When the patent of Vanguard on ETF share classes expired on May 16, 2023, market observers and participants expected a significant number of new ETFs which are actual share classes of existing mutual funds since the promoters of active managed mutual funds may want to attract investors who are only using ETFs in their portfolios. Opposite to this expectation, the promoters of mutual funds in Europe have been rather shy in using this new feature to enhance their fund distribution strategies. Nevertheless, the use cases and advantages for ETF share classes are still valid and a further increase of the

When looking at the fund landscape in Europe it is obvious that there are various share classes of literally any mutual fund registered for sales in Europe. This is especially true for the so-called cross-border funds which are domiciled in one of the international fund hubs (Ireland and Luxembourg) in Europe and distributed all over the continent. In the ETF segment this looks a bit different, since a large number of ETFs don’t have multiple share classes. So, why are there so many share classes of most mutual funds and what are they used for? What is a Primary Share

We are now seeing a high news flow with regard to active ETFs. Conversely, the market share of these products in Europe is by all measures quite low. So why should a fund promoter think about using the ETF wrapper? Obviously, the assets under management in active ETFs are growing at a high pace but this is caused by the low basis rather than by massive inflows. This means the current high growth rate can’t be seen as reason for an active fund manager to move into the segment of active ETFs—especially since the inflows into active ETFs are currently

When the European ETF industry started back in the year 2000, ETFs were mainly launched as primary share classes. But over time the number of so-called convenience share classes per ETF grew. Looking at the overall fund industry in Europe this is not a surprise, since additional share classes with one or more features—which are not included in the original portfolio (accumulating/distribution/currency denominations/currency hedged/etc.)—which supplement the primary share class are rather the rule than the exception for mutual funds.  These share classes have the purpose to attract additional fund flows from investors who prefer the respective feature of the convenience