A new Morningstar analysis reveals that between 2021 and 2025, 39 U.S. ETFs will be launched with roughly $8.7 billion in seed assets from individual investors. Wealth managers are transferring clients’ concentrated, low-basis stocks into newly formed ETFs, receiving no gain at the time of transfer if the exchange meets Section 351 requirements. This strategy avoids immediate capital gains events and allows for structural tax benefits such as in-kind redemptions that minimize future fund-level realizations. However, the tax-free treatment is denied if the transfer results in “diversification” of the investor’s interests. The strategy is not for everyday retail investors, as minimum contributions typically start at $1 million.