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How an ETF share class could make a mutual fund more tax efficient

The ETF share class acts like a fund redemption pressure release valve

Brent Sullivan· · 3 min read
Cartoon showing the ETF share class acting as a redemption pressure-release valve for a more tax-efficient mutual fund

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In a throwback two weeks ago, F/m Investments added a mutual fund share class (TBFMX) to its ETF (TBIL).

Now “Investors can choose the wrapper that makes the most sense for them,” Alex Morris, F/m’s CEO, told me on a call.

F/m is the first to follow Vanguard in offering a dual share class structure.

In 2000, Vanguard got SEC approval to add an ETF share class to some of its mutual funds.

But why?

And how does that relate to the idea of a mutual fund redemption pressure release valve?

My infographic below should clear things up…