Convert existing assets into an ETF through a tax-deferred Section 351 exchange.
351 Seed Strategies
Leverage a 351 seed strategy for exchange-traded funds
Launch an ETF using a 351 seed strategy
A Section 351 exchange allows investors to contribute appreciated securities into a newly formed ETF in a tax-deferred transaction. This approach preserves investor cost basis while unlocking the ETF wrapper’s structural benefits. Because this is one of the most complex ETF launch paths, success depends on rigorous compliance, precise execution, and durable governance.
Ultimus supports you from feasibility through execution and ongoing ETF operations within a proven conversion framework and established governance processes.
Treat the seed as a regulated fund launch
Determine feasibility before committing to the path
Not every strategy or asset mix fit into a Section 351 exchange. We’ll help you evaluate contributor eligibility, account types, and whether proposed assets align with the ETF’s stated strategy before launch decisions lock in.
Navigate tax, compliance, and control requirements
A 351 exchange introduces IRS diversification and control-group considerations that must be addressed and documented. With disciplined oversight, expect close coordination with fund counsel and tax advisors to support a compliant, well-considered conversion plan.
Execute the conversion with institutional discipline
Execution requires complex coordination across separately managed account (SMA) custodians and stakeholders. We manage in-kind transfers, reconciliation, and initial NAV establishment through a controlled process that supports launch readiness.
Operate with confidence after the ETF launches
A conversion is only the start of the ETF lifecycle. With Ultimus, you’ll transition into a comprehensive operating model that includes fund accounting, daily ETF operations, board governance support, and ongoing regulatory reporting over the lifecycle of the fund.
Services and solutions
Confirm feasibility and conversion control points
Evaluate whether a Section 351 exchange fits your strategy by considering eligibility, account types, and how assets may align with the ETF’s stated objective.
Coordinate compliance and documentation
Support diversification and control-group testing, coordinate with counsel and tax advisors, and document requirements to strengthen governance and audit readiness.
Manage transfer, reconciliation, and NAV setup
Leverage multi-custodian coordination, oversee in-kind transfers and reconciliation, and support initial NAV establishment to enable ETF launch readiness.
Operate the ETF after launch
Gain fund accounting, daily ETF operations, board governance support, and ongoing regulatory reporting within a scalable trust infrastructure or your proprietary trust.
Benefits of working with Ultimus
Preserve investor cost basis at launch
Enable a tax-deferred exchange that preserves investor cost basis while moving assets into an ETF structure, subject to applicable requirements.
Reduce execution risk in a complex launch path
Coordinate custodians, transfers, reconciliation, and NAV establishment through disciplined workflows designed for precision and control.
Strengthen governance credibility from day one
Support a conversion process designed to meet regulatory requirements and withstand audit and board scrutiny with clear documentation and oversight.
Build a durable operating foundation post-launch
Move from conversion into ongoing ETF operations and reporting within a proven framework designed to support scale after launch.
Frequently asked questions
What is a Section 351 seed strategy?
A Section 351 seed strategy allows eligible contributors to transfer securities into a newly formed ETF in a tax-deferred exchange at launch, provided key requirements are satisfied.
Why should a 351 seed be treated like a regulated fund event?
Because the ETF must launch with a prospectus and operate within fund and market infrastructure requirements. Execution must support governance, controls, and operational readiness—not only the tax concept.
What makes a 351 seed more complex than a standard ETF launch?
The 351 seeds typically add coordination across multiple contributors, custodians, tax lots, and approvals, and require disciplined validation, change control, and reconciliation during the execution window.
How do you confirm contributed assets fit the ETF?
Contributed assets should closely align with the ETF’s disclosed strategy and be suitable for in-kind contribution and market making. Early indicative reviews and final validation help prevent late-stage issues.
What needs to happen after launch?
Post-launch stabilization includes confirming cost basis and monitoring holding periods, completing audit and tax documentation, and operating the ETF through ongoing administration, reporting, and servicing.