Fuse Blog

Unwrapping the Allure of Active ETFs

  • Asset managers have, or are considering, mutual fund conversions as a path to entering the ETF marketplace. Many have set their sights on active ETFs, which seemingly makes good sense given advisor plans to increase their usage of these vehicles, as we discussed in the prior blog.
  • Conversions have contributed approximately 16% of active ETF AUM, and eight of the 20 largest offerings are conversions. However, of these eight funds:
    • Seven are from Dimensional, and one is from JPMorgan
    • Only two placed among the top 20 best-selling funds (YTD 3Q23)—both Dimensional offerings
  • I am reminded that some of the best gifts I received growing up came wrapped in the comic pages of The Boston Sunday Globe. It is not the shiny packaging that delivers happiness (i.e., success); it is what’s inside:
    • Converting a mediocre mutual fund simply creates a mediocre ETF.
    • Without access to inorganic funding, a conversion, not unlike a new offering, requires a differentiated strategy, attractive performance, competitive pricing, and a coherent distribution plan.

Percentage of Total Active ETF Conversion AUM, 3Q23

Blog 11.21.23 Rev

Source: Morningstar, FUSE Research Network