36 Arcadia Road, P.O. Box 69
Old Greenwich, CT 06870
Tel. (203) 512-0979

January 11, 2002


Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-0609

Reference: SEC Concept Release No. IC - 25258, File No. S7-20-01

Dear Mr. Katz:

Shoreland Partners LLC ("Shoreland" or "the Company"), is pleased to submit to the Securities and Exchange Commission (the "Commission") comments concerning a developing class of actively managed exchange traded funds ("ETF"), referenced in the Commission's Concept Release, File No. S7-20-01 (the "Commission Release"), as Active ETFs.

Privately held, with offices in Greenwich, Connecticut and London, U.K., Shoreland has developed a proprietary statistical-based methodology (the "Pricing Model") that is able to continuously provide, at 15-second intervals, a synthetic net asset value ("NAV") for an Active ETF throughout the trading day. The Pricing Model also calculates, on a real-time basis, an optimal hedging portfolio for Active ETF specialists, market makers and traders. At the same time, the unique application of Shoreland's Pricing Model does not require any confidential information disclosure whatsoever. More specifically, the actual holdings and/or number of holdings and/or portfolio strategy is not revealed, thereby ensuring an active manager's portfolio confidentiality at all times - no portfolio information whatsoever is held in, or revealed to, the Pricing Model. The Pricing Model is robust, flexible, consistent and statistically optimal and can provide a synthetic NAV for active equity (including enhanced or leveraged instr uments) and fixed income ETFs alike. The Pricing Model can also accommodate portfolios that include currency holdings.

Similar to the compelling growth in assets seen in the $80 - $90 billion index-based, or Passive ETF U.S. marketplace, Shoreland believes that a robust and rigorous model, able to continuously provide a synthetic NAV for Active ETFs, will potentially drive strong growth in this asset class. With continuous and full intra-day pricing transparency, institutional and retail investors would be able, for example, to use Active ETFs throughout the trading day to speculate (long and short), hedge and design new trading strategies.

Shoreland's proprietary quantitative solution:

  1. Does not require any disclosure of actively managed portfolios;

  2. Supplies a synthetic NAV continuously even as the portfolio manager employs a variety of hedging tools and derivatives;

  3. Is highly accurate - recent testing over a twelve month period reveals an absolute average deviation of less than 12 basis points from the actual NAV of the test portfolio; and

  4. Provides an optimal hedging solution for Active ETF specialists, market makers and traders.

Although the many operational and regulatory questions raised in the Commission Release are beyond the technical scope of the Pricing Model, we are of the opinion that the Pricing Model effectively answers and solves many of the technical issues and concerns raised by the Commission concerning Active ETF implementation, such as:

  1. Ensuring complete portfolio manager confidentiality;

  2. Eliminating "front running" and "free riding";

  3. Ensuring that an Active ETF synthetic NAV price closely tracks the actual NAV of the underlying portfolio; and

  4. Providing an optimal hedging portfolio for an Active ETF book, thereby providing market makers, specialists and traders with the means necessary to maintain a liquid market.

Shoreland would be pleased to meet with representatives of the Commission in order to further explain the methodology behind the Pricing Model and how we believe the Pricing Model can possibly assist the Commission in developing a technical framework for Active ETF implementation.

In addition, as a consequence of the development of our Company's Pricing Model, Shoreland has developed a view as to the possible construction and operation of the Active ETF Portfolio Deposit and Redemption Basket and would be pleased to discuss these views with the Commission at that meeting.

In closing, Shoreland appreciates the opportunity to submit our comments and looks forward to continued discussions with the Commission.


Ivar Bjornstad