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An ETF share class is an additional share class of an existing mutual fund, offering exchangetraded flexibility while maintaining the same underlying portfolio, management team and investment strategy as traditional mutual fund shares.
An ETF share class is an additional share class of an existing mutual fund where all share classes are connected to a single underlying portfolio. This means the same investment strategy, stocks, bonds or other assets managed by the same portfolio team can be accessed through either traditional mutual fund share classes or the ETF share class. The key difference is how the investment is accessed and traded: mutual fund shares trade at end-of-day net asset value (NAV), while ETF shares trade on an exchange throughout the day at market prices.
In May 2023, a patent on the ETF-as-a-share-class structure expired. This patent had previously allowed exclusive offering of ETF share classes for passively managed mutual funds. Following its expiration, other asset managers could seek SEC approval for similar structures, including actively managed strategies.
When ETF shares are redeemed, the fund has the ability to distribute actual securities from the portfolio rather than selling them for cash. This in-kind transfer is not a taxable event, meaning no capital gains are realized or passed through to shareholders. This mechanism can reduce the tax burden for both ETF shareholders and traditional mutual fund shareholders in the same fund.
Yes, and this is a significant advantage. Existing mutual fund shareholders with embedded capital gains can exchange their mutual fund shares for ETF shares without triggering a taxable event. This eliminates a longstanding barrier for investors who want ETF benefits without having to realize capital gains.
No. The assets within both the traditional mutual fund share classes and the ETF share class are invested in the same stocks, bonds or other assets managed by the same portfolio team with the same investment approach. The identical underlying investment strategy is accessed regardless of which share class is chosen.
Since 2014, positive ETF net flows have consistently outpaced mutual fund flows, reflecting investor preference for the transparency, flexibility and tax efficiency that ETFs provide. This sustained trend has prompted asset managers to respond with increased ETF launches and mutual fund-to-ETF conversions.
Nuveen was among the first wave of firms to gain SEC approval and plans to bring ETF share classes to market in 2026.
Both prospective investors and existing mutual fund shareholders can benefit. Prospective investors seeking intraday trading flexibility and liquidity will find value in the ETF structure, while existing mutual fund shareholders can benefit from improved tax management and the flexibility to exchange into ETF shares without tax consequences.
Before investing, carefully consider fund investment objectives, risks, charges and expenses. For this and other information that should be read carefully, please request a prospectus or summary prospectus from your financial professional or Nuveen at 800.257.8787 or visit nuveen.com
Exchange-Traded Funds (ETFs) may not be marketed or advertised as mutual funds because they each have distinct characteristics due to their differing fee structures, frequency of trading, and methods for buying and selling. Shares of ETFs are typically bought and sold continuously during trading hours through a broker on a national securities exchange at market prices as opposed to mutual funds, which are bought and sold directly from the issuing fund at net asset value only once per day after market close. As a result, an investor in an ETF may pay more or less than net asset value when buying and receive more or less than net asset value when selling. In addition, brokerage commissions on an ETF could reduce an investor's returns. Only certain institutional investors may purchase and redeem shares directly from an ETF in large blocks of shares called Creation Units.
This material, along with any views and opinions expressed within, are presented for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as changing market, economic, political, or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. There is no promise, representation, or warranty (express or implied) as to the past, future, or current accuracy, reliability or completeness of, nor liability for, decisions based on such information, and it should not be relied on as such. This material should not be regarded by the recipients as a substitute for the exercise of their own judgment. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager.
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or investment strategy and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor's objectives and circumstances and in consultation with their financial advisors. Financial professionals should independently evaluate the risks associated with products or services and exercise independent judgment with respect to their clients.
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