The Luxembourg regulator is set to relax transparency requirements for active ETFs by allowing managers to publish holdings with a one-month lag.
In a move designed to attract active ETFs to domicile in the country, updated Q&As published by the Commission de Surveillance du Secteur Financier (CSSF) declared that “actively managed UCITS ETFs should publish the full portfolio holdings…at least on a monthly basis with a maximum time lag of one month.”
Active managers will have to justify the chosen frequency of portfolio publication but are allowed to “take into account the need to protect proprietary information.”
With many active mutual fund managers hesitant to launch ETFs given the transparency requirements, the move from the watchdog is a clear attempt to steal a march in the race to become the leading domicile in Europe’s burgeoning active ETF market.
It means the CSSF will have a divergent stance from the Central Bank of Ireland (CBI) on disclosure requirements, with the latter still requiring daily publication of portfolio holdings.
The Irish watchdog may soon review its transparency rules, however, with CBI deputy governor Derville Rowland saying in October that the regulator recognizes the importance of the protecting IP in relation to further active ETF innovation.
“As a leader in Europe for ETFs, the central bank is open to engaging with industry to develop a proportionate and effective approach to different models of portfolio transparency in our domestic framework,” Rowland said.
“We are likely to settle on a principles-based approach rather than focusing on one particular model.”
The two regulators have been in a battle to attract active ETFs in recent months, with the CBI expected to converge to the CSSF’s stance on the use of the UCITS ETF identifier at the share class level of existing mutual funds.
This makes it “more realistic” for active managers looking to enter the ETF market as by launching listed share classes of existing mutual funds they are spared having to build a separate platform for their ETF offering.
Last week, active managers received another boost from Luxembourg lawmakers, with parliament endorsing a subscription tax exemption for active ETFs aligning them with the tax treatment afforded to passive funds.
Jean-Marc Goy, chairperson of the Association of the Luxembourg Fund Industry (ALFI), said, “The new transparency and tax regime applicable to Luxembourg domiciled ETFs provides asset managers with a uniquely attractive framework in Europe. He added, “the active ETF market continues to grow rapidly, and Luxembourg, Europe’s largest cross-border investment fund domicile, is well-positioned to capitalize on this momentum.”
