BlackRock Converts Global Allocation Funds to Active ETFs

The Event in Detail

On September 15, 2025, BlackRock, a prominent U.S. asset manager, advanced its active Exchange Traded Fund (ETF) strategy by converting two established mutual funds from its Global Allocation suite into active ETFs. This strategic move introduced the iShares Dynamic Equity Active ETF (BDYN) and the iShares Disciplined Volatility Equity Active ETF (BDVL) to the market.

These newly launched ETFs draw upon the eight-year performance record and a combined $3 billion in assets under management (AUM) inherited from their predecessor mutual funds. Both BDYN and BDVL maintain the identical investment objectives and fundamental policies of their former mutual fund structures. BDYN is designed to provide broad global equity exposure, seeking to outperform the MSCI World Index through a blend of fundamental, quantitative, and thematic analyses. In contrast, BDVL offers a more defensive approach, targeting stocks with historically lower volatility to mitigate price fluctuations and aiming to exceed the MSCI ACWI Minimum Volatility Index. The iShares Dynamic Equity Active ETF (BDYN) carries a gross expense ratio of 0.42% (0.40% net), while the iShares Disciplined Volatility Equity Active ETF (BDVL) has a gross expense ratio of 0.41% (0.40% net). These products are an integral part of BlackRock's $50 billion Global Allocation platform, showcasing the firm's expertise in global asset management.

Analysis of Market Reaction

BlackRock's decision to convert these mutual funds into ETFs is a direct response to evolving investor preferences and the burgeoning demand for active ETFs, particularly within sophisticated model portfolios. Active ETFs present several advantages to investors, including enhanced flexibility, improved tax efficiency, and generally lower expense ratios when compared to traditional mutual funds.

This conversion strategy enables BlackRock to seamlessly integrate established and successful mutual fund strategies into its rapidly expanding model ecosystem. This alignment is crucial given the significant growth of its Global Allocation Selects platform, which expanded from under $1 billion in early 2023 to $10 billion. By transforming existing funds, BlackRock aims to deliver its investment expertise in what is increasingly becoming the "wrapper of choice" for a broad spectrum of contemporary investors, thereby maintaining its competitive edge in a dynamic market.

Broader Context and Implications

This strategic conversion by one of the industry's largest asset managers underscores a significant and accelerating shift in the broader investment landscape: the migration of mutual fund strategies into the ETF format. BlackRock, already managing over 100 active ETFs globally, positions this latest move to further catalyze the adoption of active ETFs across the financial industry. The firm projects a substantial expansion of global active ETF assets under management (AUM), anticipating a rise from $1.4 trillion in June 2025 to $4 trillion by 2030.

This robust projection highlights a profound investor preference for the benefits associated with ETFs, including their exchange tradability, potential tax advantages, and typically more competitive expense ratios. The trend reflects a broader evolution in how investors seek diversified, actively managed exposure to global markets, emphasizing liquidity and cost-effectiveness.

Expert Commentary

"The US equity market continues to stand alone in terms of earnings delivery, sales growth and sustainable trends in analyst estimates and revisions," commented Michael Gates, lead portfolio manager for BlackRock's Target Allocation ETF model portfolio suite, emphasizing the strength of the U.S. market within the firm's broader strategy.

Russ Koesterich, a portfolio manager within BlackRock's Global Allocation team, further articulated the rationale behind the conversion, stating, "The world of investment is rapidly shifting, and there are strong opportunities to generate alpha for investors with a globally diversified, actively managed strategy." This sentiment underscores the firm's proactive approach to adapting its offerings to meet evolving client needs and market demands.

Looking Ahead

The expansion of BlackRock's active ETF lineup signals a continued strategic focus on this high-growth segment of the asset management industry. Future market developments will likely feature heightened competition among asset managers, driving further innovation in active ETF solutions and potentially leading to more competitive pricing across the sector. Investors will closely monitor the performance of BDYN and BDVL as key indicators for the successful transition of established mutual fund strategies into the ETF wrapper.

Furthermore, the sustained growth of model portfolios and their increasing allocation to active ETFs will remain a critical factor influencing asset flows, product development, and the overall trajectory of the active ETF market in the coming years. This shift represents a foundational change in investment vehicle preference, with lasting implications for both asset managers and investors.