The ETF “ANTs” go marching one by one: active non- and semi-transparent models


Monday, February 24, 2020 | By Nichole M. Kramer, Manager, ETF Order Desk, Intermediary Operations, Distribution Services

The ETF “ANTs” go marching one by one: active non- and semi-transparent models

“If you’re a mutual fund warehouse, you’re trying to figure out how to grow your business without giving away your secret sauce.” ~Nichole M. Kramer, Wall Street Journal, February 8, 2019

With relentless competition for investors’ dollars and increasing fee compression, some open-end mutual funds have found growing their assets under management a daily challenge. More so, we often hear new and existing managers ask how they can expand their asset gathering opportunities. SS&C ALPS would like to share with you some general details about these new ETF wrappers that have the potential to complement traditional mutual fund families’ existing alpha-driven investment strategies. 

Up until this point, active managers that operate in the traditional mutual fund world have been hesitant to step into the ETF space due to the daily transparency requirements that would give away their investment strategy, or secret sauce. However, a number of firms have filed non- and semi-transparent (sometimes called ANTs for active non-transparent) models that combine the lower overall costs associated with ETFs with the ability to actively manage a portfolio without disclosing a fund’s daily holdings. Five out of seven ANT models were granted approval on their exemptive relief applications during 2019; two are still pending.

As outlined in our Semi-Transparent ETF whitepaper, there are some key similarities and differences between these products. The two obvious differences are in intraday pricing and what is disclosed daily to the AP, since daily transparency is no longer a requirement in these models.

Firms looking to launch an ETF in one of these ANT models will need to perform due diligence and sample modeling to determine what will work best for their strategy—no single model is a catchall, and firms may find that they may need more than one wrapper to cover their suite of products. Precidian, Blue Tractor Group, Fidelity and NYSE all offer licensing agreements for their respective models. T. Rowe Price is still evaluating licensing. 

Could these ANTs work for you?  Read more in the SS&C ALPS Whitepaper.



Asset Management, Wealth Management


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