91´«Ã½

Last updated 2/18/2026

 An exchange-traded fund (ETF)is an investment product that combines the features of mutual funds and stocks. Some insurers invest meaningful amounts of capital into ETFs.[1]

Both mutual funds and ETFs are ways to invest in many assets at once, making individual investments less risky through diversification. ETFs are like stocks in that they trade on major stock exchanges (like the NYSE or NASDAQ), their price changes throughout the trading day, and they can be traded anytime the market is open. Conversely, a mutual fund’s net asset value (NAV) per share is calculated once per day after market close.[2]

The market price of ETF shares trade near their NAV per share.  Otherwise, financial arbitrage would quickly bring the price nearer to its NAV. That is, the natural market forces of supply and demand maintain the (near) equivalency of the ETF share price and the NAV per share.

For example, if the ETF share price traded below the fund's NAV per share, investors could purchase ETF shares on the exchange until they had enough shares to make a creation unit, the basic unit used to construct an ETF, and then submit the creation unit to an authorized participant (AP) for redemption into the underlying investment (e.g., individual stocks).[3] They would then sell those individual securities for a higher price than they paid for the ETF. The ETF share purchases would drive the price up closer to the NAV per share. 

Alternatively, if the share price for the ETF is greater than the NAV per share of the ETF itself, an investor could do the opposite and buy a basket of securities (e.g., individual stocks) and submit them to an AP in exchange for the more valuable creation unit of ETF shares. They would then sell the individual ETF shares in the market to make a profit. In this scenario, increasing the supply of ETF shares in the market would drive down the price of the ETF shares to a level closer to the NAV per share. 

Also, like stocks, ETFs can be bought on margin, sold short, and traded using limit orders or stop orders.[4]

The ETF's portfolio can be passively managed based on a market index or actively managed based upon a defined strategy.  For ETFs following an index approach, the portfolio is compiled on the basis of criteria specific to a particular index. The index-based ETFs may replicate the index, meaning the ETF invests in the component securities of the index in about the same proportions as exists in the index. Examples include the S&P 500 (largest stocks) and the NASDAQ (largely tech and growth company stocks). Many ETFs follow a specific sector, such as the financial sector or transportation sector, which may be tied to an index as well.

In September of 2019, the Securities and Exchange Commission (SEC) announced rule 6C-11, which would allow ETFs to operate within the scope of the Investment Company Act of 1940. This change allows ETF to operate in the marketplace without the cost and delay of obtaining an exemptive order (which was required prior to this ruling).[5]

Investors typically buy ETF shares through the exchange on which it is listed. Investors can also exit their position by simply selling their ETF shares.

Under 91´«Ã½ statutory accounting principles in the Accounting Practices and Procedures Manual, shares of an ETF are reported as shares of common stock; except for an ETF that holds only bonds (or only preferred stock) and meets other criteria specified in the Purposes and Procedures Manual of the 91´«Ã½ Investment Analysis Office. If the 91´«Ã½ Securities Valuation Office (SVO) concludes that an ETF meets the criteria specified in the Manual, it can place the name of the ETF on the List of Exchange Traded Funds Eligible for Reporting as a Schedule D Bond (the "ETF Bond List") or as Schedule D Preferred Stock (the "ETF Preferred-Stock List"). An insurance company that purchases an ETF on the List then reports it to the SVO for the assignment of an official 91´«Ã½ Designation. ETFs that are not on the List are reported as common stock under the general rule.