First Hancock ETF To Be A Global Balanced Fund
June 21, 2010
John Hancock, the Boston-based financial firm that filed to offer actively managed ETFs last year, said the first fund it will seek to register once regulators approve its exemptive relief filing will be a global balanced fund of both
The ETF will be called the John Hancock Global Balanced Fund, and will normally invest 60 percent of its assets in equities and the remaining 40 percent in fixed-income securities, according to the filing with the Securities and Exchange Commission.
The ETF will also be able to invest in other investment companies, including other ETFs, according to the filing. It will also be able to “extensively” hold short-term money-market-type securities should it be necessary for the fund to take a defensive posture.
While actively managed funds make up a miniscule portion of U.S. ETF assets, a growing number of firms have filed to be able to offer such funds, including the world’s biggest ETF company, iShares. Just less than 25 actively managed funds have gathered about $1.5 billion, compared with more than 1,000 passively managed ETFs with about $800 billion in assets.
However, neither the Global Balanced Fund, nor any future fund relying on the exemptive relief order, will be allowed to invest in options contracts, futures contracts or swap agreements, except to the extent permitted by the commission and/or its staff in the future.
The SEC said in March it was looking into whether more protections are needed surrounding the use of derivatives—such as swaps—by mutual funds, exchange-traded funds and other investment companies in a move that’s likely to slow the launching of some ETFs.
The SEC decision has prompted some companies to change their plans regarding the use of derivatives in ETFs, and the language in Hancock’s filing that precluded the use of derivatives was not in its initial exemptive relief filing.
Exemptive relief filings grant the ETF firms exception to sections of the Investment Act of 1940 and are just the first step in the path to launching ETFs. It often takes at least six to 12 months from the date of the initial filing for a company’s first ETF to hit the market.