In 2025, the slow evolution from mutual funds to ETFs has become a full-fledged migration.
Across Wall Street, traditional asset managers are rethinking their delivery models as investors, advisors, and platforms increasingly favor ETFs as the modern standard for active management.
Mutual funds have already seen roughly $432 billion in net outflows this year, according to Bloomberg Intelligence, while ETFs have taken in more than $1 trillion, highlighting the widening gap in investor preference.
By mid-November, 48 mutual funds representing roughly $38 billion in assets had transitioned into ETFs, bringing the total to more than 160 conversions since 2021. The pace and scale of these shifts are signaling a consensus: the ETF is becoming the default wrapper for delivering active strategies.
Who Is Making the Move
What sets 2025 apart is the diversity of firms joining the transition.
Established players like J.P. Morgan and BlackRock have continued to repackage long-running mutual funds, while boutique managers, including Leuthold Group and Matrix Advisers are following suit.
Several headline conversions highlight the scope of this year’s activity:
- J.P. Morgan converted five funds year-to-date, led by the JPMorgan Mortgage-Backed Securities ETF (JMTG), totaling about $5.8 billion in assets.
- BlackRock launched the iShares Dynamic Equity Active ETF (BDYN) with approximately $2.2 billion, alongside two other conversions completed this year.
- AllianceBernstein transitioned three funds, led by the AB New York Intermediate Municipal ETF (NYM), adding a combined $3.3 billion.
The average conversion size has risen to nearly $800 million, up from about $700 million in 2024.
The standout conversion so far is Akre Capital’s Akre Focus ETF (AKRE), a roughly $10 billion transition completed in late October, marking the largest of 2025.
Across all 48 funds converted this year, the mix is evenly split between equity and fixed income, and notably, every single one is actively managed.
Why It Matters
The migration to ETFs is not just about cost. It reflects a broader structural shift in how active management reaches investors.
Fee pressure, evolving distribution platforms, and the rise of model portfolios are reshaping how investment strategies are packaged and consumed. Conversions have become a practical, capital-efficient solution for managers who want to modernize without disrupting their investment process.
Immediate Impact: Costs and Flows
1. Lower Fees, Higher Value
Conversions typically deliver immediate cost benefits. Expense ratios for several high-profile funds have fallen sharply:
- Akre Focus ETF (AKRE): from 1.32% to 0.98%.
- JPMorgan Mortgage-Backed Securities ETF (JMTG): from 0.65% to 0.25%.
- AllianceBernstein New York Intermediate Municipal ETF (NYM): from 0.76% to 0.27%.
These reductions narrow the pricing gap between active ETF peers, helping traditional managers stay competitive in an environment where investors have grown increasingly fee sensitive.
2. Mixed Flow Momentum
Early post-conversion results have been mixed.
JMTG, for instance, has gathered more than $300 million in new assets, while Eaton Vance Mortgage Opportunities ETF (EVMO) has attracted over $120 million in the past three months.
Others, such as TCW Core Plus Bond ETF (FIXD) and abrdn Focused U.S. Small Cap Active ETF (AFSC), have seen ~$100 million and ~$45 million in outflows, respectively.
Performance, distribution strategy, and brand familiarity continue to play crucial roles in how quickly converted funds gain traction.
The Rationale Behind the Shift
For asset managers, conversions are no longer experimental, but strategic. The ETF wrapper offers competitive advantages that directly impact business sustainability and growth.
From the manager’s perspective:
- Asset Retention: Conversions preserve existing AUM that might otherwise migrate to competing ETF issuers.
- Operational Efficiency: By consolidating share classes and eliminating legacy distribution costs, managers simplify fund operations and improve net revenue.
- Broader Reach: ETFs open access to RIA platforms and direct-to-consumer brokerage accounts that often exclude mutual funds.
From the investor’s perspective:
- Transparency: ETFs disclose holdings daily, enhancing portfolio oversight.
- Tax Efficiency: In-kind creation and redemption mechanisms help minimize taxable gains.
- Accessibility: The ETF format removes investment minimums and sales loads, allowing investors of all sizes to own the same active strategies once reserved for institutional accounts.
The Bigger Picture
Mutual fund to ETF conversions mark a turning point in how investors access active management. Platform dynamics and advisor demand are accelerating the shift. Model portfolios, zero commission trading, and tax aware allocation tools now favor ETFs across most distribution channels.
The trend also continues despite an upcoming regulatory change that could allow mutual funds to add an ETF share class, a framework more than 75 firms including BlackRock and State Street are awaiting approval for. Interestingly, many managers have chosen not to wait for the exemptive relief and instead move forward with full conversions.
Either way, for asset managers, the cost of remaining outside the ETF ecosystem is too high. As more firms seek to align with investor preferences and platform demands, conversions are becoming less about innovation and more about necessity.
The Bottom Line
With the ETF structure now the new normal for active management, the question is no longer if a mutual fund should convert, but when. The firms that act decisively will likely be best positioned to capture future inflows and investor confidence.
Tidal Financial Group partners with issuers through every stage of the conversion process, providing regulatory, operational, and strategic expertise to ensure a seamless transition. As conversions accelerate, experienced execution will separate participants from leaders.
For those aiming to move into the ETF ecosystem with confidence and precision, Tidal offers the structure, experience, and partnership required to ensure a smooth and successful conversion.
