ETF Database is pleased to announce the launch of our latest tool designed to help investors navigate the rapidly-expanding world of ETFs: the Mutual Fund To ETF Converter. In recent years, more and more long-term investors have embraced ETFs as a preferred vehicle for implementing a buy-and-hold strategy. Because ETFs generally charge expense ratios considerably lower than the fees of traditional actively-managed mutual funds, investors and advisors have expressed growing interest in replacing mutual fund holdings with comparable exchange-traded funds. This new free tool is designed to allow investors to easily identify the exchange-traded products most comparable to to a selected mutual fund [see all of our ETF Tools].
In order to map each of the nearly 10,000 largest mutual funds to the most appropriate ETF alternatives, we employed a methodology based on the indexes that serve as the benchmarks for mutual funds and the basis for ETFs. For each mutual fund, two separate tables of ETF alternatives will be presented: 1) ETFs that seek to replicate the index acting as the mutual fund’s benchmark and 2) ETFs tracking indexes that are included in the same ETFdb Category as the mutual fund benchmark.
For example, the AllianceBernstein Small Cap Growth Fund (QUASX) is benchmarked against the Russell 2000 Growth Index. Entering in this mutual fund’s ticker would first present a table displaying any ETFs that seek to replicate that index–in this case the iShares Russell 2000 Growth Index Fund (IWO). A secondary table would present all ETFs in the Small Cap Growth ETFdb Category–currently a list that includes eight different ETFs.
For mutual funds benchmarked against a custom index comprised of multiple indexes, ETF alternatives are provided for each component of the benchmark. For example, the Dreyfus Balanced Opportunity Fund (DBOAX) is a multi-asset class mutual fund that is benchmarked against a custom index weighted between the S&P 500 Index and the Barclays Capital U.S. Aggregate Bond Index. Entering in this ticker displays “exact match” ETFs for both of these indexes, as well as ETFs in the Large Cap Blend ETFdb Category and Total Bond Market ETFdb Category.
If a mutual fund is benchmarked against an index for which there is not an “exact match” ETF, the converter tool will display ETFs linked to indexes in the same ETFdb Category as the mutual fund. For example, the Columbia Tax-Exempt Fund (COLTX) is benchmarked against the Barclays Capital Municipal Bond Index, which does not serve as the basis for any U.S.-listed ETF. Entering this ticker symbol in will present a table of all ETFs in the National Munis ETFdb Category.
Currently, the Mutual Fund To ETF Converter contains data on the 10,000 largest mutual funds. Additional tickers will be added in coming months to complete the mutual fund universe.
Because this tool utilizes the index specified as the mutual fund’s benchmark, it can deliver skewed results if the selected benchmark does not correspond to the composition of the related mutual fund. For example, if an emerging markets ETF is benchmarked against the S&P 500 Index, this tool would indicate that the most comparable ETFs are SPY, IVV, and VOO–those that seek to replicate the S&P 500 Index. While this scenario is rare, it is important to keep in mind the limitations of the underlying methodology when using the Mutual Fund To ETF Converter.
The launch of the Mutual Fund To ETF Converter represents the latest step in our effort to provide institutions, financial advisors, and individual investors with a powerful array of tools to navigate the growing and increasingly-complex world of ETFs. In coming months, we look forward to enhancing our ETF Screener and ETF Country Lookup Tool while also developing new resources for ETF investors. If you have any ideas for tools that would be useful to you as an ETF investor, please drop us a line and offer up your suggestions–we’ll do our best to make them a reality.
Disclosure: No positions at time of writing.