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July 17, 2019 at 10:53 AM
Financial advisors are big fans of nontransparent and semi-transparent actively traded ETFs, according to a new survey from Broadridge Financial Solutions.
Its survey of 200 financial advisors with $10 million or more in assets under management, including 25% in mutual funds or ETFs, found that more than four in five advisors are hoping their favorite actively managed mutual funds become available in a nontransparent ETF structure.
Until recently, it was not possible for an ETF to exist that did not disclose its holdings on a daily basis — unlike mutual funds, which disclose holdings quarterly with a delay — but in May the Securities and Exchange Commission gave final approval to a nontransparent ETF strategy called ActiveShares, developed by Precidian Investments. Its CEO, Daniel McCabe, expects the first ETF using the strategy will debut sometime before year-end.
At least 10 mutual fund companies have already licensed the strategy from Precidian and approximately 30 more are in talks to do the same, according to McCabe, and a handful of other mutual funds have filed applications for their own nontransparent ETF structures with the SEC, including T. Rowe Price and Eaton Vance.
“What is interesting is the level of comfort advisors already have the concept of active, opaque ETFs — and how quickly they would plan to allocate assets to these products,” said Matthew Schiffman, principal for Distribution Insight at Broadridge, in a statement.
Eighty-five percent of the advisors surveyed said they are likely to use actively managed nontransparent ETFs and close to half expect to allocate new, uninvested assets to such funds. Even more, 63%, said they anticipate reallocating assets from actively managed open-end mutual funds to nontransparent active ETFs.
