The Securities and Exchange Commission denied Precidian Investments’ second request to launch non-transparent actively managed exchange traded funds, strengthening Eaton Vance’s exchange traded managed funds, or ETMFs, as a leader in the space.
Back in October 2014, the SEC rejected the proposed BlackRock and Precidian Funds, citing that it “believes that Applicants’ proposed ETFs do not meet the standard for exemptive relief under section 6c of the Investment Advisers Act of 1940.” [SEC Deals a Blow to Issuers’ Non-Transparent Active ETF Ambitions]
The money manager refiled with the regulator in December after updating the filing, but its so-called ActiveShares funds were rejected in a letter dated April 17 that just became widely public, reports Daisy Maxey for the Wall Street Journal.
Daniel McCabe, chief executive at Precidian, said the company is still working on resolving issues and plans to refile to launch the funds.
“This is a normal part of the ETF application process. They ask questions, you answer, and they ask more questions,” McCabe said in a Reuters article.
The dated denial letter was made public by competitor Eaton Vance Corp after acquiring the information from the SEC through a Freedom of Information Act request. Eaton Vance has been keeping a watchful eye on other proposals in the space as the company has already received SEC approval for its own product line.
”The reason we’re releasing it [the letter]is that NextShares is material to our company,” as is the size of the potential competitive market, Tom Faust, chief executive of Eaton Vance, said in the WSJ article.
Eaton Vance’s Navigate Fund Solutions unit has already received SEC approval to offer the new type of ETMFs under the NextShares brand. The ETMFs will combine some of the best features of ETFs and traditional actively managed 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. However, it is important to note that ETMFs are not ETFs. 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. [ETMFs: A Cost-Efficient Alternative to Active Funds]
A number of financial firms have licensed Eaton Vance’s NextShares ETMFs and filed with the SEC to launch active funds under the new non-transparent investment vehicle. For instance, Principal Financial has requested the launch a number of ETMFs, including the first offering called the Principal Global Value NextShares Fund, Ignites reported. Principal has also pared its bets with an ETF offering, launching the Principal EDGE Active Income ETF (NYSEArca: YLD) earlier this month. [Principal Financial Enters ETF Fray With Multi-Asset Fund]
Additionally, according to a recent SEC filing, Ivy Investment Management Company is seeking to launch a suite of Ivy NextShares ETMFs.
The companies join others licensee firms including American Beacon, Gabelli Funds, Hartford Funds, Victory Capital and Pioneer Investments that are waiting on SEC approval.
For more information on non-transparent active funds, visit our ETMFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.