Before advisors consider whether to invest in actively managed nontransparent ETFs (ANTs), they might want to consider the pros and cons of this novel investment vehicle.
There are only a handful of these ETFs on the market now, but they are sure to proliferate since multiple asset managers have filed with the Securities and Exchange Commission for approval to trade such funds, including Goldman Sachs Asset Management and T. Rowe Price.
ANTs, also known as nontransparent or semi-transparent ETFs, are actively managed ETFs that share one major characteristic with mutual funds: They disclose their holdings with a lag, unlike traditional ETFs, which disclose holdings daily. The delayed disclosure allows portfolio managers to keep their so-called secret sauce secret for a time to prevent copycats.
Otherwise ANTs are generally like ETFs, with similar advantages over mutual funds: more tax-efficient due to in-kind redemptions; lower fees because they don’t have embedded marketing or distribution costs; trading costs borne by their buyers and sellers, rather than long-term shareholders; and intraday trading and pricing (mutual funds are priced only at the end of daily trading).
As a result of these advantages, there is an expectation that some asset managers will choose to replace their actively managed mutual funds with an ANT that follows the same investment strategy.