Following the US Security and Exchange Commission’s (SEC) approval of Precidian’s Active Shares model in May, four semi-transparent ETF structures were just yesterday given notice of approval by the SEC. The new ETF structures could herald a new era of active ETFs.
On November 14, the SEC gave contingent approval for new proxy-based, semi-transparent active ETF structures from Natixis/New York Stock Exchange (NYSE), T.Rowe Price, Fidelity, and Blue Tractor Group. While each of the products is unique, they all use “proxy baskets” to avoid the possibility that investors will use disclosed information about an ETF’s holdings to front run the strategy. The official SEC approval will come on or around December 10, barring any public objections, and these structures may provide a compelling option for active managers to enter the ETF market without revealing their “secret sauce.”