The ETF launch reimagined: Communications strategies for 351 conversions 

Key Takeaways:

• 351 conversions are redefining the launch playbook for ETF issuers and demand a thoughtful communications strategy for each phase: before, during and after launch. 
• Early, clear education can turn the technical concepts into understandable stories that resonate help attract more contributors and maximize assets at launch.
• Strategic messaging and storytelling tailored to 351 conversions can enhance a new ETF’s visibility and its team’s credibility in the increasingly crowded ETF market.

As more than 1,400 ETFs come to market in 2025 alone, the 351 conversion, where investors have an opportunity to defer taxes by rolling appreciated assets into a new ETF at launch, is redefining the launch playbook for some issuers. Because 351 conversions represent a one-time opportunity for a targeted group of investors to participate ahead of launch—before the fund opens to everyone once it starts trading—the communications strategy is different from that of a traditional ETF launch.

First, a few basics:

• 351 conversions, also known as ‘351 exchanges’, have existed for decades in other areas of tax law and are now being used in the ETF space to offer investors a tax-efficient path to roll appreciated portfolios into a new ETF without triggering capital gains. For managers, they create a way to launch with significant assets—in a hyper-competitive market that pays attention to launch size.
• Investors benefit from tax deferral. They can contribute positions (single stocks or other ETFs) with large unrealized gains.
• Assets contributed in a 351 conversion must meet strict diversification requirements And contributors collectively must own at least 80% of the new ETF at launch.
• As RIAs have focused increasingly on tax efficiency, they have been drawn to 351 exchanges as innovative options beyond the more familiar direct indexing and tax-loss harvesting approaches.

Here’s how the process works:

Security identification: First, investors identify appreciated securities they wish to contribute to the 351 conversion. Asset managers gather those assets and ensure they meet the “25/50 rule,” a diversification requirement that no single equity or ETF can represent more than 25% of contributed assets, and the top five portfolio holdings cannot exceed 50% of the contributed portfolio.

Transfer: Second, once participants are confirmed, legal and operational teams handle the transfer. On the evening before launch, the ETF’s net asset value is calculated and diversification confirmed.

Share issuance: Finally, on launch day, participating investors receive the newly issued ETF shares with the same cost basis and holding period as before. Investors can stay invested, diversify further, or sell after the conversion is completed. Taxes are due only when the new ETF shares are sold. The result is a fully functioning ETF seeded with existing holdings instead of newly injected cash.

The communications challenge

Executing a 351 conversion is only one part of the story. Communicating the process clearly is equally important. ETF launches via 351 conversion involve complex rules, a diverse pool of participants, and potentially longer timelines. Every stage needs its own communications plan that keeps investors, advisors, and the media well informed.

We suggest a three-prong communications strategy encompassing pre-launch, launch, and post-launch.

1. Pre-Launch: Priming the pump
   
   
   Before the ETF files, firms need to identify participants with portfolios that meet the IRS diversification standards. This is also the moment to “prime the pump.” That means building awareness, educating advisors, and generating interest from potential contributors, all within strict compliance guardrails.
   
   
   Educational outreach to both advisors and media helps do just that. Simple explanations, educational webinars and transparent messaging can turn a complex structure into a relatable opportunity.
   
2. Launch: Making the debut count
   
   
   When the ETF goes live, attention turns to the broader story as represented through the new ETF strategy and the portfolio management team. Communications should introduce the new fund, explain its strategy, and connect messaging to the firm’s expertise and capabilities.
   
   
   At launch, the goal is visibility. This is the moment to engage ETF industry reporters, advisors, and investors who can now access a strategy that is available through the public, regulated ETF wrapper which is preferred by many advisors and investors.
   
3. Post-Launch: Keeping the Story Alive
   
   
   Once the ETF is trading, consistent storytelling helps sustain momentum. That can include media opportunities for portfolio managers, ongoing educational commentary and insights that link the ETF to current market trends and timely news stories.
   
   
   Post-launch communications can turn early interest into long-term credibility and ongoing asset growth. They also position the fund and its managers as trusted experts in their field.
   

Why 351 communication matters

For many firms, a 351 conversion is not only a new way to build a product. It is a way to modernize portfolios, broaden investor access, and enter the ETF ecosystem with a strong narrative. But this innovation comes with a higher bar for clarity. Advisors and investors need simple, compliant explanations of how it works and why it matters.

A clear communications strategy can make the difference between a quiet filing and a visible, credible market debut. The truth is issuers have one bite at the apple in terms of maximizing assets at launch.  Effective communications can help them make the most of that opportunity.

Looking ahead

While 351 conversions are still new, adoption is growing at speed. Several firms have already launched ETFs through this process, and many others are exploring this process as awareness spreads. As with any more complex structure, education can drive success. Asset managers need partners who can turn technical concepts into understandable stories that resonate. And clear communication at every step can make a significant difference.

Lowe Group can help firms bring your ETF to life through thoughtful communication that turns complex launches into clear, compelling messages. Considering a 351 conversion?

Let us know.