The investment landscape has been shifting dramatically over the past decade, with one trend standing out: mutual funds are experiencing significant outflows, while exchange-traded funds (ETFs) are seeing record inflows.
According to a recent study by Bank of America mutual funds that converted to ETF’s gained back more than the assets they lost from the mutual fund. Over the 121 conversions to date, the average fund had $150 million in net outflows in the 2 years prior to conversion but enjoyed $500 million of inflows to the ETF. [1]
This movement isn't just a passing trend—it’s a fundamental change in how investors approach their portfolios.
Several factors are contributing to this shift from mutual funds to ETFs:
Data highlights the stark difference in trends between these two investment vehicles. Over the last decade, mutual funds have consistently seen net outflows, with billions of dollars leaving traditional funds each year. Conversely, ETFs have been breaking inflow records, attracting trillions of dollars from retail and institutional investors.
Mutual funds are headed for their third consecutive year of outflows, with investors pulling $340 billion through November 2024, while ETF inflows have hit an annual record and have crossed $1 trillion, according to Morningstar Direct.
The movement of assets from mutual funds to ETFs is reshaping the investment management industry:
The migration from mutual funds to ETFs shows no signs of slowing. As investors demand lower costs, greater transparency, and more flexibility, ETFs are positioned to continue capturing the lion’s share of new investment dollars.
While mutual funds still play a role, particularly in retirement accounts and niche strategies, the ETF revolution has fundamentally changed the investment landscape. For investors, this means more options, lower costs, and a more modern approach to building portfolios. For mutual fund managers, this means jumping on the ETF bandwagon and launching or converting to ETFs.
In a world where efficiency, transparency, and customization reign supreme, ETFs are leading the way—and investors are taking notice. If you are a mutual fund manager and interested in converting to an ETF, contact us. ETC can walk you through our seamless process.
Don’t let outflows get the better of you, consider taking a ride on the ETF wave. Let’s Talk >>
[1] All data sourced from: Bank of America Global Research Report, Financial Times, 11/25/2024