Invesco Debuts Four ETFs Designed to Prevent Front-Running

Invesco Ltd. is launching four ETFs that don’t report their holdings daily, seeking to shield the asset manager’s strategies from front-running or replication from rivals.

The active non-transparent exchange-traded funds will use a structure that conceals a portion of their positions. The $1.2 trillion Atlanta-based firm plans to publish a “tracking basket” on its website each day, designed to give investors an idea of how the ETFs’ assets might be performing. The net asset value of the products will be offered twice a day, providing authorized participants with the information needed to create and redeem shares.

Invesco’s new funds are part of a wave that became one of this year’s hottest trends in the $5.3 trillion ETF industry. Assets in the active non-transparent category -- known as ANTs -- could triple to $3 billion by the end of next year, Bloomberg Intelligence predicts. Advocates contend that the new structure will help ETFs win over investors from mutual funds, while skeptics question how much demand there will be for less transparency and the higher costs associated with the active products.

“We really tried to understand, are we solving a problem or are we jumping on a train only because everybody is talking about it?” Anna Paglia, head of ETFs and indexed strategies for Invesco, said in an interview. “We asked our investment personnel: ‘hey, we are really good at certain things, why aren’t we offering those things in an ETF wrapper?’ And transparency was an issue for many of our managers. They really had concerns about front-running.”

The Invesco Focused Discovery Growth ETF (IVDG) tracks companies in the early phase of their business cycle, while the Invesco Real Assets ESG ETF (IVRA) is focused on those that meet the firm’s environmental, social and governance standards. Each fund has an expense ratio of 0.59%.

There’s also the Invesco Select Growth ETF (IVSG) of large and mid-sized companies with attractive growth outlooks compared to their valuations, and the Invesco US Large Cap Core ESG ETF (IVLC).

©2020 Bloomberg L.P.

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