Active fund managers will soon get to join the passive party via “stealth” ETFs.

The SEC has granted asset managers T. Rowe Price, Natixis, Fidelity, and Blue Tractor preliminary regulatory approval to launch non-transparent ETFs. These new ETFs require their holdings to be declared quarterly, instead of daily.

Why do active managers run shy of passive ETFs? It’s because they want to shield their precious, money-making investment ideas from the public eye. A daily disclosure would bare their strategies to competing fund managers and distort the market before the idea reaches fruition. “Stealth” is a good adjective for non-transparent ETFs.

Non-transparent ETFs: Precidian was the first to get its foot in the door

The current bunch of approvals is not the first SEC green light for non-transparent ETFs, however. In April this year, the SEC accorded preliminary approval for a non-transparent ETF model to Precidian Investments.

When the non-transparent ETF product finally launches, it may allow inflow-starved active fund managers into the ETFs arena. Investors have flocked to passively managed ETFs for their low costs and easy trading. Assets in the ETF market currently aggregate nearly $4 trillion. This year itself, investors plowed in approximately $200 billion.

Last month, Precidian held a networking dinner to educate market participants about the forthcoming steps for launching the new ETFs. The firm has licensed 14 different parties, including Legg Mason, BlackRock, Capital Group, JP Morgan, GSAM, Nationwide, Gabelli, Columbia Threadneedle, American Century Investments, and Nuveen.

There could be demand for active management in an ETF wrapper

However, the non-transparent ETFs would likely come with higher fees compared to the run-of-the-mill ETFs. According to one fund manager, these could be in the range of 50-60 bps. That could be a lot, considering vanilla ETFs levy 3-4 bps.

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