Dan Solin's Newsletter, February 2, 2017
Non-transparent ETFs: For Clueless Investors Only
A non-transparent exchange-traded fund is an ETF that only reveals its holdings quarterly. Avoid them.
An ETF that is actively managed is an oxymoron. The original purpose of ETFs was to track an index, at a low cost. A non-transparent ETF has all the negatives of active management – primarily likely underperformance, especially over the long-term – with the added disadvantage of an opaque structure.
I’m not aware of evidence demonstrating a lack of transparency is correlated with better performance.
Wesley R. Gray, Ph.D. correctly observed that fund families touting non-transparent ETFs "…are pushing overpriced average performance product through their massive sales distribution pipelines."
Would you go to a grocery store, buy and eat a food product without knowing its ingredients?
If so, you will love non-transparent ETFs!