ETF Watch: Vanguard Plans Active ETF Entry

Vanguard has filed for exemptive relief to offer transparent actively managed ETFs that are not share classes of existing mutual funds. It’s an interesting distinction given that all of Vanguard’s 70 index-based ETFs are share classes of its passively managed mutual funds.

In 2014, Vanguard filed an exemptive relief request for transparent actively managed ETFs that would be shares of its mutual funds.

The firm is known for its index-based funds, both mutual funds and ETFs. However, the latest exemptive relief filing suggests the firm is looking to branch further into active management.

Nontransparent actively managed ETFs have been the latest holy grail in the ETF space. Eaton Vance has launched the first funds in its NextShares lineup of exchange-traded managed funds. However, those products are not considered actual ETFs, and Fidelity recently made a filing for a structure that is a hybrid mix of a closed-end fund and an ETF. And Precidian is still in limbo on getting the go-ahead for its own version of a nontransparent active fund.  

Vanguard is bucking the trend by filing for actively managed transparent ETFs. Most active managers don’t like the idea of daily disclosure for fear of front-running, but in the Vanguard filing, it specifically notes, “Although the portfolio of each Fund will be managed actively, Applicants do not believe such portfolio could be managed or manipulated to produce benefits for one group of purchasers or sellers to the detriment of others.”

The filing did not mention an initial fund.

Contact Heather Bell at [email protected].