American Century Investments has come out with its first offerings in what could be the start to a suite of new, actively managed, non-transparent exchange traded funds.
“One is going to be called Focused Dynamic Growth, and the other one is called Focused Large Value, and they’re going to be a new concept, I would say, in the ETF space. One, they’re going to be concentrated, and two, they’re going to be semi-transparent or non-transparent,” Ed Rosenberg, Senior Vice President, Head of ETFs, American Century Investments, said at the Inside ETFs conference.
American Century has launched the Focused Dynamic Growth ETF (FDG) and Focused Large Cap Value ETF (FLV) on Wednesday.
“Unlike traditional ETFs, the fund does not tell the public what assets it holds each day. Instead, the fund provides a verified intraday indicative value (VIIV), calculated and disseminated every second throughout the trading day by the Cboe BZX Exchange, Inc. (Listing Exchange) or by market data vendors or other information providers,” according to American Century.
Checking The VIIV
The VIIV is based on the current market value of the securities in the fund’s portfolio on that day. The VIIV is intended to provide investors and other market participants with a highly correlated per share value of the underlying portfolio that can be compared to the current market price.
“Liquidity providers are going to be able to provide efficient pricing,” Matt Lewis, Head of Capital Markets, American Century Investments, said.
“There are things like a VIIV, which is an indicative value that will be out there every single second for the market participants to view and understand where the market is for that ETF, so we feel that the market participants and liquidity providers will be able to provide an efficient price for our clients.”
The semi-transparent nature should help American Century protect its management’s investment style from potential front-runners that would seek to undercut the more transparent nature of the ETF investment structure.
Additionally, through these semi-transparent or non-transparent ETF structures, money managers like American Century will feel more open to adapting traditional fund strategies into the more efficient ETF wrapper.
Hear what Ed Rosenberg and Matt Lewis Had To Say About Non-Transparent ETFs:
For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category
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