ETF Inflows Reach $1T; Morgan Lewis Updates on ETF Trends for 2021

The Wall Street Journal, citing Morningstar data, reported that inflows into ETFs world-wide crossed the $1 trillion mark for the first time at the end of November, surpassing last year’s total of $735.7 billion, with most of the inflows going to low-cost ETF providers such as BlackRock and State Street. The WSJ report noted the that firms including Dimensional Fund Advisors are converting mutual funds into active ETFs. In the latest issue of its ETF Roundup, Morgan Lewis provides a guide to recent legal and regulatory developments affecting the ETF industry. The publication includes commentary on conversions of mutual funds to ETFs, crypto assets in ETFs, recent tax regulations that affect ETFs, among other topics. The Morgan Lewis lawyers write that in addition to regulatory, board, and tax considerations, “sponsors that wish to convert their existing mutual funds into ETFs should take into account operational and structural challenges, which the SEC has focused on in their review of such proposed conversions.” The lawyers noted, for example, that the SEC is focused on “how a firm will move direct mutual fund shareholders into brokerage accounts necessary for ETF ownership, as well as how a firm will handle fractional shares of mutual funds, given that ETFs are issued in whole shares.”