The Conversion Secret: Why Wall Street Giants Are Making the Leap

With bonds back in favor, investors are increasingly looking to active ETFs for their portfolios. Sarah Cummings, ETF Specialist at Morgan Stanley, discussed the firm's mutual fund conversions, the benefits of legacy, and fixed income opportunities at Future Proof 2025. 

Transcript

Opening: Bringing Legacy to ETFs

Cummings: We converted a longstanding Morgan Stanley mutual fund dating back to 1997 into an ETF. Something that we're doing differently is really tapping into our existing expertise, our long legacy of success and performance in the active fixed income space.

A Platform Focused on Active Fixed Income ETFs

Nadig: Hey there, Dave Nadig, ETF.com. I'm here with Sarah Cummings, ETF Specialist at Morgan Stanley Investment Management Company. Sarah, one of the stories of the convention has to be active fixed income. A lot of advisors talking about it, a lot of issuers talking about it. You guys have been in the space a while, a little bit of a different approach. How do you guys think about active management and fixed income?

Cummings: Yeah, so we have launched a number of active fixed income ETFs – whether they've been from conversions from existing mutual funds or kind of fresh new products since 2023 when we entered the ETF space. We built our platform really around this active fixed income ETF opportunity, and something that we're doing differently is really tapping into our existing expertise, our long legacy of success and performance in the active fixed income space. And looking to areas where we feel like there are some holes in the product offering, where clients might feel like they're not able to find the products they might be looking for.

For example, floating rate is where we saw we could really enter that space and provide a product that wasn't quite meeting the needs of the investors currently. We have our EVLN floating rate product now. Mortgages, securitized product sector is another area where we're really excited. Just earlier in August, we converted a longstanding Morgan Stanley mutual fund dating back to 1997 into an ETF – so that ticker is EVMO. So, those are kind of two areas where we think there are great opportunities, unmet needs.

Another space is Core Plus. We're super excited there. That probably has been our most successful ETF thus far. Another conversion from March of 2024 that was about 360 million at that time and is now just about to cross over the 3 billion mark. So, yeah, we're seeing a huge opportunity in active fixed income, great performance that we've had in a number of five-star rated funds.

Investors are Taking the Leap to Active

Nadig: So, that Core Plus Core bond fund of yours, the Core Plus fund. I mean, 10x in one year, obviously, really resonated with advisors. What's that conversation like with an advisor? Are they coming from just being in the AGG? Are they trying to get more discreet about their exposure? What's the secret to success there? Because it's not always just, "Oh, it was five basis points better performing."

Cummings: Right. Yeah, I think we're seeing a mix. Definitely people are starting to look a little bit more closely at AGG allocations in models, just in stand-alone and think like, "Okay, you know, we're willing to take that step into an active product." Traditionally maybe not interested in active fixed income ETFs at all or were only invested in passives. So we're looking at the model inclusion, we're looking at acceptance on wirehouses, and independent broker dealers and then just your stand-alone RIAs. So, it's been a huge mix.

One thing that we feel like we've been able to lean on is the legacy that the portfolio management team has. Many people in the industry are familiar with this Eaton Vance Broad Markets fixed income team. They know and love them. They know their track record, they know the funds they manage, and now we are able to offer this ETF wrapper alongside our existing menu of broad markets fixed income funds.

Nadig: Obviously, having some expertise in the mix makes a lot of sense. Sarah, thanks for joining us.

Cummings: Thank you very much for having me.