Motley Fool ramps up ETFs focus with $1bn conversions plan

The asset management affiliate of Motley Fool plans to jump on the wave of mutual fund-to-ETF conversions as part of an overhaul of its business.

Motley Fool Asset Management, previously known by its acronym MFAM, intends to transform its actively managed $704m MFAM Global Opportunities and $331m MFAM Mid-Cap Growth funds into ETFs by year-end. The manager already runs two index ETFs, the $526m Motley Fool 100 Index ETF and the $186m MFAM Small-Cap Growth ETF.

The rebrand allows the group to draw on its history with Motley Fool, which is known for its website providing stock picks and financial advice to individual investors, company executives say. The website and asset manager are separate entities under the Motley Fool umbrella.

Shifting the focus to ETFs will allow the company to take advantage of the clearer brand, which is known for making investing simpler for individuals, said Kelsey Mowrey, president of Motley Fool Asset Management. The funds will, however, keep the MFAM brand in their names, even after converting to ETFs.

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“The timing [of the ETF conversions] just feels perfect,” Mowrey said. “It goes back to the principles and the beliefs of our parent: accessibility.”

Overall, investors tend to prefer ETFs for their user-friendly benefits, such as transparency, tax efficiency and low fees, she added. The group intends to roll out more ETFs down the road, she noted.

Motley Fool is the latest in a string of mutual fund managers to disclose plans to refashion products into ETFs. Dimensional Fund Advisors, Guinness Atkinson and the Cannabis Fund already have completed conversions, while JPMorgan Asset Management plans to make the switch on several funds.

The company has been researching ETF conversions since the January 2018 launch of the Fool 100 Index ETF, Mowrey said. “We wanted to focus on doing it right over being the first,” she said.

Global Opportunities’ three-year returns of 20.7 per cent have outperformed the median fund in the Morningstar world large-stock growth category by 1.4 percentage points, placing it in the top third of its peer group. Year-to-date through Friday, the fund returned 15.5 per cent, exceeding the peer median by 1.7 percentage points, placing it in the top 40 per cent of peers.

Mid-Cap Growth’s performance, however, has not been standout. The fund returned 15 per cent over the three-year period ended Friday and 10.2 per cent year-to-date, placing the fund in the bottom 15 per cent of its Morningstar category. The fund lagged its peer median by 5.1 percentage points over three years, and 4.6 percentage points year-to-date.

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