Method of creating and maintaining multi-manager exchange traded funds

Abstract

Systems and methods for creating and maintaining multi-manager exchange traded funds. An embodiment of a method includes receiving a plurality of model portfolios, each created by a different portfolio manager and identifying a plurality of assets traded on a stock exchange. A portfolio composition file is created based at least in part on at least a portion of the model portfolios. The portfolio composition file identifies a set of constituent assets traded on the stock exchange. One or more authorized participants are authorized to trade the set of constituent assets for a creation unit of an exchange traded fund. The creation unit includes at least one share that is tradable on the stock exchange by both the authorized participant(s) and the investors.

The invention claimed is: 
     
         1 . A computer-implemented method for use with a stock exchange, investors, a plurality of portfolio managers, and an exchange traded fund having at least one authorized participant, the at least one authorized participant being different from the investors, the method being performed by at least one computing device, the method comprising:
 receiving a plurality of model portfolios, each model portfolio having been created by a different one of the plurality of portfolio managers and received from a different computing device, each model portfolio identifying a plurality of assets traded on the stock exchange;   combining at least a portion of the model portfolios into a combined portfolio;   creating a portfolio composition file based at least in part on the combined portfolio, the portfolio composition file identifying a set of constituent assets traded on the stock exchange, the exchange traded fund trading a creation unit comprising at least one share of the exchange traded fund for the set of constituent assets, only the one or more authorized participants being authorized to trade the set of constituent assets for the creation unit of the exchange traded fund, the at least one share of the creation unit being tradable on the stock exchange by both the at least one authorized participant and the investors; and   transmitting the portfolio composition file to at least one other computing device operated by the at least one authorized participant.   
     
     
         2 . The method of  claim 1 , wherein the combined portfolio identifies a plurality of assets, and a number of shares of each of the plurality of assets identified by the combined portfolio, and the method further comprises:
 identifying one or more illiquid assets within the plurality of assets identified by the combined portfolio; and   modifying the combined portfolio by at least one of (1) removing the identifications from the combined portfolio of the one or more illiquid assets, (2) reducing the number of shares of the one or more illiquid assets identified by the combined portfolio, or (3) replacing the identifications of the one or more illiquid assets with identifications of different assets that are more liquid.   
     
     
         3 . The method of  claim 1 , further comprising:
 performing a risk analysis on the combined portfolio to determine whether the combined portfolio is within a set of risk parameters; and   modifying the combined portfolio if the risk analysis determines the combined portfolio is not within the set of risk parameters.   
     
     
         4 . The method of  claim 1 , further comprising:
 modifying the combined portfolio to adjust for at least one corporate action having an effective date in the future.   
     
     
         5 . The method of  claim 4 , wherein the at least one corporate action comprises at least one of a stock split, a cash reinvestment, or a dissolution. 
     
     
         6 . The method of  claim 4  for use with one or more source of market information, the method further comprising:
 obtaining information identifying the at least one corporate action from at least one computing device operated by the one or more source of market information. 
 
     
     
         7 . The method of  claim 1 , wherein the combined portfolio identifies a plurality of assets and a value for each asset from which a number of shares of the asset may be determined, and the method further comprises:
 removing from the combined portfolio identifications of any assets having a value below a threshold number.   
     
     
         8 . The method of  claim 1  for use with the exchange traded fund having a first set of constituent assets, the method further comprising:
 crossing the plurality of model portfolios with one another and the first set of constituent assets before creating the portfolio composition file. 
 
     
     
         9 . The method of  claim 1 , wherein the identification of the plurality of assets in each of the plurality of model portfolios comprises, for each asset, an identifier identifying the asset, and a number of shares of the asset to be included in the model portfolio, and combining the portion of the model portfolios into the combined portfolio comprises:
 selecting a corresponding weight for each model portfolio in the portion of the model portfolios;   for each model portfolio, multiplying the number of shares of each of the plurality of assets by the weight corresponding to the model portfolio to obtain a weighted number of shares; and   aggregating the weighted number of shares.   
     
     
         10 . The method of  claim 9 , wherein for each for each model portfolio, the corresponding weight is selected based on an evaluation of conformance of the one of the plurality of portfolio managers who created the model portfolio to a set of guidelines. 
     
     
         11 . The method of  claim 10 , wherein the set of guidelines comprises at least one of an excess return target compared to a benchmark, or a desired maximum risk variation. 
     
     
         12 . The method of  claim 1 , further comprising:
 transmitting the portfolio composition file to the plurality of portfolio managers.   
     
     
         13 . The method of  claim 1 , further comprising:
 transmitting the portfolio composition file to each different computing device from which one of the plurality of model portfolios was received.   
     
     
         14 . The method of  claim 1  for use with at least one other computing device operated by a file distribution entity, wherein transmitting the portfolio composition file to the at least one other computing device operated by the at least one authorized participant comprises:
 transmitting the portfolio composition file to the at least one other computing device operated by the file distribution entity for transmission thereby to the at least one other computing device operated by the at least one authorized participant. 
 
     
     
         15 . The method of  claim 1 , further comprising:
 obtaining indications of which of the plurality of portfolio managers are active, the portion of the model portfolios combined into the combined portfolio comprising the model portfolios received from those of the plurality of portfolio managers that are indicated as being active.   
     
     
         16 . The method of  claim 1  for use with at least one computing device operated by one or more source of market information, the method further comprising:
 receiving financial information from the at least one computing device operated by the one or more source of market information, wherein the portfolio composition file is created based at least in part on the combined portfolio, and the financial information. 
 
     
     
         17 . The method of  claim 1  for use with the exchange traded fund comprising constituent assets and being managed by a fund manager, the method further comprising:
 creating a trade list based on the model portfolios, the trade list identifying one or more trades to be performed by the fund manager to modify the constituent assets of the exchange traded fund. 
 
     
     
         18 . The method of  claim 17 , further comprising:
 modifying the trade list to adjust for at least one corporate action having an effective date in the future.   
     
     
         19 . The method of  claim 18 , where in the at least one corporate action comprises at least one of a stock split, a cash reinvestment, or a dissolution. 
     
     
         20 . The method of  claim 1 , further comprising transmitting the portfolio composition file to at least one other computing device operated by the exchange traded fund. 
     
     
         21 . The method of  claim 1 , wherein for each of the plurality of model portfolios, the identification of the plurality of assets comprises, for each of the plurality of assets, an identifier identifying the asset, and a value from which a number of shares of the asset to be included in the model portfolio may be determined. 
     
     
         22 . The method of  claim 1 , wherein for each of the plurality of model portfolios, the identification of the plurality of assets comprises a buy-list and a sell-list, the buy-list identifying a plurality of assets to buy and for each asset to be bought a value from which a number of shares to be bought may be determined, the sell-list identifying a plurality of assets to be sold and for each asset to be sold a value from which a number of shares to be sold may be determined. 
     
     
         23 . The method of  claim 1 , wherein only the one or more authorized participants is authorized to redeem a creation unit for the set of constituent assets. 
     
     
         24 . The method of  claim 1 , wherein the portfolio composition file is transmitted to the at least one other computing device when the stock exchange is closed. 
     
     
         25 . A system for use with a stock exchange, investors, and an exchange traded fund having a plurality of authorized participants, the at least one authorized participant being different from the investors, the system comprising:
 at least one first computing device operated by a modeling entity;   at least one second computing device operated by the exchange traded fund, the exchange traded fund comprising a first set of constituent assets;   a first plurality of computing devices operated by the plurality of authorized participants; and   a second plurality of computing devices configured to transmit a plurality of model portfolios to the at least one first computing device, the at least one first computing device being configured to identify a second set of constituent assets based on the plurality of model portfolios, and transmit identifications of the second set of constituent assets to the at least one second computing device and the first plurality of computing devices operated by the plurality of authorized participants,   the exchange traded fund at least one of buying and selling a portion of the first set of constituent assets on the stock exchange based on the identifications of the second set of constituent assets received from the at least one first computing device,   each of the plurality of authorized participants being authorized by the exchange traded fund to trade the second set of constituent assets for a creation unit comprising shares of the exchange traded fund, each of the plurality of authorized participants being further authorized by the exchange traded fund to trade the creation unit for the second set of constituent assets, the shares of the exchange traded fund being tradable on the stock exchange by the investors.   
     
     
         26 . The system of  claim 25 , wherein the at least one first computing device transmits the identifications of the second set of constituent assets to the at least one second computing device and the first plurality of computing devices when the stock exchange is closed. 
     
     
         27 . A computer-implemented method performed by at least one computing device operated by an exchange traded fund comprising a first set of constituent assets each of which is tradable on a stock exchange, the method comprising:
 receiving identifications of assets to buy and identifications of assets to sell that were determined based on a plurality of model portfolios each created by a different portfolio manager;   modifying the first set of constituent assets to create a second set of constituent assets by buying assets identified in the identifications of assets to buy on the stock exchange, and selling assets identified in the identifications of assets to sell on the stock exchange;   identifying a third set of constituent assets based on the second set of constituent assets, the third set of constituent assets corresponding to a creation unit comprising at least one share of the exchange traded fund; and   trading the creation unit for the third set of constituent assets, the at least one share of the exchange traded fund being tradable on the stock exchange.   
     
     
         28 . The method of  claim 27 , further comprising:
 transmitting identifications of the third set of constituent assets to a plurality of computing devices each operated by a different one of the portfolio managers who created one of the plurality of model portfolios.   
     
     
         29 . The method of  claim 27 , further comprising:
 transmitting identifications of the third set of constituent assets to one or more computing devices each operated by an authorized participant.