As Eaton Vance (NYSE: EV) readies its recently approved non-transparent exchange traded managed funds, some anticipate that ETMFs could carve out a larger chunk of the mutual fund industry’s market share, with more investors shifting into the cheaper active investments.
Eaton Vance executives believe that the new ETMFs, which will be launched under the NextShares brand, will likely compete with existing mutual fund strategies as investors capitalize on cheaper costs, reports Jackie Noblett for Financial Times.
“It is reasonable to expect that a significant percentage of what would’ve been the Class I shares sales of the mutual fund to shift to NextShares, which we expect to have a lower expense ratio,” Eaton Vance chief executive Tom Faust said in the Financial Times article.
I shares make up about two thirds of Eaton Vance mutual fund flows, with A shares and C shares accounting for the balance.
The fund provider will be marketing NextShares as a low-cost and potentially better-performing and more tax-efficient option to traditional open-end, mutual funds.
ETMFs are a new concept that marry the liquidity and tax efficiencies that have attracted investors to ETFs with active investment strategies, while maintaining the confidentiality of current portfolio trading information. The new investment structure will trade on an exchange, and to achieve their non-transparent nature, the products will trade based on their net asset value, or utilize a so-called NAV-based trading.
“NextShares can be expected to trade at prices that are consistently close to NAV in the absence of daily portfolio holdings disclosure,” according to Eaton Vance.