The deep freeze that has kept more than a dozen would-be issuers of active ETFs from entering into the space seems to be thawing a bit. Shortly after iShares received the green light from the agency to launch active ETFs, Eaton Vance got similar news. In a filing dated March 30, the SEC approved the exemptive relief application originally made in early March of last year and amended in August. Eaton Vance had previously shared details on a number of actively-managed ETFs covering various corners of the domestic bond market, including:
- Enhanced Short Maturity
- Government Limited Maturity
- Intermediate Municipal Bond
- Prime Limited Maturity
- Short Term Municipal Bond
Active Bond ETF Boom
Active ETFs offering exposure to equity securities have been slow to take off to this point, but a number of active bond funds have managed to attract significant assets. PIMCO offers four active bond ETFs (MINT, SMMU, MUNI, BABZ) that have aggregate assets of more than $1.3 billion (the lion’s share of that total is in money market alternative MINT). WisdomTree offers actively managed bond ETFs focusing on debt of emerging markets (NYSEARCA:ELD) and Asian economies (NYSEARCA:ALD). Those two relatively new products have close to $1 billion in aggregate assets. AdvisorShares also offers an active junk bond ETF through a partnership with Peritus. HYLD has outgained the other products in the High Yield Bonds ETFdb Category by a considerable margin this year, and has accumulated close to $25 million in assets.
Some believe that the approval of Eaton Vance’s application may signal upcoming sign-offs for other issuers. “The Eaton Vance approval follows less than a week after the SEC’s green-lighting of a similar request from BlackRock’s iShares, signalling that the long delay in active ETF clearances may have drawn to an end,” writes Joe Morris. More than a dozen mutual fund companies and other financial services firms have sought approval to launch actively-managed ETFs, including Legg Mason, T. Rowe Price, and JP Morgan.
Eaton Vance has been one of the early pioneers in the development of “non-transparent” ETFs that would be required to disclose their holdings less frequently than the current lineup of exchange-traded products. Many in the industry have argued that the disclosure requirements will prohibit the growth of the active ETF industry because large funds will be vulnerable to “front running” by traders who examine fund holdings and identify when a manager is moving into or out of a position (also see Active ETFs: Full Steam Ahead).
Last year Eaton Vance acquired a number of patents related to NAV-based pricing, a methodology that would facilitate the introduction of non-transparent ETFs.
Disclosure: No positions at time of writing.
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