Would that (gently used) cherry of a 1970 Toyota Corolla fetch a higher price if its eight-track player has been upgraded to Apple CarPlay?

There’s a corollary for the advice business: Might deal-hungry private equity firms be willing to pay more for RIAs that have their own exchange-traded funds? A company that provides third-party services to help businesses launch ETFs says yes. But there’s some nuance to that, and adding new funds certainly isn’t the right move for everyone.

“Anybody buying an ETF business probably has deep pockets,” said Brittany Christensen, senior vice president at Tidal Financial Group, noting that the firm sees valuations for ETF platforms being eight to 10 times earnings multiples, compared with three to four times for most other wealth managers and asset managers. “If you become known for something or invent a category and are first to that market, that makes your business more attractive.”

Tidal Wave

That idea straddles two trends. The numbers of RIA deals and ETF launches are both at record highs. Last year, there were 322 RIA transactions announced, up from 272 in 2024, according to data from DeVoe & Company. And there were 1,167 ETF launches in 2025, up nearly 60% from the 736 in 2024, FactSet reported.

There’s also a subset of the ETF launch trend, which is the rise of 351 exchanges, where pools of appreciated assets (usually in stocks) are moved tax-free to ETFs at the time of launch. “So many ETFs have been launched in just the last two years. We will see closures … but you will see people who are shining or still innovating,” Christensen said. “Consolidation happens when an industry is growing, and growing healthily.”

But, advisors have to contend with two major aspects of the ETF business if they want in:

• Having an ETF lets them extend asset allocation services to people who aren’t already clients, and that can help with scale.
• But funds can be costly to run, and without $100 million or more, ETFs may not be self-sustaining.

Sounds Nice, in Theory: “I’ve always thought that turning our Green Sage Sustainability Portfolio into an ETF or mutual fund would be a great way to scale our portfolios, scale our impact,” said Peter Krull, partner and director of sustainable investing at Earth Equity Advisors, whose firm has a total of about $200 million assets under management. “But what we’ve consistently run into over time is expenses … We’ve never been able to make the economics work.”

Another firm, Sovereign Wealth Financial Group started a tender offer fund, which has limited liquidity. “Our mass-affluent clientele wanted exposure to alternative investments,” principal Charles Failla said about the choice of that wrapper. While 351 funds can make sense for some clients, it can be hard to argue that there isn’t already an ETF out there to address other needs, given that there are thousands on the market, he noted. Why RIAs roll out their own ETFs beyond 351s, “that, I don’t quite understand,” he said.

It must be nice to have a biggest fan.

Investment company Baron Capital is one of the largest investors in Elon Musk’s aerospace technology company, SpaceX, with allocated assets currently sitting at about $10 billion. The firm also launched five new active products in December that are designed to mirror its strategies in private investment accounts and mutual funds, including the Baron First Principles ETF (RONB), which allocates 14% of its holdings to SpaceX. Along with two new ETF industry hires this week, the company is building on a larger trend of increasing retail access to some of the largest private companies in the US.

“It is not a surprise that investors are starting to include these companies in portfolios,” said William Snape, co-founder of the startup fundraising platform OpenVC. “It is actually long overdue.”

Solid, Less Liquid, Liquid

Baron Capital gets away with its SpaceX investments by treating the company as “less-liquid,” a classification that allows it to skirt an SEC rule against illiquid securities taking up more than 15% of a portfolio. The firm’s situation isn’t completely unique, said Adam Sabban, associate director of equity strategies at Morningstar, since there are a handful of other mutual funds and ETFs that hold SpaceX. “It’s not like they have a monopoly on [SpaceX],” he said, “but it is still relatively rare.”

Other investment vehicles that hold SpaceX include:

• The Entrepreneur Private-Public Crossover ETF (XOVR), which added SpaceX through a special-purpose vehicle last year.
• The Destiny Tech 100 ETF (DXYZ), a closed-end fund with nearly a quarter of its holdings in SpaceX.

I See an IPO. SpaceX is also reportedly considering an IPO later this year, which could lead the fund to lose some of its luster in the long term. “Once that happens and the market opens up, every other competing mutual fund or ETF can buy shares of it,” Sabban said. “But the ability to own it before it goes public is usually something that’s sought after.”

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.”