Mutual Funds Hemorrhage $432B Amid Wall Street’s ETF Conversion Wave
Mutual funds are stuck in intensive care — and the lifeline isn’t coming. Investment managers are scrambling to convert their struggling mutual funds into exchange-traded funds (ETFs) as investors flee the older structure in droves. The carnage continues with mutual funds losing $432B so far this year, while their ETF cousins broke records by capturing $1.1T in 2024.
- Over 30 mutual fund conversions have taken place this year, the fastest pace since 2021, as State Street’s Frank Koudelka says many funds “simply make more sense as an ETF.”
- Over 60 firms, including BlackRockBLK and State StreetSTT, are awaiting approval of multi-share class structures that would let mutual funds and ETFs coexist under one roof.
The loyalty exodus: Despite expectations that conversions might slow pending regulatory changes, investment managers aren’t waiting around. Since ETFs offer superior tax efficiency and liquidity compared to their mutual fund predecessors, waiting around just means watching investors move their money elsewhere. With mutual funds bleeding assets for three consecutive years, Wall Street’s preference has moved firmly toward ETFs as the vehicle of choice.