An Exchange Fund or Swap Fund is a mechanism specific to the U.S., first introduced in late 1990s that allows holders of large amount of a single stock to diversify into a basket of other stocks without directly selling their stock.
The purpose of this arrangement is to diversify their holdings without triggering a "taxable event". Note that the tax is not avoided, just postponed, when the diversified holdings are eventually sold tax will be due on the difference between the sales price and the original cost basis of the contributed stock.
Read more about Exchange Fund: Criticism, Providers, Detailed Structure, Public Vs. Private Equity Exchange Funds
Famous quotes containing the words exchange and/or fund:
“I can exchange opinion with any neighbouring mind,
I have as healthy flesh and blood as any rhymer’s had,
But O! my Heart could bear no more when the upland caught the wind;
I ran, I ran, from my love’s side because my Heart went mad.”
—William Butler Yeats (1865–1939)
“I am advised that there is an unexpended balance of about $45,000 of the fund appropriated for the relief of the sufferers by flood upon the Mississippi River and its tributaries, and I recommend that authority be given to use this fund to meet the most urgent necessities of the poorer people in Oklahoma.”
—Benjamin Harrison (1833–1901)