The fund industry has a long history of disruption and much
have it has worked in favor of advisors and investors. For decades, actively
managed mutual funds ruled the roost, but index funds would later provide
disruption in the form of cost efficiencies.
Starting in the 1990s and accelerating this century, ETFs
married the cost effectiveness of index funds and the liquidity of stocks.
Trillions of dollars later, it’s fair to say ETFs are one of the most
positively disruptive financial instruments of all time.
Time will tell if active non-transparent ETFs (ANTs) follows
a similar path, but at the very least, the stage is set for these new products
to change how to fund users think about active management and daily fund
One way of looking at ANTs is that this category is a new
fund “technology.” ANTs represent the best of both world’s ideas: the
advantages of active management with the liquidity and tradability of ETFs,
something that long eluded the actively managed mutual fund industry.
The Future is Here
“Most portfolio managers understandably do not want to give
away their intellectual property and insight into their methodologies, the
primary source of their livelihood,” according to Pensions & Investments.
“Semi-transparent or non-transparent ETFs, approved in concept and structure
last year, may change that paradigm.”
Some of the biggest financial players are already dabbling
with the nontransparent ETF idea. For example, BlackRock Inc. has filed to use
the structure after the funds debuted in April. JPMorgan Chase & Co. is
also working on its own active non-transparent ETFs and projects the
non-transparent ETF industry could ultimately command over $7 trillion in
assets as more traditional fund managers transition over to the efficient ETF structure.
Count Alger, American Century, Clearbridge and Fidelity
among the fund giants that have already brought ANTs to market, some of which
are rapidly catching on with advisors.
“Still, advisors want to try out these products, according
to Broadridge research, which reports that 83% of advisors want their favorite
mutual fund to introduce an active ETF product,” reports Financial Planning.
“The research indicates what lies ahead for non-transparent ETFs, which are the
newest iteration of a fund whose popularity has soared over the last decade.
ETFs surpassed $4 trillion in assets last year, and their low-cost and
tax-efficient advantages have put pressure on active managers.”
For more news and strategy on active ETFs, visit our Active
The opinions and forecasts expressed herein are solely those
of Tom Lydon, and may not actually come to pass. Information on this site
should not be used or construed as an offer to sell, a solicitation of an offer
to buy, or a recommendation for any product.
here for the original article.