Mallika Mitra
2 min read
The investment fund space is poised to see another mutual fund-to-ETF conversion—a growing trend as more asset managers look to take advantage of the structural benefits of funds that trade more like stocks.
On Thursday, Akre Capital Management announced that it had proposed the conversion of its Akre Focus Fund to the actively managed Akre Focus ETF (AKRE). If approved by shareholders, the conversion is expected to take place in the fall of 2025, according to a press release. The AKRE Focus fund, which was launched in 2009 and has approximately $12.2 billion in net assets as of May 31, seeks to achieve long-term capital appreciation by selecting companies based on factors related to their business, management and reinvestment.
The proposed conversion is expected to provide shareholders with enhanced tax efficiency, increased transparency and lower costs, according to the press release. The fund’s prospectus shows that the current expense ratios range from 0.98% to 1.32% depending on share class and that the ETF’s proposed unitary fee is 0.98%.
In March, Akre Capital applied for an exemption that would allow its mutual fund to offer an ETF share class, but it is no longer pursuing that option.
“In our effort to deliver the significant benefits of the ETF structure to our mutual fund shareholders, we evaluated three options: launching a standalone ETF (clone), converting the mutual fund to an ETF and introducing an ETF share class within the mutual fund,” John Neff, CEO and CIO at Akre Capital explained to etf.com in an emailed statement. The firm determined that converting the mutual fund to an ETF would be in the best interest of its shareholders.
“This conversion represents an upgrade to a superior structure,” Neff added. “In contrast, launching a standalone ETF would offer no benefit to existing shareholders, while introducing an ETF share class could create unnecessary confusion for investors and platforms.”
Akre isn’t alone in trying to take advantage of the tax advantages, lower expense ratios and intraday tradability ETFs have over their mutual fund counterparts. CFRA Research reports that last year, mutual funds (excluding money market funds) experienced $579 billion worth of net outflows, while $1.1 trillion moved into ETFs.
Just last month, the world’s largest asset manager, BlackRock, filed with the Securities and Exchange Commission to convert the BlackRock GA Disciplined Volatility Equity Fund (BIDVX) and BlackRock GA Dynamic Equity Fund (BIEEX) to ETFs.
