Eaton Vance Files Fifth Amended Exemptive Application for Clearhedge™ Method
Eaton Vance Corp. (NYSE: EV) has filed a fifth amendment with the U.S. SEC for exemptive relief to offer ETFs utilizing the innovative Clearhedge™ Method. This method allows for confidential portfolio trading while engaging market makers in 'Clearhedge Swap' transactions to manage inventory risk. The proposed ETFs aim to enhance secondary market trading performance and provide transparency in trading costs. With $515.7 billion in assets under management as of October 31, 2020, Eaton Vance is focused on rolling out this method across the ETF industry.
- Potential for improved secondary market trading performance through the Clearhedge Method.
- Increased transparency of investor trading costs compared to traditional ETFs.
- Eaton Vance's substantial AUM of $515.7 billion enhances credibility.
- The long process of SEC approvals may delay the launch of the Clearhedge Method ETFs.
- Dependence on licensing arrangements may limit broader adoption of the Clearhedge Method.
BOSTON, Dec. 7, 2020 /PRNewswire/ -- Eaton Vance Corp. (NYSE: EV) today announced that Eaton Vance Management, a wholly-owned subsidiary, and Eaton Vance Exchange-Traded Fund Trust (together, the Applicants) have filed a fifth amendment to the application with the U.S. Securities and Exchange Commission seeking exemptive relief to permit the offering of exchange-traded funds (ETFs) that would employ a novel method of supporting efficient secondary market trading of fund shares (the Clearhedge™ Method). Because disclosure of current holdings would not be necessary, an ETF's portfolio trading activity could remain confidential. The Clearhedge Method exemptive application was originally filed on February 20, 2019 and previously amended on March 18, 2020, July 13, 2020, September 25, 2020 and November 5, 2020.
As proposed, ETFs utilizing the Clearhedge Method would (i) publicly disclose prior to the beginning of U.S. market trading each business day a "NAV Reference Portfolio" generally consisting of liquid market instruments trading throughout U.S. market hours and designed to closely track the daily performance of the ETF's actual portfolio; and (ii) provide for market makers and other arbitrageurs active in the ETF's shares to enter into "Clearhedge Swap" transactions with the ETF, allowing for a precise hedge of their ETF shares positions. Applicants believe that, by varying the size and direction of its NAV Reference Portfolio and Clearhedge Swap positions as it changes its positions in ETF shares intraday, an arbitrageur could manage its inventory risk in the ETF's shares with substantially the same precision as if it knew the ETF's current portfolio holdings. Accordingly, Applicants expect ETFs utilizing the Clearhedge Method to demonstrate better secondary market trading performance than other ETFs that maintain the confidentiality of their current portfolio trading activity (Portfolio-Protected ETFs). As an additional potential advantage, Applicants expect ETFs utilizing the Clearhedge Method to provide greater transparency of investor trading costs than offered by existing ETFs.
"Today's filing is another step toward our goal of bringing the Clearhedge Method to the marketplace," said Stephen W. Clarke, President, Advanced Fund Solutions LLC (AFS), a subsidiary of Eaton Vance Management formed in 2019 to manage the development and commercialization of ETFs utilizing the Clearhedge Method and other fund-related intellectual property. "Unique among the different approaches to Portfolio-Protected ETFs, the Clearhedge Method enables arbitrageurs to manage the basis risk between their ETF shares positions and offsetting hedge positions, which we expect to translate into lower costs to buy and sell fund shares. We are pleased to be moving toward potential approval and launch."
Aspects of the Clearhedge Method are subject to U.S. Patent 10,102,573 and pending patent applications. Through licensing and services arrangements, Eaton Vance and AFS seek to make the Clearhedge Method broadly available across the ETF industry.
Eaton Vance provides advanced investment strategies and wealth management solutions to forward-thinking investors around the world. Through principal investment affiliates Eaton Vance Management, Parametric, Atlanta Capital, Calvert and Hexavest, the Company offers a diversity of investment approaches, encompassing bottom-up and top-down fundamental active management, responsible investing, systematic investing and customized implementation of client-specified portfolio exposures. As of October 31, 2020, Eaton Vance had consolidated assets under management of
The information contained herein is provided for informational purposes only and does not constitute a solicitation of an offer to buy or sell any security, investment product or service.
Statements in this press release that are not historical facts are "forward-looking statements" as defined by the U.S. securities laws. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to uncertainties and other factors that could cause actual results to differ materially from those set forth.
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SOURCE Eaton Vance Corp.
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