On July 12, 2023, Dimensional Fund Advisors became the second asset manager this year to file an application with the SEC to permit mutual funds to offer an ETF share class.
Dimensional's filing, which builds upon ETF share class relief obtained by Vanguard nearly 20 years ago, as well as the February 2023 SEC filing by Perpetual, would permit certain actively-managed Dimensional mutual funds to offer an ETF share class.
The SEC has said these types of applications raise potential issues, including potential cross-subsidization among the share classes, particularly with respect to the transaction cost savings and tax efficiency typically associated with ETFs, but not mutual funds.
A successful application must address the SEC’s concerns in that regard. In addition, it is unclear how an ETF share class of a mutual fund would be affected if the SEC mandates swing pricing by mutual funds.
We look forward to helping clients work through these and other complex ETF issues, so if you have questions, please get in touch.
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