Blue Tractor Group, one of several firms to develop a nontransparent ETF structure that has been been approved by the Securities and Exchange Commission, has secured its first licensing agreement.
The Nottingham Co., a service administrator for ETFs and mutual funds, has licensed Blue Tractor Group’s Shielded Alpha ETF structure, which allows it to issue a Shielded Alpha ETF through its white label ETF investment advisor affiliate, OBP Capital.
The “Shielded Alpha ETF structure offers unique features and benefits to advisors and investors alike,” said Kip Meadows, founder and CEO of Nottingham, in a statement. The benefits include those of all ETFs: lower costs than comparable mutual funds and SMAs, greater tax efficiency and intraday liquidity, according to Nottingham. But unlike most ETFs a Shielded Alpha ETF will not disclose its weighted holdings on a daily basis.
The actively managed ETF will instead disclose its holdings but not their weights through the daily publication of its Dynamic SSR Portfolio. Another nontransparent ETF strategy, ActiveShares from Precidian Investments, which was the first to get SEC approval, won’t publicly disclose its actual holdings daily but rather a “verified intraday indicative value” of them. Only the broker acting as an authorized participant representative that either buys or liquidates an ActiveShares portfolio basket in exchange for cash would know the holdings.
The Nottingham licensing announcement is a step toward the launch of nontransparent ETFs that use Blue Tractor Group’s strategy. Sub-advisors managing active portfolio strategies will be able to issue their own branded Shielded Alpha through ETFs through Nottingham’s white-label affiliate, OBP Capital LLC.
That’s how Nottingham helped launch several more traditional ETFs, including two cannabis ETFs — the Amplify Seymour Cannabis ETF (CNBS) and The Cannabis ETF (THCX) — as well as the Fieldstone UVA Unconstrained Medium-Term Fixed Income ETF (FFIU) and Fieldstone Merlin Dynamic Large Cap Growth ETF (FMDG), which ceased trading in December 2018 after about 16 months.
Blue Tractor Founder Terry Norman, in a statement, said he knows “many active managers now using a traditional mutual fund that are keen to explore the benefit of porting their alpha strategy into to an ETF wrapper.”
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