Kovitz Hops on Mutual Fund to ETF Conversion Trend

Eleven-year-old fund with over $642 million in assets takes on new life.

Kovitz Investment Group Partners, which manages more than $6.5 billion, relaunched its 11-year-old value mutual fund as an exchange-traded fund, following other issuers making similar moves as demand for ETFs surges. 

The actively managed Kovitz Core Equity ETF (EQTY) has more than $642 million in assets. Formerly known as the Green Owl Intrinsic Value Fund, the ETF was unchanged at $16.22 on light volume on the NYSE Arca. 

Kovitz’s conversion is the latest in a progression of similar moves made by firms such as Dimensional Fund Advisors, Franklin Templeton Investments and Fidelity Investments—which announced it was converting six of its thematic mutual funds into ETFs last month—as demand for ETFs outpaces mutual funds. ETFs are widely seen as having distinct tax and liquidity advantages over mutual funds. 

Over a dozen mutual funds have become ETFs this year, with J.P. Morgan spearheading the largest switch in June when it relaunched four mutual funds with almost $9 billion of combined assets as ETFs. The first switchover came in March 2021 when Guinness Atkinson converted two of its mutual funds into ETFs.  

Over $40 billion in ETF assets were from converted funds as of Dec. 7, 2022, according to recent data from CFRA. 

“ETFs can be more tax efficient compared to traditional mutual funds,” Kovitz’s Principal and Portfolio Manager of EQTY Bryan Engler told ETF.com. “Assuming an ETF and a mutual fund have the same total return, the ETF will grow at a faster pace due to its tax advantage.” 

EQTY will invest primarily in equity securities of U.S. and foreign companies, including small and midcap companies, targeting constituents of the S&P 500 Index for U.S.-based companies and the S&P Global 100 Index for its non-U.S.-based companies.  

Chicago-based Kovitz aims to follow a “value” investment strategy based on the methodology formed by finance pioneers such as Benjamin Graham and Warren Buffett. Although its goal is to maximize return, the firm prioritizes “safety of principal with a focus on minimizing permanent loss of capital,” according to its prospectus. The S&P 500 Value index has retreated 6.5% so far this year, less than half of the 14% drop in the S&P 500.  

The Green Owl Intrinsic Value Fund had dropped 26% this year through Nov. 3, the day before Kovitz announced the transition.  

EQTY comes with an expense ratio of 0.99%. 

Contact Zoya Mirza at [email protected]