SEC plans to approve Vanguard request to list actively managed ETFs

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MFInvestor
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SEC plans to approve Vanguard request to list actively managed ETFs

Post by MFInvestor » Fri Sep 08, 2017 10:20 pm

SEC plans to approve Vanguard request to list actively managed ETFs

Reuters:

https://www.reuters.com/article/vanguar ... SL4N1LP5EM

Sept 8 (Reuters) - The U.S. Securities and Exchange Commission (SEC) on Friday said it planned to approve an application that would let Vanguard Group, the world’s second largest asset manager, offer exchange-traded versions of its actively managed mutual funds.

Vanguard’s move was seen by analysts as a potential game-changer for the U.S. actively managed funds industry that would increase competition and push down costs.

The SEC said in the filing it would require Vanguard to disclose on its website the identities and quantities of the portfolio positions that would form the basis for the fund’s calculation of net asset value at the end of the day.

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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by lack_ey » Fri Sep 08, 2017 10:34 pm

Have there been any indications or even hints about which funds this would be?

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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by stlutz » Fri Sep 08, 2017 11:35 pm

Their Global Minimum Variance fund was always the most rumored one when they originally made the application.

Daily reporting of holdings would be a big change for Vanguard. They are pretty much the last holdout on this point among ETF issuers.

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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by welderwannabe » Sat Sep 09, 2017 12:39 pm

I wouldn't mind seeing their investment grade actively managed bond funds turned into ETFs.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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Doc
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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by Doc » Sat Sep 09, 2017 1:15 pm

welderwannabe wrote:
Sat Sep 09, 2017 12:39 pm
I wouldn't mind seeing their investment grade actively managed bond funds turned into ETFs.
I use Vanguard's actively managed bond funds. I don't think I would use the ETF share class. But that said, the intermediate investment grade fund distributed a significant amount of both short and long term capital gains in December last year. To the extent that an ETF share class might reduce these cap gains distributions going forward wold be a good thing.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by welderwannabe » Sat Sep 09, 2017 1:23 pm

Doc wrote:
Sat Sep 09, 2017 1:15 pm
welderwannabe wrote:
Sat Sep 09, 2017 12:39 pm
I wouldn't mind seeing their investment grade actively managed bond funds turned into ETFs.
I use Vanguard's actively managed bond funds. I don't think I would use the ETF share class. But that said, the intermediate investment grade fund distributed a significant amount of both short and long term capital gains in December last year. To the extent that an ETF share class might reduce these cap gains distributions going forward wold be a good thing.
My bond holdings aren't large enough for me to be able to take advantage of their admiral shares ($50k min). Vanguard's ETFs usually have the same ER as the admiral class, so this could be a way for a peon like me to get access to the lower er.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by grabiner » Sat Sep 09, 2017 3:23 pm

Doc wrote:
Sat Sep 09, 2017 1:15 pm
welderwannabe wrote:
Sat Sep 09, 2017 12:39 pm
I wouldn't mind seeing their investment grade actively managed bond funds turned into ETFs.
I use Vanguard's actively managed bond funds. I don't think I would use the ETF share class. But that said, the intermediate investment grade fund distributed a significant amount of both short and long term capital gains in December last year. To the extent that an ETF share class might reduce these cap gains distributions going forward wold be a good thing.
The ETF structure doesn't help bond funds as much with capital gains. If interest rates fall, all bond prices rise, and that causes bond funds to sell bonds for capital gains. Vanguard's bond index ETFs have distributed capital gains, while very few of the stock index ETFs have distributed any.
David Grabiner

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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by lack_ey » Sat Sep 09, 2017 3:34 pm

You can kind of replicate Vanguard's investment-grade bond funds with passive funds, as the performance and characteristics are so similar. More interesting would be getting Vanguard pricing with wider access via ETFs in areas like the muni bonds, especially the state funds where there aren't good options from competitors. Also the Wellington-managed high yield corporate fund, which has had lower expenses, higher returns, lower credit risk taken, and lower volatility than the index funds like HYG and JNK in the space. If they wanted to maybe they could offer the active core bond fund as well, to compete with BOND and TOTL and so on at a lower cost (and much less active mandate).

I don't imagine they would offer ETF versions of the active stock and balanced funds that are closed or semi-closed because they're trying to keep AUM down there. But I think beyond just the global min vol fund, the internal quant team manages a number of other active stock funds for Vanguard (e.g. strategic equity), which probably both have higher capacity and lower AUM, and those seem like possibilities I suppose.

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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by maximuum » Sat Sep 09, 2017 4:06 pm

I wonder if this means the active mutual funds will be share classes of the etf's like Vanguard's index funds? That would make the active mutual funds with etf's much more tax efficient.

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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by Doc » Sat Sep 09, 2017 4:44 pm

grabiner wrote:
Sat Sep 09, 2017 3:23 pm
The ETF structure doesn't help bond funds as much with capital gains. If interest rates fall, all bond prices rise, and that causes bond funds to sell bonds for capital gains. Vanguard's bond index ETFs have distributed capital gains, while very few of the stock index ETFs have distributed any.
Thanks David, I guess the other end of Mass Ave has to be right some of the time. :D
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by MFInvestor » Fri Sep 15, 2017 2:26 pm

"Vanguard's Actively Managed ETFs Could Be Game Changer"

September 14,2017 Wealth Management.com

http://www.wealthmanagement.com/etfs/va ... me-changer

Excerpts from the article:

"The Securities and Exchange Commission said it would grant Vanguard’s request to list active exchange traded funds, according to a Sept. 8 filing. The move could pave the way for other active managers to launch active ETF versions of their mutual funds, putting even more price pressure on product producers across the asset management industry.

ETFs have long been recognized as low-cost, tax-efficient structures for index investors, on a growth trajectory far outpacing traditional mutual funds. Yet active managers have been hesitant to adopt ETFs as they require daily disclosure of holdings - akin to giving away the secret recipe of their strategies to the broader market.

While there is a "laundry list" of asset managers lining up to produce "non-transparent" actively managed ETFs, Vanguard's foray into active ETFs will "step up the bar for everybody," says Tom Lydon, president of Global Trends Investments and editor of ETFtrends.com. Davis Advisors launched a handful of actively managed ETFs earlier this year, "and were quite bold to do so,' says Lydon. He suspects Vanguard's first actively managed ETF may replicate the strategy in their actively managed Wellington Fund, but doesn't think there is a concern that Vanguard will be cannibalizing itself. “This is for ETF fans looking for active managers,” Lydon said."

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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by Barry Barnitz » Fri Oct 06, 2017 1:08 pm

Hi:

With the INVESTMENT COMPANY ACT OF 1940 Release no. 32852 / October 4, 2017, the SEC formerly grants an exemption order for Vanguard to issue active fund exchange-traded funds. Here is the pdf link---> Release no. 32852.


The order would permit: (a) actively-managed series of certain open-end management
investment companies (“Funds”) to issue shares redeemable in large aggregations only
(“Creation Units”); (b) secondary market transactions in Fund shares to occur at negotiated
market prices rather than at net asset value...
regards,
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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by CABob » Fri Oct 06, 2017 1:45 pm

Does this increase the questions and discussions regarding the ETF vs. MF issue?
I don't think I will make any portfolio changes because of the new ETFs.
Bob

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Re: SEC plans to approve Vanguard request to list actively managed ETFs

Post by grabiner » Fri Oct 06, 2017 6:10 pm

CABob wrote:
Fri Oct 06, 2017 1:45 pm
Does this increase the questions and discussions regarding the ETF vs. MF issue?
I don't think I will make any portfolio changes because of the new ETFs.
It could make actively managed mutual funds with an ETF class more tax-efficient, just as it does for ETFs in high-turnover asset classes such as small-cap and value.
David Grabiner

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