The Vanguard Group’s application to add ETF shares to its actively managed mutual funds will likely significantly ramp up competition in the space if/once the SEC approves such hybrid structures, industry analysts say. The asset manager is known for offering lower management fees than other providers and for being a pioneer in using dual shares for its passively managed mutual funds since the early 2000s.
Vanguard filed an application with the SEC for regulatory approval of dual shares on June 11.
“Vanguard is the industry’s pioneer in offering multi-share class ETF products,” wrote a Vanguard Group spokesman in an emailed response. “The multi-share class ETF structure has served Vanguard index investors well for more than two decades, and we look forward to extending the benefits of the structure to investors in Vanguard’s actively managed funds.”
Vanguard already applied for a dual-share class for its actively managed funds a decade ago, but at the time, the SEC declined its request. The fact that it’s trying again likely signals that the SEC has moved closer to approving the strategy, according to Daniel Sotiroff, senior manager research analyst with Morningstar.
The line-up to use dual shares now includes over 60 asset managers who have filed applications with the SEC. These managers include BlackRock, State Street Corp., JPMorgan Chase and Fidelity Investments, among others.
“The fact that Vanguard is joining now carries home the point that we are probably closer to an approval than we’ve ever been over those two years,” said Sotiroff. “The other thing is it’s dialing up the competition. Now you are going to have to compete with Vanguard if you are going to go into actively managed ETFs.”
The filing also indicates Vanguard executives are aware that growth in actively managed ETFs outpaces that in passive ETF strategies and are looking to expand in that space, said Aniket Ullal, head of ETF research and analytics with CFRA, in an emailed response.
Year-to-date in 2025, actively managed ETFs have accounted for 30% of U.S. ETF flows, Ullal wrote. That’s in spite of the fact that they total just 7% of overall U.S. ETF assets. Vanguard’s active ETF holdings remain modest, accounting for less than 0.4% of the firm’s U.S. ETF assets.
“So, it could look to grow in this space as a low-cost provider,” according to Ullal. “This will put cost pressure on competitors, who have been able to charge higher fees in the active space, relative to the extremely low margin indexed category.”
Potential Hitch
One potential issue that Vanguard and other asset managers pursuing dual shares for active strategies might face is pushback from their funds’ sub-advisors, noted Sotiroff. Some active managers want to retain the ability to close their funds to new investors in order to maintain their management edge, which is why they might gravitate toward mutual funds over ETFs.
For example, Vanguard closed its Vanguard PRIMECAP Fund and Vanguard PRIMECAP Core Fund to new investors in the past, and its Vanguard Capital Opportunities fund is currently closed to new inflows as well, Sotiroff said.
He said Vanguard likely discussed the issue with its fund sub-advisors before filing the application with the SEC and received some positive responses; otherwise, the filing would not make sense. However, ETF dual shares will make the most sense for those of Vanguard’s actively managed mutual funds that are most similar to their category index and carry low active risk. These would include funds with broader exposure to stocks or bonds than their competitors.
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