On March 27, 2013, Eaton Vance applied to the SEC for exemptive relief for a new type of exchange-traded fund, which it calls an exchange-traded managed fund (“ETMF”). Exchange-traded funds (“ETFs”), particularly actively managed ETFs, have been popular recently with fund managers. This has been especially true following the SEC’s decision to lift the moratorium on approval of applications for actively managed ETFs intending to use derivatives. However, one remaining drawback of actively managed ETFs in the eyes of many managers is the requirement for daily disclosure of portfolio holdings.
The ETMF proposal from Eaton Vance would, in lieu of daily disclosure of portfolio holdings, have ETMFs trade on an exchange during the day at a premium or discount to the to-be-determined end-of-day NAV (e.g., a trade at 10:00 am might be made at NAV+$0.02, with the NAV, and thus the final price of the trade, not being determined until the end of the day). Eaton Vance argues that the arbitrage mechanisms that operate to minimize premiums and discounts for an ETF would do the same for ETMFs. Eaton Vance suggests in its application that ETMF shares would remain attractive to purchasers on the secondary market who are seeking to access the particular investment strategy and who are attracted by the potential cost, performance and tax efficiency advantages of the ETMF structure.
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