Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup

Do Investors Want ETFs with Fewer Disclosures?

April 10, 2019 By Jeremy Jones, CFA

By Casper1774 Studio @ Shutterstock.com

Asset managers have been begging the SEC to allow them to hide their ETF holdings for years, with the simple argument that they can’t deliver market beating returns if all their competitors know what they’re holding at all times. Currently ETF managers are forced to disclose their holdings each day, but the disclosures haven’t allowed for managed ETFs to take off because managers can’t maintain secrecy. A new decision from the SEC could change all that, allowing managers to hide their assets better, but do investors even want that? Annie Massa and Rachel Evans report at Bloomberg:

After more than four years of waiting, active managers may soon be able to start exchange-traded funds without giving away their investing secrets — but it may be too little, too late to rejuvenate the industry.

In a milestone decision, the U.S. Securities and Exchange Commission said Monday that it plans to approve a special kind of ETF that partially conceals its holdings, unlike a normal fund that reports them daily. Proponents view the structure — created by Precidian Funds — as a way for stock pickers to get in on the ETF game and fight back against the shift to indexed products.

That said, it isn’t clear there’s much investor demand for ETFs with reduced disclosure.

“The interest has been far greater among asset managers than it has been among investors,” said Ben Johnson, who heads passive strategy research at Morningstar Inc. “More fundamentally it’s an asset management problem they’re looking to solve, with concerns around transparency.”

Active managers have been under competitive pressure from passive products like ETFs for years. Stock pickers have largely watched as the funds grew into a $3.8 trillion industry, unwilling to start an ETF that would reveal their holdings and allow competitors to guess their strategy and possibly front-run their trades.

Now that they’ll soon be relieved of that problem, a larger issue related to fees remains: Paying more for active funds is increasingly unappealing to investors who saw two-thirds of such equity mutual funds trail their benchmarks in March.

Large asset managers who will pay to license Precidian’s ActiveShares technology include BlackRock Inc., JPMorgan Chase & Co. and Capital Group Cos., according to Precidian. Morgan Stanley expects the first funds to start trading within about six months.

“What we’re doing now is leveling the playing field for the active manager who can provide alpha, and allow him to bring his wares to market” said Dan McCabe, chief executive officer of Precidian.

But investors may not be eager customers given reservations about products with limited disclosure. Eaton Vance Corp. began selling non-transparent ETFs back in 2016. These funds, which function differently from Precidian’s model, have been slow to gather assets. A number of other structures are also seeking approval.

Read more here.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • The Trouble with Balanced Mutual Funds and ETFs
  • Ackman Faces the Flight of his Investors
  • Do ETFs Belong in Your Portfolio?
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #5 in CNBC's 2021 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • Despite Inflation, Best Year Ever for Vacation Demand - July 1, 2022
  • Purchases of Gaming Chips for Crypto Mining Tailing Off - June 30, 2022
  • Are Google, Amazon, and Microsoft About to Crash This Specialized Real Estate Market? - June 29, 2022

Search Young Research

Most Popular

  • Here’s Why You Need a 15-Year Retirement Investment Plan
  • Why Work When Taxes Take It All?
  • Are Google, Amazon, and Microsoft About to Crash This Specialized Real Estate Market?
  • What Happens to Your Passwords When You Die?
  • Regulators' Bungled Attempts to Cut Emissions Drove Oil Prices Higher
  • Is the Great Job Boom Over?
  • RURAL RENAISSANCE: America Finds the Country Again
  • The Power of a Compound Interest Table
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • Your Survival Guy: Clearing the Decks, Buying a Boat, Seeing the World and More

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • Happy Independence Day
  • For Investors Who Want to Stop Worrying About a Market Crash
  • Breaking News: House Election Update
  • WATCH: New York Governor Melts Down When Asked for Facts
  • Florida Is a Refresher Course in American Greatness
  • Should You Believe Ms. Hutchinson?
  • Biden’s Economy Even Weaker than Thought
  • A Cashless Society Is A Debacle for Americans
  • Time to Save, Troubles Dining Out, and Intelligence on Yellowstone
  • Democrats Running AWAY from Biden on the Campaign Trail

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2022 | Terms & Conditions

 

Loading Comments...
 

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.