Securities and Exchange Commission (SEC) is expected to soon grant exemptive relief allowing for the creation of an exchange-traded fund (ETF) share class. Once that occurs, the second phase of launching these products will begin. At this stage, asset managers and fund boards will need to evaluate a wide range of factors spanning regulatory, governance, commercial, and operational considerations, before moving forward with an ETF share class. While it is not possible at present to predict how many funds will adopt such a structure, or the eventual success rate, most in the industry expect greatness to be thrust upon the ETF share class.
This whitepaper explores the data, metrics, and criteria that product teams and boards can use to assess suitability, navigate Rule 18f-3 and Rule 6c-11 requirements, and balance both oversight and commercial opportunity. Drawing on industry analysis and engagement with fund companies, it highlights the key factors that are shaping how ETF share classes will be developed, approved, and monitored.