Relaxed disclosure regulations could see active ETF market soar

Active exchange-traded funds (ETFs) in the US have been given approval by the Securities and Exchange Commission to trade without disclosing their holdings on a daily basis, which could see the ETF market expand rapidly worldwide, according to Antipodes Partners.

Director of listed products at Pinnacle Investment Management, Chris Meyer, said the relaxation of disclosure regulations in the US was a major step forward in the development and growth of the US active ETF market, and the move could spur many more fund managers to offer active ETFs while still allowing them to protect their intellectual property.

Active ETFs in the US would still be required to disclose daily holdings, but only to a new subset of professional trader called “authorised participant representatives”, and the public would only receive portfolio holdings on a quarterly basis, as they do in Australia.

“The decision is considered a win for active stock pickers who do not want to reveal their holdings for fear front runners and others may seek to capitalise on predicting their next move,” Meyer said.

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“As the active ETF market grows in the US, increased education on what active ETFs are and the benefits they offer for investors should help stimulate interest in, and adoption of active ETFs in Australia. That bodes well for the industry’s growth.”