Goldman Sachs files to create an unprecedented type of ETF that will keep certain details secret
- Goldman Sachs filed to create a new type of exchange-traded fund that wouldn't disclose its holdings on a daily basis.
- The Goldman Sachs Multi-Asset Income ETF would invest across US stocks, American depository receipts, master limited partnership investments, and other ETFs, according to the Securities and Exchange Commission filing dated January 16.
- The ETF could benefit from its lack of transparency, Goldman wrote, as it would likely face lower risk of traders replicating its investment strategy.
- Traditional ETFs are required to release information on their holdings every day to maintain transparency with investors.
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Goldman Sachs filed earlier in January to create a new type of exchange-traded fund that wouldn't be required to disclose daily asset holdings to its investors.
The Goldman Sachs Multi-Asset Income ETF would invest across US stocks, American depository receipts, master limited partnership investments, and other ETFs, according to the Securities and Exchange Commission filing dated January 16.
Most ETFs are required to disclose their holdings and asset rotations daily to maintain transparency with their holders. Goldman acknowledges the new kind of investment vehicle may be more expensive than traditional ETFs to trade and boast a portfolio that's cheaper than the ETF's tradable share price.
Yet the investment bank claims that the lack of daily disclosures may also serve as a benefit, as traders won't be able to replicate its structure as easily as with traditional ETFs.
"By keeping certain information about the ETF secret, this ETF may face less risk that other traders can predict or copy its investment strategy. This may improve the ETF's performance," Goldman wrote in the filing.
The bank added that the fund's performance may suffer if traders can predict its investment strategy.
The ETFs included in the new Goldman vehicle would be used to gain exposure to fixed-income assets and international stocks, according to the filing. The Goldman ETF's equity holdings will be weighted in favor of companies with regular dividends or other current income.
The new class of ETF would exist with the ActiveShares model established by Precidian Investments, which has already received approval for the less-transparent ETF structure. The model is meant to ensure the ETF trades "at market prices that are at or close to" the net asset value of the fund's holdings, the filing said.
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