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Nuveen Works on Active Exchange Fund


Nuveen Investments of Chicago and Epoch Partners, an investment banking firm in San Francisco, announced plans last week to introduce two more exchange-traded funds. Nuveen also announced that it is developing an actively-managed exchange-traded fund. Nuveen does not yet know whether it will introduce a single actively-managed exchange-traded fund or several of them, said Laurel O'Brien, a spokesperson for Nuveen.

Nuveen announced plans to introduce its first equity-based exchange-traded fund Oct. 16. The fund will be based on the America's Fastest Growing Companies index and traded on the American Stock Exchange, O'Brien said. Nuveen has not yet filed with the SEC to register the fund but has applied for exemptive relief from the Investment Company Act, O'Brien said. There are standard exemptions from the act that exchange-traded funds seek. The fund will be the first in a series of new equity exchange-traded funds, Nuveen said. The firm already has several municipal bond exchange-traded funds, Nuveen said.

Individual Investor Group, a publishing and investment management company in New York, developed the America's Fastest Growing Companies index. It consists of 500, predominately small-capitalization companies that meet specific earnings growth criteria, Nuveen said. The index currently includes retailers Abercrombie & Fitch Co. of Reynoldsburg, Ohio, Coach USA of New York and Ethan Allen Interiors of Danbury, Conn., as well as BARRA, a portfolio software developer of Waltham, Mass., Federated Investors of Pittsburgh and E*Trade online brokerage of San Francisco.

Unlike other small-cap indexes that drop companies when their market cap exceeds the index's capitalization limits, the America's Fastest Growing Companies index will retain companies even if their capitalizations grow beyond $2 billion, said Gary Gastineau, managing director for structured investments at Nuveen, in a statement.

This exchange-traded fund will be based on an index that will minimize changes to it, in order to limit transaction costs and capital gains, Gastineau said in the statement.

Gastineau left his position as senior vice president for new product development at the American Stock Exchange in March to join Nuveen with the mandate of developing exchange-traded funds. (MFMN 3/7/00)

Also last week, Epoch, which underwrites initial public offerings, announced it would offer its first exchange-traded fund. Epoch plans to offer baskets of stocks that will trade on the American Stock Exchange, according to a Sept. 13 SEC filing. The baskets of securities will be structured as stock depository receipts and not as unit trusts, making them similar to Holding Company Depository Receipts (HOLDRS) from Merrill Lynch of New York, according to the filing.

Epoch's filing makes no mention of how many of these new products, which it is calling New Era Trust Securities, or Nets, it will offer, or in what sectors they will invest. A spokesperson for Epoch declined to elaborate because of the silent period that the SEC imposes on companies during a registration process.

Epoch's filing does say, however, that each Net will invest in a basket of 20 stocks and that Epoch will sell these in lots of 100 at $40 to $50 a share. The minimum investment in each Net will be from $4,000 to $5,000, according to the filing.

Epoch is a joint venture between Charles Schwab & Co. of San Francisco, Ameritrade of Omaha, Neb. and TD Waterhouse of New York, according to Epoch.