ACA Releases White Paper on “The Expanded ETF Ecosystem”

ACA Group, in conjunction with Arro Financial Communications and ETF Trends, released a white paper entitled “The Expanded ETF Ecosystem: Transparent and Semi-Transparent ETFs.” The report delves into the nuances between traditional passive ETFs as well as newer semi-transparent ETF offerings. Semi-transparent ETFs selectively disclose portfolio holdings information to the public on a schedule similar to traditional actively managed mutual funds while still working to maintain market and net asset value parity. While utilizing many of the same structures as traditional ETFs, semi-transparent ETFs are mostly distinguished from fully transparent ETFs by the methods utilized to signal the value of the ETF’s underlying portfolio. The white paper details different ways in which semi-transparent ETFs disclose their holdings on a limited basis including:

  • Shielded Alpha
  • Tracking Basket
  • Proxy Portfolio
  • ClearHedge

For instance, in Fidelity’s Tracking Basket model, the fund discloses its “tracking basket” which consists of “select recently disclosed portfolio holdings and ETFs that convey information about the types of financial instruments utilized by the fund that are not fully represented by Strategy Components.” The white paper concludes by noting “[f[irms will also be required to keep a close eye on how their products are trading, both to ensure that they are putting enough information into the market and that they are meeting reporting obligations under their exemptive applications which require reporting certain events up to a fund board on short notice – something you don’t see with traditional transparent ETFs.”

Click here to access the white paper “The Expanded ETF Ecosystem: Transparent and Semi-Transparent ETFs.”