Actively managed exchange traded funds (ETFs) are required to be
transparent. That hasn't always settled well with active managers,
so they're finding different ways to surmount the hurdles.
The Securities and Exchange Commission (SEC) has mandated that
active ETFs are to disclose their holdings with a one-day lag. Some
active managers have been discouraged by this requirement, fearful
that it might result in front-running of their funds.
Shishir Nigam for Active ETFs recently noted
a few of the ways some funds are dealing with the regulatory
AdvisorShares Dent Tactical (NYSEArca: Active ETFs And The
2. Market-on-close (
) trading. Some managers will use market-on-close instead of
trading intraday. The benefit is two-fold: the portfolio manager
gets the closing price, and liquidity is greater at MOC. AER
Advisors, the sub-advisors for
PowerShares Active AlphaQ (NYSEArca: PQZ)
, takes this approach.
3. Shrugging their shoulders. Some managers recognize that it's
not very cost-effective for an individual investor to copy the
portfolio and follow along. One portfolio manager says that the
majority of investors would take the convenience of an active fund
vs. trying to do it themselves just to save a few dollars a
The fact is, transparency benefits investors and it's part of
active ETFs stand out
from mutual funds. Mutual funds aren't required to disclose their
holdings more than once per quarter, and what you see on that
statement may not be what's currently in the portfolio. Perhaps
others considering launching active ETFs will be persuaded to join
in when they see that active management and transparency can work
well together. [
Actively Managed ETFs a Flop? Not So Fast.
Visit our active management category
for more stories about these types of ETFs.
Tisha Guerrero contributed to this article.