On Monday, Invesco Ltd. (NYSE: IVZ), a leading global provider of ETFs, announced it has reached the final regulatory stage in it its effort to build its own active non-transparent ETF model. The U.S. Securities and Exchange Commission (SEC) has published a notice regarding Invesco’s exemptive application, indicating its plan to grant the needed relief subject to any comments it receives.
“Invesco is always looking for solutions to best solve for our clients’ investment outcomes in an innovative manner, and we have high conviction that the Invesco active non-transparent ETF model will bring together the right combination of active and passive strategies,” says Anna Paglia, Global Head of ETFs and Indexed Strategies at Invesco.
She continues, “The unique perspective and specialized background of Invesco’s active managers, housed within an ETF wrapper has exciting potential for client portfolios.”
The Proposed Model
The proposed Invesco active non-transparent ETF model will retain many characteristics that investors find attractive in an ETF structure, including an effective arbitrage mechanism, tax efficiency, and intraday tradability. Under the proposed model, each trading day, Invesco will publish key data metrics to offer a clear view into an ETF’s portfolio value without fully disclosing the ETF holdings.
The Invesco non-transparent model would thereby maintain the confidentiality of a fund’s strategy and help mitigate the risk of front-running by keeping a portion of the fund’s holdings shielded from the market. If approved, the Invesco non-transparent active ETFs will strike at least two NAVs per day, thus providing multiple creation and redemption windows to authorized participants throughout the day.
Invesco also filed for an exemptive order to license Fidelity’s active equity ETF methodology in July 2020, which was granted in October 2020. Once the proprietary Invesco application is approved, the firm plans to utilize both the Fidelity active non-transparent equity model and the Invesco model to create Invesco active non-transparent ETFs. Invesco active non-transparent ETFs will allow Invesco to deliver our active management’s benefits in a tax efficient and cost-effective ETF wrapper, thus unlocking new opportunities for our clients.
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