In addition to the massive influx of assets, two big themes emerging in the world of actively managed ETFs are issuers introducing ETF versions of previously successful active mutual funds, as well as converting those funds to the ETF structure.
In the latter scenario, Dimensional Fund Advisors (DFA) is one of the leaders, having already converted several tax-managed mutual funds into ETFs. The firm is planning more of the same with the Tax-Managed DFA International Value Portfolio and the T.A. World ex-US Core Equity Portfolio slated to become ETFs.
Late last year, DFA said it planned six mutual fund to ETF conversions this year, with the first four scheduled for June. The Tax-Managed DFA International Value Portfolio and the T.A. World ex-US Core Equity Portfolio could join the initial quartet in September.
“The investment objective of the Tax-Managed DFA International Value Portfolio is to achieve long-term capital appreciation while minimizing federal income taxes on returns,” according to the issuer.
In late March, Guinness Atkinson Funds Guiness Atkinson became the first mutual fund sponsor to convert its mutual fund products to ETFs, doing so with the SmartETFs Dividend Builder (NYSE Arca: DIVS) and the SmartETFs Asia Pacific Dividend Builder (NYSE Arca: ADIV) – a pair of actively managed dividend growth strategies.
“Generally lower costs, easier access and tax advantages mean ETFs have been luring assets away from mutual funds for years, and this week’s conversions could be the start of a wave,” reports Claire Ballentine for Bloomberg. “The U.S. ETF industry took in almost $500 billion last year, while mutual funds lost about $362 billion, according to data compiled by Bloomberg. That’s helped push total ETF assets up from about $4 trillion at this time in 2020.”
With ETFs on another torrid pace of asset-gathering this year and mutual fund issuers looking to keep up, it’s possible more issuers will be looking to enter the ETF arena.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.