The U.S. Securities and Exchange Commission is moving to allow asset managers to offer a single portfolio as both a mutual fund and an ETF [1].
This shift removes the traditional trade-off between the two investment vehicles. By allowing a dual-share-class structure, the SEC aims to provide investors with greater flexibility in how they access the same underlying strategy depending on their account type or tax needs [2].
Under this model, a single portfolio is offered simultaneously as a mutual fund share class and an exchange-traded fund share class [3]. F/M Investments became the first ETF issuer to launch a fund using this structure, applying it to a three-month Treasury bill (TBIL) strategy [4].
Industry experts, including Funmi Osiyale of J.P. Morgan ETF sales and Dimensional analysts Joel Schneider and Lauren Olson, said that this structure can offer potential cost savings and improved tax efficiency [5]. It also allows for broader access across different brokerage and retirement accounts [6].
While some reports indicate the SEC is still considering the implementation of these classes, other reports state the agency paved the way for these approvals on a Monday in April 2024 [1, 7]. The move comes as the global ETF market continues to expand, with total assets reaching $20 trillion [5].
Asset managers have long sought ways to simplify product lineups. A dual-share-class approach eliminates the need to manage two separate funds that track the same strategy, one for mutual fund investors and one for ETF traders [6].
“A dual-share-class structure lets the same underlying portfolio be offered as both a mutual-fund share class and an ETF share class.”
The transition toward dual-share classes represents a convergence of traditional mutual funds and modern ETFs. By decoupling the investment strategy from the delivery vehicle, the SEC is allowing the market to prioritize liquidity and tax efficiency without forcing asset managers to duplicate their operational efforts. This likely signals a broader trend toward 'wrapper-agnostic' investing, where the specific fund structure becomes secondary to the underlying asset strategy.
