$26.5M Mutual Fund Converts To ETF

The Convergence Long/Short Equity Fund is the first conversion in 2022.

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Reviewed by: Dan Mika
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Edited by: Dan Mika

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An 11-year old mutual fund with just under $26.5 million in assets is the first to convert into an ETF in 2022. 

The Convergence Long/Short Equity ETF (CLSE) debuted on the Cboe Global Markets on Tuesday. Upon launch, CLSE charges a fixed 0.95% management fee. It also lists an expense of 61 basis points to cover the brokerage fees for dividends and interest from stock shares held short. That fee is variable based on how many shares the fund manager holds short, and is reflected in the fund's net asset value rather than being assessed on shareholders.

In normal market conditions, CLSE aims to maintain a net long exposure of 90-150% in U.S. equities based on equally weighted valuation, growth, momentum and quality factors. It also can carry between 20-70% of its assets in short positions. 

As a mutual fund, CLSE has posted an average annual pretax return of 12.44% versus the 16.3% return of its benchmark, the Russell 3000 Total Return Index. It has four years of returns higher than 15%, and posted a 32.93% return in 2021.

It is the first long-short strategy to convert from a mutual fund into an ETF.

Just under $30 billion in assets were moved from mutual funds into the ETF wrapper via direct conversion last year, according to ETF.com estimates. The first to do so was Guinness Atkinson with approximately $30 million in assets in late March, but the vast majority of converted assets came from approximately $28.65 billion run by Dimensional Fund Advisors in June. 

The largest confirmed group of mutual funds set to convert this year are from J.P. Morgan, which could convert four funds with approximately $29.5 billion in assets as soon as April. 
 

Contact Dan Mika at [email protected], and follow him on Twitter 

Dan Mika is a reporter for etf.com. He has previously covered business for the Ames Tribune and Cedar Rapids Gazette in Iowa, and BizWest Media in Fort Collins, Colorado. Dan holds a bachelor's degree in journalism from Truman State University.