ETFs that hide their portfolios get go-ahead from SEC

ETFs that hide their portfolios get go-ahead from SEC
T. Rowe Price, Fidelity, Natixis and Blue Tractor won permission from the regulator to disclose their holdings only once a quarter.
DEC 11, 2019
Four new types of exchange-traded funds that allow money managers to hide their holdings have been approved by U.S. regulators. T. Rowe Price, Fidelity, Natixis and Blue Tractor won permission from the Securities and Exchange Commission to create ETFs that disclose their holdings once a quarter, rather than every day like conventional ETFs. The watchdog indicated in November that it was inclined to approve the applications. It's a huge boon for active money managers who've watched trillions of dollars flow out of mutual funds and into ETFs over the last decade. Many proved slow to start their own ETFs, fearing the transparency that they traditionally require would reveal strategies and expose them to front-running. Almost all the $4.2 trillion U.S. ETF market is passively managed as a result. But that could be about to change. The four latest approvals join another structure — from Precidian Investments — that got the nod earlier this year. [Recommended video: 6 reasons advisers should learn about ESG and impact investing] "The SEC's announcement today is a huge milestone for the ETF industry," Fidelity's Greg Friedman, head of ETF management and strategy, said in an emailed statement. The firm will allow other issuers to license its structure to create their own funds, he said. The regulator's blessing sets up a new battle for active managers — persuading investors that their model is better than their rivals' structures, as well as transparent ETFs. The four models that were approved this week will all use a so-called proxy basket, meaning they will publish some information about their portfolios every day. This will help market makers price their funds, without revealing their entire portfolio. [More: Who benefits the most from nontransparent ETFs?] The Precidian approach is different; funds that use its structure will publish an indicative value every second to help traders make a price. Cboe Global Markets Inc. is seeking permission from the SEC for a rule change that would allow it to list two ETFs from American Century that would be the first of these funds. Meanwhile, Invesco Ltd. is asking the regulator to approve its own structure. But some analysts have expressed skepticism that any of these models will appeal to investors. "Despite their high hopes and deep pockets, most of these 'ANTs' will struggle to eat in the ETF jungle," said Eric Balchunas, an ETF analyst at Bloomberg Intelligence, referring to active non-transparent ETFs. "There just isn't much natural demand right now for humans picking stocks."

Latest News

Advisor moves: Atlas tops $1B as Wells Fargo, UBS add bank veterans
Advisor moves: Atlas tops $1B as Wells Fargo, UBS add bank veterans

Wells Fargo adds two bank-channel recruits, UBS lands a JPMorgan Chase veteran, and a multi-family office lifts Atlas past $1B

Advisor mom’s son used her password to log into clients’ accounts, sell deal with conflicts, according to Washington state
Advisor mom’s son used her password to log into clients’ accounts, sell deal with conflicts, according to Washington state

“The state comes down on you in years when you make 40% returns for clients,” said Bill Swayne, the advisor and son of Candace Swayne.

Osaic in talks with Anthropic as AI reshapes advisor workforce
Osaic in talks with Anthropic as AI reshapes advisor workforce

The Independent broker-dealer giant has had “active conversations” with the Claude maker, which is days away from its expected IPO

The retirement milestone advisors aren't tracking
The retirement milestone advisors aren't tracking

For Gen X clients entering life after work, answering the financial question isn't enough to solve the entire retirement equation.

Wealthtech firms target stock pay, pensions and heirs for advisors
Wealthtech firms target stock pay, pensions and heirs for advisors

Tools from Grantd, Income Lab and Healthspan Wealth aim to keep RIAs involved in clients’ biggest money decisions

SPONSORED Best Practices for Engaging Women Around Alternatives

Growing wealth, evolving priorities, and untapped opportunities are reshaping how women approach long-term investing.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.