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Understanding a method of transferring assets without selling
What Is an In-Kind Transition?
An in-kind transition refers to the transfer of an asset directly without selling it for cash. Instead of liquidating a position and reinvesting the proceeds, the investor contributes or transfers the asset itself into a new structure or account, subject to eligibility and operational requirements. As a result, ownership of the underlying asset is generally maintained throughout the transition, even though the way the asset is held may change.¹
This approach differs from more traditional transitions, which typically involve selling the asset, temporarily holding cash and re-entering the market through a new investment.² Whether an in-kind transition is possible or appropriate depends on the specific asset, the destination structure and the investor’s individual circumstances.
Why In-Kind Transitions Matter
In-kind transitions can be relevant when investors want to change how an asset is held—without changing what they own.
- MAINTAINING MARKET EXPOSURE Because the asset is not sold, exposure to the underlying investment is generally maintained during the transition, subject to operational timing and requirements.²
- REDUCING TRANSACTION COMPLEXITY An in-kind transition can eliminate multiple market transactions and the operational steps associated with selling and reinvesting, which may simplify execution in certain situations.¹
- POTENTIAL TAX CONSIDERATIONS Selling an asset for cash often triggers a taxable event. While tax treatment is highly fact-specific and depends on applicable law, in-kind transitions are sometimes evaluated as part of broader tax-aware planning discussions.³
- RELEVANCE FOR DIGITAL ASSETS Digital assets introduce additional considerations related to custody, trading venues and operational workflows. For investors who already hold digital assets, in-kind transitions may be explored as a way to reposition those holdings within a different investment or custody framework—without exiting and re-entering the market solely to change how the asset is held.⁴
How In-Kind Transitions Are Used
In-kind transitions are typically considered when an investor already owns an asset and is evaluating whether a different structure, account type, or investment vehicle may better align with their objectives. At a high level, the process generally involves:
- Confirming that the asset is eligible for in-kind transfer¹
- Coordinating among custodians, counterparties, and administrators
- Transferring the asset directly into the new structure rather than selling it
Compared with a cash transaction, the distinction is straightforward.
| ATTRIBUTE | IN-KIND TRANSITION | CASH TRANSACTION |
| Asset sold? | No | Yes |
| Market exposure | Maintained | Temporarily exited |
| Primary steps | Direct asset transfer | Sell, then reinvest |
| Tax considerations | Situation-specific⁵ | Often triggered at sale |
Execution timelines, operational requirements and costs can vary, and in-kind transitions may take longer than standard market trades. As a result, they are typically planned in advance and coordinated with financial, tax and operational professionals.¹
What Kinds of Clients May Find In-Kind Transitions Relevant?
In-kind transitions are not designed for every investor. They are most often explored by clients who:
- Already hold meaningful positions in a specific asset
- Are evaluating changes to portfolio structure rather than asset exposure
- Have longer time horizons and less immediate liquidity needs
- Engage professional advisors as part of tax-aware or complex planning
- Are comfortable with additional operational coordination
These transitions are generally discussed in the context of broader portfolio construction and wealth-planning conversations rather than as standalone investment decisions. Suitability depends on an investor’s objectives, risk tolerance, liquidity needs and overall financial situation.
Key Takeaways
An in-kind transition is a method of transferring assets without converting them to cash. For certain investors—particularly those with existing holdings and complex planning needs—this approach may offer a way to reposition holdings while generally maintaining exposure to the underlying asset.
Understanding how in-kind transitions work—and the considerations involved—can help investors and their advisors evaluate a broader set of tools when navigating portfolio and structural decisions.
For questions about in-kind transitions, please contact the MSIM ETF Specialist Team at etf_specialists@morganstanley.com.
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