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One of the most persistent investment trends is the migration of money out of stock mutual funds and into exchange-traded funds, which are easier to trade, have lower operating expenses and often have favorable tax treatment.

Over the last 10 years, a net $900 billion has flowed out of stock mutual funds and $1.8 trillion has flowed into stock E.T.F.s, according to Morningstar.

Eager to give the public what it wants, and to keep shareholders from walking out the door with their assets, some fund providers have begun to convert stock mutual funds into E.T.F.s. Others run E.T.F. versions of their popular mutual funds, and one company, Vanguard, allows tax-free direct swaps of mutual fund positions into equivalent E.T.F.s.

E.T.F.s are simpler and cheaper for managers to run than mutual funds. Investors benefit when the savings and convenience are passed on to them, and from other inherent advantages that drove the rise in E.T.F.s in the first place.

“There are real benefits to having more E.T.F.s, especially in larger, more liquid funds,” said Christopher Cordaro, chief investment officer of RegentAtlantic, a Morristown, N.J., financial-planning firm. “If I’ve got two versions of something and the E.T.F. has a lower-cost portfolio, it’s an easy decision to use the E.T.F. over the mutual fund.”

The decision to test the conversion concept was not all that easy for Guinness Atkinson Asset Management, which was the first fund provider to do it, said Todd Rosenbluth, director of E.T.F. and mutual fund research at CFRA Research. Jim Atkinson, Guinness Atkinson’s chief executive, said the plan was studied for two years. It was carried out in late March when Guinness Atkinson Dividend Builder and Guinness Atkinson Asia Pacific Dividend Builder became E.T.F.s listed on the New York Stock Exchange.

“This is a trial balloon for other funds,” he said. “Operationally, we want it to go OK.”

If it does, the firm’s alternative energy fund is up next. Mr. Atkinson conceded that while “there may be funds that are better as open-end mutual funds, our intention is to convert all of our funds.”

Dimensional Fund Advisors is sending aloft a trial balloon of its own. It plans to convert six stock mutual funds into E.T.F.s, with the first four conversions set for June. The new structure will allow it to reduce its annual management fee to 0.23 percent from about 0.32 percent on average.

A third fund provider, Foothill Capital Management, filed last month for approval to convert its Cannabis Growth Fund, with about $7 million of assets, into an E.T.F.

E.T.F.s are cheaper to run in part because the management company can stay out of the way and let buyers and sellers deal with one another. Operating a mutual fund means handling new investments and redemptions every day and having cash on hand in case redemptions significantly exceed sales.

Another advantage often accruing to E.T.F. shareholders is favorable tax treatment. Mutual funds generally have to distribute capital gains each year, whereas an E.T.F., like a stock, incurs tax liability only when the owner sells at a profit.

Converting a mutual fund to an E.T.F. is legally a merger of the old fund with the new, Mr. Atkinson said, and is thus not a taxable event.

Vanguard is using a different technique to let investors in 47 of its index mutual funds, 36 that own stocks and the others bonds, move their assets into E.T.F.s free of tax consequences. Each E.T.F. was created as a share class of the equivalent mutual fund, which the law regards as a nontaxable transfer.

Vanguard has no plans to convert any mutual funds, said Rich Powers, its head of E.T.F. and index product management, nor does the company expect to create E.T.F. share classes for any actively managed mutual funds.

Other fund providers run E.T.F. versions of their large index-based mutual funds, but Vanguard has a patent on the technique of tax-free transfers between share classes. Mr. Powers said there were discussions with other fund providers about licensing it, but none have taken the plunge, perhaps because the patent expires in two years and other companies may be waiting until then to offer such transfers.

Whichever companies follow in the footsteps of Guinness Atkinson and Dimensional in making conversions are not expected to be industry giants. Indeed, several of the largest fund providers — BlackRock, Vanguard, T. Rowe Price and Fidelity — said they had no intention to convert their mutual funds.

There are two reasons that conversions are more appealing to smaller firms. Mr. Cordaro noted that mutual funds can be bought and sold free of charge on platforms run by brokerages. The brokerages need large, popular fund providers — the BlackRocks of the world — to attract investors, but smaller managers need the platforms more than the platforms need them, so they often have to pay to be on them. E.T.F. managers face no such demand.

The other impediment for large managers is a feature of E.T.F.s that they might view as a bug, at least when it comes to actively managed portfolios: the requirement that most E.T.F.s disclose their holdings daily.

Disclosure is seldom a problem for smaller funds, which usually complete portfolio trades the same day. Mr. Atkinson said that is the case with the two funds that have been converted. But large funds may need several days to execute significant portfolio changes to avoid moving the market. If an E.T.F. discloses that it has begun buying or selling a particular stock, traders may jump in and do the same to try to take advantage of anticipated price movements.

Another issue that Mr. Powers cited to explain why Vanguard does not offer actively managed E.T.F.s, and would not be inclined to convert actively managed mutual funds, is that there is no way to restrict investment in an E.T.F. If a mutual fund in a frothy market segment attracts too much money, making managing the portfolio unwieldy, the manager can limit new investment, but that isn’t allowed with an E.T.F.

E.T.F. conversions may be limited to smaller funds, but Mr. Cordaro would worry about trying one with anything too small.

“There’s an ongoing downside to smaller, more thinly traded E.T.F.s when you have turmoil in the markets,” he said. “During big down days, when there’s a lot of dislocation or volatility, there can be a big discount” to a fund’s net asset value, “or a big impact on the bid-ask spread,” the difference between the price at which buyers buy and the slightly lower price at which sellers sell.

Whatever size portfolio might be the object of a conversion, Mr. Rosenbluth anticipates more of them after the first have had any kinks resolved and have been shown to be successful.

“We’re likely to see more of these once these pioneering strategies make the effort and we see that investors don’t revolt, and stay within the fund,” he said.

A potential limit on conversions is that “some investors are still comfortable with mutual funds,” Mr. Rosenbluth added. “What I hear from asset managers is they want to give investors choice.”

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Small-cap value stocks rank among the market’s riskiest fare.

But higher risk can bring bigger rewards, and in the first quarter, it did for three of the better-performing mutual funds. Each returned more than 20 percent by betting on small-cap value.

Value investors are betting on stocks that they think are trading below their fundamental worth. Often, companies end up classified this way because they operate in out-of-favor industries or have had setbacks.

Here are some of the choices that enabled three funds to prosper.

Kinetics Small-Cap Opportunities

The Kinetics Small-Cap Opportunities Fund toted up a first quarter return that would have been whopping for an entire year — 60.5 percent. In contrast, the S&P 500 index gave a total return of 6.2 percent for the quarter.

Peter Doyle, one of the fund’s co-managers, said his fund achieved its result thanks to an unusual holding: the Texas Pacific Land Corporation.

Texas Pacific grew out of the bankruptcy of the Texas Pacific Railroad in the 1800s. It owns land and water rights in Texas’s Permian Basin, one of the United States’ leading oil-and-gas-producing locales. The company earns royalties from others’ drilling on its land, and its stock shot up in the first quarter, returning nearly 120 percent.

Until this year, some mutual funds wouldn’t hold Texas Pacific because it was a publicly traded trust, not a corporation. It converted its legal structure in January, though Kinetics has owned it since 2002.

Texas Pacific recently accounted for 43.9 percent of the fund’s assets. It was one of 36 holdings.

Kinetics’s enormous bet is “an outgrowth of our long time horizon and low turnover strategy,” Mr. Doyle said. “Maybe five of our names will be great investments. If you don’t turn over frequently, those five will become a bigger and bigger percentage of the portfolio.”

Mr. Doyle said patience is essential to how he and his co-managers run their fund. He said they view it as an advantage in a business characterized by shorter-term thinking.

Fund managers’ bonuses are often based on annual returns, so they focus on those, he said. “If you can get away from that, you can buy great companies at a discount.”

But a concentrated approach, like Kinetics’s, can increase risk because it reduces diversification.

By at least one measure, the fund is riskier than its peers: Morningstar says the standard deviation of its returns — a measure of their ups and downs — is 35.7 percent, compared with 25.5 for its average peer. A higher number signals more risk.

The fund’s no-load shares have a net expense ratio of 1.65 percent and returned an annual average of 26.4 percent for the five years that ended March 31, compared to 16.3 percent a year for the S&P 500.

He said that’s an outgrowth of his approach, which focuses on companies’ ability to produce free cash flow — that is, cash left over after a company funds its operations and maintains its assets. (Small-cap energy businesses can be speculative and require substantial investment before producing free cash.)

To spot cash spigots, Mr. Kammann ranks the 900 stocks in his investment universe and digs deeper into the better-ranking ones to understand why they’re cheap.

“One of the risks I assume, quite intentionally, is I’m selecting stocks where the market is fearful,” he said. Otherwise, the shares wouldn’t be bargains.

Value hunters are betting that the market is wrong and that their stocks are sturdy enough to outperform lagging industries or bounce back from difficulties.

“The key is that investors have a tendency to overextrapolate good news and bad news,” Mr. Kammann said. “That’s why value investing works.”

Lately, his stock picking has led him to a company helped along by the pandemic: Poly, formerly known as Plantronics, a maker of headsets and other communications equipment.

The company had seen a planned merger collapse and a competitor, Jabro, swipe market share. The stock sank in the early days of the pandemic.

Mr. Kammann sensed a buying opportunity. “We thought the stay-at-home environment would be positive for headsets and that, post-Covid, there was going to continue to be some form of hybrid work. So we redoubled the position.”

The Hartford fund, whose A shares have a net expense ratio of 1.3 percent, returned 23.8 percent in the first quarter.

American Century Small-Cap Value

Free cash flow is also a lodestar for Jeff John, lead portfolio manager of the American Century Small-Cap Value Fund.

It’s one of several measures he considers as he’s screening companies. Others include balance-sheet strength and quality of management.

“We generate a score for each company, and that lets us compare it to other companies in its sector and across the portfolio,” he said. “We want to use data to remove some of the inherent biases we all have.”

Like Mr. Kammann’s approach, Mr. John’s has led him away from such traditional value-centric industries as energy and utilities.

Instead, he has lately found promise in Compass Diversified, which he calls a mini-conglomerate.

Compass, a publicly traded partnership, owns such diverse companies as the Sterno Group, producer of the canned fuel, and 5.11, a maker of clothing and gear for law enforcement and for the outdoors.

Compass’s managers are “incredible allocators of capital,” Mr. John said. “They invest in these businesses and help them grow, and if there’s an opportunity to sell them, they’ll do that.”

In 2019, for example, Compass sold off Clean Earth, an environmental remediation company, and Manitoba Harvest, a producer of hemp foods .

Mr. John also likes Penske Automotive, calling it “one of our core holdings for quite some time.”

Penske is known for its network of car dealerships, but its business is burlier than that, he said. Commercial trucks, via sales and leasing, have recently powered the company’s growth.

“Within the commercial truck space, 70 percent of gross profit comes from the servicing,” he said. “A sale is really just an entree to providing service over time.”

The company’s chairman, Roger S. Penske, makes shareholder interests a priority because he’s a substantial one himself, Mr. John said. “Penske owns 40-percent-plus of the company.”

The American Century Fund, whose investor shares have an expense ratio of 1.25 percent, returned 24.7 percent in the first quarter.

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Crucial bridges are decaying. The electricity grid is straining. And climate change, as it worsens storms, floods and wildfires, is intensifying problems. The American Society of Civil Engineers gave the United States a C– in its latest infrastructure report card.

Help may be coming. President Biden has proposed $2 trillion in new infrastructure spending. A compromise between the president and Senate Republicans would provide about half that, though congressional Democrats are pushing for more.

No matter what happens in Washington, infrastructure challenges will endure, and the need will grow. That may create opportunities for such infrastructure stocks as electric utilities, builders of roads and bridges, and owners of railroads and cellular towers. And the mutual funds and exchange-traded funds that specialize in owning those outfits could benefit.

“There are so many tailwinds right now,” said Josh Duitz, manager of the Aberdeen Global Infrastructure Fund. “Two big ones are renewables and 5G.”

Renewable energy, such as wind and solar power, is needed to meet global climate goals; more cell towers are required for the rollout of fifth-generation — 5G — wireless networks.

If the U.S. government chips in more money, that should only help, Mr. Duitz said.

Of course, an investment opportunity, no matter how tantalizing, doesn’t guarantee gains. The market can rise and fall on wishes and worries; unanticipated woe — be it a financial crisis or a pandemic — can sap it.

“Stocks may be in the infrastructure industry or they may own infrastructure assets,” said Josh Charlson, a director of manager selection at Morningstar. “But the securities themselves are still publicly traded equities and are usually going to share in the trends of the broader markets.”

Aside from the recession induced by the coronavirus pandemic, trends for the sector have been favorable for much of the last decade. Infrastructure stocks have trailed the S&P 500 but put up positive returns while providing higher dividends.

The U.S. dollar-hedged version of the S&P Global Infrastructure Index had an average annual total return of 7.9 percent for the decade that ended June 30, while the S&P 500 returned a 14.8 percent annual average.

But the pandemic, with its traffic-congestion reprieves and aircraft groundings, battered the infrastructure sector: The index slipped 8.2 percent in 2020, while the S&P 500, after a spring plunge, ended up delivering a total return of 18.4 percent. As of June 30, the infrastructure index was up 6.5 percent this year, while the S&P 500 was up 15.3 percent.

“Many infrastructure assets were disproportionately hurt” by the pandemic, said Jay L. Rosenberg, head of public real assets for Nuveen.

Mr. Rosenberg said auto traffic is bouncing back to prepandemic levels, but air travel might not recover for several years.

A growing number of funds invest in infrastructure stocks. Morningstar counts more than 30, up from fewer than 10 a little more than a decade ago.

They typically own shares of what Matt Landy, one of the portfolio managers of the Lazard Global Listed Infrastructure Portfolio, called “regulated monopolies providing essential services.”

“When you’re cooking dinner on a stove or sitting in your office using a computer or driving on a road, you’re using infrastructure,” he said. Pipelines providing natural gas, power lines transmitting electricity and roadways all count as infrastructure.

The 407 ETR, a turnpike skirting Toronto, for example, is operated by a Spanish public company named Ferrovial, a recent top holding of Mr. Landy’s fund.

Investors pondering a bet on infrastructure can opt for an actively managed fund, like the Lazard offering, or an indexed one, like the iShares Global Infrastructure E.T.F. or the SPDR S&P Global Infrastructure E.T.F.

Active funds offer the chance to beat the market or to match it with less jittery returns, while passive ones typically have lower expenses and track market indexes.

The retail shares of Mr. Landy’s fund, with an expense ratio of 1.23 percent, returned an annual average of 10.4 percent over the decade that ended in March. In contrast, the iShares E.T.F., with an expense ratio of 0.46 percent, returned an annual average of 5.5 percent over that period.

One allure of many infrastructure funds is income: In a world of measly interest rates, they often have healthy yields. The average infrastructure mutual fund tracked by Morningstar paid a 12-month yield of 1.7 percent on May 31, while the 10-year U.S. Treasury security was paying about 1.5 percent in early July.

Infrastructure investments are sometimes said to provide inflation protection — something salient with prices lately rising. Common forms of infrastructure income, like tolls and utility rates, often grow with inflation. “For a lot of these companies, their top line is tied to inflation, so they’re able to keep pricing in line with inflation,” said Pranay Kirpalani, manager of the Fidelity Infrastructure Fund.

Yet one analysis concluded that claims of inflation protection didn’t hold up.

Vanguard in 2018 studied the performance of infrastructure stocks over 28 years and found that they didn’t hedge inflation any better than the broader market or real estate investment trusts.

“If your primary objective is inflation protection, commodities might be a better option,” said Aidan Geysen, author of the report and a senior investment strategist at Vanguard.

A reputed benefit of infrastructure that did hold up was risk reduction. Mr. Geysen found that infrastructure stocks were less volatile than the overall market.

If you’re considering an infrastructure fund, be aware that infrastructure stocks and interest rates tend to move in opposite directions, he said. That may matter more in the months ahead: Rates will most likely rise if inflation endures.

“As rates fall, you can get a tailwind,” Mr. Geysen said. “But you wouldn’t expect that that tailwind would persist going forward. As rates normalize, they may well turn into a headwind.”

Another potential peril of an infrastructure bet is doubling down on risks you’ve already taken.

Infrastructure funds usually hold big slugs of utilities and industrial stocks. Those two sectors together account for nearly 80 percent of the S&P infrastructure index. You may already own plenty if you have a broadly diversified portfolio.

Perhaps the main risk of buying an infrastructure fund or E.T.F. is misunderstanding what you’re getting, said Barbara Weber, founding partner of B Capital Partners, an infrastructure investment consultancy in Zurich.

People often talk about infrastructure investing as if they could directly own a piece of a steady source of income like a toll road, she said. A more typical holding of a U.S.-focused fund or E.T.F. would be stock in a big public utility, like Duke Energy or the Southern Company, which run fossil fuel power plants and complex energy distribution networks.

“There you have full-blown market risk and operational risk. There’s nothing bad about that, but I wouldn’t call it safe,” she said. https://nohu.win/ Our user-friendly platform and mobile app make it easy to place bets, track your results, and manage your account on the go.