Faust Takes On Eaton Vance's Biggest ETMF Challenge: B-Ds
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Monday, May 18, 2015

Faust Takes On Eaton Vance's Biggest ETMF Challenge: B-Ds

Tom Faust has a plan to win over broker-dealers who can make available Eaton Vance's [profile] new ETF-like product structure for active managers.

Faust, Eaton Vance's CEO, told Jessica Toonkel of Reuters that the Boston-based, publicly-traded mutual fund company is ready to chip in for the technology costs of making exchange-traded managed funds (ETMFs), branded NextShares, on B-Ds' platforms. Other fund firms have already signed on to license the ETMF structure and launch their own NextShares funds, and Eaton Vance is kicking off a big NextShares marketing push and creating a NextShares consortium to promote the new structure.

"The biggest challenge we see at this stage of the game is getting broker-dealers," Faust told the wire service. "If we are looking to launch before the end of the year, we need the broker dealers to start making system changes and otherwise preparing themselves to offer this to clients ... We don't think this is an overwhelming task for broker-dealers."

Faust did not reveal how much Eaton Vance will shell out to help B-Ds with their ETMF technology costs.

"This is the first time I have ever heard of a firm offering to pay some brokerage costs for a new product," Morningstar ETF analyst Ben Johnson reportedly said.

Reuters reports that one B-D told Eaton Vance that it would cost about $200,000 to get ETMFs onto that B-D's platform.

Like traditional mutual funds, ETMFs won't have to disclose their portfolio holdings daily and orders placed throughout the day will use the end-of-day NAV. Like ETFs, ETMFs will trade on an exchange. ETFs strip out some fees that are built into regular mutual funds, including fees that normally are used to help pay for distribution through advisors and broker-dealer platforms, so investors end up paying for trades and account costs directly, like they would with an individual securities trade.

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