Malvern-Based Vanguard’s Unique Model Attracts Competition

Malvern’s Vanguard group might be seeing some competition. A multi-boutique asset manager wants permission to replicate its unique structure of creating ETFs as a share class of mutual funds, according to Bloomberg.  

Vanguard has been using this structure, which helps it be tax efficient, for over two decades.

Vanguard has held a patent for the structure since 2001. However, with expiration looming in May, competitors are filing for permission to use similar structures. The U.S. arm of Australian Perpetual Ltd, PGIA, will be one of the first to use the model if the exemptive relief is approved by the U.S. Securities and Exchange Commission (SEC).

Issuers have always been able to use the ETF-within-a-mutual-fund structure, but they would have to enter a licensing agreement with Vanguard and get relief from the SEC. The current exemptive relief from Vanguard only applies to passive share class ETFs.  

Read more about Vanguard’s potential competition on Bloomberg.  

What is an ETF?