Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

the slow direct conversion of mutual funds into active ETFs

Just a head's up. We wrote about a potentially game-changing development early in the summer: the SEC had agreed, in principle, to allow an operating mutual fund to be repackaged whole as an ETF. A number of firms have launched ETF clones of still-operating funds, but the Guinness Atkinson decision was to move two of their funds intact into an ETF format. That move would allow them to substantially reduce expenses and marginally increase tax efficiency.

I talked with the head of Guinness Atkinson early this week, and he says they're close.

Today they launched SmartETFs Sustainable Energy II ETF (SULR) which is a clone of Guinness Atkinson Alternative Energy (GAAEX) which Morningstar puts in the "international small-mid value" box ... a fine assignment give-or-take the fund's special mandate, 33% US equity stake and growth orientation. In any case, the plan is to launch this ETF now, finish the conversion of the mutual fund into SmartETFs Sustainable Energy I early in 2021 then immediately merge the two.

By mid-December, they anticipate converting Guinness Atkinson Dividend Builder (GAINX) into an active ETF. The hang up has been "a thousand thoughtful questions and comments" from the SEC. They're at the point that the SEC is asking them to put specific dates (one of which is December 12) into the prospectus on file. They take that as a good sign.

And, before year's end, they anticipate launching SmartETFs Advertising Technology ETF.

GAINX deserves more attention, so this is a good thing for the firm and for investors. Similarly, this might offer a lifeline to other small mutual funds whose managers are capable but whose expense structure - much of which is dictated by the fact that it's classified as a mutual fund under the '40 Act - makes them virtually unmarketable.

For what interest that holds,



  • My question is if all mutual funds were to convert to ETF format would that increase or decrease market volatility? Marked to market intraday vs end of day? The distinction being is this upcoming transition going to include actively managed mutual funds that trade intraday? Most ETF's today are index or basket of stocks type arrangements with less intraday trading.
  • Howdy.

    Here's a guess, but it's only a guess. The far greater tide will be non-transparent active ETFs that are clones of still-open mutual funds. That seems to be the path that giants like Fidelity and T. Rowe Price are taking. They're under no pressure to change the structure of funds that have already drawn billions or tens of billions. Running an ETF alongside the legacy fund simply opens another marketing channel.

    The attraction of fund-to-ETF conversions is likely to be limited to funds that are barely limping along with a few tens of millions, perhaps a hundred million, in assets and no real prospects of things getting better.

    While those could be actively traded intra-day, they won't be. The key is that active traders are looking for very targeted bets ("I need to short oil and go long natural gas ahead of the API news") and a (relatively) broad portfolio isn't likely to be the best vehicle for placing those bets.

    Just a guess.


    As of today - Jan 5 2021 - GAINX is still a mutual fund. Any update on ETF conversion? Thanks.
  • @David_Snowball,

    Technical question...can MFO hyperlink ETFs the same way mutual fund ticker symbols are hyperlinked?

    Readers can link for VFINX, but not SPY.

    Also, we may have to begin developing a transition plan for MFO to ETFO.
  • @bee
    As I recall, Accipiter from way back, built much of the program functions here. Tickers with 3 or 4 symbols could be linked and name shown when hovering over the symbol, as well as not remaining in black text.
    I asked about this several years ago, when this feature disappeared. I do believe that some functions of the original program were no longer supported from required/necessary changes at the server.
    But, David and/or chip will be able to provide information for this.
    Take care,
  • Hmm ... interesting question. You're right that Accipiter did the programming. I have some vague recollection of a problem linking the Navigator to a database, but I'll have to ask Chip tonight. I'm not sure she can fix it (her specialty is more IT management and security than programming) but I'm sure she can see more than we can.

    If it's fixable, I can reach out to Brad or Andrew - two folks who've done programming for us - to see if they can fix it.

    More soon!

  • @David_Snowball,

    Any update on GAINX conversion? Thanks.
Sign In or Register to comment.