BOSTON, Dec. 3, 2014 /PRNewswire/ -- Navigate Fund Solutions LLC (Navigate), a subsidiary of Eaton Vance Corp. (NYSE: EV), announced today the availability of a new white paper that examines the avoidable structural costs of actively managed mutual funds and their impact on fund performance. The white paper may be accessed at no cost at nextshares.com/whitepaper. Reproducing or distributing the white paper in any form without permission is strictly prohibited.
As described in the paper, the performance of actively managed mutual funds reflects significant fund costs in addition to manager fees, asset custody charges and the cost of portfolio trades to implement managers' buy and sell decisions. These added costs include embedded fund distribution and service (12b-1) fees, transfer agency (TA) fees, the trading costs funds incur in connection with shareholder inflows and outflows, and the effect on fund performance of not being fully invested (cash drag). The paper quantifies these costs for the universe of actively managed equity mutual funds available to retail investors in the U.S. over the period 2007 to 2013. Annual 12b-1 fees averaged 40 basis points on an equal-weighted basis (EW) and 15 basis points asset-weighted (AW). Annual TA fees, flow-related trading costs and cash drag together averaged 65 basis points EW and 63 basis points VW. The white paper asserts that these costs could be substantially avoided by moving to a more efficient fund structure. Adjusting realized fund returns to remove avoidable structural costs, 55% EW and 65% AW of actively managed fund shares benchmarked to major U.S. equity indexes outperformed the corresponding average of index exchange-traded funds over the seven-year study period, a significant improvement over fully burdened active mutual fund performance.
Navigate is a wholly owned subsidiary of Eaton Vance Corp. formed to develop and commercialize NextShares™ exchange-traded managed funds. For more information about NextShares, see nextshares.com.
Eaton Vance Corp. is one of the oldest investment management firms in the United States, with a history dating back to 1924. Eaton Vance and its affiliates managed $297.7 billion in assets as of October 31, 2014, offering individuals and institutions a broad array of investment strategies and wealth management solutions. Eaton Vance's long record of providing exemplary service, timely innovation and attractive returns through a variety of market conditions has made it the investment manager of choice for many of today's most discerning investors. For more information, visit eatonvance.com.
This press release is for information purposes only and is not intended to constitute, and should not be construed as, an offer to sell securities. Navigate does not guarantee the accuracy or completeness of the information presented in the white paper and has not attempted to verify the accuracy of the third-party data relied upon. The study involved numerous assumptions, and the outputs of the study are merely estimates. Actual results may differ. In particular, it should be understood that a fund's actual flow-related trading costs could vary from reported amounts to reflect variation in the actual amount of fund trading in connection with shareholder flows and/or the actual average cost of flow-related trades from amounts assumed. It should be further understood that a fund's actual cash drag could vary from estimated amounts to reflect one or more of the following: (a) cash holdings at beginning of each measurement period were not representative of the fund's average cash holdings for the period; (b) actual returns on the fund's cash investments varied from assumed cash returns; and (c) indicated cash amounts did not reflect the fund's true investment positioning due to fund leverage, short positions or positions in derivatives.
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SOURCE Eaton Vance Corp.
