(Bloomberg) — Mutual funds are bleeding assets anew, just as their ETF cousins break fresh records. Now, firms from Lazard to Aberdeen Group Plc. are pushing to convert traditional funds into exchange-traded ones, even as regulators look poised to bless a structure that would allow both to coexist in peace.
The number of mutual funds being converted into ETFs in 2025 has already topped 30, the most since 2021, barring last year when one large swathe of funds issued by a single firm were flipped, according to figures compiled by Bloomberg Intelligence. Data from State Street and Morningstar show a similar trend as well.
It comes even as the asset-management industry awaits a groundbreaking regulatory change that would allow firms to add an exchange-traded fund share class onto their existing mutual funds, arguably negating the need to go all-in on just one wrapper. In the meantime, money managers have forged forward with their conversion plans.
In 2024, mutual funds bled a net $451 billion, while their exchange-traded counterparts — which typically offer superior tax efficiency and liquidity — took in a record $1.1 trillion, according to data from Bloomberg Intelligence. So far in 2025, mutual funds have already lost $432 billion.
Read more: Wall Street’s Rush to Launch Vanguard-Style Funds Draws Warnings
Instead of the brisk pace seen so far this year, State Street’s Frank Koudelka had “expected mutual-fund-to-ETF conversions to slow down because of the impending approval of ETF share class.”
“I believe this is a result of most clients recognizing that some of its mutual funds simply make more sense as an ETF. Others have chosen not to wait for the regulatory approval of ETF share class,” said Koudelka, the firm’s global head of ETF solutions.
More than 60 firms, including BlackRock Inc. and State Street Corp., are waiting for the regulator to sign off on the so-called multi-share class structure, which was made possible after Vanguard Group’s exclusive patent on the fund design expired two years ago.
The steady pace of conversions also underscores Wall Street’s growing preference to package strategies of all stripes into ETFs instead of mutual funds, as the latter vehicle has seen net outflows for the past three years.
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