Eaton Vance Wins Exemptive Relief

April 05, 2011

Eaton Vance wins exemptive relief, and remains focused on nontransparent active ETFs.


Eaton Vance, the Boston-based firm known for its extensive lineup of closed-end funds, won the right to market actively managed ETFs from the Securities and Exchange Commission, raising the question of what its next move might be, particularly as it relates to nontransparent ETFs.

Indeed, apart from seeking the so-called exemptive relief required to market ETFs, Eaton Vance also bought the assets of Managed ETFs, a company owned by Gary Gastineau, a longtime ETF industry consultant and a staunch advocate of nontransparent ETFs.

The issue of being able to offer nontransparent active ETFs is a central concern of some of the mutual fund firms that have begun the regulatory process to be able to offer ETFs. They appear to want to get into the growing ETF market while preserving one of the cornerstones of active management, namely not having to disclose portfolio holdings daily as ETFs are now required to do.

“The exemptive relief actually allows us to move forward in our efforts with Gary and Managed ETFs in the nontransparent active space,” Robyn Tice, a spokeswoman at Eaton Vance, said in a telephone interview. “That’s going to be our primary focus.”

“It’s going to help us to more fully think about what we plan to do and how we plan to do it, so it gives us the ability to have that flexibility now,” she added, referring to its exemptive relief status, which it earned on March 30. Tice declined to say whether Eaton Vance might first bring transparent ETFs to market before it solves the conundrum as to how to offer a nontransparent exchange-traded product.

A lot is at stake. Assets in U.S-listed ETFs are rapidly approaching $1.1 trillion, though well less than 1 percent is in actively managed strategies. Some think that could change if active ETFs are ever successfully introduced.

Many industry sources have told IndexUniverse that the possibility of a nontransparent ETF will only be real once the SEC specifically allows such funds to be marketed. And that day could be a long way off, particularly considering how busy the commission is with other concerns, including its ongoing derivatives review.

However, few seem to think actively managed ETFs of the future will operate like active mutual funds, and be required to disclose holdings quarterly with a 60-day lag. That could make for a regulatory row that’s a bit less difficult to hoe.


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