BFSI insights

Implications of Growth in ETFs: Evidence from Mutual Fund to ETF Conversions

Published 19 Nov 2025 ยท www.federalreserve.gov
www.federalreserve.gov preview

Overview

The Federal Reserve's study examines the impact of mutual fund to ETF conversions on market liquidity and stock volatility. By 2024, $80 billion had been converted, with a notable $30 billion conversion event in June 2021.

Key Insights

  • ETF Conversions and Market Liquidity: Conversions improve market liquidity.
    • Evidence: $80 billion converted by 2024, with a significant $30 billion event in June 2021.
    • Verifiable: Yes, sourced from Federal Reserve data.
  • Stock Volatility Reduction: Conversions lead to reduced stock volatility.
    • Evidence: A 1% increase in ETF ownership correlates with a 10% decrease in volatility.
    • Verifiable: Yes, based on regression analysis.

Why It Matters

This trend impacts asset management by enhancing liquidity and reducing volatility, crucial for investment strategies.

Actionable Implications

  • Asset managers should consider ETF conversions for tax efficiency and improved liquidity.
  • Investors might prefer ETFs for their stability and lower volatility.
researcher global article financial-services-asset-management-mutual-ucits-funds financial-services cross-bfsi technology strategy
Open on www.federalreserve.gov