Fund ETF Conversion in Employer Accounts

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gtwhitegold
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Fund ETF Conversion in Employer Accounts

Post by gtwhitegold »

With Bridgeway likely converting BOTSX - Bridgeway Tax Managed Omni Small Cap Value Fund and DFA, JP Morgan, Fidelity and other companies either already converted funds or are in the process of doing so, how does this work for accounts that are not set up to hold ETFs like certain 401k, 403b, and similar types of accounts? Are they normally liquidated before the conversion or is the fund still held? As more fund managers convert their funds into ETFs, this definitely becomes more of an issue to investors.
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jeffyscott
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Re: Fund ETF Conversion in Employer Accounts

Post by jeffyscott »

I did not even know this was a thing, but went looking and found that Fidelity says:
Shareholders who hold fund shares through an IRA or group retirement plan whose plan sponsor does not have the ability to hold shares of ETFs on its platform may need to redeem their shares prior to the applicable conversion, or their broker or intermediary may transfer their investment in a fund to a different investment option prior to the conversion.
https://www.fidelity.com/bin-public/060 ... -funds.pdf
And so it goes, And so it goes, And so it goes, And so it goes, But where it's goin' no one knows
TropikThunder
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Re: Fund ETF Conversion in Employer Accounts

Post by TropikThunder »

jeffyscott wrote: Tue Jan 24, 2023 9:49 pm I did not even know this was a thing, but went looking and found that Fidelity says:
Shareholders who hold fund shares through an IRA or group retirement plan whose plan sponsor does not have the ability to hold shares of ETFs on its platform may need to redeem their shares prior to the applicable conversion, or their broker or intermediary may transfer their investment in a fund to a different investment option prior to the conversion.
https://www.fidelity.com/bin-public/060 ... -funds.pdf
Yeah that sounds like what they do when switching 401k or 403b custodians if the new one doesn’t offer funds the current one has. In other words, it’s not a process to unique BOTSX.
Angst
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Re: Fund (BOTSX) ETF Conversion in Employer Accounts

Post by Angst »

gtwhitegold wrote: Tue Jan 24, 2023 9:53 am With Bridgeway likely converting BOTSX - Bridgeway Tax Managed Omni Small Cap Value Fund and DFA, JP Morgan, Fidelity and other companies either already converted funds or are in the process of doing so, how does this work for accounts that are not set up to hold ETFs like certain 401k, 403b, and similar types of accounts? Are they normally liquidated before the conversion or is the fund still held? As more fund managers convert their funds into ETFs, this definitely becomes more of an issue to investors.
This is my understanding: Assuming Bridgeway's BOTSX conversion to ETF proxy vote goes for "Yes" on Feb 15th, then on Mar 10th, any shares of BOTSX held in any brokerage anywhere will either be automatically converted to a round number of ETF shares (and a small bit of cash b/c no fractional ETF shares will be issued), or instead, if the brokerage account cannot hold ETFs, then the entire value of BOTSX shares held will be liquidated to cash.

BOTSX will no longer exist after March 10th, if the Feb proxy vote goes Yes. (My assumption is that a "Yes" vote here is essentially given.)
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gtwhitegold
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Re: Fund (BOTSX) ETF Conversion in Employer Accounts

Post by gtwhitegold »

Angst wrote: Wed Feb 01, 2023 10:08 am
gtwhitegold wrote: Tue Jan 24, 2023 9:53 am With Bridgeway likely converting BOTSX - Bridgeway Tax Managed Omni Small Cap Value Fund and DFA, JP Morgan, Fidelity and other companies either already converted funds or are in the process of doing so, how does this work for accounts that are not set up to hold ETFs like certain 401k, 403b, and similar types of accounts? Are they normally liquidated before the conversion or is the fund still held? As more fund managers convert their funds into ETFs, this definitely becomes more of an issue to investors.
This is my understanding: Assuming Bridgeway's BOTSX conversion to ETF proxy vote goes for "Yes" on Feb 15th, then on Mar 10th, any shares of BOTSX held in any brokerage anywhere will either be automatically converted to a round number of ETF shares (and a small bit of cash b/c no fractional ETF shares will be issued), or instead, if the brokerage account cannot hold ETFs, then the entire value of BOTSX shares held will be liquidated to cash.

BOTSX will no longer exist after March 10th, if the Feb proxy vote goes Yes. (My assumption is that a "Yes" vote here is essentially given.)
That's what I am tracking as well, but I was curious if there were any odd-ball cases where something else was possible, such as changing the investment into a separately managed account.
Angst
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Re: Fund (BOTSX) ETF Conversion in Employer Accounts

Post by Angst »

gtwhitegold wrote: Wed Feb 01, 2023 9:37 pm That's what I am tracking as well, but I was curious if there were any odd-ball cases where something else was possible, such as changing the investment into a separately managed account.
I have no experience with that but would guess it would have to be something that the 401k or 403b administrator offered to fund holders, and possibly at the behest of the employer involved.
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