A Shielded Alpha℠ ETF confers to active managers the ability to manage their ETF creation basket to generate additional alpha

NEW YORK, Dec. 11, 2019 (GLOBE NEWSWIRE) -- Blue Tractor Group, LLC (“Blue Tractor”) is pleased to announce that the U.S. Securities and Exchange Commission (“SEC”) has approved the exemptive relief necessary to permit Blue Tractor’s Shielded Alpha℠ exchange-traded fund (“ETF”) structure.  Blue Tractor thanks the SEC for its collaborative regulatory approval process.  The SEC issued its exemptive order on December 10, 2019.

Blue Tractor’s Shielded Alpha℠ structure is a ‘wrapper’ that facilitates management of actively managed portfolio strategies within an ETF rather than in a traditional mutual fund or separately managed account, thereby conferring the benefits of an ETF to advisors and investors alike, including lower cost, greater tax efficiency and intra-day liquidity. 

Similar to a fully transparent active ETF, the Shielded Alpha℠ wrapper is a highly transparent ETF structure designed to ensure efficient primary and secondary market trading.  However, unlike a fully transparent active ETF that must disclose its actual portfolio on a daily basis, the Shielded Alpha℠ structure uses proprietary math to generate daily a creation basket which will ensure that an advisor’s alpha generation strategy and portfolio trading execution remains fully opaque to predatory traders, totally eliminating the risk of reverse engineering and associated front-running and free-riding. 

Implementation of a Shielded Alpha℠ ETF is streamlined and efficient because all workflow used by a fund or its custodian/fund administrator to generate the creation basket is hosted in Blue Tractor’s cloud platform. 

Said Terry Norman, Founder of Blue Tractor, “We are absolutely thrilled by the SEC’s announcement and would like to thank them for their thorough process.  As a result of our many interactions with SEC staff we believe that we have successfully and uniquely navigated the fine balance between providing the transparency that the market requires for efficient ETF trading, offset by the need for active portfolio managers to keep their alpha generation and trading execution opaque to predators.  We believe that our Shielded Alpha℠ ETF wrapper has found the optimal balance.”

The Shielded Alpha℠ ETF wrapper is wholly differentiated from all other SEC approved non-transparent wrappers, including:

  • A Shielded Alpha℠ wrapper is not non-transparent but rather highly transparent, thereby promoting highly efficient primary and secondary market pricing and trading;
  • All workflow to generate the Shielded Alpha℠ ETF creation basket is hosted in the cloud, making implementation of the Blue Tractor wrapper rapid and efficient; and
  • Using intuitive tools in the cloud software, portfolio managers can manage a Shielded Alpha℠ ETF’s daily creation basket to lower trading costs, enhance capital gains tax efficiency and fully cloak trading execution when building or exiting portfolio positions.             

The investable universe for the Shielded Alpha℠ ETF wrapper includes domestic small, mid and large cap equity securities, ETFs and ETNs, exchange-traded preferred stock, futures, commodity pools, metal trusts, currency trusts, real estate investment trusts and American Depositary Receipts (ADRs), cash and cash equivalents and notably, foreign equity securities from markets that trade contemporaneously with the U.S. Moreover, no changes to current portfolio management methods are required. 

Observed Blue Tractor Co-Founder Simon Goulet, “Competing non-transparent structures invariably highlight in their promotional material that their fundamental, core benefits versus a mutual fund are lower cost, increased tax efficiency and intra-day liquidity.  Frankly, these are ‘table stakes’ and any ETF wrapper structure should at a minimum provide these benefits.  Blue Tractor suggests that portfolio managers undertaking due diligence should instead focus upon what additional benefits the ETF wrapper confers, such as whether the creation basket can be managed for cost and tax efficiencies to generate additional portfolio alpha.  We are confident that Blue Tractor has raised the bar by offering active managers the ability to manage their baskets for the ultimate benefit of investors.”

Blue Tractor’s final application for exemptive relief for the Shielded Alpha℠ ETF structure (dated October 23, 2019) was prepared by Michael W. Mundt, Partner in the Washington, D.C. office of Stradley Ronon Stevens & Young, LLP and is available for review, along with the SEC’s exemptive order, on the SEC’s website through the EDGAR database at sec.gov and at bluetractorgroup.com

About Blue Tractor Group
Blue Tractor Group, LLC develops proprietary solutions to facilitate novel exchange-traded fund products.  Blue Tractor’s Shielded Alpha℠ ETF structure (patent pending) permits active portfolio management within an ETF wrapper, while fully shielding a fund’s proprietary alpha strategy. More information is available at bluetractorgroup.com.

Contact:        
Chris Sullivan
MacMillan Communications
(212) 473-4442
chris@macmillancom.com