Navigating the Actively Managed ETF Space with Blue Tractor Group
As exchange-traded funds (ETFs) have swelled in popularity, more ETF strategies are coming to market. For the first installment of a three-part series delving into the recent ETF developments, we spoke with Simon Goulet, co-founder of Blue Tractor Group, to discuss the actively managed ETF space and provide actionable information for asset managers considering an active ETF strategy.
Let’s begin with an overview of what Blue Tractor does and what it offers to asset managers.
Blue Tractor is a New York City-based company that has developed an SEC-approved ETF structure for active portfolio managers that we call “Shielded Alpha.” The Blue Tractor ETF structure is part of the burgeoning category of exchange-traded funds (ETFs) that are commonly called semi or non-transparent ETFs. In a nutshell, the Blue Tractor semi-transparent ETF provides an active portfolio manager with all of the features and benefits of an ETF versus a traditional mutual fund while simultaneously protecting the portfolio manager’s confidential investment strategy from predatory actors. Plus, as fiduciaries, active managers using the Blue Tractor wrapper can be confident that their shareholders’ wealth is protected.
We license our cloud-hosted technology and SEC exemptive relief to asset managers, and we work closely with them pre- and post-launch to maximize their success and raise assets under management (AUM). Asset managers have launched actively managed ETFs using the Blue Tractor wrapper on the Nasdaq exchange, with more launches pending.
Why should an asset manager focused on active management consider launching an ETF?
We believe that every active manager should consider an ETF strategy. It doesn’t matter if, to date, you have been super successful within a mutual fund wrapper. The fact of the matter is that investor wallets are doing the talking, and it’s clear that the largest and most sustained flows are out of mutual funds and into ETFs. ETF growth in the U.S. over the past 20 years has been phenomenal, with total AUM now over $5.5 trillion and heading to $10 trillion before the decade is out. So ‘follow the money,’ and for this reason alone, it’s a business imperative you consider what you’re going to do before your board asks you the question.
So, why are ETFs gaining market share? Three key reasons that make it clear the ETF is a superior wrapper for investors:
- Lower cost because of reduced fund administration expenses and no 12(b)1 fees.
- Intra-day liquidity for investors as they’re exchange-traded and accessible on multiple platforms.
- Perhaps most importantly, they are super tax efficient for the investor as due to the inherent structure of the ETF wrapper (and a key feature called custom baskets), most actively managed ETFs will not book a capital gain at the fund level. So, no 1099-DIVs for the investor for end-of-year capital gain distributions like you normally see with actively managed MF.
The market anticipates the high growth trajectory of ETFs to continue, driven by the ease for asset managers to launch new products, the ease for investors to trade ETFs on numerous platforms and the shift in investor demographics to a younger, digitally savvy generation.
Click here to read the final installment, Blue Tractor Group on Supporting the Launch of New ETFs.
For asset managers seeking more information on Blue Tractor, please speak with your Nasdaq relationship manager to set up a call. Asset managers can also reach out to Goulet directly at simon@bluetractorgroup.com and learn more at bluetractorgroup.com
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