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

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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