BlackRock Makes its First Mutual Fund-to-ETF Conversion

BlackRock Inc., the world’s largest ETF issuer, has made its first mutual fund-to-exchange-traded fund conversion, switching over its $755 million International Dividend mutual fund into the nimbler exchange-traded fund format.

New York-based BlackRock, with $3.04 trillion in 438 ETFs, created the active BlackRock International Dividend ETF (BIDD) from its BlackRock International Dividend Fund. The fund is BlackRock’s first U.S.-listed active ETF that tracks international firms that pay dividends, the company said in a statement.  

BlackRock said the conversion results from investors’ preference for ETFs over mutual funds while the move follows a trend that helps account for the ETF industry’s rapid growth and the slow diminishment of traditional mutual funds. With ETFs being bought and sold like stocks on exchanges—mutual funds are traded once daily with the fund itself—investors and issuers increasingly prefer the format.

About $155 billion in mutual funds have converted to ETFs since the first in 2021, according to CFRA Research. BlackRock follows rivals including Morgan Stanley, JPMorgan Chase & Co., PIMCO or Pacific Investment Management Co., and others by converting mutual funds to ETFs, and most likely saw an opportunity to grab market share in the less-saturated international dividend arena, CFRA’s lead ETF researcher Aniket Ullal said.

“This conversion allows Blackrock to jumpstart their push in this category with an existing fund that already has assets and a track record,” Ullal, a member of the etf.com editorial advisory board, wrote in an email. U.S.-focused dividend ETFs hold $439 billion of assets, while international dividend funds manage $53 billion, he said. “The latter is less competitive and offers more opportunities for growth.”

Active ETFs

Active ETFs are hauling in assets, he said, grabbing a quarter of all flows so far this year. “This also allows Blackrock to take advantage of growth in this space. Having an active fund will be a differentiator.”

BIDD will be run by Olivia Treharne and Molly Greenen, said BlackRock, which runs the iShares ETF business. BlackRock's largest fund is the $540 billion iShares Core S&P 500 ETF (IVV), which is also the third-largest U.S. ETF.