One of the marquee developments in the fund industry in recent memory are the launches of active non-transparent ETFs, or ANTs.
One way of looking at ANTs is that this category is new fund “technology.” ANTs represent the best of both worlds ideas: the advantages of active management with the liquidity and tradability of ETFs, something that long eluded the actively managed mutual fund industry.
ANTs “are actively managed exchange-traded funds that disclose their holdings quarterly instead of daily. This gives portfolio managers a chance to use their strategies in cheaper alternatives to mutual funds without running the risk of being copied or front-run,” according to ETFdb.com.
Currently, six ANTs with approximately $330 million in combined assets under management are listed in the U.S. with several more on the way soon. American Century, Fidelity, and Clearbridge are the current players in the space with T. Rowe Price expected to soon bring its own ANTs to market.
In April, American Century launched the Focused Dynamic Growth ETF (FDG) and Focused Large Cap Value ETF (FLV), which are now the two largest ANTs. FDG has over $182 million in assets, an impressive for any new ETF, let alone one testing structure advisors aren’t accustomed to.
In June, Fidelity launched three ANTs of its own: the Fidelity Blue Chip Growth ETF (FBCG), Fidelity Blue Chip Value ETF (FBCV) and the Fidelity New Millennium ETF (FMIL).
Fidelity’s ANTs use a proxy basket methodology, allowing for seamless implementation that uses existing infrastructure and requires very little operational build-out, adding the methodology helps to protect the firm’s insights and research while providing sufficient information to efficiently affect a trade.
Fidelity’s active equity ETFs will employ an innovative tracking basket methodology, which maintains the benefits of the ETF structure, provides information to market participants to promote efficient trading of shares, and preserves the ability to add value through active management.
Integral to the success of ANTs are mechanics, such as the verified intraday indicative value (VIIV), which is calculated and disseminated every second throughout the trading day by the exchange the ANT trades on.
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.
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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.
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