Fidelity International is aiming to open a new growth channel with the launch on Wednesday of Europe’s first “semi-transparent” active ETF, a wrapper that will conceal its portfolio holdings to protect the strategy from predatory traders.
The Fidelity US Fundamental Small-Mid Cap UCITS ETF (FFSM) and the Fidelity US Fundamental Large Cap Core UCITS ETF (FFLC) are listed on Deutsche Borse and will list on the London Stock Exchange (LSE) on 4 September with a total expense ratio (TER) of of 0.43% and 0.38%, respectively.
Both ETFs will list on SIX Swiss Exchange and Borsa Italiana in due course.
Benchmarked against the Russell 2500 index, FFSM will be the first Irish-domiciled UCITS ETF in Europe to use the semi-transparent UCITS structure after the Irish regulator opened the door to the rule change in April this year.
The semi-transparent structure will see daily disclosure of the ETF's full portfolio holdings restricted to market makers and authorised participants (APs) under a non-disclosure agreement (NDA). Other investors will be able to see the constituents of the ETF with a three-month lag.
This structure is attractive to managers that are unwilling to give away their intellectual property and that are concerned about the risk of their positions being front-run by other traders.
FFSM will primarily hold small and mid-cap stocks, “while remaining unconstrained to any particular investment style”, according to the release.
Meanwhile, FFLC will hold US companies with large market capitalisations and is benchmarked against the S&P 500 index.
Commenting on the launches, Neil Davies, head of ETF product and capital markets for Europe and Asia Pacific at Fidelity International, said high conviction ETFs have the potential to “drive the next phase of growth in the European ETF market.”
Fidelity Investments currently houses seven semi-transparent ETFs with $5.8bn AUM, as at 2 September.
