Market Vectors Removes Derivatives From Two Active ETF Plans
Mon, Aug 30, 7:11 AM ET, by Shishir Nigam, ActiveETFs | InFocus
Van Eck Global, the company behind the Market Vectors line of ETFs, has been the latest issuer to modify its plans to remove the usage of derivatives in its proposed actively-managed ETFs. Van Eck currently manages in excess of $14 billion in assets in its exchange-traded funds and had previously filed with the SEC to launch two actively-managed ETFs: Market Vectors - Active Africa ETF and Market Vectors - Active Short Municipal ETF. The original investment mandate for each of the two funds would have allowed them to invest in various derivative instruments such as futures contracts, equity linked derivatives, swaps and options. However, the latest amendment to the application, made on August 27th removes this flexibility and the funds are no longer expected to utilize derivatives as part of their investment process. This move from Van Eck follows up on similar modifications made by other Active ETF issuers such as AdvisorShares and Legg Mason, who have tried to restrict the usage of derivatives in order to avoid delays and scrutiny associated with the SEC's on-going investigation of derivative usage in ETFs. The SEC first announced this investigation in March 2010 and very few actively-managed ETFs have been launched on the market since. Van Eck's Active Africa ETF is planned to invest primarily in equity securities in Africa while seeking long-term capital appreciation. The fund advisors, Van Eck Advisors, will utilize qualitative and quantitative measures, to select companies for the Active Africa ETF that have growth potential within their market niche. The Active Short Municipal ETF will try to exceed the total return of the Barclays Capital AMT-Free Short Continuous Municipal Index by investing the large majority of its assets in investment-grade municipal securities, whose interest is tax-exempt from federal income tax.
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