This has become an increasingly common question in recent years. Our answer remains: not anytime soon, particularly in our micro and small cap strategies.
As a firm that prides itself on investing our own money alongside our clients’, we fully understand the pain points of mutual fund investing, most notably, that mutual fund shareholders may owe taxes each year on unsold shares.
The increasingly popular way to access public markets is through an exchange-traded fund (ETF). Unlike mutual funds, ETFs generally trigger taxes only when the investor sells the investment, similar to owning individual stocks and bonds. This tax treatment is typically preferred, which is why we are frequently asked whether Grandeur Peak is considering an ETF.
One reason why Grandeur Peak isn’t planning to launch an ETF goes back to one of our founding principles. As investors focused on micro to mid cap companies, we believe it’s vital to limit assets in our strategies. Micro and small cap stocks can be thinly traded, particularly in non-US companies. Our micro and small cap funds could become very difficult to manage if we were not able to stop new investments. Due to the structure of an ETF, once launched, asset flows cannot be limited.
Another distinguishing characteristic of an ETF is daily transparency of holdings. This could be difficult to manage in a micro or small cap strategy with holdings that are not very liquid. There are instances when we need time to build into or sell out of a position due to how illiquid the stock is. Having to report ownership on a daily basis could allow other market participants to see what we’re doing and interfere with our intended investment. This is why we share holdings of our mutual funds with a two-month lag.
Grandeur Peak has consistently prioritized client performance over asset growth. We’ve done this by prohibiting new investments in our mutual funds when asset levels are high and by limiting transparency in order to give ourselves time to trade. And now we’re doing it by choosing not to offer our strategies in an ETF wrapper.
Author’s Note
Interestingly, an act was introduced in Congress in March 2025 called the GROWTH Act1. The act proposes to defer taxation of mutual fund shares until they’re sold, removing a long-standing headwind for mutual funds and putting them on more equal footing with ETFs.
This post is for information and educational purposes only and expresses our opinion and view of the market and is not a recommendation to transact in any securities.
[1] https://www.ici.org/system/files/2025-09/25-ici-growth-act.pdf