain environmental, social and governance (“ESG”) standards. The ETF has a total expense ratio of 0.48%.
These ETFs are different from traditional ETFs. Traditional ETFs tell the public what assets they hold each day. These ETFs will not. This may create additional risks for your investment. For example:
- You may have to pay more money to trade these ETF shares. These ETFs will provide less information to traders, who tend to charge more for trades when they have less information.
- The price you pay to buy ETF shares on an exchange may not match the value of the ETF’s portfolio. The same is true when you sell shares. These price differences may be greater for these ETFs compared to other ETFs because they provide less information to traders.
- These additional risks may be even greater in bad or uncertain market conditions.
- The ETFs will publish on its website each day a “Substitute Basket” or “Tracking Basket” designed to help trading in shares of the ETFs. While the Substitute Basket or Tracking Basket includes some of the ETF’s holdings, it is not the ETF’s actual portfolio.
The differences between these ETFs and other ETFs may also have advantages. By keeping certain information about these ETFs secret, these ETFs may face less risk that other traders can predict or copy its investment strategy. This may improve the ETF’s performance. If other traders are able to copy or predict the ETF’s investment strategy, however, this may hurt the ETF’s performance.
“Invesco’s suite of ESG ETFs has one of the longest track records in the ESG space5, and we are excited to expand our offerings more broadly to include Invesco’s first actively managed ESG ETF strategies in the United States,” said Paglia.
The new Invesco active non-transparent ETF suite will utilize innovation from Invesco’s proprietary active non-transparent ETF model and Fidelity’s active equity ETF methodology.
“It’s become clear there’s a market for products that go beyond just providing raw market exposure,” said Dave Nadig, ETF Trends Director of Research. “It makes sense for a firm like Invesco to reach into their capability set and find approaches that will work in an ETF wrapper — transparent or not.”
The Invesco active non-transparent model will publish key data metrics each day by using a ‘substitute basket’ to offer a clear view into each ETF’s portfolio value, thus providing multiple creation and redemption windows to authorized participants throughout the day. The ETFs’ holdings will not be fully disclosed, thereby maintaining confidentiality of the ETFs strategy and help mitigate the risk of front-running by keeping a portion of the fund’s holdings shielded from the market.
Fidelity’s active equity model will utilize a ‘tracking basket’ methodology, which maintains the benefits of the ETF structure while still providing information to market participants to promote efficient trading of shares and preserve the ability to add value through active management. This ‘tracking basket’ is disclosed daily and is used to facilitate the creation and redemption process.
Invesco has always been a pioneer in the active ETFs space. The firm broke new ground when it obtained the first exemptive relief for a transparent active ETF in 2008. Now, twelve years later, active ETFs are growing more quickly than passive ETFs and over half the ETFs launched in 2020 were actively managed6.
The four new non-transparent active ETFs began trading today on the Cboe BZX Exchange.