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Tuesday, December 15, 2015

Faust's First ETMFs Take One Last Regulatory Step

Reported by Neil Anderson, Managing Editor

Tom Faust and his team just cleared the last regulatory hurdle to launching the first batch of Eaton Vance's new kind of ETF-like funds early next year.

Stephen Clarke
NextShares Solutions
Stephen Clarke, president of freshly-rebranded Eaton Vance [profile] subsidiary NextShares Solutions (formerly Navigate Fund Solutions), confirms that the SEC has "declared effective" the registration statements for the first 18 exchange-traded managed funds (ETMFs), branded NextShares. This, Clarke states, "is the last regulatory step" before launch.

Those ETMFs are slated to launch in the first quarter of 2016, though don't expect 18 launches on a single day.

"I don't think there's any plan to launch that many funds into the market at once," Jonathan Isaac, director of product management with Eaton Vance and managing director of product strategy with NextShares, tells MFWire.

Jonathan Isaac
Eaton Vance
Director of Product Management
Eaton "hasn't publicly declared what that [introductory launch] will look like," Isaac says, but he expects it to include a small subset of those first 18 funds.

ETMFs are designed for ETF-like trading and ETF-like tax efficiencies, combined with disclosure dialed down to regular mutual fund frequency to protect active investment strategies. Eaton Vance first filed for these 18 ETMFs in July 2014, and the SEC blessed the ETMF structure idea with exemptive relief in December 2014. At the time Eaton Vance chairman and CEO Faust aimed to launch the first ETMFs in Q2 2015.

"It certainly has taken longer than a traditional regulatory period," Isaac says. "This is a totally new security ... There's no template. Anyone who moves ahead here in the future is going to use these, or the format or template of these, as the way they register products."

One key piece of the ETMF puzzle for Eaton Vance will be distribution. Faust has said that the Boston-based, publicly-traded fund shop is willing to help B-Ds foot the technology bill for making NextShares ETMFs available on platforms. So far giant TAMP Envestnet and online brokerage Folio have both signed on to offering NextShares.

"We do continue to talk to distribution partners, large and small," Isaac says, adding that conversations are "ongoing and extremely positive right now."

This year the Eaton Vance team worked on both a NextShares advertising campaign and a NextShares consortium to get the word out on the new ETMF structure. And a host of other firms may follow Eaton Vance's lead and launch their own NextShares ETMFs, licensing the idea from NextShares. So far at least 11 other firms have signed on, including: DST's ALPS, American Beacon, Broms, Columbia Threadneedle, Gabelli, Hartford, Waddell & Reed's Ivy, Nile, Pioneer, Principal, and Victory

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