Morgan Stanley’s ETFs break US$1 billion with fund conversions

MORGAN Stanley’s exchange-traded lineup now holds more than US$1 billion thanks to the firm’s first-ever mutual-fund conversions.

The issuer is flipping two fixed-income mutual funds – one that follows a total return bond strategy and one focused on short-duration municipal debt – into exchange-traded funds (ETFs), the company said on Monday (Mar 25). That brings Morgan Stanley’s total ETF lineup to 14 funds.

The conversions come as Morgan Stanley seeks to expand its footprint in the increasingly competitive US$9 trillion ETF market. While Morgan Stanley was an early supporter of the industry three decades ago, the firm did not launch its own products until last year. It has since created ETFs under a handful of Morgan Stanley’s brands, including Calvert, Parametric, and Eaton Vance. Monday’s new converts show Morgan Stanley’s deepening commitment to active, fixed-income ETFs, according to the firm’s global head of ETFs.

“We are very focused on some of these industry trends, and the two major ones are fully transparent ETFs and the acceleration of fixed-income,” Morgan Stanley’s Anthony Rochte said. “We thought long and hard about which mutual funds are we going to convert, and which brand will we use.”

Industry players such as Dimensional Fund Advisors, JPMorgan Asset Management and Fidelity Investments have switched billions of US dollars between vehicles after the first mutual fund conversion into an ETF was completed roughly three years ago. While Morgan Stanley has ventured into the process as well, the firm is “very focused on net new organic launches”, Rochte said.

The mutual funds will begin trading on Monday as the Eaton Vance Total Return Bond ETF (ticker EVTR) and the Eaton Vance Short Duration Municipal Income ETF (EVSM). The actively managed funds will charge 32 basis points and 19 basis points, respectively.

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“We work backwards. We start with where is there interest, where is there demand,” Rochte said on Bloomberg Television’s ETF IQ on Monday. “There’s insatiable appetite for income and yield in this environment, and that’s really driven some of the new active products we have launched.” BLOOMBERG