In an attempt to refresh the way investors think about actively managed funds, Eaton Vance is expanding on its NextShares exchange traded managed funds suite to cater toward rising demand for an efficient and cheap investment structure that can serve as an alternative to traditional active mutual funds.
On the upcoming panel, How to Deliver Alpha in an Active ETF, at the Inside ETFs conference on January 22, Stephen Clarke, President of NextShares, will speak about the public perception of the fund industry and offer an alternative to active mutual funds as a way to deliver outperformance.
Exchange traded managed funds are a new concept that marry the liquidity and tax efficiencies that have attracted investors to exchange traded funds with active investment strategies, while maintaining the confidentiality of current portfolio trading information to protect a manager’s “secret sauce.”
NextShares trades take place intra-day with pricing contingent upon determination of the NAV at the end of the day. NextShares use a patented new trading protocol called “NAV-based trading.” In NAV-based trading, all bids and offers are quoted throughout the day relative to the fund’s next-determined NAV and all trade prices are directly linked to NAV. Trade executions are binding at the time orders are matched, with final price contingent upon the determination of NAV.
The patented methodology allows the funds to trade just once per day at the close of business, but investors can still buy and sell exchange traded managed funds in real time during normal hours. Consequently, 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.
Clarke said that many fund managers concluded NextShares was their go-to choice for active strategies as the fund structure allowed managers to maintain product confidential information and capitalize on the efficient fund structure associated with ETFs.