SEC Company Response from Natixis Funds Trust IV (CIK 0001095726) — May 25, 2022
Natixis Funds Trust IV (CIK 0001095726)
Date: May 25, 2022 · CIK: 0001095726 · Accession: 0001193125-22-160074
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File numbers found in text: 811-09945
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CORRESP 1 filename1.htm Natixis Funds Trust IV May 25, 2022 U.S. Securities and Exchange Commission Division of Investment Management 100 F Street, NE Washington, DC 20549-0504 Attention: Karen Rossotto VIA EDGAR Re: Registrant: Natixis Funds Trust IV File No.: 811-09945 Filing Type: Form N-1A Dear Ms. Rossotto: This letter responds to comments of the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) received by telephone on May 17, 2022, regarding the post-effective amendment to the Natixis Funds Trust IV (the “Registrant”) registration statement on Form N-1A for the AEW Global Focused Real Estate Fund (the “Fund”), which was filed with the Commission on April 1, 2022 (the “Registration Statement”). For your convenience, we have summarized each comment below, followed by the Registrant’s response. Any term that is used, but not defined, in this letter retains the same meaning as used by the Registrant in the Registration Statement. Please note that the Registration Statement is scheduled to become effective automatically on June 1, 2022. Prospectus 1. Comment. Please add disclosure to the “Principal Investment Strategies” section of the Fund’s prospectus clarifying how the Fund will meet its investment goal of providing investors with above-average income. Response. The Registrant believes that the Fund’s broad exposure to the securities of real estate companies, including those that are primarily focused on income-producing commercial property and real estate development, will allow the Fund to meet its investment goal of providing investors with above-average income. The majority of these companies are Real Estate Investment Trusts (“REITs”). To qualify as a REIT, a company must distribute a significant percentage of its taxable income to shareholders in the form of dividends (at least 90% in the U.S.), and this dividend payout ratio is generally higher than that of non-REIT companies. In response to this comment the Registrant has revised the first paragraph of the “Principal Investment Strategies” section of the prospectus as follows: “Under normal market conditions, the Fund will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in securities, including common stocks and preferred stocks, of real estate investment trusts (“REITs”) and/or real estate-related companies (e.g., real estate operating companies). REITs are generally dedicated to owning, and usually operating, income-producing real estate, or dedicated to financing real estate. The Fund primarily invests in equity REITs, which own or lease real estate and derive their income primarily from rental income. To qualify as a REIT, a company must distribute a significant percentage of its taxable income to shareholders in the form of dividends (at least 90% in the U.S.); this dividend payout ratio is generally higher than that of non-REIT companies. Real estate-related companies are those companies whose principal activity involves the development, ownership, construction, management or sale of real estate; companies with significant real estate holdings; and companies that provide products or services related to the real estate industry. The Fund intends to meet its investment goal by investing primarily in a portfolio of securities of REITs and real estate companies, including those that are primarily focused on income-producing commercial property and real estate development. Companies in the real estate industry, including REITs and real estate operating companies in which the Fund may invest may have relatively small market capitalizations. The Fund invests in securities of issuers located in no fewer than three regions, North America, Europe and Asia Pacific. Under normal circumstances, the Fund’s regional weightings will be+/- 10% of the regional weightings of the Fund’s benchmark, the FTSE EPRA Nareit Developed Index (Net). Although the Fund does not seek to track any particular index, the Fund will be diversified in terms of geographic and property type exposures, and the FTSE EPRA Nareit Developed Index (Net) may be used as a benchmark for the regional weighting of the Fund’s portfolio. The Fund may invest up to 10% of its assets in securities of companies located in emerging markets. For the purposes of determining whether a particular country is considered an emerging market, the Fund uses the designation set forth by the FTSE EPRA Nareit Emerging Index. The Fund follows a focused investment approach and typically holds 50 to 60 securities.” 2. Comment. Please provide the Staff with completed “Shareholder Fees” and “Annual Fund Operating Expenses” tables and a completed expense example before the effective date of the Registration Statement. Response. Below, please find the completed “Shareholder Fees” and “Annual Fund Operating Expenses” tables and the completed expense example: Fund Fees & Expenses The following table describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in this table. Shareholder Fees (fees paid directly from your investment) Class A Class C Class N Class T Class Y Maximum sales charge (load) imposed on purchases (as a percentage of offering price) 5.75 % None None 2.50 % None Maximum deferred sales charge (load) (as a percentage of original purchase price or redemption proceeds, as applicable) None 1 1.00 % None None None Redemption fees None None None None None 1 A 1.00% contingent deferred sales charge (“CDSC”) may apply to certain purchases of Class A shares of $1,000,000 or more that are redeemed within eighteen months of the date of purchase. Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) Class A Class C Class N Class T Class Y Management fees 0.75 % 0.75 % 0.75 % 0.75 % 0.75 % Distribution and/or service (12b-1) fees 0.25 % 1.00 % 0.00 % 0.25 % 0.00 % Other expenses 0.42 % 0.43 % 0.35 % 0.42 %1 0.41 % Total annual fund operating expenses 1.42 % 2.18 % 1.10 % 1.42 % 1.16 % Fee waiver and/or expense reimbursement2,3 0.27 % 0.28 % 0.25 % 0.27 % 0.26 % Total annual fund operating expenses after fee waiver and/or expense reimbursement 1.15 % 1.90 % 0.85 % 1.15 % 0.90 % 1 Other expenses are estimated for the current fiscal year. 2 AEW Capital Management, L.P. (“AEW” or the “Adviser”) has given a binding contractual undertaking to the Fund to limit the amount of the Fund’s total annual fund operating expenses to 1.15%, 1.90%, 0.85%, 1.15% and 0.90% of the Fund’s average daily net assets for Class A, C, N, T and Y shares, respectively, exclusive of brokerage expenses, interest expense, taxes, acquired fund fees and expenses, organizational and extraordinary expenses, such as litigation and indemnification expenses. This undertaking is in effect through May 31, 2023 and may be terminated before then only with the consent of the Fund’s Board of Trustees. The Fund’s investment adviser will be permitted to recover, on a class by class basis, management fees waived and/or expenses reimbursed to the extent that expenses in later periods fall below both (1) the class’ applicable expense limitation at the time such amounts were waived/reimbursed and (2) the class’ current applicable expense limitation. The Fund will not be obligated to repay any such waived/reimbursed fees and expenses more than one year after the end of the fiscal year in which the fees or expenses were waived/reimbursed. 3 Natixis Advisors, LLC (“Natixis Advisors”) has given a binding contractual undertaking to the Fund to reimburse any and all transfer agency expenses for Class N shares. This undertaking is in effect through May 31, 2023 and may be terminated before then only with the consent of the Fund’s Board of Trustees. Example This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods (except where indicated). The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same, except that the example is based on the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement assuming that such waiver and/or reimbursement will only be in place through the date noted above and on the Total Annual Fund Operating Expenses for the remaining periods. The example for Class C shares for the ten-year period reflects the conversion to Class A shares after eight years. The example does not take into account brokerage commissions and other fees to financial intermediaries that you may pay on your purchases and sales of shares of the Fund. Although your actual costs may be higher or lower, based on these assumptions your costs would be: If shares are redeemed: 1 year 3 years 5 years 10 years Class A $ 685 $ 973 $ 1,282 $ 2,157 Class C $ 293 $ 655 $ 1,144 $ 2,299 Class N $ 87 $ 325 $ 582 $ 1,318 Class T $ 364 $ 662 $ 982 $ 1,887 Class Y $ 92 $ 343 $ 613 $ 1,386 If shares are not redeemed: 1 year 3 years 5 years 10 years Class C $ 193 $ 655 $ 1,144 $ 2,299 3. Comment. Please confirm that any expense waiver in the fee table will extend at least one year beyond the effective date of the prospectus. Response. The Registrant confirms that the expense waiver in the fee table will extend at least one year beyond the effective date of the prospectus. 4. Comment. Please outline the material investment strategy changes that were incorporated in the Registration Statement filing made on April 1, 2022. Response. The following disclosure was added to the “Principal Investment Strategies” section of the Fund’s prospectus in the Registration Statement filing made on April 1, 2022: “ESG: AEW seeks to identify environmental, social, and governance (“ESG”) factors that it believes are most relevant to real estate investments in the Fund’s investable universe. ESG factors may include, among other things, the environmental performance of buildings, diversity, equity and inclusion policies, corporate giving, and Board diversity. AEW incorporates insights from fundamental research and company meetings alongside third party data and ESG data sourced directly from the issuer into a proprietary ESG risk score, which is an input into AEW’s securities valuation analysis. While AEW considers ESG factors in all buy and sell decisions for the Fund, the ESG profile of an investment will not be prioritized over other considerations in AEW’s investment selection process.” There were no other material changes made to the “Principal Investment Strategies” section of the Fund’s prospectus. 5. Comment. Does the Fund invest in specific subsectors of real estate (e.g., residential or commercial)? Are there any unique risk metrics that should be disclosed (e.g., work from home trend)? Response. The Fund invests in many subsectors of real estate, including, but not limited to, traditional real estate sectors such as Apartments, Office, Regional Mall, Shopping Centers, Hotel, Industrial, and Health Care, as well as more niche subsectors such as Data Centers, Net Lease, Single Family Rental, Manufactured Homes, Storage, and Cell Towers. The Registrant respectfully submits that although each sector has its own unique risks, ownership of real estate securities across these subsectors and geographies would be expected to mitigate the impact of any specific single subsector risk factor. The Registrant respectfully submits that no additional disclosure is necessary. 6. Comment. Please describe the current weightings and geographic exposures of the Fund’s benchmark. Response. In response the Registrant has added the following disclosure to “Appendix C – Additional Information”: “As of March 31, 2022, the Fund’s benchmark (FTSE EPRA Nareit Developed Index) had a weighting of 63.7% to North America, 20.86% to Asia Pacific and 15.44% to Europe.” 7. Comment. Please explain how the Fund’s model anticipates cash flows and clarify the difference between capital markets value and real estate value. Response. The Fund’s adviser has developed a proprietary stock valuation model that is designed to reflect its value-oriented investment philosophy as applied to equity securities investing. As a first step in its modeling process, the adviser inputs projected income statements, balance sheets and cash flow statements for each company in its coverage universe. These estimates are formulated by the investment teams in each region based on a detailed analysis of historical trends and expectations for the future for each company’s financial statements. The model breaks out the company’s holdings by property type and separately analyzes the impact of tenant rollover, acquisitions, and development. After completion of preliminary pro forma statements, the assumptions utilized are generally discussed with representatives from each company. The model is designed to estimate what the anticipated cash flows are worth to a stock investor (a “Capital Markets Value,” or “CMV”) and to a direct real estate investor (a “Real Estate Value,” or “REV”). The CMV and REV incorporate the factors that influence the valuation of the cash flows by these different types of investors. These factors are the quantification of a broad array of subjective characteristics that AEW believe are important in the relative valuation process for both sectors and individual stocks. In response to this comment the Registrant has revised the third paragraph of the “Principal Investment Strategies” section of the prospectus as follows: “Valuation: AEW has developed a proprietary model to assess the relative value of each stock in the Fund’s investment universe. These estimates are formulated by the investment teams in each region based on a detailed analysis of historical trends and expectations for the future for each company’s financial statements. As a first step in its modeling process, AEW inputs projected financial information for each company. After completion of preliminary pro forma statements, the assumptions utilized to create the pro forma statements are generally discussed with representatives from each company. This model is designed to estimate what an issuer’s anticipated cash flows are worth to a stock investor (a capital markets value) and to a direct real estate investor (a real estate value). The capital markets value and real estate value incorporate factors that AEW believes influence the valuation of the cash flows by these different types of investors. These factors are the quantification of a broad array of subjective characteristics that AEW believes are important in the relative valuation process for both sectors and individual stocks. The model helps AEW to identify stocks that it believes trade at discounts to either or both of these model values relative to similar stocks. AEW will generally sell a security once it is considered overvalued or when AEW believes that there is greater relative value in other securities in the Fund’s investment universe.” 8. Comment. In the “Principal Investment Strategies” section of the Fund’s Item 4 disclosure, please indicate if the Fund will continue to invest in a company that scores poorly on the Fund’s proprietary ESG risk score. Response. In response to this comment the Registrant has added the following disclosure to the “ESG” subsection of the “Principal Investment Strategies” disclosure in the Fund’s prospectus: “The Fund may continue to invest in an issuer with a lower ESG scor