The First Mutual Fund to ETF Conversion on Behalf of SmartETFs is Underway

MAR 01, 2021 | PRACTUS LLP

The First Mutual Fund to ETF Conversion on Behalf of SmartETFs is Underway

Authored by Robert Elwood, Karen A. Aspinall

Practus, LLP Announces that the First Mutual Fund to ETF Conversion on Behalf of SmartETFs is Underway

Innovative Merger of Fund Strategies Is a Milestone for the Asset Management Industry

WASHINGTON, D.C., March 2, Practus, LLP, a virtual law firm with an innovative approach to client service and cutting-edge legal work, today announced the effectiveness of certain filings with the Securities and Exchange Commission that will allow for the first ever mutual fund to exchange-traded-fund (ETF) conversion on behalf of client Guinness Atkinson Asset Management and SmartETFs, its family of exchange-traded funds. It is anticipated that the transactions will be completed on or about March 26, 2021. The establishment of an accepted legal framework for such a conversion is a milestone for the asset management industry and a positive development for fund providers seeking to offer their clients additional ways to access their investment strategies. 

The first two actively managed ETFs to convert from mutual funds are the SmartETFs Dividend Builder ETF (ADIV) and the SmartETFs Asia Pacific Dividend Builder ETF (DIVS).  Each ETF will continue the active investment strategies under the same portfolio management and with the same performance history as their respective predecessor mutual funds, Guinness Atkinson Dividend Builder Fund (GAINX) and Guinness Atkinson Asia Pacific Dividend Builder Fund (GAADX).

As of March 26, 2021, shares of each mutual fund will be exchanged into shares of its corresponding ETF. The majority of shareholders will experience the change as a seamless transaction, while a small group may need to provide additional information concerning their current brokerage arrangements. Current clients can contact Guinness Atkinson Asset Management directly for more information.

The transaction was led by Alexandra Alberstadt, a former partner in the Practus, LLP’s financial services practice. Bringing more than two decades of focused experience serving investment management firms to the table, Ms. Alberstadt was able to navigate numerous regulatory complexities and by combining elements of historical transactions, she developed a solution for advisers looking to evolve their investment offerings into the ETF space while maintaining fund scale. Although converting mutual funds to ETFs has been suggested in the past, this transaction is an entirely new model for asset management firms that may be interested in pursuing innovative approaches. She was assisted by Practus partner Robert Elwood who focused on the tax implications for current and future investors of the funds.   

“The key to finding a successful resolution was to understand the structure of our client’s funds, verify their suitability as ETFs, while aiming to ensure that current shareholders would benefit from the change,” said Ms. Alberstadt. “While this type of conversion will not work for all funds, in this case it was an exciting opportunity to deliver successful and established strategies to the client’s shareholders, with lower overall costs and better after-tax results going forward.” 

As a result of ongoing shareholder interest and after determining that particular investment strategies were suitable for the ETF structure, Guinness Atkinson Asset Management began to pursue converting the first two of their traditional mutual fund strategies into ETFs under their SmartETFs brand. As a boutique asset management firm dedicated to contributing to human progress by investing in it, the firm’s CEO, Jim Atkinson, knew he needed to access top-tier legal knowledge, coupled with flexibility for a prolonged dialogue with regulators. 

“The customized legal support we received from Practus made it possible for a firm like ours to blaze a trail in supporting our shareholders in a manner that had never been successfully done before,” said Mr. Atkinson. “What I appreciate most about Practus is the firm’s creative approach. The conversion would not be possible without the creative thinking of the firm’s counselor, Alex Alberstadt.”

The ability to serve agile first movers, such as Guinness Atkinson Asset Management, is a core value of Practus, LLP, established by founders John Lively and Robert Elwood in 2018. The firm was founded with the goal of providing better outcomes for both clients and attorneys through the use of technology, streamlined processes and flexible fee arrangements. 

“When we started Practus we sought a better way to do business without compromising on providing clients with world-class legal advice,” said Mr. Lively. “We are pleased that our deep bench strength of veteran financial services attorneys provided the platform to make yet another significant and creative breakthrough on behalf of a valued client.” 

About Practus, LLP

Practus is an innovative law firm that is disrupting the outdated ways of practicing law. By leveraging mobile technology, cloud-based solutions, and an agile infrastructure to deliver legal services, both clients and attorneys benefit from this visionary model.

The testimonials and references in this press release may constitute attorney advertising and do not constitute a guarantee, warranty or prediction regarding the outcome of your legal matter.  Testimonials, reference and/or past results do not guarantee or predict future results.

Media Contacts

Justin Lavelle
Justin Lavelle Communications, LLC

Victoria Odinotska

The Authors
Robert Elwood
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Karen A. Aspinall
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Practus, LLP provides this information as a service to clients and others for educational purposes only. It should not be construed or relied on as legal advice or to create an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.

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