Investing in a Bank Mutual Fund: A Convenient but Costly Option

Investing in a bank mutual fund can be a good option for those who would otherwise avoid investing. While it may be expensive, with fees ranging from 1.7 to 2.8 per cent, it's easy and convenient. Bank mutual funds can be compared to cheaper options like exchange-traded funds (ETFs) and index-tracking mutual funds. A recent report by the Ontario Securities Commission found that bank mutual fund salespeople may not always provide good advice.

In recent years, the investment landscape has witnessed a significant shift from traditional mutual funds to exchange-traded funds (ETFs). This trend is driven by the advantages ETFs offer, such as lower expenses, real-time pricing, and tax efficiency. One notable example of this transition is the RiverNorth Active Income ETF (CEFZ), which launched recently after a nearly 20-year tenure as the RiverNorth Core Opportunity Fund [1].

CEFZ represents a hybrid model that combines active management with the structural benefits of ETFs. It aims to achieve a 10% annual distribution run rate while maintaining a focus on income generation and long-term capital appreciation. The fund will continue to invest in closed-end funds (CEFs) and ETFs, mixing equity and fixed income exposure [1].

This shift is part of a broader trend where mutual funds are converting into ETFs. For instance, Eaton Vance introduced the Eaton Vance Mortgage Opportunities ETF (EVMO), which is a repositioning of the Morgan Stanley Mortgage Securities Trust mutual fund [1]. Similarly, the Lazard International Dynamic Equity Fund (IEQ) was launched as a conversion of Lazard Asset Management’s International Equity Advantage mutual fund [1].

The conversion of mutual funds to ETFs represents a structural change in the delivery of investment products. ETFs provide investors with lower expenses, real-time pricing, and a tax-efficient structure, making them the vehicle of choice for both retail and institutional investors [1]. This trend is not limited to actively managed funds; even passively managed funds are seeing conversions. For example, Vanguard offers the ability to exchange ETF shares for mutual fund shares without fees, but the mutual funds often have higher expense ratios [2].

This shift is also evident in the fund industry statistics released by the Securities and Investment Management Association (SIMA). In June 2025, mutual fund assets reached an all-time high, but ETF assets grew at a faster pace, reflecting the increasing preference for ETFs [3]. Additionally, several fund mergers and terminations indicate the ongoing optimization of fund lineups, with a focus on ETFs [3].

Investors considering mutual funds should weigh the higher fees against the convenience and ease of access. While ETFs offer lower costs, mutual funds provide a more hands-off approach, which might be appealing to those who prefer simplicity. However, it is essential to be aware of the potential lack of personalized advice from bank mutual fund salespeople [2].

In conclusion, the transition from mutual funds to ETFs is a significant trend in the financial industry. This shift is driven by the advantages ETFs offer, and it is reshaping the investment landscape. Investors should carefully consider their options, weighing the pros and cons of each type of investment.

References:
[1] https://www.inkl.com/news/rivernorth-transitions-from-mutual-fund-to-high-yield-etf-cefz
[2] https://www.reddit.com/r/Bogleheads/comments/1mw06gh/why_are_vanguard_mutual_fund_expense_ratios/
[3] https://www.theglobeandmail.com/investing/markets/funds/FID5491.CF/pressreleases/33982989/market-month-fund-news-and-updates/