Move over Sydney Sweeney rumors, there’s a bigger conversion in the news.
Northern Trust Asset Management announced plans to convert six of its mutual funds to ETFs, in what would be the largest such conversion recorded. The conversion of the funds, which collectively hold about $33 billion, will more than double the company’s exchange-traded fund assets to about $60 billion. The move reflects growing investor demand for the wrapper, the company said.
The transparency and efficiency of the ETF vehicle “better reflects how many clients are implementing portfolios today,” Northern Trust Global Head of ETFs and Funds Dave Abner said in an announcement.
Back to Basics
Northern Trust is known for its distributing ladder ETFs. But this conversion affects its Income Equity Fund, Tax-Advantaged Ultra-Short Fixed Income Fund and several large, mid and small equity index funds. “When you look at their current ETF lineup, it’s a lot of … things like smart beta, strategic beta, dividends,” said Daniel Sotiroff, associate director of ETF and passive strategies research for Morningstar. The conversion “fills out their lineup by giving them the core index-tracking ETFs, but the challenge for them is going to be competing against the Vanguards and the BlackRocks and the State Streets of the world.”
Although the SEC has given companies exemptions to add ETF share classes to existing mutual funds, conversions allow them to plug existing assets and track records (more important for active funds) directly into the wrapper. This scale is helpful in an increasingly crowded ETF landscape. “Northern Trust obviously sees the future as ETFs,” said David Cohne, a mutual fund and active management analyst at Bloomberg Intelligence. “They’re looking at these strategies and coming to the conclusion that the mutual fund wrapper is not necessary.”
A few other firms have recently filed for conversions:
- Earlier this month, Franklin Templeton announced plans to convert its US, international, and emerging market core equity funds to ETFs.
- Around the same time, Morgan Stanley announced plans to convert nearly $10 billion worth of municipal bond funds to ETFs.
Go With the Flow: Conversions have picked up over the past few years. In 2024, there were 56 conversions, and in 2025, there were 60, representing $34.7 billion in AUM, per Morningstar data. So far this year, 54 conversions have either already taken place or are planned, representing nearly $60 billion in AUM. This reflects a move away from mutual funds: ETFs have taken in about $1.3 trillion this year through the end of August, compared with $428 billion in mutual fund outflows. “People are going after cheaper, more tax-efficient vehicles, and the ETF just serves that purpose much better than a mutual fund does,” Sotiroff said. “That’s really what’s driving all of it.”