BlackRock Inc. (BLK), the world’s largest asset manager, plans to convert its BlackRock GA Disciplined Volatility Equity Fund (BIDVX) and BlackRock GA Dynamic Equity Fund (BIEEX) to exchange-traded funds, according to a recent filing with the Securities and Exchange Commission (SEC).
The two equity mutual funds will be reorganized into the iShares Disciplined Volatility Equity Active ETF and the iShares Dynamic Equity Active ETF, respectively, on Sept. 12. The expense ratios will be 0.4%, and both funds will retain their current objectives and managers and maintain “substantially similar” strategies.
“Active ETFs are becoming an integral part of investor portfolios around the world, with financial advisors increasingly incorporating them into their practices,” a BlackRock spokesperson told etf.com. “BlackRock’s decision to convert a mutual fund into an ETF underscores this growing demand and our commitment to aligning the strategies we offer with the investment vehicles that best suit our clients’ needs.”
There has been a significant shift from long-term mutual funds to ETFs in recent years. In 2024, mutual funds (excluding money market funds) experienced $579 billion worth of net outflows, while $1.1 trillion moved into ETFs, according to CFRA Research.
ETFs have structural advantages that in some cases make them more appealing than mutual funds, Aniket Ullal, head of ETF research and analytics at CFRA, explained to etf.com. They have an in-kind creation/redemption mechanism that provides tax advantages over traditional mutual funds, tend to have lower expense ratios and trade like stocks on exchanges, providing intraday tradability.
“ETFs in the U.S. generally don’t have distribution fees and sales loads, unlike some mutual funds,” Ullal added. “[And] there are more ETFs than mutual funds that provide targeted exposure to specific sectors, factors and themes.”
Last year, Bank of America Global Research reported that funds that convert from mutual funds to ETFs attract an average of $500 million in new money within two years of conversion, reversing previous outflows.
Wall Street is taking note. J.P. Morgan Asset Management and Leuthold Group are among firms that have made mutual fund-to-ETF conversions this year, following in the footsteps of Dimensional Fund Advisors, which helped create the playbook for these types of conversions.
BlackRock made its first conversion in November, reorganizing the $755 million International Dividend mutual fund into the more flexible wrapper.