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Exchange Traded Funds: How They’ve Become Stingier With Information

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A new kind of fund has entered the marketplace. Whether it is better than its predecessors remains to be seen.

The new entrant is known as a nontransparent actively managed exchange-traded fund. That mouthful sounds like a self-contradictory term — an oxymoron, really — but 16 nontransparent active E.T.F.s are already being sold, according to Elisabeth Kashner, vice president and director of E.T.F. research at FactSet.

What are they exactly? Let’s define terms.

Exchange-traded funds, which may be bought or sold all day like stocks, started as index funds — meaning, at relatively low cost, they mirrored the market and didn’t try to beat it. Actively managed funds, run by people who select individual stocks and bonds, were originally packaged only as traditional mutual funds, which can be bought or sold only once a day.

Attributes of those two main kinds of funds were combined more than a decade ago, with the advent of actively managed E.T.F.s. Now, there is a newer innovation: The Securities and Exchange Commission says some funds don’t have to disclose all of their holdings, making them “nontransparent.”

Is this cause for celebration? It may be for fund companies, which can avoid tipping their hand to the competition when they make trades. It’s too early to say for the vast majority of investors, who have not embraced the new nontransparent funds in a big way so far.

Actively managed mutual funds as a whole have underperformed their benchmark indexes for years. Whether active E.T.F.s, including the nontransparent kind, will do better remains to be seen.

Assets held in actively managed E.T.F.s of all varieties amount to $136 billion, according to FactSet. Of that total, nontransparent active E.T.F.s hold only about $730 million.

That compares with $4.8 trillion for all E.T.F.s, according to the Investment Company Institute, a trade group. Most E.T.F.s are basically index funds. Traditional stock and bond mutual funds still hold most fund assets — more than $18 trillion, according to the institute.

E.T.F. giants like BlackRock, State Street Global Advisors, Vanguard, Invesco and Fidelity all offer active E.T.F.s. And T. Rowe Price, which had not done so, is beginning to offer actively managed ones.

The JP Morgan Ultra-Short E.T.F. a short-term bond fund, leads all active E.T.F.s with $14 billion in assets under management, Ms. Kashner said. Its expense ratio is 0.18 percent. Other short-term bond E.T.F.s have expense ratios ranging from .08 percent to 0.42 percent, according to FactSet.

One active E.T.F. that has done especially well lately is the Ark Innovation E.T.F. which is focused on leaders in so-called disruptive technologies like robotics and artificial intelligence. It gained 83.8 percent this year through Sept. 30.

Tom Staudt, chief operating officer for Ark Invest, says its E.T.F. format provides “a cheaper way to have actively managed funds.” The fund’s expense ratio is 0.75 percent, according to Morningstar. That compares favorably with the average expense ratio of 1.16 percent for all midcap growth mutual funds.

The Ark fund reports its holdings daily, said Catherine Wood, the fund manager, making it highly transparent. Traditional mutual funds typically report holdings only quarterly. “Investors love transparency,” she said.

But nontransparent funds are useful for some fund companies. The new form of fund is intended to protect fund managers from competitors who might otherwise copy their holdings and front-run big trades that can only be executed gradually, said Todd Rosenbluth, senior director of E.T.F. and mutual fund research at CFRA, an independent research firm.

American Century Investments has issued four nontransparent — it calls them semitransparent — active E.T.F.s. Front-running was “theoretically a problem,” said Edward Rosenberg, head of E.T.F.s for the company. These American Century funds typically own just 30 to 60 stocks, and it sometimes takes days to amass a large position in each new holding, making it vulnerable to potential copy cats.

The mutual fund giant T. Rowe Price has also received S.E.C. approval to start four nontransparent active E.T.F.s. Tim Coyne, head of E.T.F.s for the company, said if T. Rowe Price had to disclose all of its trades daily, that information “could be used against us.” The motivation for less frequent reporting, he said, is “to protect our intellectual property.”

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Score Apple’s Powerbeats3 Wireless Earphones Today at a Discount

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These powerful earphones were made for an active lifestyle.

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October 25, 2020 2 min read

Disclosure: Our goal is to feature products and services that we think you’ll find interesting and useful. If you purchase them, Entrepreneur may get a small share of the revenue from the sale from our commerce partners.

When you’re working hard every day, you need to blow off some steam from time to time. Whether you like doing that by running, cycling, boxing, or just going on a long walk, music is always a welcome accompaniment. And the best way to enjoy your music is with a set of high-powered wireless earphones like the Apple Powerbeats3.

A product of Apple’s acquisition of Beats by Dre, these Bluetooth earphones will take any workout to the next level. The earphones have a long 12-hour battery life and secure-fit ear hooks that ensure they stay comfortably in your ears, no matter how hard you work. Plus, the Fast Fuel charging feature lets you get one hour of playback on just a five-minute charge, so if you power down at the end of your workout, you can get one last burst of music.

The Powerbeats3 have an improved ergonomic design that provides clear, dynamic sound through dual-driver acoustics. They’re also sweat- and water-resistant to give you unparalleled durability, whether you’re running in the rain or just sweating a lot.

CNET writes, “The Beats Powerbeats3 Wireless offers an improved fit, very good sound for Bluetooth sports headphones, reliable operation, and strong battery life.”

Upgrade your wireless listening game without breaking the bank. Normally $89, you can get a pair of Apple Powerbeats3 Wireless Earphones for 13 percent off at just $77.99 now. They’re also available in Indigo or Violet.

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Treat Sore Muscles Anywhere with This Portable Massager

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Reduce muscle pain, improve function, and more.

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October 25, 2020 2 min read

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Remote life comes with all kinds of stressors and bumps. Whether you’re uncomfortable in your office chair all day or you’ve picked up a workout regimen now that you don’t have to commute, it’s entirely likely your muscles aren’t feeling 100 percent all the time. While that’s part of aging, you can give yourself some relief with the Alyne Therapy Massager.

This patent-pending, professional-grade massager utilizes concentrated and rapid movements to treat muscle and deep-tissue pain right at the source. As it relaxes muscle tissue, it helps to drain lactic acid build-up that causes soreness, decrease nerve compression, and increase your range of motion. With three impact modes, three tilt angles, and three quick snap attachments, you can cater to all of your body’s muscle needs, whether you’re sore after a workout, stiff after sitting all day, or have chronic joint pain.

With the Alyne Therapy Massager, you can also improve blood and lymph circulation and enhance the delivery of oxygen and nutrients to muscle cells. This will give you an extra burst of energy and can even help heal scar tissue or muscle tears. With reduced pain throughout your body, you’ll be able to do more with less wear and tear.

Designed to be fully portable, the Alyne Therapy Massager can easily travel with you from home to the office to the gym to meet all of your muscle needs anywhere. So don’t just go around in pain. Normally $299, you can save 20 percent off the Alyne Therapy Massager when you get it for $239 today.

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Save More Than $200 on QuickBooks Online Essentials

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Score an awesome deal on the world’s leading accounting program.

Free Book Preview Money-Smart Solopreneur

This book gives you the essential guide for easy-to-follow tips and strategies to create more financial success.

October 25, 2020 2 min read

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If you earn your money by invoicing clients, you know what a hassle it can be. Not only does creating invoices take time and energy, but onboarding clients to your payment system and following up with delinquent customers to ensure they pay on time becomes a genuine waste of energy. If you’re having trouble with invoicing and managing your accounts, it may be time to bring in some technology to help.

QuickBooks Online Essentials is the web-based version of the world’s top accounting platform, specifically designed for service-based businesses. With QuickBooks Online Essentials, you can create individual or recurring invoices, track bill statuses, record payments, and much more from one intuitive app. You’ll be able to track your income and expenses seamlessly in a single portal, and QuickBooks will help you maximize tax deductions based on your accounting. You can also pay multiple vendors and bills at the same time and create checks to pay bills in person whenever you want.

QuickBooks Online Essentials goes beyond office management, as well, giving you detailed reports to analyze your expenses and manage contractors. You can even track miles, sales tax, time, and send estimates to customers before you do the work. It’s effectively everything you need to run your business.

QuickBooks Online Essentials has earned a rare Excellent review from PC Mag for good reason. See how it can help your business when you get a one-year subscription for 44 percent off with promo code “COUNT21” at checkout. 

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