Transparency the 'grail' for actively managed ETFs

Grail Advisors LLC said today that it has filed a registration statement for two actively managed exchange traded funds, the Grail American Beacon International Equity ETF and the Grail American Beacon Large Cap Value ETF.
JAN 15, 2009
Grail Advisors LLC said today that it has filed a registration statement for two actively managed exchange traded funds, the Grail American Beacon International Equity ETF and the Grail American Beacon Large Cap Value ETF. American Beacon Advisors Inc. of Fort Worth, Texas, a manager of managers, will be the subadviser for both funds. American Beacon expects to manage the new Grail Advisor offerings in a similar fashion to the $1.13 billion American Beacon International Equity Fund (AAIEX) and the $5.33 billion American Beacon Large Cap Value Fund (AAGPX). ETF providers have been slow to develop actively managed offerings because such funds would have to divulge their holdings on a daily basis. That isn’t something many active managers have been willing to do, due to fears that market traders could use that information to jump in front of trades, hurting their performance. Invesco PowerShares Capital Management LLC of Wheaton, Ill., launched the first actively managed equity ETFs last April. In order to get around the issue of transparency, those ETFs strictly limit how much active management is allowed. Boston-based Grail Advisors, however, has chosen a different strategy. The firm hopes to employ managers who don’t view transparency as a hindrance, said chief executive William M. Thomas. “The cracking of the code … is finding those investment management firms comfortable with complete transparency,” he said. “That’s how we differentiate ourselves.”

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