Not too long ago, Tom and I did a podcast about nontransparent active ETFs. If you missed it, check it out here: https://mullooly.net/nontransparent-active-etfs/7641. Our main question about these potential investments was primarily focused on who they would benefit and how.
Yesterday reports surfaced that the SEC shot down BlackRock’s proposal to launch nontransparent active ETFs. Apparently our concerns over who would benefit from these products wasn’t misplaced. An article from The Wall Street Journal quoted Todd Rosenbluth, director of ETF and mutual-fund research at S&P Capital IQ saying:
“It doesn’t shut the door completely, but it came across very clearly that the lack of transparency was going to cause undue risk for investors that the SEC was uncomfortable with. The message that seems to be coming from the SEC is that lack of intraday clarity is not in the public interest.”
At this point, it seems like the SEC is concerned about the possible risks of these investments outweighing the advantages. The key to my previous sentence is “at this point”. Things can change, but for the time being we won’t be seeing an nontransparent active ETFs.