(Bloomberg) — Fidelity Investments is looking to convert two of its municipal bond mutual funds into exchange-traded funds, a move that underscores the popularity of the US$10 trillion arena.

The two affected funds are the $170 million Fidelity Municipal Bond Index Fund and the Fidelity Municipal Core Plus Bond Fund, which has less than 70 million dollars in assets. Both are expected to convert next year, according to two separate regulatory filings.

“These conversions can provide new opportunities and value for our existing shareholders, while also expanding our solutions to help meet the demand for access to innovative strategies in an ETF wrapper,” said Greg Friedman, head of ETF management and strategy. to Fidelity, in an emailed statement. .

The Boston-based asset manager is not new to the trend. In June 2023, Fidelity announced it would return six of its mutual funds in ETFs, after revealing plans for the first wave of conversions last year.

Such conversions became popular a few years ago after Dimensional Fund Advisors, JPMorgan and Neuberger Berman flipped their funds. Now, it is starting to become more common in the muni market as well. BlackRock Inc. is planning to convert its BlackRock High Yield Municipal Fund into an ETF, according to a recent filing.

With investors flocking to low-cost products, muni ETFs have grown into a $135 billion arena. There are now more than 100 such ETFs tracked by Bloomberg.

However, the pace of inflows into municipal ETFs has slowed. The funds have accumulated to more than $10 billion so far in 2024. That compares with about $15 billion in 2023 and a peak of $29 billion in 2022, according to Bloomberg Intelligence data.

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