A Blow To Transparency?
Rosenbluth's emphasis on a desire among some investors for more fund transparency—or an aversion to a lack of transparency—resonated strongly among ETF strategists that ETF Report contacted.
These money managers that build portfolios using index ETFs are riding a cresting wave that values portfolio construction that discloses portfolio holdings daily. For these advisors, there's no turning back to the days of delayed portfolio disclosure—precisely what ETMFs feature.
"We're still analyzing ETMFs, but my initial thought is it doesn't appear we would use them much, if at all," said Clayton Fresk, portfolio management analyst at Georgia-based Stadion Money Management. "We have price conviction when we trade, so having the intraday pricing 'unknown' doesn't fit us well. We also favor transparency, which is another knock on the ETMF as compared to the ETF."
However, other ETF strategists are welcoming ETMFs as part of a healthy competition of ideas.
"I tend to like choice," said Michael McClary, chief investment officer of Akron, Ohio-based ValMark Advisers, an ETF strategist with more than $5 billion in assets under management. "I'm not sure the ETMF will be the 'be-all end-all' forever, but I think one of the reasons the ETMF was approved by the SEC is because it isn't that different from a mutual fund."
That said, McClary says the ETMF doesn't solve the deeper problem of underperformance.