Mutual Funds Are Not Dying, They're Becoming Wrapper-Agnostic: Exchange Traded Concepts' Richard Malinowski on the Future of Asset Management
ETF industry veteran says ETF share classes, 351 exchanges, and investor choice will reshape product delivery over the next five years
The long-running debate over whether ETFs are replacing mutual funds is asking the wrong question, according to Richard Malinowski, Co-CEO and General Counsel of Exchange Traded Concepts (ETC).
Speaking with Deborah Fuhr, producer of ETF TV, and Margareta Hricova, Malinowski argued that the future of asset management will be defined not by competition between wrappers, but by investor access, tax efficiency, and the ability to deliver investment strategies through multiple channels.
"Reports of the mutual fund's death are greatly exaggerated," said Malinowski. "What we're seeing is not replacement. We're seeing evolution."
Strategy First, Wrapper Second
According to Malinowski, one of the most important structural shifts underway is the increasing separation of investment strategy from investment wrapper.
Historically, investors accessed strategies through mutual funds tailored to distribution channels. Today, the ETF structure is expanding beyond self-directed brokerage accounts and becoming increasingly relevant in retirement plans, advisory platforms, and institutional portfolios.
"The strategy will become the product, while the ETF or mutual fund share class becomes the vehicle used to deliver that strategy where it best fits," he said.
This evolution is expected to accelerate following the SEC's approval of ETF share classes, which allows asset managers to offer both mutual fund and ETF exposure within the same fund structure.
ETF Share Classes Create New Distribution Opportunities
The SEC's approval of ETF share classes may prove to be one of the most significant developments for traditional asset managers in decades.
According to Malinowski, managers are no longer limited to choosing between mutual funds and ETFs. Instead, they can increasingly provide both structures simultaneously, expanding investor access while preserving existing distribution relationships.
"ETF share classes create a dual benefit," he explained. "They allow investors to access strategies on an exchange while also potentially opening the ETF structure to channels that historically only supported mutual funds."
For many firms, the critical question will no longer be whether to launch an ETF, but which combination of wrappers best serves their clients.
The Rise of the 351 Exchange
Another area generating significant interest among asset managers is the use of Section 351 exchanges, particularly among firms managing large separately managed account (SMA) businesses.
As SMAs appreciate over time, managers often face increasing challenges related to embedded capital gains and tax management.
A 351 exchange allows qualifying SMA assets to be contributed into a corresponding ETF in a tax-efficient manner, enabling investors to maintain exposure to the same investment strategy while potentially benefiting from the ETF's structural tax advantages.
For successful SMA managers, this could become a powerful tool.
"Traditional tax-loss harvesting eventually reaches its limits," said Malinowski. "A 351 exchange can provide a pathway to a more tax-efficient structure while maintaining continuity of investment strategy."
Execution Matters
Despite the opportunities, Malinowski cautioned that both ETF conversions and ETF share class launches involve substantial planning and governance.
For 351 transactions, managers must carefully assess account eligibility, diversification requirements, and security selection criteria. Recent IRS and Treasury guidance has further emphasized the need for contributed assets to closely align with the intended ETF strategy.
Similarly, the introduction of ETF share classes creates new demands around:
- Board oversight
- Transfer agency operations
- Cost allocation
- Compliance structures
- Operational complexity
"As these structures become more common, managers and fund boards will need to devote significant attention to implementation and oversight," he noted.
Retirement Assets Represent a Major Growth Opportunity
Looking ahead, Malinowski expects ETFs to continue expanding into retirement and qualified account markets, areas historically dominated by mutual funds.
He believes modernization of retirement platforms and increased demand for investor choice will help accelerate ETF adoption.
"Retirement systems are becoming more capable of handling ETFs," he said. "Managers that fail to think about how investors want to access strategies risk being left behind."
Industry Interest Continues to Grow
As a leading ETF white-label provider, Exchange Traded Concepts has been at the center of many of these conversations.
The firm works with asset managers seeking ETF launches, ETF conversions, capital markets support, and education around ETF adoption.
According to Malinowski, inquiries from asset managers continue to increase as firms evaluate ETF share classes, wrapper selection, and tax-efficient product structures.
"The divide between ETFs and mutual funds will continue to erode," he said. "We're increasingly seeing asset managers focus on offering strategies wherever investors want them, rather than forcing investors into a single product structure."
Key Takeaways for Asset Managers
- Mutual funds are evolving, not disappearing.
- ETF share classes are likely to expand distribution flexibility.
- 351 exchanges are becoming an important tool for SMA managers.
- Product design is becoming increasingly wrapper-agnostic.
- ETFs are expected to gain further adoption in retirement and qualified accounts.
- Investor choice is becoming a critical competitive differentiator.
- Firms that fail to modernize product delivery may face growing competitive pressure.
As the distinction between mutual funds and ETFs continues to blur, success may depend less on selecting a single structure and more on delivering investment strategies through whichever wrapper investors prefer.
"Ultimately, this isn't about ETFs versus mutual funds," concluded Malinowski. "It's about giving investors access to the strategies they want, in the format that works best for them."
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