The first two ETFs to launch in the Precidian ActiveShares’ semi-transparent structure in February, from American Century Investments have performed well. The American Century Focused Dynamic Growth ETF (FDG) is in the top 10 – 15 per cent of all growth funds, including mutual funds and ETFs within the Morningstar dataset, reports Edward Rosenberg (pictured), senior vice president and head of ETFs at the firm.
From a trading perspective, FDG is averaging 20,000 plus shares a day, while American Century Focused Large Cap Value ETF (FLV) is just under 17,000.
Rosenberg says: “FDG is trading in line with a lot of our growth ETFs and had a NAV return of 18.05 per cent last month, against the mutual fund version which saw 18.30 per cent.”
This is an even more significant achievement in that the mutual fund can own international stocks, while the ETF cannot. The ETF has also been overlaid with filters to optimise tax loss harvesting, which has affected its returns.
In terms of trading, Rosenberg says that the marketmaker has kept quotes to about 10 cents wide, sometimes tighter. “It’s drifted to 11 or 12,” he says, “which puts it into the 21 to 26 bps wide margin, which is exceptional considering the end marketmakers don’t know the underlying holdings. All client trades have gone off at ask.”
A large trade of USD5 million on FLV went through the institutional desk and was 5 cents inside the ask.
Assets stand at USD13.37 million for FLV and USD10 million for FDG.
“They are trading very nicely and clients are very happy,” Rosenberg says. The new ETFs are not as yet available on many platforms in the US and Rosenberg has at least one buyer awaiting their take up.
“Normally ETFs take time to launch but as this is a new structure it will take a bit longer to get it on a platform,” he says. “Being first means we have to payve the way through this.”
Next on the list are two semi-transparent ETFs with the NYSE structure – a mid-cap growth impact ETF with the ticker MID and a sustainable equity ETF with the ticker ESGA.
“The reception from clients is that they have been well received and there is more interest than I thought of initially,” Rosenberg says. “We have had clients come to American Century who have never talked to us before so it’s an interesting process and there seems to be a pent-up demand for these types of products.”
Commenting on the first launch of their ActiveShares’ ETFs, Dan McCabe, Precidian CEO says: “They are working exceedingly well and the performance of the American Century Funds (FLV and FDG) has been stellar. The accuracy of the VIIV (verified indicative value) has played a significant role in enabling investors to understand the true value of the products every second and it is a valid benchmark for trading purposes. We are looking forward to the next launch from Legg Mason to be followed by several other licensees over short weeks.
“To witness ActiveShares products which have been so thoroughly vetted by the trading community, regulators and investors for a decade, behave in such a solid and predictable manner during the most volatile markets is both validating and a resounding testament to their straightforward design.
“This is very good news for investors looking forward.”
Rosenberg concludes: “It’s nice to be out first and really pave the way for the industry to go forward with new innovative style products.”
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