Mutual Fund Pioneer MFS Rolls Out its First ETFs

One hundred years after creating the first U.S. open-end mutual fund, Boston-based MFS Investment Management stands out as one of the last legacy mutual fund companies to enter the ETF space, as the younger, smaller industry grabs market share from its older, larger cousin.

MFS, which has nearly $700 billion under management across its mutual funds, separate accounts, and collective investment trusts, officially entered the ETF business this week with five actively managed strategies:

• MFS Active Value ETF (MFSV)
• MFS Active Growth ETF (MFSG)
• MFS Active International ETF (MFSI)
• MFS Active Core Plus Bond ETF (MFSB)
• MFS Active Intermediate Muni Bond ETF (MFSM)

Michael Roberge, MFS Chairman and Chief Executive Officer, said the initial ETF rollout is in response to investor demand and the lineup is designed to cover broad market categories.

In the works for more than a year, the MFS ETF business is expected to grow deliberately from here, according to Roberge.

“I would expect we would broaden our capabilities in active ETFs, but it will be driven by what our clients want,” he said.

MFS Active ETFs Don't Clone Mutual Funds

As MFS telegraphed a year ago, the establishment of an ETF business meant hiring people dedicated to the unique characteristics of the marketing and distribution of exchange-traded funds. However, the investment management part is being handled by the same people managing the mutual funds, Roberge said.

Regarding the delayed entry into the ETF business, Roberge cited the relatively recent introduction of fully transparent active ETFs as the driver behind MFS’ move.

“What came first was the semitransparent ETF, where there never was much acceptance,” he said. “We did not go there, because we did not believe the semitransparent ETF was a vehicle that worked.”

The new MFS ETFs are “not full clones” of existing mutual funds, nor are they ETF conversions from mutual funds, Roberge noted. MFS has not yet filed with the Securities and Exchange Commission for an ETF share class, but the CEO said they are watching the developments in that area.

Roberge acknowledged that MFS’ mutual fund business has seen outflows, mostly from equity strategies, in line with the overall mutual fund industry. But added that the qualified retirement account business is still healthy for mutual fund companies.