Dimensional has filed an amended version of its application for exemptive relief to offer ETF share classes of its traditional mutual funds. The move comes after Mark Uyeda, acting chairman of the Securities and Exchange Commission, said that he had directed staff to prioritize the review of more than fifty applications for relief that had been unprocessed for as long as two years.
Vanguard has been the sole manager able to offer a multi-class share structure to date. But there are pending applications from all the major asset managers. Some want to add ETF shares to mutual funds, while some want to do the opposite.
The application would allow managers to offer dual share classes of mutual funds and ETFs, which would greatly increase the options available to investors and could potentially “revolutionize the ETF and mutual fund landscape,” according to Dimensional co-CEO and co-CIO Gerard O’Reilly.
“The ability to offer both mutual fund and ETF share classes in certain funds could provide lower transaction costs, tax efficiencies, and benefits of scale to all shareholders,” said O’Reilly. “Granting ETF share class relief more broadly would give investors more fund groups and strategies to choose from, and competition in the market would benefit investors by incentivizing funds to operate efficiently and keep fees and expenses low.”
With this latest, updated filing, Dimensional adds conditions that the firm believes address the concerns raised by SEC staff during recent conversations. For example, the board of directors of a fund with a multi-class structure will conduct an annual evaluation and the asset manager will establish a monitoring process to help determine whether the fund has encountered any issues with the multi-class structure, said a Dimensional spokesperson.
When it adopted the existing ETF Rule in 2019, the SEC noted that offering an ETF share class raises additional policy considerations, such as whether cash flows from the ETF would raise costs for all classes of shareholders or affect capital gains.
Dimensional has also added ETFs to the application, which if approved, could enable it to offer traditional mutual fund share classes for its existing lineup of ETFs, something that has been replicated by peers in several subsequent applications for exemptive relief.
The spokesperson added that the firm hopes that the revised application will continue to act as a template for others seeking similar exemptions.
In December, a Cerulli report suggested that more than half of ETF issuers were planning to offer some form of dual class share structure once able.
Greater Choice for Investors
In his speech at the Investment Company Institute’s 2025 investment management conference, Acting Chair Uyeda appeared keen to kick start the process of reviewing the applications in order to allow investors this additional access.
Uyeda said that the ETF market has grown significantly in the last twenty years and has demonstrated how the process of experimentation can work in the asset management industry. With ETFs now accounting for approximately 30 percent of total industry assets, Uyeda said managers should be encouraged to continue improving.
“One innovation may be funds offering both mutual fund and ETF share classes,” said Uyeda. “More than two years have passed since the most recent set of exemptive applications for ETF share class relief was filed. I have directed the Commission staff to prioritize their careful review of the many applications filed for this relief, and I look forward to considering their recommendations.”
