The expiration of a Vanguard patent may allow ETF competitors to implement a tax-efficient structure currently used by Vanguard. This structure, which allows ETFs to exist as a separate share class within a mutual fund, could reduce taxable events and benefit millions of investors.
An expired patent — previously held by Vanguard — may spark a shake-up in the exchange-traded fund industry.
Wall Street saw the patent as critical to Vanguard's success because it saved an enormous amount of money in taxes. Now, the firm's ETF competitors could get a chance to use it, too.Vanguard's patent expired in 2023. How it works: Investors can access the same portfolio of stocks through two different formats: a mutual fund and an ETF. The portfolio has the same managers and the same holdings.
"ETF share classes appended to the mutual fund would help improve the tax efficiency of the fund to the benefit of everybody," said Johnson, the firm's head of client solutions. Look inside: 33-year-old pays $3,100 a month to live in an old bank turned apartment in Montreal—'it was a beautiful blank canvas'
"My thesis has been that it's a matter of when, and not if," said Johnson, who added the ETF industry thinks it could happen as soon as this summer.Big swing and a big miss? How options and private credit ETFs are changing the market.Look inside: 33-year-old pays $3,100 a month to live in an old bank turned apartment in Montreal—'it was a beautiful blank canvas'
ETF Mutual Fund Patents Taxes Investment
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