Expired patents (previously held by Vanguard) can cause reforms in the fund industry in the exchange industry.
Wall Street thought the patent was important to Vanguard’s success, as it saved a huge amount of money on taxes. Now, the company’s ETF competitors also have the opportunity to use it.
“It’s really a game changer,” Ben Slavin, global head of ETFS at BNY Mellon, told CNBC’s ETF Edge this week.
Vanguard’s patent expired in 2023. How it works: Investors can access the same stock portfolio using mutual funds and ETFs in the same portfolio in two different forms. The portfolio has the same manager and the same holdings. “ETF Edge” host Bob Pisani points out the advantage of reducing taxable events in his (shared) portfolio.
Morningstar Ben Johnson argues that the structure will help millions of investors reduce their tax burden. His research firm describes it as the way ETFs exist as another class of stock within mutual funds.
“The ETF stock class added to the mutual fund will help improve the tax efficiency of the fund,” said Johnson, head of Client Solutions.
It ultimately leads to approval by the Securities and Exchange Commission.
“My paper added that the ETF industry believes it could happen this summer, and that was, “It was when my paper was a problem and not a problem.”
