The USAA Investments [profile] team wants to offer ETFs that work like Vanguard [profile] ETFs work, but with an active twist. The two mutual fund shops are in negotiations now. Watch for USAA to launch its ETFs next year.

MFWire could not immediately reach a Vanguard spokesperson for comment for this story.

On Monday, San Antonio, Texas-based USAA filed with the SEC, requesting permission to create ETF shares of its active, open-end mutual funds. The filing notes specifically that what the military friendly financial services provider's mutual fund arm is looking for "is similar to the relief granted by the Commission to the open-end management investment companies issued by Vanguard Index Funds," though so far Vanguard only offers ETF shares of its passive mutual funds.

In 2005, Vanguard patented its methodology of creating ETF shares of its mutual funds. Paul Fulmer, assistant vice president of product management at USAA Investments, confirms that USAA has "started a dialogue with Vanguard" about licensing the Vanguard ETF shares methodology.

"We were intrigued with that structure and have basically been in talks with them to license their patent around that share-class structure," Fulmer tells MFWire. "We filed this week so that we can basically be prepared should we finalize an agreement with Vanguard."

Fulmer adds that the goal is for USAA to launch its ETFs, primarily playing to USAA's fixed income strength, in 2016.

USAA's proposed move comes as several other fund shops are working with Eaton Vance about using its new quasi-ETF product structure. 

Edited by: Neil Anderson, Managing Editor


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