Nottingham ready to go with Blue Tractor model of semi-transparent ETFs
US fund administrator Nottingham has received clearance from the SEC to launch active ETFs within the Blue Tractor Shielded Alpha semi-transparent ETF structure.
The ANT ETF Spinnaker ETF Series will emerge through Nottingham, which has USD31 billion in assets under advisement, and its investment adviser affiliate OBP Capital. Kip Meadows, Founder and CEO of Nottingham, explains that, so far, the firm is offering administration services to four ETFs, having only recently taken a step into the industry.
“ETFs are very similar to mutual funds but with a number of differences and it's where we think markets are heading now, with much more growth in ETFs in the future,” Meadows says.
The drivers lie in the tax efficiency of ETFs in the US, Meadows believes. “They are also attractive to younger investors who want to see their investments instantly on their mobile devices, at any time of the day, against the open-ended mutual fund pricing once a day, and ETFs also usually have lower expense ratios and all this drives momentum.”
Nottingham’s first outing in the semi-transparent space is with Blue Tractor as Meadows was impressed with the firm's principals, Terry Norman and Simon Goulet (both speakers at ETF Express’s etfLIVE North America event in October).
He feels the pair had well thought out the whole process of the different parties that would be involved in creating a semi-transparent ETF and enabling the market makers or authorised participants to create a market.
“You need ease of use in the market place as the portfolio manager will want to hide part of their investment strategy, but not all of it,” he says.
Nottingham says that his firm is in several conversations at the moment in, what he calls, a ‘chicken and egg’ moment where there are a number of firms who are interested in launching ANT ETFs, but each wants to let somebody else try it first.
The Blue Tractor semi-transparent model is the most transparent of the structures on offer at the moment as it varies the percentages of the securities in the portfolio. Nottingham also applied for in March, and expects to receive SEC clearance, to offer the NYSE Actively Managed Solution structure in the next few weeks.
“We expect that ETFs will be a big business for us going forward,” Meadows says. “Our expectation is that this is where the markets are going with portfolio managers who want to start launching ETFs. We have a real big push for firms that have open ended mutual funds that want to convert.”