American Century Debuts Active Non-Transparent ETFs

The first Active Non-Transparent ETFs made their trading debut today via a pair of funds from American Century Investments.

The American Century Focused Dynamic Growth ETF (FDG) is designed to invest in early stage, rapid growth companies with large market opportunities while the American Century Focused Large Cap Value ETF (FLV) is designed to invest in large-cap, high-quality companies temporarily selling at a discount in the Russell 1000 Index. Fund holdings will be reported once a quarter like a mutual fund.

Ed Rosenberg, head of exchange traded funds for American Century Investments, told ETF Trends its Active Non-Transparent ETFs were a natural extension of its fundamental and quantitative expertise.

“We’ve been doing fundamental investing since 1958,” Rosenberg told ETF Trends. “The firm was built around growth products and then in the 1990s, we launched value products as well. Since then we’ve continued to expand into different product types.”


He said investors have been looking for a different wrapper of its fundamental investment process.

FDG and FLV will use the ActiveShares structure, which is licensed from Precidian Investments.

Precidian’s ActiveShares functions in a similar fashion to existing ETFs by quoting a consistent intraday price to the market (called a “VIIV” or verified intra-day indicative value). While all other ETFs publish an IIV/IOPV every 15 seconds, ActiveShares will take it a step further and publish the VIIV every second.

Dan McCabe, Chief Executive Officer at Precidian Investments, said: “Combining the benefits of active and passive investing in one innovative solution, ActiveShares’ unique, periodically-disclosed structure could set a new industry standard for both mutual funds and ETFs alike. We are pleased to see American Century and Cboe being first-to-market with this product type, and look forward to expanding industry adoption of the ActiveShares structure.”

The new structure will allow American Century to deliver its time-tested actively-managed investment strategies in these ETF vehicles without the daily holdings disclosure requirement of fully transparent ETFs.

Rosenberg said that while this new type of structure is unique, the new funds would still “look like ETFs.”

He noted the new funds would publish their holdings within a 15-day window after each quarter ends, meaning investors will have an initial idea of what’s in these ETFs. 

“The biggest thing that will help with these funds is the more information that comes out,” he said. “Investors will be able to see how they trade, what the spreads end up being, holdings, and eventually historical holdings where people can look back on quarters or top tens. Over time, you are going to see more information come out and it will dictate what the turnover of the fund is for people and they’ll have more of an idea of what’s in it.”

By using the ActiveShares structure, ACI’s fund managers will be able to combine the potential for alpha generation – traditionally associated with active mutual funds – with the simplicity, cost-efficiency and tax benefits of ETFs.

“If there’s ever a time when you can make an argument for adding a human being into your investment process, a time when the entire global economy is being refactored seems like a good one,” said ETF Trends Director of Research, Dave Nadig. “On top of that, ACI is coming to market at a time when the value of intraday liquidity has never been more apparent.”

ETF Trends CEO Tom Lydon added, “Passive investing has really worked well for the last ten years, but with the current market volatility and need for more stock selectivity, we may begin to see a shift in strategy.”

The two new ACI actively managed, semi-transparent exchange-traded funds are listed on the Cboe BZX Exchange.

In addition to Cboe as the primary listing venue, IHS Markit is the verified intraday indicative value (VIIV) calculation agent, Citadel Securities is the lead market maker (LMM), and State Street Corporation and Cantor Fitzgerald & Co. are Authorized Participant Representatives (APRs).

As part of the agreement, State Street will provide services including basket creation, dissemination, settlement, custody, fund accounting, order-taking, financial reporting and transfer agency services to American Century Investments’ new suite of funds. In addition, State Street, through its affiliated broker dealer within its Global Markets division, will also serve as the first Authorized Participant Representative (APR) in the ActiveShares ecosystem. The APR is a new and pivotal role, serving as agent for the execution of the underlying confidential portfolio holdings, and standing in between the Authorized Participant and the Investment Manager to protect the confidentiality of the portfolio holdings.

Author: Brenton Garen –

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