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Just looked at these, after logging in. "These are not like other CEFs." The holdings are not published daily... WTF. Are they trying to scare people away?
I think you mean the newer active ETFs. Several types have been approved by the SEC and they have different ways to provide limited portfolio information. Provide some tickers.
It would be harmful to the fund company and the investors if the holdings are published on daily basis. Even for open-end mutual fund the holdings posted is at least 30 days old.
Regular ETFs do require daily releases of holdings. That is OK for indexed ETFs and active bond ETFs but not for equity ETFs. That is what held up their development so far. But the SEC has now approved several semi-transparent active ETFs that release limited daily holdings to professional 3rd parties, especially those involved in creation/redemption processes. There are also a handful of offbeat active ETFs that voluntarily release holdings daily (Davis, etc).
Traditionally, indexed ETFs were not required to disclose holdings on a daily basis. The rules were changed in the past few years; in 2015 the WSJ wrote:
here’s what many ETF investors probably don’t know: Passively managed ETFs—those that seek to track an index—actually aren't required to disclose all of their portfolio holdings daily.
Many fund sponsors voluntarily provide that information. But at least one major ETF sponsor, Vanguard Group, doesn’t.
Index funds do have to make available to so-called "authorized participants"—typically large institutional organizations, such as large securities firms—what's known as a "creation basket" daily. That list of securities typically [but not always] mirrors an ETF’s holdings or is a representative sample. Authorized participants who assemble and deliver that specified basket of securities receive ETF shares in its place.
My point here is just that IMHO transparency is overrated. Vanguard ETFs worked well for many years without it. So long as the arbitrage mechanism with authorized participants and portfolio composition files (creation basket/redemption basket) works well to keep market price close to NAV, daily transparency isn't essential.
As Sven noted, mutual funds generally take their full 30 days plus to disclose portfolios and investors are okay with that.
Surely no list of offbeat active ETFs that voluntarily release holdings on a daily basis would be complete without mentioning ARKK's daily disclosure.
Many of these semi-transparent ETFs from TRP or Capital are based broadly on and/or will try replicating the models/holdings of their 'equivalent' mutual funds but won't necessarily contain the same holdings, too.
(For example TRP's Growth ETF might almost be the same as TRBCX and even have the same name, managers, and relatively similar holdings, but it won't be quite identical.)
For decades, the ETFs operated under the so-called "exemptive-orders" (from rules that were really designed for mutual funds). Early ETFs got generous exemptions, but the later ones had more restrictive exemptions. Vanguard got away with murder with its very early exemptive-orders. The SEC announced reforms to this old, contorted mechanism and guess who was among those opposing the reforms - Vanguard. Anyway, the reforms happened in 2019 and now every ETF has to follow the same rules. But rules are still different for passive ETFs, active ETFs, leveraged ETFs (another fiasco where the SEC left out ETNs from those). https://www.sec.gov/news/press-release/2019-190
Not quite every ETF operates under the same rules. As the PR notes, "Rule 6c-11 will be available to ETFs organized as open-end funds, the structure for the vast majority of ETFs today".
A couple of not so obscure ETFs with a different structure are SPY and DIA. Since the creation of new UITs is unlikely and the SEC would have struggled to fit them into Rule 6c-11, UITs were excluded from the Rule.
It draws a distinction not so much between passive and active as between transparent and non-transparent. I suppose in theory an index fund could be non-transparent. I'd ask why bother, except Vanguard seemed to think there was a reason not to disclose its index ETF holdings.
I recall that Vanguard characterized its Tax-Managed International Fund¹ (VTMGX) as actively managed while calling the ETF share class of the fund, VEA, passively managed. I asked Vanguard about this, and the response was that tax management made the fund actively managed, but the ETF (same fund) was passively managed! Yes, Vanguard got away with murder.
Have you checked into who in addition to Giroux was moved from T. Rowe Price Associates, Inc. to T. Rowe Price Investment Management, Inc.?
[M]anagers who may have bounced ideas off a favorite analyst or a favorite manager may no longer be able to do that. The idea is to have these groups operate more or less autonomously. In other words, they can't share ideas across the line.
Comments
Provide some tickers.
https://troweprice.com/personal-investing/tools/fund-research/etf
It would be harmful to the fund company and the investors if the holdings are published on daily basis. Even for open-end mutual fund the holdings posted is at least 30 days old.
My point here is just that IMHO transparency is overrated. Vanguard ETFs worked well for many years without it. So long as the arbitrage mechanism with authorized participants and portfolio composition files (creation basket/redemption basket) works well to keep market price close to NAV, daily transparency isn't essential.
As Sven noted, mutual funds generally take their full 30 days plus to disclose portfolios and investors are okay with that.
Surely no list of offbeat active ETFs that voluntarily release holdings on a daily basis would be complete without mentioning ARKK's daily disclosure.
Many of these semi-transparent ETFs from TRP or Capital are based broadly on and/or will try replicating the models/holdings of their 'equivalent' mutual funds but won't necessarily contain the same holdings, too.
(For example TRP's Growth ETF might almost be the same as TRBCX and even have the same name, managers, and relatively similar holdings, but it won't be quite identical.)
https://www.sec.gov/news/press-release/2019-190
A couple of not so obscure ETFs with a different structure are SPY and DIA. Since the creation of new UITs is unlikely and the SEC would have struggled to fit them into Rule 6c-11, UITs were excluded from the Rule.
More generally, "While the Rule covers most ETFs, the Rule excludes unit investment trust (UIT) ETFs, Leveraged/Inverse ETFs, Share Class ETFs [notably Vanguard ETFs], and Non-Transparent ETFs."
Exchange-Traded Funds Alert, October 2019; A Closer Look at the New ETF Rule, Stradley Ronon
It draws a distinction not so much between passive and active as between transparent and non-transparent. I suppose in theory an index fund could be non-transparent. I'd ask why bother, except Vanguard seemed to think there was a reason not to disclose its index ETF holdings.
I recall that Vanguard characterized its Tax-Managed International Fund¹ (VTMGX) as actively managed while calling the ETF share class of the fund, VEA, passively managed. I asked Vanguard about this, and the response was that tax management made the fund actively managed, but the ETF (same fund) was passively managed! Yes, Vanguard got away with murder.
¹ On "April 4, 2014, Vanguard Developed Markets Index Fund merged into Vanguard Tax-Managed International Fund, and the combined fund was renamed Vanguard Developed Markets Index Fund."
https://institutional.vanguard.com/investments/product-details/fund/0127
Maybe none of the ETF managers are on the same side of the firewall, maybe they all are. It's a starting point.