Thornburg Investment Files for ETF Share Classes
The Santa Fe, New Mexico-based firm joins a growing wave of businesses pursuing a mutual fund-ETF hybrid structure following Vanguard's patent expiration.
ETF share classes are taking center stage as Thornburg Investment Management looks to add exchange-traded fund share classes to its mutual funds, according to a Jan. 8 filing with the Securities and Exchange Commission.
For retail investors who want access to Thornburg’s strategies but prefer the tax efficiency and tradeability of ETFs, the proposed structure would allow them to invest in the same underlying portfolios available in the firm’s mutual funds through ETF share classes, according to the filing.
The move comes as dozens of asset managers rush to replicate Vanguard’s patented mutual fund-ETF share class structure after its expiration in May 2023, potentially transforming how investment products are packaged and distributed to investors seeking tax-advantaged trading flexibility.
According to the firm’s website, Thornburg manages $47 billion in client assets across actively managed global equity, fixed income, multi-asset solutions, and sustainable investments.
Industry Race for ETF Share Classes Heats Up
Over three dozen fund companies await SEC approval for similar ETF share class filings.
Under the proposed structure, investors could convert their mutual fund share classes into ETF shares tax-free through an exchange privilege, though ETF shareholders couldn’t convert back to mutual fund shares, the filing detailed.
The Santa Fe, New Mexico-based firm proposed additional investor protections, including clear disclosure about differences between the share classes and ongoing board oversight of potential conflicts.
If approved, Thornburg would join a broader industry shift, as 55 mutual funds converted entirely to ETFs in 2024 amid growing demand for an ETF structure.
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Thornburg says it is “committed to providing customers a choice in the investment products” it offers, according to the filing, highlighting the firm’s aim to meet the “evolving needs of investors.”
Rather than launching standalone ETFs, the share class model could allow Thornburg to leverage its existing mutual fund track records while offering the benefits of both structures to different types of investors.