Morgan Stanley Adds 12th ETF in First Year

Morgan Stanley Investment Management this week unveiled its 12^th ETF in as many months, marking an entrance into the space that executives are describing as successful and flush with new opportunities for the $1.5 trillion asset management conglomerate.

“MSIM has been clear and intentional about our focus on building a multi-asset and multi-brand ETF platform,” said Anthony Rochte, MSIM’s global head of ETFs.

The newest member of the ETF suite, which includes three of Morgan Stanley’s five asset management brands, is the Eaton Vance Floating-Rate ETF (EVLN).

The actively managed strategy is designed for investors seeking higher levels of income through a portfolio of at least 80% in floating-rate credit investments. Most of those investments will be in floating-rate corporate term loans, which taps into an MSIM strength.

Rochte described MSIM as a “pioneer in senior loan investment management” with a platform that was established 35 years ago and manages more than $30 billion globally.

“This strategy makes use of that deep loan market expertise and the in-demand ETF structure to meet the needs of a broader range of income clients,” he said.

In terms of the timing of an ETF launch designed to tap into higher yields when the Federal Reserve is nearing interest rate cuts, MSIM's Head of Floating-Rate Loans and Chairman of MSIM Fixed Income Andrew Sveen highlighted that the "high-income strategy right now has a yield of almost 10%."

Attractive Yields for a While

While the strategy invests in high-yield debt, Sveen said it should appeal to investors who “like the backdrop of the U.S. economy and feel good about the U.S. consumer.”

Sveen added that the current yield is “so attractive,” even if the Fed starts cutting rates, “you’re looking at really attractive yields for the next few years.”

“It will take a while for you to be in this trade and say, ‘where’s all my yield’?” he added.

Sveen noted that in a worst-case scenario, the underlying assets are high yield and include credit risk. But he also added that the biggest hit for investors would come only if the U.S. central bank cut interest rates quickly to zero.

EVLN, which begins trading Feb. 8 and charges 60 basis points, joins MSIM active fixed income ETFs the Calvert Ultra-Short Investment Grade ETF (CVSB), the Eaton Vance Ultra-Short Income ETF (EVSB), the Eaton Vance High Yield ETF (EVHY) and the Eaton Vance Intermediate Municipal Income ETF (EVIM).

MSIM’s ETF business has grown to $600 million since it entered the space in February 2023 with six Calvert-branded ETFs and expanded the platform in October with two Parametric-branded ETFs and three Eaton Vance-branded ETFs.