Active Non-Transparent ETFs: What Are They Good For?
Assessing the benefits and drawbacks of this novel fund type.
A new generation of exchange-traded funds debuted earlier this year. Actively managed non-transparent ETFs, or ANTs, share much in common with traditional ETFs. Their most distinctive feature is that they do not disclose the contents of their portfolios to the public on a daily basis. This helps prevent their managers from tipping their hand to the market. These ANTs offer investors meaningful benefits over traditional actively managed mutual funds. They also differ from conventional ETFs in nuanced but important ways. Investors should weigh the benefits and drawbacks of this novel fund type to decide whether it has a place in their portfolios.
Actively managed non-transparent ETFs function much like traditional ETFs. They trade on the stock exchange during normal market hours and can be bought and sold in an amount as small as a single share. This means they are available to any investor with a brokerage account and enough cash to cover the share price. Broad availability and low investment minimums are an advantage that ANTs (and ETFs more generally) boast over many mutual funds.