A pair of affiliates in the ETF space are teaming up with a startup focused on translucent active ETFs.

Terrence "Terry" Norman Blue Tractor Group Founder

The team at Tidal ETF Services is licensing New York City-based Blue Tractor Group's Shielded Alpha ETF structure. Toroso Asset Management will serve as advisor to the Shielded Alpha-style Tidal ETFs. (Toroso AM and Tidal and both affiliates of Toroso Investments.)

Eric Falkeis, CEO of Tidal, puts the team-up with Blue Tractor in the context of his efforts at "growing rapidly by partnering with firms that value innovation, diversity, and excellence."

"The next frontier in actively managed ETFs is non-transparency, and Blue Tractor offers a unique solution," Falkeis states.

Shielded Alpha, which was approved by the SEC in December 2019, is a "wrapper" that allows for active management within an ETF but without daily full portfolio disclosure. The idea is to still provide some transparency (but less frequently) and protecting the strategy from mimics and front runners.

"There's a refined balance between transparency and hiding the secret sauce," Blue Tractor founder Terry Norman tells MFWire. On the unique structure of Shielded Alpha, Norman says, "We think the Blue Tractor wrapper is ideally suited because it balances the transparency demanded by these certain investors. We want to see in these contemporary spaces that their social values match their investments."

The Blue Tractor team has been engaged in the process of filing for an exemptive relief with the SEC since 2016. Blue Tractor's filing in August 2019 marked the firm's ninth attempt. Now, since gaining the exemptive relief, Shielded Alpha has been licensed to another mutual fund industry back-office provider.

"With Tidal, we're really pleased. They're seasoned professionals," Norman tells MFWire. He adds, "Toroso specializes more on the investment management side and Tidal more on the administration side, which is perfect for us."

The translucent ETF space started coming to life last year, when the SEC granted conditional approval to another translucent ETF structure. Since then others have been approved, too. 

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