The menu of types and styles of exchange-traded funds available to investors keeps growing. The Securities and Exchange Commission just approved four proposals for a new type of exchange traded fund: non-transparent, active ETFs. David Mann, our Head of Global ETF Capital Markets, explains the implications.

The active exchange-traded fund (ETF) news just keeps coming in! And the choices for investors continues to grow in this space. ETFs are no longer only passive vehicles tracking a broad, capitalization-weighted index. Today, ETFs encompass active and passive styles, cover niche industries and track custom-designed indexes.

Recently, I discussed the passing of the “ETF Rule” and what that could mean for active ETFs—which combine active investment management expertise and capabilities within the benefits of an ETF structure. As a very quick reminder, operationally the ETF Rule treated active and index funds the same. One of the main reasons was because in both cases, there was complete daily transparency of the underlying securities.

These transparent active ETFs are quite prevalent in the ETF market today, now totaling almost $100 billion of assets under management (AUM) in the United States. (We would note all of Franklin Templeton’s active ETFs fall into this bucket.)

However, these transparent active funds should not be confused with the announcement earlier this year that non-transparent ETFs were on the way. That is a topic I also have discussed.

ETFs continue to become more and more popular with all investors. Thus far in 2019, there has been another $250 billion of inflows, bringing the total ETF AUM in the United States to $4.2 trillion.1 Along the way, “ETF” has come to mean a lot more than “passive, index-tracking fund.” ETFs can track a single factor index or a multi-factor index. They do not even need to track an index as long as there was daily transparency on the underlying holdings.