Terry Norman, Founder, Blue Tractor discusses the rise of semi-transparent ETFs, and how the firm’s Shielded Alpha ETF WrapperSM could help give active managers an edge.
Last year, investors were introduced to the semi-transparent ETF. This new type of exchange-traded product aims to deliver both the cost and tax efficiency of an ETF as well as the potential outperformance of an actively managed strategy. The approval of the semi-transparent structure eased restrictions around disclosing daily holdings, and gave active managers the ability to keep their security selections somewhat protected.
Blue Tractor’s flagship ETF wrapper leverages a proprietary cloud-hosted algorithm to generate a daily published creation basket of all of the portfolio’s underlying holdings, but with a different weighting pattern. Ultimately, this unique approach allows active managers to conceal their alpha generation strategy and trading activities.
The Stance Equity ESG Large Cap Core ETF, shooting to launch early this year by Red Gate Advisers and managed by Stance Capital, will be the first ETF to utilize Blue Tractor’s Shielded Alpha WrapperSM.
ALPS Advisors also announced plans to launch their first semi-transparent ETF in Q1 2021. The Active REIT ETF will leverage the Shielded Alpha ETF WrapperSM and will be sub-advised by GSI Capital. Norman is a financial mathematician, experienced at developing alpha generation models to support Equity, Fixed Income and FX businesses globally.
Previously Norman worked for firms in both the UK and U.S., including Bank of America, WorldInvest, PanAgora Asset Management, Morgan Stanley and Merrill Lynch. He is a listed inventor on numerous issued and pending patent applications concerning exchange traded funds (ETFs) and is the sole inventor on the second issued U.S. patent (2003) concerning pricing of a non-transparent actively managed ETF. Norman has a degree in mathematics from the University of London.
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