(Bloomberg).
But four years after them debutactively managed strategies that only periodically disclose their holdings are experiencing a slow decline—and missing out on the massive swing their transparent counterparts are enjoying.
Non-transparent active ETFs (ANTs) – or semi-transparent funds, as they are also called – have amassed a modest $9 billion in assets as of 2020. That's just over 1% of total assets on the exchange. actively managed-traded funds, according to data compiled by Bloomberg and a team at JPMorgan that includes Bram Kaplan.
Meanwhile, active ETFs have generally accounted for more than 60% of new fund launches in each of the past four years, according to JPMorgan. Over the past year, they have collected a quarter of all US ETF inflows.
The less transparent distressed funds can be summed up in a simple explanation: investors not only like to know what they own, but they also hate paying for something that might have a cheaper alternative.
“Investors want to see properties. ETFs were built on transparency and this was a step backwards,” said Athanasios Psarofagis of Bloomberg Intelligence. “Strategies are not inspiring – many large-cap funds. Most of them hold the same stocks you get in the S&P, and it's not impressive that you're hiding the fact that you own Apple.”
To make up for lost ground, fund managers like IndexIQ and Fidelity have converted some of their semi-transparent ETFs in recent months to more transparent wrappers. They are following similar moves by Franklin Templeton and Nuveen, the latter late last year converted a growth ETF that at one point boasted the highest ranking among these products when it came to assets. Some others are simply closing their offers.
There are a handful of semi-transparent funds seeing inflows this year. The Fidelity Blue Chip Growth ETF (ticker FBCG) brought in the most in 2024 — $630 million — followed by the T Rowe Price US Equity Research ETF ( TSPA ), at $608 million, according to data compiled by Bloomberg.
However, the group's year-to-date inflows total about $2.6 billion, compared to $136 billion for the overall active ETF universe over the same period.
“Indeed, the vast majority of assets and inflows in active ETFs are in transparent active funds,” wrote the JPMorgan team that includes Kaplan, “demonstrating that portfolio transparency need not be a barrier to a strategy's success ETF assets”.
One reason interest in semi-transparent funds has waned is because of fees, according to Todd Sohn, an ETF strategist at Strategas. Since this category of funds claims to offer specialized stock-picking expertise, issuers were able to charge more for them. The average fee is 0.6%, according to data compiled by Bloomberg. This compares to an average of 0.5% charged across all ETFs.
“Fees matter in the ETF universe. Semi-transparent ETFs tried to take what was essentially a cheap, fundamental aspect of ETFs — being able to see holdings every day — and take that away,” Sohn said. “That's like saying your free coffee is now going to be $5.”