On this week’s episode of ETF Prime, Todd Rosenbluth, head of research at TMX Vetta-Fi, joins host Nate Geraci to discuss how ETF share‑class expansions are getting more attention in 2025. Later, Paul Baiocchi, head of fund sales and strategy at SS&C ALPS Advisors, weighed in on the promise and pitfalls of ETF share-class expansion. He also highlighted three ETFs under the Alps banner.

According to Todd Rosenbluth, the SEC is expected to approve ETF share classes of mutual funds, most likely in the fourth quarter. Rosenbluth views this as a major milestone for the ETF industry, though he expects adoption to ramp slowly. “Just like it took time for fixed income ETFs to gain traction after launching in 2002, the full impact of multi-share class ETFs won’t be felt overnight.”

The advent of such funds could open the door for more investors to move seamlessly between fund types while accessing better tax and cost outcomes.

Unlike the crypto-ETF surge, Rosenbluth told Geraci he expects the rollout to follow the model of semi-transparent active ETFs. He expects individual firms launching at their own pace, rather than a wave of launches.

Push for Broader Use in Active Management

For years, Vanguard held a patent on a unique ETF share class structure that allowed it to add an ETF share class to its mutual funds that shared the same portfolio. That patent expired in 2023, paving the way for broader industry adoption. The structure offers tax efficiency, operational simplicity, and the ability to maintain long-standing performance records, while making strategies accessible to new investor segments.

However, it was only approved to do so for passively managed funds. The current push from issuers is for firms to be able to add ETF or mutual fund share classes to their funds for both passively managed and actively managed funds.

Rosenbluth highlighted that firms like Fidelity and T. Rowe Price, long active in both mutual funds and ETFs, are well-positioned to lead in the multi-share class space. Their experience blending wrappers and navigating past innovations like semi-transparent ETFs gives them a potential edge as this structure evolves.

Wrapping up, Geraci emphasized the importance of due diligence, even when share classes share the same portfolio. “Investors still have to do their homework here,” he said. “You still have to look under the hood.” To which Rosenbluth recommended closely reviewing the existing track record of the mutual fund or ETF and ensuring that the product’s holdings truly match the strategy described.

Paul Baiocchi on the ETF-Mutual Fund Crossover

Paul Baiocchi provided a thoughtful perspective on the shifting ETF landscape, focusing on the rise of the multi-share class structure. He acknowledged the legal and operational complexities. However, he noted that for some asset managers, particularly those new to ETFs, this approach may serve as a strategic entry point into the space.

Baiocchi expressed concern over the potential for mutual fund investors to take advantage of ETF tax efficiencies. This raises questions about the long-term sustainability and fairness of the model. He cautioned that such structural innovations might not expand the investment universe. Rather, they may reallocate existing assets, especially if distribution platforms remain hesitant to embrace additional share classes.

Against the backdrop of record ETF inflows and heightened industry competition, Baiocchi underscored the importance of deliberate, meaningful innovation. He pointed out rising expense ratios, evolving fee structures, and the emergence of products like single-stock ETFs and tokenized assets. These could be signs of a rapidly maturing and increasingly complex market.

He concluded by highlighting several ALPS ETFs, including the ALPS Electrification Infrastructure ETF (ELFY), the CoreCommodity Natural Resources ETF (CCNR), and the Alps Equal Sector Weight ETF (EQL). These he positioned as distinctive solutions that aim to stand out in an increasingly crowded marketplace.

For more from SS&C ALPS Advisors on the growing demand for electricity, register for the free webcast taking place on August 28, 2025.