The WSJournal recently wrote that JPMorgan Chase was joining a long line of asset managers backing a new type of exchange-traded fund that mimics active strategies but keeps its investments secret. The concept, designed by Precidian Investments, has so far been rejected by the SEC despite support from industry giants including BlackRock, American Funds owner Capital Group, and Legg Mason, which owns a minority stake in Precidian.

Precidian’s ETFs would disclose stockholdings on a delay rather than daily basis, as traditional ETFs do. If approved, the funds could open a lucrative new business line for banks and asset managers whose investors are clamoring for ETFs, which trade on public exchanges just like company stocks.

The approval of the Precidian approach - dubbed “nontransparent” active ETFs - would pave the way for firms like JPMorgan, Invesco and BlackRock to repackage their mutual funds and separately managed accounts into ETFs without giving away their proprietary trading strategies to potential copycats.

“We hear from advisers that they want our best capabilities in ETF vehicle. It will be no less transparent than a traditional mutual fund, and there won’t be the risk of front-running or reverse engineering.” - - Bob Deutsch, head of ETFs for JPM’s asset management unit.

The Precidian case has been closely watched by asset managers, who have seen ETFs grow faster than mutual funds, driven by the tax advantages of ETFs and the lackluster performance of many actively managed funds.

Precidian’s approval could put a huge swath of investor capital within reach of the U.S. ETF industry, which has swelled to more than $2.4 trillion but is still dwarfed by the $16.2 trillion sitting in U.S. mutual funds.

The SEC has been skeptical of allowing nontransparent products because it would be difficult to assess the real-time value of an ETF’s stockholdings if investors don’t know what the fund owns. Precidian would post the real-time value of its holdings on exchanges. New share creations and redemptions would be routed through custodians who know what the fund is buying and selling but keep the trades specifics confidential, similar to how some mutual funds are handled today.

Even if Precidian wins approval, it isn’t clear that investors will flock to active ETFs because they have consistently lagged behind their cheaper, passive competitors. Passive U.S.-listed equity ETFs returned 29% in the past year at an average cost of 0.62% while actively managed funds returned 19% at a cost of 0.92%.