Guinness Atkinson To Attempt First Mutual Fund-to-ETF Conversion

The small mutual fund provider will try to ride the growth of the ETF industry.
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While the mutual fund industry still owns far greater assets overall, it's the ETF industry that capturing the fastest growth.

So we shouldn't be surprised when that a small mutual fund company with modest assets wants to try to join the party.

That's exactly what the $250 million Guinness Atkinson plans on doing.

According to a Barron's article based on a recent SEC filing, the company plans on converting the Guinness Atkinson Dividend Builder Fund (GAINX) and the Guinness Atkinson Asia Pacific Dividend Builder Fund (GAADX) into ETFs in hopes that the ETF structure helps it gain more exposure.

To be clear, what Guinness Atkinson is proposing isn't the same as mutual funds having ETF counterparts. For example, there's the Vanguard S&P 500 ETF (VOO) and the Vanguard 500 Index Fund (VFIAX). There are all sorts of these pairs out there, but they were always separate funds opened at separate times.

This would be the first time a mutual fund is directly converted into an ETF in the United States.

I say "in the United States" because this has already been done in Canada so it won't necessarily be a "first time ever" situation.

It's also worth noting that the mutual fund-to-ETF conversion was attempted around a decade ago here in the United States, but ended up being unsuccessful.

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For the record, Charles Ragauss is currently a portfolio manager for the Exponential ETFs. He says that his company ran into so much red tape from the SEC that it eventually gave up. According to his tweet, this took place a decade when the ETF industry was far smaller than it is now.

Guinness Atkinson's latest attempt could finally be successful or it could run into just as much regulatory pushback.

If successful, this could lead to a wave of conversions. Popular funds, like the Fidelity Contrafund (FCNTX), have long been suggested as ideal ETF candidates. Fidelity hasn't launched a Contrafund ETF, but a successful mutual fund-to-ETF conversion could at least restart the conversation.

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