Daily ETF Watch: Feeder-Fund Quest

March 14, 2014

FlexShares is embracing a trendy fund structure patented by Vanguard.

FlexShares has filed regulatory paperwork seeking permission to offer fund-of-funds ETFs and master feeder funds, a trend that is coursing through the ETF universe and embraced by other issuers including Deutsche Bank, Charles Schwab and Fidelity Investments.

Master-feeder structures have become trendy in the ETF space because of their flexibility in allowing ETFs, serving as the feeder fund, to hold assets of a mutual fund. The structure, while different, recalls a Vanguard patent on its share-class structure whereby its exchange-traded funds are separate share classes of identical open-end mutual funds.

Vanguard, which launched its first ETF under the structure in 2001, is now the No. 3 U.S. ETF company, with more than $346 billion in assets, according to data compiled by ETF.com Analytics. The patent is said to be in effect until 2019.

There are no further filings or launches.



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