Introduction#
Gabe Plotkin, a hedge fund manager and co-chairman of the Charlotte Hornets, is looking to convert some of his personal assets into an exchange-traded fund (ETF) as part of a tax-deferral strategy. This move has been reported by Bloomberg News, citing sources familiar with the situation.
What is an ETF?#
An exchange-traded fund (ETF) is a type of investment fund that holds a collection of assets, such as stocks or bonds, and trades on stock exchanges, much like individual stocks. Investors can buy shares of the ETF, which allows them to invest in a diversified portfolio without having to purchase each asset individually.
The 351 Conversion Process#
Plotkin plans to use a method known as a 351 conversion to create the Snowball ETF. This process allows an existing portfolio of assets to be transformed into an ETF. The popularity of this strategy on Wall Street stems from its potential tax advantages, as it can help defer taxes on capital gains that would otherwise be incurred from selling assets.
Background on Plotkin#
Previously, Plotkin managed a hedge fund but decided to shut it down after facing challenges with meme-stock traders. Following this, he acquired a stake in the NBA team, the Charlotte Hornets. The filing for the Snowball ETF was initially made in December, and Plotkin is expected to provide most of the initial securities for the fund.