The U.S. Securities and Exchange Commission (SEC) has paved the way for asset managers to add exchange-traded share classes (ETF shares) to existing mutual funds.
- The move, initially for Dimensional Fund Advisors, allows investors to buy and sell mutual fund shares throughout the day like ETFs, offering liquidity, tax efficiency, and lower costs.
- Historically, mutual funds could not market ETF shares without creating a new fund from scratch; this change blurs the line between ETFs and traditional mutual funds, potentially accelerating innovation.
- About 80 applications are currently pending with the SEC for ETF share classes, and approvals are expected to follow DFA’s lead quickly.
- Safeguards will be in place to minimize conflicts of interest and ensure investor transparency.
“We are increasing choice, reducing expenses, and making ETF innovation more accessible to retail investors,” said Brian Daly, SEC Investment Management Division.