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Firms attempt to break Vanguard’s hold on innovative mutual fund / etf structure

hank
edited August 2023 in Fund Discussions
Brief blurb excerpted from today’s Financial Times - Several different elements. I thought the most fascinating is that one firm is seeking to move in the direction opposite the trend - converting its existing ETFs to mutual funds.

Excerpt:

”A US investment boutique has filed with regulators to launch mutual fund share classes of its family of exchange traded funds in the latest attempt by the industry to break Vanguard’s lucrative US-wide monopoly on the innovative structure. Vanguard was granted a US patent for its “ETF-as-a-share-class” structure in 2000, allowing it to operate a mutual fund and a sister ETF as essentially the same vehicle … Vanguard’s patent expired in May, prompting Dimensional Fund Advisors and PGIA, the US arm of Australian asset manager Perpetual, to file for exemptive relief from the US Securities and Exchange Commission to launch ETF share classes for some of their mutual funds. F/m Investments, a Washington DC-based multi-boutique has now become the first asset manager to file for exemptive relief to move in the opposite direction — creating mutual fund share classes of its existing ETFs.”

From: The Financial Times - August 2023

(It’s near impossible for subscribers to provide workable links to the FT. Probably can find story elsewhere if interested in learning more.)

Comments

  • yogibearbullyogibearbull
    It isn't "converting", but just "adding" mutual fund classes to existing ETFs.

    Vanguard US patent, that has expired now, was on ETF classes of mutual funds. Vanguard limited itself to PASSIVE funds only.

    In Europe, Vanguard didn't follow that model.

    Some are now trying for ETF classes/cousins of ACTIVE mutual funds. Right now, several self-standing mutual fund and ETF cousins exist. So, that is another angle.
  • hank
    edited August 2023
    Re: It isn't "converting", but just "adding" mutual fund classes to existing ETFs.

    Thanks @yogibearbull. Distinction noted. (Suggest folks just read the excerpt and not pay attention to my clueless attempt to summarize it.)

    Do you have additional stories on this you can link?
  • Sven
    American funds (Capital Group) and Franklin have launched a number of passive and active ETFs. @yogibb has it correct that these ETFs are cousins and their respective OEFs. If you compare them side by side on their top 10 holdings and sector weighting, there are sufficient differences. Thus, I don’t expect them to track each other closely.
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