Investment banking giant Morgan Stanley is crashing the exchange-traded fund (ETF) party in a historic return to the asset class with the launch of its own platform.
For over two decades, Morgan Stanley Investment Management (MSIM) has been conspicuously absent from the asset class it helped pioneer at the end of the last century, making this a highly-anticipated comeback among investors.
On Wednesday, February 1, the New York-based bank launched six new products through its subsidiary Calvert Research Management, each designed around environmental, social, and governance (ESG) investing themes. The half-a-dozen funds are only the first wave – the bank signaled there are more offerings in the pipeline to come.
“This launch is the first step in MSIM’s development of a robust ETF platform that supports products across our businesses, asset classes, jurisdictions, and brands,” says Dan Simkowitz, Head of Morgan Stanley Investment Management.
Morgan Stanley’s ETF ambitions could be a “game-changer” for the industry, according to Bloomberg, as it was one of the last remaining major financial firms still sitting on the sidelines of the ETFs arena. Although it’s late to the party, it’s certainly not coming empty-handed. With around 5.5 trillion in assets, the New York-based has the capital needed to shake up the 6.9 trillion-dollar industry and give other major players a run for their money.
Anthony Rochte, who heads the firm’s ETF division, told Bloomberg the firm is planning a parallel launch in Europe at a later stage.
Morgan Stanley introduced four index-tracking funds, three based on Calvert index mutual funds that have delivered impressive relative returns and another ETF with a thematic ESG strategy. The firm also unveiled two actively managed ETFs, one offering equities exposure and the other fixed income.
Among the four index funds are Calvert International Responsible Index ETF (CVIE), Calvert U.S. Large-Cap Core Responsible Index ETF (CVLC), the Calvert U.S. Large-Cap Diversity, Equity and Inclusion Index ETF (CDEI), and the Calvert U.S. Mid-Cap Core Responsible Index ETF (CVMC). Expense ratios for these funds range between 0.14% and 0.18%.
The two actively managed funds are the Calvert U.S. Select Equity ETF (CVSE) which has a 0.29% expense ratio, and The Calvert Ultra-Short Investment Grade ETF (CVSB), which has a 0.24% expense ratio.
ETF Industry Boom
The asset class turned 30 just last month, with three decades passing since SPDR S&P 500 ETF Trust (SPY) first hit U.S. markets. Morgan Stanley was a part of the early institutional innovators of ETFs in the 1990s. (The bank’s former Vice President Bob Tull coined the term “exchange-traded fund” at the time).
In 1996, Morgan Stanley received regulatory approval to issue over a dozen ETFs known as “World Equity Benchmarks (WEBS).” They were later acquired by Barclays before becoming rebranded as “iShares” of BlackRock Inc. – today the world’s leading ETF manager. In the time since, ETFs have become a multi-trillion dollar industry, with global ETF assets under management predicted to top $20 trillion by 2026, according to PWC.
Morgan Stanley’s ETF launch this week coincided with the Fed Reserve’s latest 25 basis point interest rates adjustment on Wednesday. Investors broadly greeted the news as a sign the worst of the central bank’s aggressive rate hikes may be over, and the S&P 500 rallied in response.
All six of Morgan Stanley’s ETFs are available on the NYSE Arca exchange, with all six funds closing higher on their first day of trading.
This article was produced and syndicated by Wealth of Geeks.
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