MutualFundWire.com: Why Mutual Fund Managers Pursuing Dual Share Classes Should Not Go It Alone

MutualFundWire.com

The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication

Monday, January 26, 2026

Why Mutual Fund Managers Pursuing Dual Share Classes Should Not Go It Alone

The mutual fund industry stands on the brink of a structural inflection point.

Steven Bryan "Steve" Plump
The RBB Fund, Inc.
President, CEO

For decades, mutual funds and ETFs evolved along largely parallel tracks — each with its own operational norms, governance expectations, and regulatory frameworks. Today, those lines are blurring. With the SEC opening the door to dual share-class structures that combine mutual fund and ETF share classes within a single portfolio, asset managers are presented with an opportunity that is both transformative and, by any measure, unprecedented.

Opportunity, however, does not come without complexity.

Dual share-class structures promise meaningful benefits to shareholders: improved tax efficiency, enhanced distribution flexibility, and the ability to meet investors where they increasingly prefer to transact. But for fund managers, the path forward is not simply an extension of launching an ETF or running a traditional mutual fund. It is an entirely new operating model—one that demands a level of experience, coordination, and governance sophistication that few organizations possess internally.

This is precisely why managers contemplating dual share-class structures should strongly consider partnering with an experienced board and operating team that has experience with both ecosystems.

Governance Is No Longer a Back-Office Function

In a dual share-class world, governance moves from a compliance obligation to a strategic necessity.

While mutual funds and ETFs both fall under the Investment Company Act of 1940, the similarities can be deceptive. ETFs introduce market-based dynamics — creation and redemption mechanisms, authorized participant relationships, secondary-market liquidity considerations — that most traditional mutual fund boards have never overseen. In a dual share-class structure, boards must understand not only each structure independently, but how they interact within a single portfolio.

This is not a theoretical concern. Decisions around valuation, liquidity oversight, disclosure, and operational risk take on new dimensions when ETF and mutual fund shareholders coexist. Boards without direct ETF experience face a steep learning curve at precisely the moment when regulators, markets, and investors will be paying the closest attention.

An experienced board — one that understands and has already overseen mutual funds and ETFs — can shorten that learning curve dramatically, reducing risk and enabling managers to focus on investment performance rather than structural growing pains.

Execution Risk Is Real — and Underestimated

Dual share-class approvals may arrive via notice orders, but implementation is where the rubber meets the road.

From authorized participant agreements and distributor coordination to service-provider integration and operational testing, the mechanics of supporting an ETF share class are neither trivial nor fast. Managers attempting to build this infrastructure independently often discover that timelines stretch, costs rise, and internal teams are pulled away from revenue-generating activities.

Speed to market matters. In a competitive landscape where structural advantages can translate into asset growth and long-term viability, delays are not merely inconvenient — they are costly. Firms that have already built and maintained ETF platforms understand where projects stall, where regulators focus, and where inefficiencies quietly compound.

Working with a seasoned operating partner can mean the difference between a smooth, timely launch and a prolonged, resource-draining process that distracts from the firm's core mission.

A Pivotal Moment Requires Proven Partners

There is no question that dual share-class mutual funds represent one of the most significant structural developments the industry has seen in years. They will not be right for every manager, and they will not succeed without thoughtful execution.

But for those firms prepared to take the leap, one conclusion should be clear: Experience Matters!

The managers who recognize this early — and choose not to go it alone — will be best positioned to deliver on the promise of dual share-class structures for both their firms and, most importantly, their shareholders.

Steven Plump is the CEO and president of the RBB Fund Complex, an open-architecture, cost-sharing, turnkey ETF and mutual fund solution and series trust provider.

Printed from: MFWire.com/story.asp?s=72008

Copyright 2026, InvestmentWires, Inc.
All Rights Reserved