Calastone: ETF share classes can expand mutual fund reach

Calastone published a white paper describing how asset managers can add ETF share classes to existing mutual funds to reach ETF investors while keeping the same portfolios, mandates and performance histories intact.

The paper, titled ‘ETF Share Classes: Unlocking Distribution Without Reinventing the Operating Model’, notes global ETF assets reached $20 trillion in the first quarter of 2026 and presents share classes as a distribution option for established managers.

Under the model, a single legal fund and portfolio would support both traditional mutual fund unit classes and an ETF share class that trades on exchanges. All share classes would follow the same investment strategy and historical track record.

Calastone says managers must connect two operational ecosystems to deliver the structure. The paper identifies authorised participant connectivity, creation and redemption workflows, settlement chains and integration with international central securities depositories as key operational issues for cross-border distribution.

The paper explains how authorised participants link secondary-market ETF trading with primary-market creation and redemption, and why managers need counterparties and processes to support those interactions.

Calastone outlines options for managers considering whether to build ETF operating capabilities in-house, to rely on third-party providers, or to use hybrid arrangements that combine in-house portfolio management with partner-operated ETF infrastructure.

Calastone writes: ‘By adding an ETF share class to an existing mutual fund, managers can access ETF-native investors while retaining the same portfolio, investment strategy and performance track record. But while the proposition is compelling, delivering it requires managers to bridge two very different operational ecosystems.’

The paper recommends flexible systems that can support new wrappers, markets and distribution channels over time and notes the option lets managers use ETF distribution channels without creating separate funds.