Van Eck Seeks To Copy Vanguard ETF Design

March 02, 2012

 

"We tend to be fairly agnostic about this, in the sense that different investors like different things," Rodney Comegys, an executive at Vanguard's Equity Investment Group, said in a telephone interview.

"They are really two different doors to the same end result," Comegys added, referring to mutual funds and ETFs.

ETFs also have intraday tradability—which is mostly considered an advantage over mutual funds—and the Van Eck filing singled out tradability as one aspect of ETFs that investors favor.

A notable exception to that prevailing view is held by John Bogle, Vanguard’s founder, who considers trading to be a fool’s errand that hurts investors, save for those few who happen to get lucky with the timing of a trade or two.

Convertibility Of Mutual Fund Shares

 

In the filing, Van Eck said that under the structure it is filing to adopt, shareholders of mutual funds will be able to convert their holdings into ETF shares in tax-free transactions. However, it stressed no shareholders will be required to do so.

It also said such conversions would be one-way, meaning that ETF shareholders wouldn’t be able to convert their shares into mutual fund shares under the conversion option Van Eck is laying out.

One of the questions left unanswered in the filing is how Van Eck’s actively managed mutual funds would be handled if and when ETF share classes of the funds are brought to market. After all, Van Eck’s Market Vectors ETFs and the four ETNs it markets are all index strategies.

Van Eck has ETF assets of about $26.5 billion in more than 40 funds. Vanguard has 64 exchange-traded funds and total ETF assets of $200.46 billion, according to data compiled by IndexUniverse.

 

 

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