Eaton Vance announced Monday that its first NextShares product will start trading on the Nasdaq stock exchange Feb. 26.
NextShares are actively managed hybrid ETFs that price once a day, like traditional open-end funds. Like other ETFs, NextShares will trade on the stock exchanges.
Eaton Vance says NextShares will offer lower expenses than most actively managed funds, as well as greater tax efficiency.
The first NextShare product is a master-feeder fund, meaning its investments will be held indirectly through a separate fund, Stock Portfolio. Eaton Vance Stock Fund, rated four stars by Morningstar, also invests through the portfolio.
The $308 billion Boston-based company has registered 18 NextShare funds across all asset classes.
Eaton Vance says 12 investment advisers, including
Columbia Threadneedle , Pioneer Investments and the Gabelli funds, have all indicated their intent to offer NextShare funds.
Institutions will be able to exchange creation units from the fund, which should reduce capital gains payouts. In-kind redemptions typically don't trigger capital gains.
Unlike ETFs, NextShares won't be required to disclose their entire portfolios, which Eaton Vance says will reduce the possibility of front-running, which is when other investors anticipate a fund's moves and get a boost from its larger stock purchases.
Individual investors will be able to buy the fund via
Folio Investing and Folio Institutional starting February 29.
The NextShares rollout has been somewhat bumpy. Credit Suisse downgraded the company's stock in July 2015, saying it was worried that Eaton Vance wouldn't be able to obtain sufficient distribution for NextShares. Eaton Vance won
final approval for the fund structure in December.
“It's still going to be difficult to distribute, since it's available only on one fairly narrow platform,” said Ben Johnson, director of global ETF research at Morningstar. And, while eliminating 12b-1 fees from the NextShares is a boon for investors, it could be a nonstarter for some middlemen, he says. “It's still going to be quite some time for real proof of concept,” Mr. Johnson said.
