Investment Services Shareholders W. Thomas Conner and Deborah Bielicke Eades were featured recently in an ETF.com article, “How Mutual Funds Convert to ETFs.” The article provided a practical discussion of the primary regulatory requirements for converting an actively-managed mutual fund to a non-fully transparent ETF.

Many sponsors of actively-managed mutual funds have been closely watching a new ETF model recently approved by the SEC that may offer the advantages of an ETF while permitting active management without front running concerns. The ETF.com article discusses the primary legal requirements for such a conversion.

During the interview with ETF.com contributor John Hyland, CFA, Mr. Conner and Ms. Eades shared that mutual fund-to-ETF conversions are possible and outlined the two primary ways to approach the process. According to Ms. Eades, “One is where a mutual fund company does all the work to set up the active ETF first, and then, before the ETF lists, reorganizes the mutual fund into the new ETF.” As for the second method, she states that “there’s a direct conversion where the mutual fund changes its current structure, including potentially changes to governing documents, fee structure, share class structure and its registration statement to become an active, non-fully transparent ETF.”

Asked whether one approach has a clear advantage over the other, Mr. Conner explained that while direct conversions may appear simpler, they may involve more legal issues to be dealt with. On the other hand, the Investment Services Group at Vedder Price has structured and closed hundreds of reorganizations and mergers—some of them quite complex—so that seems a more tried-and-true path.

To read the interview in full, please click here.