Coniderations for Managers
These product structures may be ideal for an asset manager who is managing active strategies and is wary of publishing their holdings daily. When considering whether these products are right for their firm, managers should ask themselves:
- Which product structure is right for my strategy?
- How will I price these products alongside my existing investment menu?
- Should I seek to replicate existing strategies or launch something new?
- Will broker/dealer platforms support these products?
- What are the operational nuances that are unique to these products?
- How will I need to adjust my distribution strategy to support these products?
- How should I structure my capital markets team to support these products?
Asset managers should consider what strategies may work in this wrapper and how a proxy-basket, semi-transparent active offering could be added to their capabilities. BBH is ready to discuss these products in more detail and welcome the opportunity to engage with firms in deeper dialogue about this development.
Over the past 15 years, Brown Brothers Harriman (BBH) has partnered with more than 40 asset managers and sponsors to bring ETFs to market in the US, Europe, and Hong Kong. BBH has worked with all four proxy product sponsors and other third-party providers to design an operating model to service these products.
On December 10, the SEC approved new proxy-based, semi-transparent active ETF structures from Natixis/New York Stock Exchange (NYSE), T.Rowe Price, Fidelity, and Blue Tractor Group. While each of the products is unique, they all use “proxy baskets” to avoid the possibility that investors will use disclosed information about an ETF’s holdings to front run the strategy. These structures may provide a compelling option for active managers to enter the ETF market without revealing their “secret sauce.” In this edition of Exchange Thoughts, we break down the different features of these active structures.
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