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More filings for semi-transparent ETFs in the US


News came yesterday that the SEC had approved four new filings for semi-transparent ETFs, the new active ETF structure with a semi-transparent portfolio that allows investment managers to keep their trading relatively discreet.

The four filings came from Fidelity, T Rowe Price, Natixis and Blue Tractor. The first three filings are from asset managers, with Fidelity and T Rowe Price dominating, while the last one is seeking to create its own structures for semi-transparent ETFs.

Referring to the asset managers’ filings, Todd Rosenbluth (pictured), head of ETF & Mutual Fund Research at CFRA says: “Get ready for the big boys of active management, including T Rowe Price and Fidelity, to enter in 2020 with non-transparent ETFs now that the SEC has approved their latest filings. Given how high demand has been for the ETF wrapper, their strong brand and broad distribution efforts, as well above-average performance combined with low cost structures, CFRA expects these products to garner strong interest.”
Both Fidelity and T Rowe Price have strong brands in the active management community, Rosenbluth says. “They have a strong following with institutions and retail investors, products that have excellent track records with low fees and all of this sets the stage for them to launch active equity ETFs.”
The T Rowe Price application is particularly interesting as they have not entered the ETF market so far. Commenting on the news, George Riedel, Head of US Intermediaries at T Rowe Price said: “T Rowe Price’s semi-transparent, active ETFs will be a new way for investors to access our longstanding investment capabilities. As marketplace preferences evolve, we want to be able to deliver our investment capabilities in formats investors prefer, whether that is an open-end mutual fund, an ETF, or something else, like a separately managed account or a collective investment trust.”
Rosenbluth comments that Fidelity has active fixed income and index based products. “Their active equity franchise is quite strong,” he says. “So, if and it’s a big if, they are willing to leverage their existing product line up and management team, which are well known in both cases, these products will be successful.”
The Precidian products, the first to be licensed to asset managers, will probably appear early 2020, but this wave of product is expected for the middle of the year.
“We are certainly confident we will see products in 2020,” Rosenbluth says. “I think there will be appetite for them as I assume they are coming in with a plan and not just dipping a toe into the market, so there is demand for active management in an ETF wrapper.”
Rosenbluth believes that some investors will move from their mutual fund to the ETF wrapper version, depending on their appetite for active management. However, he warns that some investors may find the higher fees of semi-transparent ETFs, likely to be in 50-60 bps band, too rich, when compared with 3-4 bps for vanilla ETFs. “Some investors are fans of paying as little as possible,” he warns.

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