Bailey McCann examined the growing trend in the US for mutual fund to ETF conversions for us this week, noting that this is a growing business, with JP Morgan and Franklin Templeton planning similar moves – and one that is adding billions to ETF assets.
Research from Cerulli Associates reveals that the number of mutual fund conversions could grow this year as more active managers consider new distribution channels for their strategies. “Managers considering launching active ETFs should also keep an eye on the dual-share-class structure used by Vanguard, which comes off patent in 2023,” says Daniil Shapiro, associate director at Cerulli in a recent research note. Previous Cerulli research finds that 38 per cent of issuers are at least considering offering products via this structure.
US-based Rusty Vanneman, Chief Investment Strategist, Orion Advisor Solutions told us that the conversions will continue. “While mutual funds are surprisingly holding their ground in terms of assets under management, and they still make sense for many investor portfolios, they aren’t growing like ETFs are. Given the cost and tax advantages of ETFs, and the advent of fractional share trading, the growth in the industry is clearly favouring ETFs. More mutual funds are likely to convert,” he said.
One of the most noteworthy conversions came from Dimensional Advisers and ETF Express spoke with Anthony Caruso, ETF Investment Strategist at the firm who detailed the firm’s growth in ETFs, with its new products also enjoying inflows which put the firm close to the top 10 of ETF providers in the world.
It’s a story of growth across the board, but the numbers for January are showing a drop on that bumper December. We have BlackRock’s report that shows that despite the overall decrease, the proportion of equity buying was at the highest level since March 2020.
Beverly Chandler, managing editor, ETF Express
Companies in this issue
Dimensional Fund Advisers
Orion Advisor Solutions
Vident Investment Advisory