Natixis launches three active semi-transparent ETFs
“It’s a marathon not a sprint,” says Nick Elward (pictured), SVP, Head of Institutional Product and ETFs at Natixis which has just announced the launch of three semi-transparent ETFs. The process of launching them started in 2017, they got the approval in 2019 and are launching those ETFs on 17 September.
The three new funds are all US equity focused, in line with the current restrictions on semi-transparent ETFs, and draw on the boutique fund management skills, some 20 firms, of the Natixis brand from around the globe.
The ETFs represent a new route for existing strategies that are currently available as mutual funds with well-established track records managed by investment teams at Natixis affiliates Loomis, Sayles & Co (Loomis Sayles), Harris Associates and Vaughan Nelson.
The funds are the Natixis US Equity Opportunities ETF (EQOP); the Natixis Vaughan Nelson Mid Cap ETF (VNMC) and the Natixis Vaughan Nelson Select ETF (VNSE).
The Natixis US Equity Opportunities ETF is a multi-managed, diversified core equity product combining fundamentally driven growth and value managers. Loomis Sayles’ Growth segment is managed by Aziz Hamzaogullari (CIO and founder of the Loomis Sayles Growth Equity Strategies Team, with some USD60 billion under management), and the management team of Harris Associates’ Value segment is led by Bill Nygren (CIO-US Equities).
The Natixis Vaughan Nelson Mid Cap ETF takes advantage of temporary information and marketplace inefficiencies in the mid-cap universe to find opportunities to invest in companies at valuations materially below their long-term intrinsic value. The fund invests in companies within the market capitalisation range of the Russell Midcap Value Index at the time of purchase. Chris Wallis (CEO & CIO), Dennis Alff and Chad Fargason are the named portfolio managers.
The Natixis Vaughan Nelson Select ETF invests in companies within the market capitalization range of the Russell 3000 Index at time of purchase and seeks long-term capital appreciation. The strategy employs sophisticated, proprietary analysis, valuation and risk management. Managers Chris Wallis and Scott Weber follow a research-intensive process emphasizing balance sheets and cash flow-based projections.
Elward says: “We have been running actively managed products for decades with a boutique set of managers across the globe and we never really strongly moved into the ETF market until 2016.”
The Natixis Seeyond International Minimum Volatility ETF (MVIN) was launched in 2016 and the Natixis Loomis Sayles Short Duration Income ETF (LSST) launched in 2017.
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Here, Natixis found that while the transparency was great, and a lot of managers were comfortable with daily transparency, there were lots of fundamental equity management teams whose trading and times of trades were crucial and needed to be shielded from potential front running.
Leveraging the New York Stock Exchange (NYSE)’s Proxy Portfolio Methodology approach, Natixis’s semi-transparent active ETFs disclose proxy portfolios on a daily basis that closely track the actual portfolios’ intraday performance. This structure allows the portfolio managers to shield the identity of stocks on which they are actively trading, while still providing market makers enough information to offer competitive bids and asks on the ETFs.
“Using this process, investors can garner good investment benefits with all the vehicle benefits of the ETF,” Elward says.
Fees on the new ETFs are 90 bp capped for EQOP; 90 bp capped for VNMC and 85 bp capped for VNSE.