The Great Divide Closes: F/m Investments Bridges the Gap Between ETFs and 401(k)s
For years, a frustrating divide has separated two of the most popular investment vehicles. On one side, we have exchange-traded funds, or ETFs, which offer the flexibility of trading like a stock throughout the day and often come with attractive tax benefits. On the other, there are traditional mutual funds, the established workhorses of the investment world, particularly within the massive, nearly $7 trillion American 401(k) retirement plan market.
Now, a significant innovation is underway that could finally bridge that gap, opening the door for some of the hottest ETF strategies to enter the retirement plans where millions of Americans save. F/m Investments is leading the charge, preparing to launch what are poised to be the industry’s first mutual fund share classes of existing ETFs.
The 401(k) Access Problem
The core of the problem is technological and regulatory history. Most 401(k) plans are built on systems designed decades ago to process mutual fund transactions, which are priced just once daily at the market close. ETFs, however, trade continuously, and many retirement platforms simply haven’t incorporated the technology to handle them easily.
For ETF issuers, this has meant that a huge pool of retirement money remains out of reach. F/m Investments, a firm with over $18 billion in assets under management and known for its innovative fixed-income products, recognized this as a massive untapped market.
The solution is a “dual share class” structure. Think of it like a convertible car. The underlying investment portfolio is the same, but you can buy a share either as an ETF, trading on an exchange, or as a traditional mutual fund, clearing at the end of the day’s net asset value (NAV).
A Critical Advantage: Performance History
While gaining access to 401(k) menus is a major win, the dual share class offers an even more crucial benefit: instantly portable performance history.
Retirement plan fiduciaries, the people responsible for selecting investment options, are often required to vet new funds based on a track record of three or five years. Prior to this innovation, if an asset manager wanted to bring an existing ETF strategy to a 401(k) market, they would have to launch a separate, brand-new mutual fund. That new fund would start with a performance history of zero, forcing plan fiduciaries to wait years before adding it to their menu. The dual share class means the mutual fund shares can leverage the ETF’s established history from day one.
F/m is targeting this structure for two of its popular strategies: the **US Treasury 3 Month Bill ETF (TBIL)** and the **Ultrashort Treasury Inflation-Protected Security ETF (RBIL)**. These short-duration Treasury funds have been hugely popular with investors seeking safe, high-quality exposure in the current interest rate environment. The firm has filed a prospectus with the Securities and Exchange Commission, a move that follows a broader exemption granted to Dimensional Fund Advisors, signaling that the regulatory environment for these structures is becoming favorable.
This development is more than just an accounting maneuver. As F/m CEO Alex Morris noted, it’s an “elegant way” for fund boards to offer choice and simplify distribution. For the average American investor, it means that some of the most dynamic and low-cost investment strategies are finally breaking down the walls that have long separated them from their workplace retirement savings.
