Thursday, April 2, marks the beginning of a new era of active, non-transparent ETFs.

In a brave step considering the current market conditions, American Century Investments will launch Thursday two new “active” ETFs. The American Century Focused Dynamic Growth ETF (FDG) and the American Century Focused Large Cap Value ETF (FLV) will list on CBOE Global Markets. (ETF.com)

American Century: the new breed of non-transparent ETFs

After a decade of tortuous progress through regulatory corridors, the ETF industry is finally seeing the light at the end of the tunnel for these new products.

Their core USP is best read from the fund manager’s filing document for FDG:

This ETF is different from traditional ETFs. Traditional ETFs tell the public what assets they hold each day. This ETF will not. This may create additional risks for your investment…  

…The differences between this ETF and other ETFs may also have advantages. By keeping certain information about the ETF secret, this ETF may face less risk that other traders can predict or copy its investment strategy. This may improve the ETF’s performance.

American Century has licensed the new ETFs from Precidian.

The market refers to these ETFs as “non-transparent” because they do not disclose their holdings daily. The two new American Century funds will reveal their investments only quarterly. In this way, they resemble mutual funds, which are adept at keeping their investing strategies (their so-called “secret sauce”) confidential.

Launch timing

However, there is an interesting comment from Bloomberg Intelligence’s Athanasios Psarofagis, an ETF analyst on the American Century ETFs: “The fact that the company delayed the launch of these new types of funds was likely to their benefit. The plan to launch Thursday likely shows they think markets will stabilize from here.”

“They are making a market call and hoping to catch an updraft. Since these are active, their performance track record is going to be key.”

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