Basket creation apparatus for actively managed ETF that does not reveal all of the underlying fund securities
A computer-implemented apparatus is provided for administering an actively managed investment company that invests assets in fixed income securities. The apparatus includes an investment company processor, an investment company portfolio trading and managing computer, and a computer database. The investment company processor issues one or more classes of shares that are listed for trading on a securities exchange and that are bought and sold in a secondary market at negotiated market prices. The investment company portfolio trading and managing computer receives instructions to select and hold a portfolio of fixed income securities that relate to a benchmark index. The selection is made in an actively managed manner such that the duration range of the securities holdings is either longer than the duration of the benchmark index, close to the duration of the benchmark index, or shorter than the duration of the benchmark index. The investment company portfolio trading and managing computer also defines a creation unit basket having a duration that is equal to a midpoint of the duration range of the securities holdings of the investment company that are held in the investment company portfolio trading and managing computer. The computer database stores the creation unit basket.
1. A computer-implemented apparatus for administering an actively managed investment company that invests assets in fixed income securities, the apparatus comprising:
(a) an investment company processor that issues one or more classes of shares that are listed for trading on a securities exchange and that are bought and sold in a secondary market at negotiated market prices;
(b) an investment company portfolio trading and managing computer that receives instructions to:
(i) select and hold a portfolio of fixed income securities that relate to a benchmark index, wherein the selection is made in an actively managed manner such that the duration range of the securities holdings is either:
(A) longer than the duration of the benchmark index,
(B) close to the duration of the benchmark index, or
(C) shorter than the duration of the benchmark index, and
(ii) define a creation unit basket having a duration that is equal to a midpoint of the duration range of the securities holdings of the investment company that are held in the investment company portfolio trading and managing computer; and
(c) a computer database that stores the creation unit basket.
2. The apparatus of claim 1 wherein the percentage of the securities holdings in the creation unit is less than 100% of the securities holdings.
3. The apparatus of claim 2 wherein the percentage of the securities holdings is about 40% to about 75% of the securities holdings.
4. The apparatus of claim 1 further comprising:
(d) a publication module in communication with the computer database that publishes the creation unit basket to facilitate creation and redemption of shares in the one or more classes of shares in part (a).
5. The apparatus of claim 1 wherein the fixed income securities are selected from the group comprising Treasury inflation-protected securities and Treasury bonds.
6. The apparatus of claim 1 wherein the creation unit basket further has a breakeven inflation exposure that is approximately matched to the breakeven inflation exposure of the securities holdings.
7. The apparatus of claim 1 wherein the creation unit basket further has a yield curve slope exposure that is approximately matched to the yield curve slope exposure of the securities holdings.
8. The apparatus of claim 1 wherein the investment company invests substantially all of its assets in fixed income securities.
9. The apparatus of claim 1 wherein the creation unit basket in the computer database is modified at a subsequent point in time only if the creation unit basket is no longer a representative sample of the securities holdings, or if the duration of the fund securities holdings has changed.