Eaton Vance has filed an amended application with the US Securities & Exchange Commission seeking exemptive relief to permit the offering of exchange-traded managed funds (ETMFs).
Eaton Vance’s latest SEC filing moves the firm a step closer to rolling out its first actively managed ETFs.
The amended application amends and supplements the ETMF exemptive application filed on March 27, 2013.
ETMFs are a proposed new type of open-end fund designed to bring the cost and tax efficiencies and shareholder protections of the exchange-traded fund (ETF) structure to active investment strategies, while maintaining the confidentiality of current portfolio trading information.
ETMFs would trade on an exchange at prices directly linked to the fund’s next-determined daily net asset value (NAV), using what is referred to as “NAV-based trading.” In NAV-based trading, prices would vary from NAV by a market-determined premium or discount, which may be zero. Because ETMFs would provide market makers with opportunities to earn reliable arbitrage profits without intraday hedging of their inventory positions, they can be expected to trade at consistently tight spreads to NAV in the absence of full holdings disclosure.
Active fund managers have to date largely avoided introducing their leading strategies as transparent ETFs because the required daily holdings disclosures can facilitate front-running of portfolio trades and enable copycat investors to replicate a fund’s portfolio positioning. By removing the requirement for daily portfolio transparency, ETMFs can potentially enable investors to access a broad range of proven active strategies through a vehicle that provides the investor benefits of an ETF.
Eaton Vance is seeking to launch a family of ETMFs that mirror existing Eaton Vance mutual funds and to license the underlying technology to other fund groups through its subsidiary Navigate Fund Solutions.
Stephen W. Clarke, President of Navigate, said: “The filing of an amended exemptive application is an important milestone in advancing ETMFs toward regulatory approval. We continue to be pleased with both our regulatory progress and the reception to the ETMF concept we are receiving from fund sponsors, fund distributors and the market making community.”