With more traditional mutual funds eying the exchange traded fund space but remaining reluctant to give up their secret sauce under the transparency of the ETF investment vehicle, many are looking into non-transparent exchange traded products as a way to combine the best of two worlds.

Many asset management firms have filed applications with the Securities Exchange Commission for exemptive relief to allow them to launch actively managed funds under a non-transparent product structure. However, only two of these non-transparent structures, Vanguard’s patented fund structure and Eaton Vance’s NextShares exchange traded managed funds have gained SEC approval.

“Over the past few years, these institutions have offered increasingly divergent approaches to satisfy the SEC’s concerns related to ‘non-transparent’ ETFs, including varying terminology to describe differing levels of transparency,” according to a new ALPS research report titled “Non-Transparent Exchange Traded Products – A Revolution 25 Years In The Marking“.

Here are highlights from the ALPS research report on the topic:

Vanguard ETFs are a “share class” of a Vanguard index mutual fund and rely on an “opaque” transparency where holdings are revealed on a month-end basis with a 15-day lag.

Eaton Vance NextShares ETMF is another SEC approved non-transparent actively managed exchange traded product available. Potential investors should be aware that these ETMFs are not to be confused with exchange traded funds, or ETFs.

Precidian ActiveShares is a strong contender to NextShares and incorporates a proposed “AP Representative” structure. The structure will also provide a verified intraday indicative value or “VIIV” on one second intervals throughout the trading day. This makes the ActiveShares model unlike any active managed ETFs on the market today.

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