The US SEC plans to allow Dimensional Fund Advisors to offer ETFs as share classes of mutual funds, opening the door for tax-saving structures. The SEC notice grants Dimensional exemptive relief, potentially impacting 70 other asset managers. This move could lower costs for investors and boost innovation, according to SEC’s Brian Daly.

Vanguard’s patent expiration cleared the way for rivals to apply for exemptive relief from the SEC to use the structure. The SEC’s approval could lead to a significant shift on Wall Street, potentially eroding some benefits of the ETF wrapper. A study estimates fund distributors could lose billions in fees if mutual funds convert to ETF share classes.

Mutual funds saw a net outflow of $451 billion in 2024, while ETFs attracted a record $1.1 trillion, indicating a strong preference for tax efficiency and liquidity. With the SEC’s approval, logistics, economics, and conversion of mutual funds to ETF share classes will be key factors in the industry’s evolution, says Morningstar’s Ben Johnson.

Read more at Yahoo Finance: SEC Intends to Allow Dimensional to Offer Dual Share Class Funds