Concept · Funds, wrappers and fees
What is an ETF share class of a mutual fund?
Direct answer A second door into an existing mutual fund, traded on an exchange like an ETF. Investors leaving through the ETF door redeem in kind, and the fund purges its lowest-basis lots that way, so the mutual-fund shareholders stop receiving capital-gain distributions too. One firm's patent on the structure expired in May 2023; the SEC has granted orders to other fund companies since November 2025.
For a holder of a mutual fund with a large embedded gain, the arrival of an ETF class lowers the fund’s tax bill without a sale. Read ETF share classes: the patent that expired.
Sources
Used in