Abstract
Mutual funds and exchange-Traded funds (ETFs) differ in significant ways. ETFs trade on exchanges whereas mutual funds do not. ETFs generate few. if any. capital gains that are passed through to shareholders which makes them tax efficient. Alternatively, mutual funds often generate capital gains that are passed through to shareholders, and this makes them tax inefficient. To correct this tax inefficiency. Vanguard astutely added an ETF share class to many of its mutual funds back in 2001. They patented this structure and recently the patent expired. Several fund sponsors have applied to the Securities and Exchange Commission (SEC) to create this structure for their own funds. If approved, this would change the operation of affected funds in ways that are important to investors.