ETF Conversions from Mutual Funds Hit Record Highs

Mutual funds are morphing into ETFs like Agent Smith transforms bystanders in “The Matrix” series.

Cohen & Steers, for example, is preparing an exchange-traded fund that will receive the assets of its existing Future of Energy Fund, according to a filing Monday. Meanwhile, Baillie Gifford is planning to convert three stock mutual funds to ETFs. That follows recent news that Impax Asset Management debuted its first US ETF, a global infrastructure fund that replaces an otherwise identical mutual fund. There were a record 60 mutual-fund-to-ETF conversions in 2025, according to Morningstar. 

Why such changes, when fund shops can provide share classes of both an ETF and mutual fund? In many cases, it’s where the money is going.

Plugging In

Broadly, ETFs have been pulling in money at a record clip, while mutual funds have been bleeding assets. If a fund company has a mutual fund that doesn’t get much distribution in employer-sponsored retirement plans (which don’t play well with ETFs), switching may be an obvious choice, as was the case with Impax’s Global Infrastructure strategy. If defined-contribution plans are key to a fund’s sales, though, adding a comparable ETF or (waiting to) add an ETF share class can be the way to go.

Cohen & Steers, which currently provides five ETFs, didn’t comment on the decision to switch the Future of Energy Fund. At about $130 million, that strategy is far from being the company’s biggest, but it’s seen strong performance over the past three years:

• It returned 17% last year, compared with 12% for funds in the same Morningstar Category, as well as 12% in 2024 (compared to 1%) and 10% in 2023 (compared to 2%).
• Year to date, it’s returned close to 16%, as the energy sector has been a standout.

They’re Beginning to Believe: Baillie Gifford is transitioning its International Concentrated Growth Equities, Long Term Global Growth and US Equity Growth mutual funds, which will represent some of its first US ETFs. The company last year appointed its first director of ETF capital markets, Goldman Sachs alum Jamie McGregor, who led portfolio implementation and capital markets in that firm’s ETF Accelerator business. Ahead of that, Baillie Gifford last year filed paperwork for five actively managed ETFs. 

“You hear that, Mr. Anderson? That is the sound of inevitability.”