Welcome to Extreme Investor Network, where we provide unique insights and valuable information to help you navigate the world of finance. Today, we’re diving into the recent trend of asset managers converting mutual funds into ETFs for increased tax efficiency.
KKM Financial is the latest player to join this movement by converting its Essential 40 mutual fund into an ETF. This shift allows investors and financial advisors with taxable accounts to have more control over capital gains and losses, unlike traditional mutual funds which can sometimes surprise investors with unexpected tax bills.
Jeff Kilburg, founder and CEO of KKM, highlighted the tax efficiency of ETFs compared to mutual funds, emphasizing the benefits for wealth advisors and their clients. With the regulatory environment becoming more favorable for ETFs, many asset managers are making the switch to provide their clients with a more tax-efficient investment option.
The Essential 40 ETF, trading under the ticker ESN on the Nasdaq, offers investors a diverse portfolio of essential companies including JPMorgan Chase, Amazon, Waste Management, and Eli Lilly. These companies are seen as integral to the U.S. economy, further emphasizing the value of this unique ETF.
Equal-weighted funds like the Essential 40 have shown strong performance, especially during market downturns. With concerns about market reliance on a few key stocks, investors are turning to strategies like equal-weighted indexes for a more balanced approach.
In 2024, the KKM fund saw a 16% year-to-date growth before its conversion, with assets totaling around $70 million. The ETF will maintain a net expense ratio of 0.70%, the same as the old mutual fund, providing investors with consistency in fees.
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