Eaton Vance Files Third Amended Exemptive Application for Clearhedge™ Method

Rhea-AI Summary

Eaton Vance Corp. (NYSE: EV) has filed a third amendment with the SEC to seek exemptive relief for offering ETFs using the innovative Clearhedge™ Method. This method allows ETFs to keep current portfolio holdings confidential while improving secondary market trading performance by enabling real-time inventory management for arbitrageurs. The Clearhedge Method is expected to enhance investor transparency regarding trading costs. As of August 31, 2020, Eaton Vance managed $526.9 billion in assets.

Positive

• Proposed Clearhedge Method may enhance ETF trading performance.
• Confidential portfolio trading could attract more investors.
• Expectations of greater transparency in trading costs.

Negative

• None.

BOSTON, Sept. 25, 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 third amendment to its 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 and July 13, 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 whose performance the ETF's adviser expects to be highly correlated with the 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 many ETFs that provide daily holdings disclosure, especially ETFs holding foreign or less-liquid investments, while maintaining the confidentiality of the ETF's current portfolio trading activity.  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 demonstrates further progress advancing the Clearhedge Method toward commercial introduction," 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. "We look forward to bringing this important innovation to the ETF market."

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 August 31, 2020, Eaton Vance had consolidated assets under management of $526.9 billion. Exemplary service, timely innovation and attractive returns across market cycles have been hallmarks of Eaton Vance since 1924. For more information, visit eatonvance.com.

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.

 

View original content:http://www.prnewswire.com/news-releases/eaton-vance-files-third-amended-exemptive-application-for-clearhedge-method-301138391.html

SOURCE Eaton Vance Corp.

FAQ

What is the Clearhedge Method proposed by Eaton Vance?

The Clearhedge Method allows ETFs to keep current holdings confidential while improving secondary market trading efficiency.

When did Eaton Vance first file for the Clearhedge Method?

Eaton Vance first filed for the Clearhedge Method on February 20, 2019.

What are the potential benefits of the Clearhedge Method?

The method is expected to enhance trading performance and improve transparency regarding investor trading costs.

How much assets does Eaton Vance manage as of August 2020?

$526.9 billion in consolidated assets under management.

What was the date of the latest amendment for the Clearhedge application?

The third amendment was filed on September 25, 2020.