Unlike traditional ETFs, ETMFs will not disclose holdings on a daily basis. Navigate’s patented methodology allows the funds to trade just once per day at the close of business. However, investors who enter a trade during the day will pay a slight premium to net asset value to acquire shares or receive slightly less than NAV to sell.
Since ETMF transactions occur just once per day, the SEC’s portfolio disclosure requirements will mirror traditional open-end funds, revealing holdings on a quarterly basis.
Along with the potential tax savings, ETMFs could help cut costs in other ways, compared to active mutual funds. For example, traditional open-end funds bear the costs of investors moving in and out of funds, some active funds hold greater cash reserves to meet potential redemptions and many funds charge 12b-1 fees.
Stephen Clarke, the president of Navigate, expects a group of ETMFs from fund providers like Eaton Vance, Gamco Investors, American Beacon and Hartford Financial Services Group to launch late this year or early 2016.
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Max Chen contributed to this article.