2025 will go down as another year of record-breaking achievements for exchange-traded funds (ETFs). Among the past year’s highlights was a record number of mutual funds converting to ETFs, as noted by Ben Johnson, Morningstar Head of Client Solutions, via a LinkedIn post.
As Johnson pointed out, 60 mutual funds turned into ETFs last year as providers sought to meet increased investor demand. That demand was evident in another record-breaking metric: ETFs pulled in about $1.5 trillion in inflows in 2025. With inherent benefits such as lower costs, tax efficiency, and greater trading flexibility than their mutual fund counterparts, ETFs are increasingly becoming the investment vehicle of choice for the general investing populace.
Johnson mentioned Guinness Atkinson as being the first to convert a mutual fund to an ETF in 2021. Since then, 190 conversions have been performed, though 28 funds have closed. This leaves 162 surviving funds that have benefited from cumulative net new flows of $77.3 billion.
That over $77 billion, however, hasn’t been an equal opportunity affair, which highlights the sheer competitiveness of the ETF marketplace. As Johnson identified, those net new flows were concentrated in specific funds, with the top 10 on that list capturing three-fourths of the post-conversion flows. Looking at firm-specific details, Johnson also noted that the top three accounted for 84% of the cumulative post-conversion flows.
“This is little surprise given that their funds were among the largest conversions. Plus, they were generally healthy before they were converted,” Johnson said in the post.
Dimensional Dominates
In the firm-specific data, ETF provider Dimensional took the top spot with $45.5 billion post-conversion flows or 57.2% of the cumulative post-conversion inflows since 2021. Their funds also occupied the top four spots in cumulative post-conversion flows: the Dimensional U.S. Core Equity 2 ETF (DFAC), Dimensional International Value ETF (DFIV), Dimensional U.S. Equity Market ETF (DFUS), and the Dimensional U.S. Small Cap ETF (DFAS). With their low expense ratios, this aligns with another industry trend: an increasing number of active ETFs hitting the market as investors seek active strategies within the ETF wrapper. As Morningstar also noted, the number of active ETFs has gone up an astounding 1,200% since 2016.
Dimensional also experienced a landmark event in 2025, when the SEC granted the firm exemptive relief to offer dual-share class funds. In a rapidly evolving ETF marketplace, this could open the floodgates for other providers to provide similar dual-share class products, which could rise in 2026. In total, over 80 asset managers filed for the same dual-share-class exemptive relief in 2025.
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