https://www.cnbc.com/2025/05/23/markets-investing-etfs-new-trading-strategies.html"Soon, as many as 3,000 new ETFs are expected to launch in an ‘absolute tsunami’ triggered by the Securities and Exchange Commission allowing traditional mutual funds to offer an ETF share class.
Currently, there are around 4,000 ETFs.
The article mentions an estimate that roughly 53 mutual fund firms have filed for the ETF share class extension, and the thousands of new funds covered will lead to an “enormous burden on individual investors and advisors to wade through that stuff”.
Comments
The current SEC rules and regulations require funds to seek "exemptive relief" from the SEC. Generally all share classes of a fund must be treated equally. That's not true of ETF shares. Hence the need for relief.
ETF shareholders cannot purchase and redeem shares at NAV (they must trade at market price in a secondary market). There are other inequities as well. When funds seek exemptive relief, they include plans for how they will deal with various differences between the share classes.
https://www.chapman.com/media/publication/15122_IL-0224-Coyle-Pershkow-Warren.pdf
(For those interested in fund mechanics, this is an interesting nine page (plus notes) piece that doesn't get bogged down in legalize. The first few pages are of more general interest, describing the differences between ETF class shares and OEF class shares.)
Another example is brokerage fees. OEF shareholders pay these fees (though they're not included in the ER calculation). They purchase shares for cash which a fund then uses to buy securities, thus incurring brokerage fees. In contrast, authorized participants buy ETF shares with creation baskets of securities already purchased. No brokerage fees involved. There are various ways a fund can deal with this disparity. A request for exemptive relief has to spell this out.
The former acting SEC chairman, Mark Uyeda, "directed staff to prioritize the review of more than fifty applications for relief that had been unprocessed for as long as two years."
https://www.institutionalinvestor.com/article/2em6tlqjoggjytyhjgjy8/corner-office/etfs-may-become-just-another-share-class-if-sec-approves-dimensionals-latest-regulatory-ask (April 1)
Maybe that's what's supposed to open the floodgates. But Uyeda was appointed back in January. So why the CNBC piece now, and not in January, or a month ago (related to the Uyeda quote above)?
The only thing I see that has happened since then is that Paul Atkins was sworn in as SEC chairman on April 21. He is not expected to change much from what Uyeda was doing. "Chairman Atkins thus has arrived at an already changed agency."
https://www.whitecase.com/insight-alert/sec-enforcement-20-chairman-atkins-has-arrived
A concern with actively managed ETFs (already discussed in an older thread) is that pragmatically they cannot close to new investment when capacity is reached. So this is something to monitor when purchasing an actively managed ETF. Soon OEF fund investors will also need to monitor capacity if their funds begin to offer ETF class shares.
It’s a good thing markets are always ”efficient”.
So, some advantages of the etf structure may be compromised when they operate as etf classes of funds.
Vanguard has been careless in merging some of its OEFs. After ignoring related investor complaints, it had to settle with the SEC on this.
The overall fund should generally benefit from having an etf class.
I haven't checked the prospectuses of these new ETFs, but Vanguard allows tax-free conversions of its mutual funds/OEFs to their etf classes that may have lower ERs (typically similar as Admiral OEF ERs), but not the reverse.
What Vanguard was careless about was how it went about reducing the min of its institutional clones of TDFs. Not the merger per se.
Reducing the min triggered a mass migration of smaller sized employer-sponsored retirement plans from the retail funds to the institutional funds. The result was a huge sell-off (and recognized gains) in the retail funds. Individual investors with shares in taxable accounts were left holding the bag - a huge tax bill.
Shortly thereafter, Vanguard merged the institutional funds with the retail funds.
Had Vanguard not reduced the min for institutions, or had Vanguard reduced the min subsequent to merging the funds, no sales and no gains would have been triggered.
I haven't checked the prospectuses of these new ETFs, but Vanguard allows tax-free conversions of its mutual funds/OEFs to their ETF classes that may have lower ERs (typically similar as Admiral OEF ERs), but not the reverse.
See https://www.chapman.com/media/publication/15122_IL-0224-Coyle-Pershkow-Warren.pdf
Investors continue to pile into ETFs at record pace
(If you’re not into sports betting at DraftKings, these products are the next best thing.)
"....meme coin blending humor, politics...."
"...fun financial ecosystem."
"Whether you'r here for the memes, the movement, or the moonshot,...."
I just puked in my mouth a bit.
Hey @anna, it gets better/worse... it's not just crypto they're launching:
"In February, Trump Media applied to trademark six investment products that track bitcoin and the U.S. manufacturing and energy sectors. The trademarks include Truth.Fi Bitcoin Plus ETF, Truth.Fi Made in America ETF and Truth.Fi U.S. Energy Independence ETF."
Src: https://www.foxbusiness.com/markets/trump-media-crypto-com-partner-etf-offerings