FYI: An exchange-traded fund that doesn’t have to reveal its assets is poised to get the regulator’s blessing after a more than four-year wait.
The U.S. Securities and Exchange Commission plans to issue an order granting Precidian Funds permission for the new type of ETF, the watchdog said in a notice Monday. Market participants can still request a hearing through May 3, the regulator said; if granted, that could potentially delay or derail the final approval. The funds also need permission to start trading from another division of the SEC.
The decision is a huge win for stock pickers who have long pushed back against a requirement that funds publish their investing positions daily.
Regards,
Ted
https://www.bloomberg.com//news/articles/2019-04-08/an-etf-that-hides-its-secret-sauce-is-poised-for-regulator-s-nod?srnd=markets-vp
Comments
Nevertheless, I'm unclear on what your concern is. Currently, no funds, not even actively managed ETFs, disclose their holdings more than daily. Authorized participant (AP) trading is based on portfolio composition files and indicative values, not on knowing exactly what's in the fund. So even now, ISTM AP trades are based on imperfect indicative values.
As far as passively managed ETFs go, some don't even disclose their holdings except monthly (and even then, with a lag). Again, what APs are buying and selling is based on portfolio composition files (baskets) which do not match what is in the fund (especially for index funds that use sampling to track their benchmark index and may be using the baskets to tweak their holdings).
Maybe (actually I'm sure) I need to think this through some more. Still, I've always felt that transparency is not the big deal that ETF proponents make it out to be.
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I agree with msf in that most folks never bother to look or possibly even care about the holdings but I think that a public fund should be required to show some semblance of transparency.
Index ETFs have the same set of rules as "other" mutual funds, i.e. just quarterly disclosures, though most disclose daily, and as linked to above, Vanguard discloses monthly.
Actively managed ETFs are required to disclose holdings daily. The theory is that this helps APs know what's in the portfolio. I still don't get how this once a day disclosure helps, because they're buying/selling intraday what's listed in a portfolio composition file that doesn't exactly match a fund's holdings anyway. But that's the theory.
What's appears to be new is that in lieu of posting holdings daily, actively managed ETFs merely need post their indicative value more frequently than before - each second instead of each quarter minute.
Current (not new) SEC rules: https://www.sec.gov/investor/alerts/etfs.pdf