BlackRock Converts $700 Million Fund to ETF in Response to Investor Demand

BlackRock Inc., the biggest asset manager globally, said it will change the BlackRock International Dividend Fund, worth over $700 million, into an exchange-traded fund (ETF) by November.

This is part of a bigger trend where asset managers are switching mutual fund assets to ETFs because investors like their low costs and tax advantages.

Around 70 funds, including ones from Dimensional Fund Advisors, JPMorgan Asset Management, and Fidelity Investments, have already switched over $100 billion in mutual fund assets to ETFs, says Eric Balchunas from Bloomberg Intelligence.

Amrita Nandakumar, president of Vident Asset Management, talked about this trend, saying, “BlackRock’s move to turn a mutual fund into an ETF shows it’s a real option for asset managers looking to enter the ETF market.” She also said deciding to switch or start new ETF strategies should be done case by case.

Investor Preference: Shifting from Mutual Funds to ETFs

Investors are moving from mutual funds to ETFs because they want better and more flexible ways to invest. BlackRock, a company that manages $22 billion across 39 active ETFs, says that clients are asking for this change.

Shift to ETFs influenced by regulatory considerations; more mutual funds expected to convert.

Jessica Tan, who heads Americas for Global Product Solutions at BlackRock, says that active ETFs are good because they are efficient and flexible, especially for fee-based advisors who use model portfolios. BlackRock thinks that mutual funds and ETFs work well together and are good for different types of clients.

According to data from the Investment Company Institute compiled by Bloomberg, lots of money is moving around. More than $65 billion has left mutual funds, and over $250 billion has gone into ETFs so far in 2024. This continues a trend from last year when mutual funds lost about $656 billion, but ETFs gained $578 billion.

The Effect of Regulations on Mutual Funds and Future Trends

The shift from mutual funds to ETFs is partly due to regulations. Some companies, like Dimensional and Morgan Stanley, have asked the SEC for permission to offer ETF shares for their existing mutual funds.

SEC decision awaited on multi-share class structures; conversions likely to continue as popular strategy.

This move could make mutual funds more tax-efficient, possibly keeping more money in them. As the industry waits for the SEC’s decision, more mutual funds are expected to become ETFs, as asset managers adjust to what investors want.

Mohit Bajaj, who works with ETFs at WallachBeth Capital, pointed out that investors are becoming more comfortable with ETFs. He said, “Asset managers are doing what they think will keep and grow assets.”

Michael Manua
Michael Manua
Michael, a seasoned market news expert with 29 years of experience, offers unparalleled insights into financial markets. At 61, he has a track record of providing accurate, impactful analyses, making him a trusted voice in financial journalism.
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