KKM Financial's Essential 40 stock fund is now an ETF
KKM Financial has converted its Essential 40 mutual fund into an ETF, joining the growing shift by asset managers to a more tax-efficient fund model.
ETFs make it easier for investors and financial advisors with taxable accounts to choose when to create capital gains or losses. This differs from mutual funds, which can sometimes hit their investors with an unwanted tax bill due to withdrawals or portfolio changes.
«When you look at the tax efficiency of an ETF compared to a mutual fund, it is much more advantageous,» said Jeff Kilburg, founder and CEO of KKM and a CNBC contributor. «A lot of the wealth advisors that I work with really have issues with the capital gain distribution typical to a mutual fund.»
Many asset managers have been converting their mutual funds to ETFs in recent years, due in part to a 2019 SEC rule change that made it easier to run active investment strategies within an ETF. The number of active equity mutual funds has fallen to its lowest level in 24 years, according to Strategas.
More broadly, many asset managers are pushing the Securities and Exchange Commission to allow ETFs to be added as a separate share class within existing mutual funds.
The newly converted KKM fund will trade on the Nasdaq under the ticker ESN. The goal of the Essential 40 is to allow investors to «buy what you use» in one equal-weighted fund, according to Kilburg. Its holdings include JPMorgan Chase, Amazon, Waste Management and Eli Lilly, according to FactSet.
«We believe without these companies, the U.S. economy would be hindered, or would be in trouble,» he said.
The old mutual fund version of the Essential 40 had a three-star rating from Morningstar. Its best relative performance in recent years came in 2022, when it
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