BlackRock wades further into active ETFs with first mutual-fund flip

BlackRock Inc. is feeding the beast: investors who have more of an appetite for ETFs than mutual funds.

The world’s biggest asset manager has converted the BlackRock International Dividend mutual fund into an ETF, after revealing plans in April to change its structure. The $765 million fund has a new name — the BlackRock International Dividend Active ETF — and a fresh ticker, “BIDD,” for its Monday debut on the New York Stock Exchange.

BIDD is actively managed and invests in dividend-paying companies in developed and emerging markets. Its five-year average annual return as a mutual fund was 6.9%, roughly in line with a basket of peer funds compiled by Bloomberg. The new ETF’s expense ratio, 0.61%, is five basis points lower in its new form.

With its first mutual fund-to-ETF conversion, BlackRock has joined the likes of asset managers including Dimensional Fund Advisors and Fidelity Investments, which have flipped funds into the generally cheaper, more tax-efficient wrapper.

Since the first flip in 2021, asset managers have converted more than 70 mutual funds into ETFs as investors increasingly flock to exchange-traded options.

Rachel Aguirre, head of US iShares Product at BlackRock, said BIDD’s shareholder base and holdings aligned with the ETF wrapper, and that the firm has “seen a shift in investor preferences demonstrated by flows into active ETFs compared to active mutual funds.”

On Friday, annual net inflows into US ETFs crossed a new high, hitting $913 billion this year, higher than 2021’s record $910 billion influx, according to Bloomberg Intelligence.

BlackRock — which has been the largest ETF issuer for more than two decades — has pulled over $223 billion into its US ETFs this year. It’s home to roughly $3.15 trillion in US ETF assets and about $350 million mutual fund assets, according to data compiled by Bloomberg. In October, BlackRock filed with the SEC to create exchange-traded fund share classes of its mutual funds, a design that would port the tax advantages of the ETF wrapper onto its billions of existing mutual fund assets.

Aguirre said BlackRock plans to do more ETF conversions “when it makes sense for the strategy, the existing shareholder base, and where we see client demand.”

However, she added, mutual funds “continue to play a critical role” for the asset manager, such as in “retirement channels due to client preferences.”