Morgan Stanley, which helped pioneer the exchange-traded fund industry before leaving it in the 1990s, is returning to the field with a handful of products focused on environmental, social and governance investing.
The firm’s investment management arm announced the launch of six Calvert Research Management-branded ETFs. Calvert is part of Morgan Stanley Investment Management.
The ETFs are Morgan Stanley’s first in nearly three decades. In the early 1990s, the firm’s then-Vice President Bob Tull and team coined the term “exchange-traded fund.” Later, the New York-based firm was given regulatory approval to launch 17 ETFs in that decade, which were eventually sold to Barclays.
The funds and their expense ratios are as follows:
- Calvert US Large-Cap Diversity, Equity and Inclusion Index ETF (CDEI): 0.14%
- Calvert Ultra-Short Investment Grade ETF (CVSB): 0.24%
- Calvert US Large-Cap Core Responsible Index ETF (CVLC): 0.15%
- Calvert International Responsible Index ETF (CVIE): 0.18%
- Calvert US-Mid Cap Core Responsible Index ETF (CVMC): 0.15%
- Calvert US Select Equity ETF (CVSE): 0.29%
Actively managed funds include CVSE and CVSB. The firm’s index fund’s offering includes CDEI, CVLC, CVMC and CVIE.
The ETFs launch after what Anthony Rochte, global head of ETFs at Morgan Stanley, said to ETF.com was a “need” for the product from the institution’s client base.
“It was clear to us that there's strong demand for ETFs,” he said. “Whether it's intermediary, institutional or self-directed [clients], it's just really clear that clients want a comprehensive offering.”
Rochte added that the firm was looking to add to its ETF lineup both domestically and abroad in the coming years.
Still, the six ESG fund launches come at a lackluster time for the fund category. Sustainable funds in the U.S.—including ETFs and mutual funds—shed $6.2 billion in last year’s fourth quarter, amid large market fluctuations and increased politicization. That’s the largest outflows from the products globally, according to Morningstar Direct data.
For ETFs alone, ESG-labeled funds had outflows of $2.1 billion in the last three months of 2022, compared with $6.1 billion of inflows in the year-ago quarter, according to data from research firm Strategas Securities.
Still, Rochte pointed to a “growing” market for ESG market, which he noted has taken off in the last five years and has the potential to attract assets.
“We’re [at] the starting line, and we look at this as a long-term strategy,” he said.
Contact Shubham Saharan at [email protected]