Blue Tractor Group

A definite ‘bee in my bonnet’. Platforms like Raymond James and LPL Financial not listing semi-transparent ETFs is poor business practice and does not serve their clients’ best interests for several reasons: 1. Restricting Access to Innovative Investment Products Semi-transparent ETFs offer actively managed strategies while maintaining some confidentiality for fund managers. By refusing to list them, Raymond James and LPL limit clients’ access to valuable investment opportunities. 2. Reducing Portfolio Diversification A well-diversified portfolio requires access to various asset classes. Semi-transparent ETFs complement traditional index funds and fully transparent ETFs. Excluding them constrains advisors and clients from optimizing their strategies. 3. Limiting Investor Choice and Fiduciary Responsibility Investment platforms must act in clients’ best interests. By arbitrarily restricting access to certain ETFs, they are making decisions that should be left to investors and their advisors. 4. Hindering Competitive Market Dynamics By refusing to list semi-transparent ETFs, these platforms create an uneven playing field. Instead of evaluating products on merit, they impose artificial barriers that may favor specific asset managers over investor choice. 5. Ignoring Industry Trends and Demand The ETF market has evolved, with semi-transparent ETFs gaining traction for their cost efficiency and active management benefits. By not listing them, Raymond James and LPL risk disadvantaging their clients. 6. Overlooking Shareholder Benefits Recognized by SEC Commissioners SEC Commissioners Hester M. Peirce and Mark T. Uyeda have acknowledged the benefits that come with utilizing a semi-transparent ETF, yet these platforms fail to recognize their value to shareholders. Conclusion Excluding semi-transparent ETFs is restrictive, anti-competitive, and misaligned with client-first principles. Investors deserve full access to available products to make informed decisions. By not listing these ETFs, Raymond James and LPL limit choice, hinder diversification, and risk failing their clients. To learn more about the premier Semi-Transparent ETF wrapper, please contact [email protected] Blue Tractor Group #ActiveManagement #ETF #ETFs #InvestorChoice #Wirehouses #InvestmentPlatforms

An investment strategy is more than just numbers on a spreadsheet—it is a reflection of belief, discipline, and conviction. If a portfolio manager does not truly value their own strategy, why should investors trust them with their capital? And yet, time and again, investors place their money in the hands of managers who appear indifferent to the very strategies they promote. This raises a critical question: why? Who—or what—is persuading investors to entrust their wealth to managers who lack confidence in their own approach? The issue is particularly glaring in the realm of fully transparent, actively managed ETFs. These managers effectively disclose their investment strategies to the market daily, giving predatory traders opportunities to exploit their positions—often at the expense of shareholder wealth. If the strategy is valuable, why would a manager willingly expose it? The answer may lie in misaligned incentives. Many so-called “active managers” operate on fixed fees rather than performance-based compensation. Without a direct financial stake in the fund’s success, they may prioritize asset accumulation and fee generation over true alpha generation. Unlike managers with significant personal investment in their funds—who have “skin in the game”—those relying solely on management fees face little direct consequence if shareholder wealth erodes. For investors, the takeaway is clear: trust should be placed in managers who not only articulate a sound strategy but also demonstrate genuine conviction—through personal investment, alignment of incentives, and a commitment to long-term performance rather than short-term fee extraction. Financial Advisors and investors alike should always look for those Active ETFs that utilize the Blue Tractor Group ETF wrapper as they then know that, the manager places value on both their investment strategy and the protection of shareholder wealth. To find out how the Blue Tractor Group ETF wrapper can help you either visit our website at www.bluetractorgroup.com or contact [email protected] to arrange a free consultation. #ActiveManagement #ETF #ETFs #PortfolioManagement #AssetManagement #FinancialAdvidor

We are undoubtedly witnessing a golden age of ETF product development, yet this progress comes with significant risks that regulators, asset managers, financial advisors and investors must carefully consider. In their August 28, 2024 comments to the SEC, Commissioners Hester M. Peirce and Mark T. Uyeda raised concerns about front-running and other predatory trading practices that can erode shareholder value. Given these recognized risks, several critical questions arise: 1. Should Fully Transparent Actively Managed ETFs be required to disclose in their prospectuses and on their websites that they are vulnerable to predatory trading practices that may negatively impact shareholder wealth? 2. Should Registered Investment Advisors (RIAs) and financial professionals be obligated to inform clients of these additional risks? More importantly, can an advisor truly claim to act in a client’s best interest if these risks are not disclosed? 3. If investors perceive that firms are exposing them to unnecessary risks, could this undermine confidence and lead to capital outflows? And if so, does this explain why these risks are not more openly acknowledged? Conclusion As the ETF market evolves, maintaining a balance between innovation and investor protection is essential. To uphold trust and transparency, the industry must address the concerns raised by regulators such as Commissioners Hester M. Peirce and Mark T. Uyeda. Investor confidence depends on clear and honest communication. Without it, the long-term integrity of the ETF industry could be at risk.

ETFs and Investor Protection With the increasing prevalence of fully transparent ETFs, one notable characteristic stands out: the ease with which investors can assess their lack of true active management. From reported returns and daily portfolio disclosures it is obvious that many of these funds are little more than closet index funds, offering minimal differentiation from their benchmarks. Meanwhile, other such funds exhibit such low levels of trading activity that they appear almost static. Despite this, these so-called “active funds” often charge management fees exceeding 60 basis points—fees that may not be justified given the limited active decision-making involved and associated near index returns. As one investment professional recently observed: “I used to leave manager meetings at a former employer trying to reconcile statements like, ‘I’m extremely bearish on Company XYZ, which is why I’m 10 basis points under the benchmark.’” While another investment professional countered, “Active Management is not the same as activity. Some of the best returns are driven by active managers discipline to patience and inactivity.” I then asked for details of these funds i.e. in order that I could assess their performance, and what was meant by the term ‘best returns’? Unfortunately no information has been provided for me to undertake an independent analysis on these ‘best returns’ funds. The concerns surrounding these fully transparent ETFs extend beyond performance to broader structural risks. In their August 28, 2024, comments to the Commission, SEC Commissioners Hester M. Peirce and Mark T. Uyeda underscored the risks posed by front-running and other predatory trading practices that can erode shareholder value. Given their recognition that such practices harm both funds and their shareholders value, the following questions merit consideration: 1. Should these ETFs be required to disclose in their prospectuses and on their websites that “Fully Transparent Actively Managed ETFs” are susceptible to predatory trading practices that may negatively impact shareholder wealth? 2. Should Registered Investment Advisors and financial professionals be obligated to inform clients of the additional risks associated with investing in Fully Transparent Actively Managed ETFs? More importantly, can an advisor truly claim to be acting in a client’s best interest if they fail to disclose these risks? Investors rightfully expect portfolio managers to safeguard their investment, if clients perceive that a firm is exposing them to avoidable risks, could this lead to a loss of confidence and capital outflows? I pose the question, is this why these additional risks are not disclosed? Finally, I pose one further question. Don’t these concerns deserve greater scrutiny, particularly from the financial regulators. Security Exchange Commission #RIA #FinancialAdvisor #RegisteredInvestmentAdvisor #PortfolioManager #AssetManager #ETF #ETFs

A recent post from Nicholas Phillips on March 3, 2025, published in ETF Central, presents what can only be described as a misinformed critique of the semi-transparent #ETF space. Higher Fees: There is no evidence to support the claim that semi-transparent ETFs charge higher fees than their fully transparent counterparts. The fee structures of both types of ETFs are comparable, and the assertion of higher costs is unfounded. Inefficiencies in the Creation/Redemption Process: Only one semi-transparent structure, namely the Precidian ActiveShares, introduces an additional layer to the process. Outside of this specific structure, there are no extra layers or inefficiencies inherent in the creation/redemption process. Less Transparency = Wider Spreads: Since the first Blue Tractor ETFs launched in 2021, there has been no evidence to suggest that bid/ask spreads on semi-transparent ETFs are consistently wider than those on fully transparent ETFs. In fact, New York Stock Exchange data from December 2024 shows that the year-to-date average bid/ask spread for fully transparent actively managed ETFs was 25.4 basis points, compared to just 19.6 basis points for semi-transparent ETFs during the same period. Limited Institutional Adoption: Could the limited institutional adoption be attributed, not to a lack of liquidity, but rather to the fact that semi-transparent ETFs cannot be licensed to portfolio managers whose strategies include options, international equities, or fixed income instruments? Furthermore, as with any valuable asset, protection is typically reserved for what is deemed valuable. You don't protect something of little worth. The statement, "The U.S. experience shows that investors overwhelmingly prefer fully transparent active ETFs over semi-transparent alternatives," is a clear indication of a lack of understanding of distribution dynamics. It is also somewhat naive to assume that investors are aware of the type of ETF wrapper being used in a given strategy. I would like to make the following concluding points: Protection of Valuable Assets: Just as individuals protect what they value, portfolio managers would likely be more invested in safeguarding their strategies if they considered them valuable. The casual approach many seem to have regarding strategy protection speaks volumes about the way they value their own investment strategies. Front-Running and Predatory Practices: Commissioners Hester M. Peirce and Mark T. Uyeda, in their August 28, 2024 comments to the Commission, highlighted concerns about front-running and other predatory practices. These practices harm both the fund and its shareholders. It begs the question: Why would portfolio managers not take steps to protect shareholder wealth, and why would investment advisors recommend investments exposed to such risks? https://lnkd.in/eP8VqxDw

At Blue Tractor Group we two key questions regarding the risks associated with predatory trading practices in the context of modern financial markets. 1. Existence of Front-Running and Freeloading: Are front-running and freeloading legitimate concerns in the financial markets, or are they merely theoretical risks with no substantial basis in practice? 2. Mitigation Strategies for Predatory Trading: Assuming that both the SEC and market practitioners acknowledge the existence of front-running and other predatory activities, what measures do funds typically implement to mitigate these risks in a manner that benefits both the fund and its shareholders? To provide context, I refer to the recent statements made by Commissioners Hester M. Peirce and Mark T. Uyeda in their comments to the Commission on August 28, 2024, regarding the adoption of Form N-PORT and Form N-CEN reporting and the guidance on open-end fund liquidity risk management programs. Both commissioners highlighted concerns over public disclosure potentially leading to front-running and other predatory practices. The Commission, while recognizing increased risks for a small subset of funds, suggests that predatory trading is not inherently harmful, which, in their view, undervalues the strategic decision-making process involved in active trading. Historically, prominent industry figures have voiced similar concerns. For instance, Joseph A. Sullivan, Chairman and CEO of Legg Mason Global Asset Management, expressed concerns in his letter to the SEC about the potential impact of full portfolio transparency on active ETFs, emphasizing the risks posed by front-running. Similarly, Christopher P. Willcox from JPMorgan Asset Management raised the issue in his correspondence, noting two critical risks: 1. The use of daily portfolio disclosures to anticipate and "front-run" a fund’s future trades, which can erode investor returns. 2. The potential for free-riding, where market participants replicate proprietary trading strategies and insights, diminishing the manager's ability to generate sustainable alpha. Despite these clear and well-documented concerns, the proliferation of fully transparent, actively managed #ETFs continues unabated. This raises a crucial question: With the increasing computational power, advanced AI, and microsecond-level trading capabilities now available, why does the industry not more actively address the potential for these predatory activities, which are becoming more pronounced as technology evolves? #ActiveManagement #ETF #SEC #PredatoryTrading #PortfolioManagement