Eaton Vance dismisses BlackRock remarks on NextShares

Eaton Vance Corp. Wednesday dismissed remarks by BlackRock Inc. executives that reportedly cast doubt on the future for NextShares, an exchange-traded successor to mutual funds.
Frank Porcelli, head of BlackRock’s U.S. wealth advisory unit, said Tuesday at a press event that Eaton Vance’s NextShares are “like a rubber nail,” which “solve no problem,” according to Dow Jones Newswires.
The news agency also quoted Mark Wiedman, who is in charge of iShares, BlackRock’s industry-leading exchange-traded fund business, as saying, “we don’t think they’re going to go anywhere.”
In an interview with InvestmentNews, Eaton Vance Corp. chairman and chief executive officer Thomas E. Faust Jr. called the remarks off base.
“One of the people at this meeting was the head of the iShares business for BlackRock — it doesn’t surprise me that he’s defending ETFs against new competition,” said Mr. Faust. “He’s not someone instinctively that would be in support of what we’re doing.”
He added: “I also don’t know what a rubber nail is.”
A BlackRock spokeswoman, Melissa Garville, said neither Mr. Porcelli and Mr. Wiedman would be made available for interviews to discuss the comments but that the published report was accurate.
NOT OPTIMISTIC
In a May 2014 interview, with Bloomberg News, Mr. Wiedman said he was not optimistic actively managed ETFs that don’t regularly disclose their underlying holdings would be a big hit with investors. Nonetheless, at the same time, BlackRock was backing a proposal that would allow it to offer such funds. That proposal was rejected by the Securities and Exchange Commission in October.
But the securities regulator said in November that it would approve Eaton Vance’s proposal for NextShares.
Tuesday’s remarks come as Eaton Vance is actively working to license its novel investment-product structure to its competitors, including BlackRock, and to convince broker-dealers to make the products available to financial advisers. Seven outside money managers have signed preliminary agreements to offer the products, according to Mr. Faust. The managers who’ve signed up include Mario J. Gabelli’s GAMCO Investors Inc.
Proponents of NextShares, which are targeted for release this year, say they offer the benefits of largely index-tracking exchange-traded funds to investors seeking managers who make investment decisions on their behalf. Eaton Vance says the products could enhance investment performance and lower costs, including tax liabilities, for mutual fund investors.
RESISTANCE
Most traditional ETFs are not actively managed. Many active managers resist offering the products because they would have to regularly disclose the stocks, bonds and other investments they buy and sell. NextShares are not bound by that requirement.

Related Topics: BlackRock Inc.