This year has seen a record number of mutual fund-to-ETF switches, according to data compiled by Morningstar Direct. A majority of the products that converted were fixed-income in nature. That tally is expected to grow. Bank of America Corp. strategists foresee about 400 mutual funds with over $325 billion in total assets that are ripe for ETF conversions, with $3 billion of that amount anticipated to occur in 2025.
For years, it’s been somewhat of a zero-sum game between the two products as investors pass over more staid mutual funds in favor of ETFs. But the flows paint a clear picture.
Investors have been yanking cash out of mutual funds in eight of the past nine years, data compiled by Bloomberg Intelligence show. Meanwhile, ETFs have posted record inflows for that period. ETFs are a win-win for both investors and issuers. Ever since ETF’s were created some 30 years ago, investors have saved over $250 billion simply by choosing ETFs thanks to their lower cost and higher liquidity, their calculations show.
It’s been a banner year for ETFs in the US with assets hitting nearly $11 trillion and inflows peaking at $1 trillion. There have also been more than 650 fund launches — a record too. With regulators potentially approving the creation of more ETF share classes as well as alternative investments, the runway for growth remains long.

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