“It’s a very elegant, simple solution that benefits both the ETF and the mutual fund investor,” Scott Burns, director of global ETF research at Morningstar, said in the report.
Vanguard, the inventor of the ETF share class structure, has patented the process and technology to create an ETF share class, providing 64 ETFs as share classes of a corresponding mutual fund. By riding off the back of an existing mutual fund, the ETF would garner an early advantage in attracting assets through leveraging the mutual fund’s reputation, assets and performance record. [Behind Vanguard’s ETF Success]
However, Van Eck proposes to create ETF share classes on active funds, including commodities, emerging markets and other alternative strategies.
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Max Chen contributed to this article.