Following recent SEC approvals for ETF share class relief, asset managers and service providers are evaluating how mutual fund and ETF share classes can operate within the same fund structure at scale.

The discussion will be front and center at next week's ICI ETF Conference in Nashville. In advance of the event, the Investment Company Institute recently published a white paper outlining the operational, regulatory, tax and infrastructure considerations associated with ETF share classes, underscoring the industry's focus on implementation as adoption expands.

Much of the conversation has focused on product strategy, distribution and investor access. Less attention has been paid to the accounting and operational infrastructure required to support these structures once they are launched.

A mutual fund and its ETF share class share the same underlying portfolio. Supporting both efficiently requires accounting, servicing, basket processing, reporting and oversight processes that remain aligned across the entire structure.

Many firms still support mutual funds and ETFs through separate accounting workflows, separate basket calculation environments and separate reconciliation processes. As ETF share class adoption expands, those operating models become increasingly difficult to sustain.

For asset managers, the challenge is introducing new product structures without introducing new layers of operational complexity. For service providers, the challenge is supporting those structures across multiple clients without increasing operational overhead with every new mandate.

The Infrastructure Behind ETF Share Classes

ETF share classes are part of a broader trend across investment management. Firms are being asked to support more asset classes, more investment products, more jurisdictions and more reporting requirements than ever before. Every new requirement places additional pressure on accounting platforms built around disconnected operating models.

ETF share classes simply bring those long-standing operational questions into sharper focus.

Many of the operating teams and service providers we speak with are still calculating standard and custom baskets outside their core accounting environment. Others continue to rely on separate operational processes to support mutual funds and ETFs tied to the same underlying portfolio.

Those approaches can work. The question is how well they scale as dual share class structures become more common.

The real challenge is not supporting ETF share classes themselves. It's supporting them without creating another operational silo.

Supporting the Next Evolution of ETF Operations

FundGuard's real-time investment operations and accounting platform enables firms to support mutual funds, ETFs and emerging investment structures on a single accounting foundation. Rather than introducing separate workflows for ETF share classes, firms can manage the complete lifecycle from one unified platform.

Key capabilities include:

  • Real-Time Basket Management: Support unlimited custom baskets and compute the precise underlying holdings required per Creation Unit for both Trade Date (T+0) and Trade Date minus one (T-1).

  • Predictive T-1 Baskets: Automatically incorporate next-day accruals, trades and corporate actions to support straight-through accounting and operational readiness.

  • Primary Market Order Processing: Process the complete lifecycle of ETF creation and redemption orders from Authorized Participants (APs), dynamically updating fund inventory and capital activity.

  • In-Kind Transfer Processing: Execute rules-based lot relief specifically designed for in-kind creations and redemptions, separate from portfolio rebalancing activity.

  • Intelligent Substitution & Cash-in-Lieu: Automate security substitutions and cash-in-lieu processing for restricted or unavailable holdings.

  • Automated Portfolio Composition Files (PCFs): Generate and export Portfolio Composition Files and supplemental data directly from a unified accounting model to support ETF rebalancing.

  • Automated Order Reconciliation: Ingest complete primary market orders and automatically validate that in-kind securities, balancing cash and creation units reconcile precisely against total notional capital, reducing manual intervention and operational risk.

Because these capabilities operate from a single accounting engine, firms can introduce ETF share classes without introducing additional reconciliation processes, duplicate technology or fragmented operational workflows.

ETF share classes are drawing attention to a question that extends well beyond a single product innovation: can your accounting infrastructure support the way investment products are evolving?

As firms expand across asset classes and investment products, the ability to support new structures from a single real-time system of record will become an increasingly important competitive advantage.

That is the conversation we will be driving throughout the ICI ETF Conference in Nashville and one we look forward to continuing with clients and partners across the industry.