Nontransparent ETF Structure Approved

Precidian wins footrace to launch actively managed nontransparent ETFs.

Reviewed by: Heather Bell
Edited by: Heather Bell

In a struggle that has been ongoing for the better part of a decade, Precidian Investments has just received approval on its filing for nontransparent actively managed ETFs. Eaton Vance’s NextShares structure won approval a few years ago, but those are not true ETFs. Precidian’s ActiveShares structure, however, is merely an enhanced version of an ETF with a blind trust and supporting processes.

While an ActiveShares portfolio is not transparent to investors, each fund will publish a verified intraday indicative value every second. Currently, regular ETFs quote net asset values to the marketplace every 15 seconds. The ActiveShares funds will have AP representatives known as trusted agents that would be provided data on portfolio holdings and use confidential accounts to do the creations and redemptions for the authorized participants, the press release says.

“These features will result in a seamless addition to the ETF landscape providing significant benefits to investors in reduced fees and tax advantages,” said Precidian CEO Daniel McCabe, adding, “For this reason, the support of large, established broker-dealers has already materialized and will continue to grow.”

Eagerly Awaited Development

According to a press release, the patented ActiveShares structure has already been licensed by the likes of Legg Mason, BlackRock, Capital Group, J.P. Morgan, Nationwide, Gabelli, Columbia, American Century and Nuveen.

Precidian cites advantages to investors in the form of lower costs and greater efficiency, to active managers in terms of flexibility and tax efficiency, and to markets in terms of diversifying the ETF market, among other benefits.

Nontransparent active management has been a sort of holy grail for the ETF industry, with many market commenters asserting that active managers would not want to launch transparent actively managed ETFs for fear of front-running. The ActiveShares structure has been in the works since at least 2013. The application that was eventually approved has gone through seven different incarnations.

Contact Heather Bell at [email protected]

Heather Bell is a former managing editor of She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.