The other shoe has dropped at Blackrock ($BLK). Last week the company announced it was getting into the index business. This week they filed with the SEC to launch non-transparent, actively managed ETFs. With these two filings Blackrock is clearly trying to carve out an even bigger footprint in the ETF industry.
Olivier Ludwig at IndexUniverse has all the details on the filing. The big surprise is not that Blackrock is interested in actively managed ETFs, but they are going to push forward using a non-transparent structure. Ludwig writes:
BlackRock’s concept goes to the heart of an ongoing pursuit in the money management industry to provide strategies that aim to beat market benchmarks. A big part of that pursuit is a belief among managers that keeping portfolios secret gives them an edge over others in the market. Without that, they say, anybody can quickly steal their “secret sauce” and undermine their edge.
The question potential investors in these funds need to ask themselves is whether there is any “secret sauce” worth stealing at Blackrock or at the slew of other money management firms looking to get into the actively managed ETF space. From a fund sponsor perspective it is clear why they are interested in actively managed, non-transparent ETFs. Investors on the other hand should remain skeptical. It is not altogether clear that putting existing active strategies into an ETF form is going to markedly improve their performance.
Prior posts on the topic of actively managed ETFs:
Teaching an old dog new tricks. (Abnormal Returns)
Buy vs. build: the ETF decision. (Abnormal Returns)
ARTV on actively managed ETFs. (Abnormal Returns)
Luck, persistence and fund performance. (Abnormal Returns)
What ETFs are in your toolbox? (Abnormal Returns)