Exchange fund

An Exchange Fund or Swap Fund is a mechanism specific to the U.S., first introduced in late 1960s 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.