Morgan Stanley was one of the early exchange-traded fund (ETF) industry pioneers. In fact, its World Equity Benchmark Series ETFs, launched in 1996, were rebranded as iShares and sold to BlackRock. And, of course, iShares became one of the most well-known ETF brands, with over 1,300 ETFs and $220 billion in inflows last year alone.
After a 30-year hiatus, Morgan Stanley is returning to the ETF market by launching six new funds under its Calvert Research and Management brand. These funds include four index ETFs and two actively-managed ETFs focusing on ESG factors. And looking forward, the investment bank anticipates launching a much broader ETF platform.
In this article, we’ll examine these new funds—focusing on the actively-managed funds—and explore how they might impact the ETF market.
See our Active ETFs Channel to learn more about this investment vehicle and its suitability for your portfolio.
A Look at the New Funds
Morgan Stanley is launching six new funds, including two actively-managed ETFs.
The Calvert Ultra-Short Investment Grade ETF (CVSB) invests in dollar-denominated, investment-grade, fixed-income securities, including government bonds, corporate bonds, and mortgage-backed securities. In aggregate, the portfolio targets a duration of one year or less with a modest (for active funds) 0.24% expense ratio.
The Calvert U.S. Select Equity ETF (CVSE) invests in large-cap equities of companies that the fund managers believe are successfully addressing global environmental or societal challenges. In addition, the fund managers may invest in leaders managing financially material ESG risk factors. And the fund charges a reasonable 0.29% expense ratio.
The other passively-managed fund launches include:
| Name | Ticker | Assets | Expense |
| Calvert US Large-Cap Core Responsible ETF | CVLC | $22.6 million | 0.15% |
| Calvert US Mid-Cap Core Responsible ETF | CVMC | $22.5 million | 0.15% |
| Calvert US Large-Cap Diversity Equity & Inclusion ETF | CDEI | $22.5 million | 0.14% |
| Calvert International Responsible ETF | CVIE | $19.7 million | 0.18% |
Entering a Competitive Space
The S&P 500 index fell about 18% in 2022 amid rising inflation and geopolitical conflict. But despite the bearish backdrop, ETF issuers launched more than 430 new ETFs, more than the 318 launches in 2020 and only a tiny drop from the prior year’s 477 launches. And familiar mutual fund giants are starting to crowd out niche ETF issuers.
It might seem like Morgan Stanley is entering an increasingly competitive market too late. But, in reality, the firm’s extensive distribution means it’s more likely to capture market share. As of December 31, 2022, Morgan Stanley had about $1.3 trillion in assets under management, making it among the largest asset managers worldwide.
Furthermore, Morgan Stanley suggested that the six ETFs were ‘the first step’ in the development of a robust ETF platform that supports products across its business, asset classes, jurisdictions, and brands. As a result, it seems like the firm will soon launch a broader range of funds, helping draw more investors into the fold and increasing competition in the space.
The Bottom Line
Morgan Stanley’s (re)entry into the ETF space marks a critical turning point for the investment bank and ETF industry. With $1.3 trillion in assets and plans to build a ‘robust ETF platform,’ the firm’s Calvert Research and Management brand could become a prominent player in the ETF space, given its extensive distribution capabilities.
Take a look at our recently launched Model Portfolios to see how you can rebalance your portfolio.
