Liquid Alternatives: American Century May Unveil the Very First Non-Transparent ETFs

February 18, 2020 | Latest News, Liquid Alternatives, News
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Two American Century funds may be the first to test waters as “actively managed” ETFs.

Having received the SEC’s approval for its final key filing, Cboe BZX Exchange, Inc. is close to launching its proposed actively managed ETFs, also known as “non-transparent” ETFs. The two American Century ETFs, based on Precidian’s ActiveShares model, will disclose their holdings on a quarterly schedule, instead of on a daily basis as other ETFs. (ETF.com)

Historic launch

American Century will likely be the first fund house to hit the market with these specialized ETFs. Non-transparent ETFs, or stealth ETFs, as they are also known, seek to keep their holdings confidential from other market participants. They fear that other funds or traders would copy their strategies and therefore dilute their edge.

Precidian Investments have designed and patented the ActiveShares ETF structure. According to Bloomberg, approximately $7.2 trillion of funds lodged in mutual funds could migrate to this new ETF structure, or “wrapper.”

These ETFs have been in the regulatory pipeline for many years. They may now finally see the light of day under American Century’s banner. The fund manager has $183 billion in assets under management.

“I don’t see anything holding us up from launching before the end of the quarter, and American Century will be the first to launch one of these funds,” said Ed Rosenberg, head of ETFs at American Century, to InvestmentNews.

The American Century ETFs

The American Century Focused Dynamic Growth ETF (FDG) and American Century Focused Large-Cap Value ETF (FLV) will both list on Cboe Global Markets when they finally launch.

FDG will focus on 30 – 45 large-cap, high growth stocks. Its expense ratio is 0.45%.

On the other hand, FLV will pic about 30 – 50 beaten-down stocks whose prices are not in sync with their intrinsic value. It will charge an expense ratio of 0.42%.

FDG comes with an expense ratio of 0.45%, while FLV has an expense ratio of 0.42%.

Will advisers bite?

According to InvestmentNews, 92% of advisers at TD Ameritrade said they did not plan to allocate client funds to non-transparent ETFs.

However, according to Mr. Rosenberg, there could be an initial reluctance, but the new funds may soon catch on with both investors and advisers.

Related Story:    Liquid Alternatives: The Goldman Sachs “Stealth” ETF

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