
Exchange-Traded Managed Fund (ETMF)
Exchange-traded managed funds (ETMFs) are a type of fund approved by the Securities Exchange Commission (SEC) in 2014. ETMFs also include many elements of exchange-traded funds, including: Tax efficiency, since the funds do not draw capital gains Net asset value (NAV)–based trading ETMFs are a middle ground between mutual funds and ETFs, combining aspects of different existing types of funds in order to retain both efficiency and portfolio confidentiality. Any exchange on which ETMFs trade must complete SEC Form 19b-4, which requires the exchange to upgrade its system to be able to host daily trading based on a proxy price. Exchange-traded managed funds (ETMFs) are a type of fund approved by the Securities Exchange Commission (SEC) in 2014.
What Are Exchange-Traded Managed Funds (ETMFs)?
Exchange-traded managed funds (ETMFs) are a type of fund approved by the Securities Exchange Commission (SEC) in 2014. They are a hybrid between mutual funds and exchange-traded funds (ETFs). They were created for the global investment company Eaton Vance and are branded as NextShares on NASDAQ.
Understanding Exchange-Traded Managed Funds (ETMFs)
ETMFs are a middle ground between mutual funds and ETFs, combining aspects of different existing types of funds in order to retain both efficiency and portfolio confidentiality. They carry many of the same characteristics as mutual funds, including:
ETMFs also include many elements of exchange-traded funds, including:
At the end of each trading day, ETMFs price the NAV, taking into account any premiums or discounts in the trades. This NAV is then used as a retrospective basis for that day's trading. Essentially, trades occur throughout the day at a proxy price since the actual price won't be determined until the market closes for the day.
What do Exchange-Traded Managed Funds Mean for Investors?
ETMFs pose a unique and novel opportunity for investors. Like mutual funds, ETMFs are actively managed, but they don't pose the same risks as traditional actively-managed ETFs. Since ETMFs can be bought and traded directly through a stock exchange, they are also cost- and tax-efficient for the investor, as they eliminate the costs and fees associated with intermediaries.
History of Exchange-Traded Managed Funds
Eaton Vance's (now Morgan Stanley) NextShares were approved by the Securities Exchange Commission (SEC) in late 2014. However, due to rules and regulations, they did not start trading until early 2016. Any exchange on which ETMFs trade must complete SEC Form 19b-4, which requires the exchange to upgrade its system to be able to host daily trading based on a proxy price. To date, the following Eaton Vance ETMFs are trading on the market:
Other companies have since followed suit and requested their own ETMFs. However, it is unclear when these funds will be approved and, if they're approved, when they'll be able to start trading.
Related terms:
Closed-End Fund
A closed-end fund raises capital for investment through a one-time sale of a limited number of shares, which may then be traded on the markets. read more
Dual-Purpose Fund
A dual-purpose fund is a closed-end fund that offers two classes of stock: Common and preferred shares. read more
Exchange Traded Fund (ETF) and Overview
An exchange traded fund (ETF) is a basket of securities that tracks an underlying index. ETFs can contain investments such as stocks and bonds. read more
Exchange-Traded Mutual Fund (ETMF)
An exchange-traded mutual fund (ETMF) is an exchange-traded security that is a hybrid between an exchange-traded fund (ETF) and an open-end mutual fund. read more
Forward Pricing
Forward pricing is an industry standard for mutual funds that requires investment companies to price fund transactions according to the next NAV. read more
Index ETF
Index ETFs are exchange-traded funds that seek to track a benchmark index like the S&P 500 as closely as possible. read more
Late-Day Trading
Late-day trading is the illegal practice of recording trades executed after hours as having occurred prior to a mutual fund posting its daily NAV. read more
Mutual Fund
A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities, which is overseen by a professional money manager. read more
Net Asset Value – NAV
Net Asset Value is the net value of an investment fund's assets less its liabilities, divided by the number of shares outstanding, and is used as a standard valuation measure. read more