US investment manager Causeway Capital Management has launched two exchange-traded managed funds using Eaton Vance’s ‘NextShares’ vehicle structure. The Causeway Global Value NextShares (CIVEC US) and Causeway International Value NextShares (CGVIC US) are available to trade on Nasdaq Exchange.
Causeway launches two NextShares ETFs.
NextShares are classed as a hybrid between an actively managed mutual fund and an ETF. They protect and harness the manager’s proprietary research in a bid to obtain benchmark-beating returns, while simultaneously enjoying intraday tradability.
All trades of the fund are finalised at day’s end with prices reflecting the fund’s Net Asset Value plus or minus a trading cost (premium/discount) that was established at the time the trade was executed. This intraday tradability allows the funds to maintain significant cost and tax advantages usually associated with ETFs.
CIVEC is constructed from a universe which primarily spans developed markets, including the US, although a small portion (up to 20%) of of the fund may invest in emerging markets. The fund aims to outperform the MSCI World Index.
Eligible companies have market capitalisations greater than $1bn, have a value tilt, and the fund normally invests exclusively in companies which pay dividends or have active share repurchase programs. The investment process is comprised of three stages: quantitative screening and initial analysis, fundamental research, and portfolio construction.
The fund is most highly exposed to the US at 39.2% of the portfolio, although this exposure is significantly underweight compared with the benchmark (60.0%). The fund is significantly overweight equities from the UK (19.1% versus the benchmark weight of 6.4%).
Financials represents the fund’s highest sector exposure at 16.6% which is marginally underweight compared with the benchmark (17.9%).
The fund has existed in mutual fund form since 2001. It has failed to outperform its benchmark over this period however, returning 7.4% per annum compared to the MSCI World’s 9.4%.
It has an expense ratio of 105bps.
CGVIC uses the MSCI EAFE as its benchmark, an index that consists of non-US, developed markets as well as emerging market stocks.
The stock selection is similar to CIVEC: Eligible companies must also have market capitalisations greater than $1bn, pay dividends or have active share repurchase programs, and have a value tilt.
The fund is most highly exposed to the UK, at 33.8% of its weighting. This is significantly overweight compared with its benchmark which has 17.3% UK exposure. Japan is the fund’s next highest exposure at 13.3%, underweight its benchmark which has 24.6% Japanese exposure.
Financials represents the fund’s highest sector exposure at 19.8% which is marginally underweight compared with the benchmark (21.1%).
The fund has also existed in mutual fund form since 2001. It has outperformed its benchmark since inception; the fund has returned 7.8% per annum net of fees versus the benchmark at 6.7%.
It has an expense ratio of 105bps.