F/m Investments has launched the first dual share class structure, allowing investors to access its F/m US TBIL 3-Month Treasury Fund through either an ETF or mutual fund wrapper within the same portfolio, marking a shift in how advisors can deploy strategies across client accounts.
The structure addresses a longstanding challenge for advisors: retirement plan participants often cannot access ETF strategies available to brokerage clients, forcing advisors to reconcile different products or accept performance disparities between accounts. With the dual share class approach, a client in a 401(k) and a client in a brokerage account can now hold identical exposures to the same underlying Treasury portfolio.
The mutual fund share class, ticker TBFMX, operates alongside the existing TBIL ETF within a single fund structure, according to an announcement from the $18 billion investment firm. Both share classes track the Bloomberg US Treasury Bellwether 3M Total Return Index and charge a 0.15% management fee, according to the prospectus.
Scale and Performance
Because both share classes sit in the same portfolio, the mutual fund benefits from the liquidity and scale generated by the ETF. The structure eliminates the performance drift advisors typically manage when running similar strategies across different vehicles.
“Combining these structures makes innovation universal (again) and builds much-needed bridges between those islands of capital,” said Alexander Morris, chief executive officer at F/m Investments.
According to the announcement, a client in a brokerage account and a client in a retirement plan can now hold the same 3-Month Treasury bill strategy — one through the ETF (TBIL), the other through the mutual fund share class (TBFMX) — without the advisor having to manage separate products or reconcile performance differences.
While mutual funds typically face internal transaction costs from redemptions, according to the prospectus, mutual fund shareholders in this structure may benefit from the ETF’s in-kind trading efficiency. The prospectus notes, however, that ETF shareholders could experience cash drag if the mutual fund side faces high redemptions, as the fund would need to hold cash to satisfy those requests.
Bridging the Retirement Gap
Retirement programs represent a primary source of wealth accumulation but remain among the most restricted in product offerings. Plan recordkeepers typically accommodate mutual funds more readily than ETFs, creating a barrier between workplace savers and strategies available through taxable brokerage platforms.
“ETFs have been a, perhaps the, primary innovative force for advisors and investors and markets,” Morris said. “Mutual funds, for all their strengths, were left behind, marooning investors.”
Todd Rosenbluth, head of research at VettaFi, said the structure could gain traction given TBIL’s adoption.
“It is exciting to see F/M lead the charge to offer a new share class of a strong ETF product,” Rosenbluth said. “TBIL has been very popular in the last three years as investors seek exposure to short-term Treasuries. I’m thrilled we will be talking about share classes at the Exchange conference in a month.”
According to the announcement, the dual share class framework operates under exemptive relief from the Securities and Exchange Commission and complies with the Investment Company Act of 1940. Unlike approaches that require separate funds for each vehicle type, this structure houses both the ETF and the mutual fund within the same portfolio, maintaining a single track record and a single set of holdings.
Future-Proofing the Structure
The rollout, according to F/m, was supported by The RBB Fund, Inc., the firm’s multi-series trust, and U.S. Bank Global Fund Services, which provided fund operations and administration. Josh Jacobs, chief commercial officer for ETFs at U.S. Bank, noted the bank worked to develop what represents the first third-party multi-share class fund solution.
“The dual share class structure didn’t require new rules or novel interpretations,” said Aisha Hunt, founder and principal of Kelley Hunt, PLLC, regulatory counsel to F/m. “It works within the existing ETF framework and the 1940 Act. That’s what makes it durable, and what makes it a model other issuers can follow.”
The 1940 Act framework supporting the dual share class structure could accommodate future developments in asset ownership and transfer mechanisms. The firm is currently working with platforms and recordkeepers to broaden distribution access, the announcement said, suggesting advisors may see the mutual fund share class appear on 401(k) menus as integrations progress.
F/m manages approximately $18 billion across fixed income strategies, according to the announcement. The firm’s TBIL ETF has attracted flows as investors sought liquid Treasury exposure during the recent elevated rate environment.
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