Fidelity Launches 3 Nontransparent ETFs

At the Inside ETFs conference in late January, Friedman described the advent of nontransparent ETFs as "the next evolution" of ETFs, "how you get active strategies in equity form." He explained, "There have been active strategies to date with fixed income — very successful, but now we're able to bring as an industry to our clients and our shareholders active equity for ETFs." 

Fidelity is the third asset manager to introduce nontransparent active ETFs, which aim to provide most of the benefits of an ETF such as tax efficiency, trading throughout the day and lower costs along with active management without revealing the manager's "secret sauce" with daily disclosure of holdings. These ETFs are essentially a lower cost alternative to actively managed funds. Many more asset managers are expected to follow either with their own proprietary structure or through licensing structures developed by outside firms.

To date, just two other asset managers have launched nontransparent ETFs: American Century Investments and Clearbridge, in partnership with Legg Mason. Those three ETFs — the ClearBridge Focus Value ETF (CFCV) and the American Century Focused Dynamic Growth ETF (FDG) and American Century Focused Large Cap Value ETF (FLV) — all use the ActiveShares structure from Precidian Investments. Under that structure holdings are disclosed quarterly with a 15-day lag and only a representative of the ETF's authorized participants will have knowledge of the fund's daily holdings.

Recently BlackRock filed to license the ActiveShares structure and Goldman filed to license Fidelity's proprietary nontransparent methodology.

In addition to the three new ETFs, Fidelity's ETF lineup includes three actively managed bond ETFs, 14 factor ETFs, 11 passive equity sector ETFs and Fidelity ONEQ, the Nasdaq Composite Index Tracking Stock. Its platform offers individual investors and advisors access to more than 2,000 ETFs, commission-free.

— Related on ThinkAdvisor:

• Second Asset Manager Launches a Nontransparent ETF
• Goldman Licenses Fidelity's Nontransparent ETF Structure
• First Nontransparent ETFs Start Trading
• Will Nontransparent ETFs Be Transformational?