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A new cohort of exchange-traded funds has been hitting headlines lately. The group is called Active Non-Transparent (ANT) ETFs. Unlike the standard actively managed ETFs, which are necessitated to disclose their holdings daily, nontransparent ETFs will only be required to disclose their holdings every quarter.
Benefits of the ANT Structure
One of the major drawbacks of actively managed ETFs is that these products run the risk of “front-running” of portfolio trades. This means that the revelation of stock holdings will give the issuer’s competitors or other investors the chance of cashing on that advance information.
Apart from front-running, real-time information on holdings changes is likely to cause logistics issues as ETFs trade throughout a session and managers are likely to alter holdings several times in an hour as per their requirement, once indicated by Investopedia.
However, ANT ETFs fix such loopholes as these give active managers a chance to keep their investing methods under coverage to evade the front-running issue. In the past few years, numerous big asset managers including JPMorgan, BlackRock Inc., American Funds owner Capital Group Cos., and Legg Mason Inc. have pitched for the necessity of active ETFs with nontransparent characteristics, meaning an active ETF not revealing holdings on a daily basis.
The asset class is yet to see success. Even after a year of two American Century product launches (the first in the United States), existing funds have amassed about $1 billion in flows – pretty low compared with the $676 billion invested in all U.S. ETFs in the past one year, per Bloomberg. There are about 40 ANT ETFs so far.
Many industry experts expected high demand for ANT funds, especially given the rising inclination toward an ETF format over the mutual funds. Many thought the pandemic would force investors to look for active management to ride out the rapidly changing market conditions. But the response is still muted for ANT ETFs. It’s not surprising though as all new concepts take time to take off. The pandemic has actually made matters worse due to lack marketing avenues.
Companies that have qualified for executing a non-transparent methodology together have about $1 trillion in large-cap assets. Current ANT assets account for just 0.3% of the amount possessed by their parent firms’ mutual funds. The figures suggest that the ANT category has the potential to reach $3 billion by the end of 2021, according to Bloomberg Intelligence.
Most Successful ANT ETFs
The most-popular ANT ETF Fidelity Blue Chip Growth ETF (FBCG - Free Report) debut on Jun 2, 2020 and has amassed about 313.1 million in assets so far. The fund is up 8% so far this year. Coming to asset generation, American Century Focused Dynamic Growth ETF (FDG - Free Report) takes the second spot with about $214.4 million assets. It hit the market on Mar 31, 2020. The third spot holder is American Century Focused Large Cap Value ETF (FLV - Free Report) with about $203.4 million in assets. This fund also debuted on Mar 31, 2020.
Top Performers of 2021
Changebridge Capital Sustainable Equity ETF (CBSE - Free Report) – Up 21.7% YTD
Fidelity New Millennium ETF – Up 17.0% YTD
T. Rowe Price Equity Income ETF (TEQI - Free Report) – Up 15.9% YTD
Fidelity Blue Chip Value ETF (FBCV - Free Report) – Up 14.1% YTD
Changebridge Capital Long/Short Equity ETF (CBLS - Free Report) – Up 14.1% YTD
Natixis U.S. Equity Opportunities ETF – Up 13.7% YTD
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A Guide to Active Non-Transparent (ANT) ETFs
A new cohort of exchange-traded funds has been hitting headlines lately. The group is called Active Non-Transparent (ANT) ETFs. Unlike the standard actively managed ETFs, which are necessitated to disclose their holdings daily, nontransparent ETFs will only be required to disclose their holdings every quarter.
Benefits of the ANT Structure
One of the major drawbacks of actively managed ETFs is that these products run the risk of “front-running” of portfolio trades. This means that the revelation of stock holdings will give the issuer’s competitors or other investors the chance of cashing on that advance information.
Apart from front-running, real-time information on holdings changes is likely to cause logistics issues as ETFs trade throughout a session and managers are likely to alter holdings several times in an hour as per their requirement, once indicated by Investopedia.
However, ANT ETFs fix such loopholes as these give active managers a chance to keep their investing methods under coverage to evade the front-running issue. In the past few years, numerous big asset managers including JPMorgan, BlackRock Inc., American Funds owner Capital Group Cos., and Legg Mason Inc. have pitched for the necessity of active ETFs with nontransparent characteristics, meaning an active ETF not revealing holdings on a daily basis.
ANTs are normally promoted as better bets than mutual funds. “Broad availability and low investment minimums are an advantage that ANTs have over many mutual funds,” per a Morningstar article. In short, ANTs combine the access and tax advantages of ETFs (than mutual funds) with the charm of active management while saving investing strategies from copycats, as explicitly indicated in a Bloomberg article.
How ANTs Are Performing in Wall Street
The asset class is yet to see success. Even after a year of two American Century product launches (the first in the United States), existing funds have amassed about $1 billion in flows – pretty low compared with the $676 billion invested in all U.S. ETFs in the past one year, per Bloomberg. There are about 40 ANT ETFs so far.
Many industry experts expected high demand for ANT funds, especially given the rising inclination toward an ETF format over the mutual funds. Many thought the pandemic would force investors to look for active management to ride out the rapidly changing market conditions. But the response is still muted for ANT ETFs. It’s not surprising though as all new concepts take time to take off. The pandemic has actually made matters worse due to lack marketing avenues.
Still, there have been green signals that ANTs often deliver. “During the February selloff, they outperformed their fully transparent peers,” per a Bloomberg article, published on Yahoo Finance (read: Top ETF Stories of February Worth Watching in March).
Companies that have qualified for executing a non-transparent methodology together have about $1 trillion in large-cap assets. Current ANT assets account for just 0.3% of the amount possessed by their parent firms’ mutual funds. The figures suggest that the ANT category has the potential to reach $3 billion by the end of 2021, according to Bloomberg Intelligence.
Most Successful ANT ETFs
The most-popular ANT ETF Fidelity Blue Chip Growth ETF (FBCG - Free Report) debut on Jun 2, 2020 and has amassed about 313.1 million in assets so far. The fund is up 8% so far this year. Coming to asset generation, American Century Focused Dynamic Growth ETF (FDG - Free Report) takes the second spot with about $214.4 million assets. It hit the market on Mar 31, 2020. The third spot holder is American Century Focused Large Cap Value ETF (FLV - Free Report) with about $203.4 million in assets. This fund also debuted on Mar 31, 2020.
Top Performers of 2021
Changebridge Capital Sustainable Equity ETF (CBSE - Free Report) – Up 21.7% YTD
Fidelity New Millennium ETF – Up 17.0% YTD
T. Rowe Price Equity Income ETF (TEQI - Free Report) – Up 15.9% YTD
Fidelity Blue Chip Value ETF (FBCV - Free Report) – Up 14.1% YTD
Changebridge Capital Long/Short Equity ETF (CBLS - Free Report) – Up 14.1% YTD
Natixis U.S. Equity Opportunities ETF – Up 13.7% YTD
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>