Active non-transparent ETFs (ANTs) are still in their infancy and it’s widely expected more fund issuers will add to this burgeoning group. However, there are some ANTs that are originals or pioneers.
One of those products is the Focused Dynamic Growth ETF (FDG) , which is designed to invest in early-stage, high growth companies.
FDG uses the ActiveShares structure, which is licensed from Precidian Investments.
Precidian’s ActiveShares functions in a similar fashion to existing ETFs by quoting a consistent intraday price to the market (called a “VIIV” or verified intra-day indicative value). While all other ETFs publish an IIV/IOPV every 15 seconds, ActiveShares will take it a step further and publish the VIIV every second.
The new structure will allow the American Century to deliver its time-tested actively-managed investment strategies in these ETF vehicles without the daily holdings disclosure requirement of fully transparent ETFs.
Focus on FDG
“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.
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.
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.
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, potentially opening the start of a greater transformation in the fund industry as more active managers consider ETFs.
The $208.72 million FDG is a “high-conviction strategy designed to invest in early stage, rapid growth companies with a competitive advantage, high profitability, growth, and scalability to sustain their leading position,” according to American Century.
FDG charges 0.45% per year, or $45 on a $10,000 investment.
For more on active strategies, visit our Active ETFs Channel.
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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