Morgan Stanley files to offer its own ETFs

Morgan Stanley files to offer its own ETFs
Decades after coining the term 'exchange-traded fund,' the firm plans to offer four socially conscious funds under the Calvert label.
AUG 17, 2022
By  Bloomberg

Almost three decades after coining the term “exchange-traded fund,” Morgan Stanley is finally set to enter the $6.9 trillion ETF arena with its own products. 

The James Gorman-led bank applied Tuesday for four socially conscious funds tracking U.S. and international equities, according to a filing with U.S. regulators. The filing lands months after Morgan Stanley revealed plans to create a dedicated ETF platform in an internal memo. 

The planned launches from Morgan Stanley are the latest in a series of investment giants caving to the ETF industry, with the likes of Capital Group and Neuberger Berman Group taking the plunge in recent months. Given that the bank’s asset management arm oversees $1.4 trillion, Morgan Stanley’s moves will make a particular splash, according to Bloomberg Intelligence.

“There’s a new issuer every month, practically, but Morgan Stanley is a beast of a company,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. “Anything they do in this space will be interesting and notable.”

Tuesday’s filings include plans for the Calvert International Responsible Index ETF, the Calvert US Large-Cap Core Responsible Index ETF, the Calvert US Large-Cap Diversity, Equity and Inclusion Index ETF and the Calvert US Mid-Cap Core Responsible Index ETF. Morgan Stanley acquired the Calvert label with its 2020 purchase of asset manager Eaton Vance Corp.

Tickers and fees for the funds were not yet listed. A Morgan Stanley spokesperson declined to comment on the filings, citing regulatory rules.

While the potential funds would be the first modern-day ETFs for Morgan Stanley, the firm has a long history with the industry. The bank was home to some of the world’s first ETFs in the 1990s, and was where Bob Tull, then a vice president at the bank, and a team of lawyers came up with the term “exchange-traded fund.” 

The bank’s influence on the industry didn’t stop there. In 1996, Morgan Stanley was granted regulatory approval to launch 17 ETFs known as World Equity Benchmarks, with Barclays as the fund manager. Barclays later bought WEBS and rebranded the products as “iShares,” and the business was sold to BlackRock in 2009.

Thanks largely to iShares, BlackRock is now the biggest ETF issuer in the world — underscoring the challenge for Morgan Stanley. There are now almost 3,000 U.S. funds, and while launches are booming, most assets reside with products that are more than five years old.

The applications land at a rocky moment for environmental, social and governance funds. The ESG category has raked in roughly $4.5 billion so far in 2022, a massive slowdown after two straight years of more than $30 billion in inflows a year, Bloomberg data show. 

“I’m surprised they went the ESG route, just given how much the investment community has seemingly cooled on ESG prospects,” said Todd Sohn, an ETF strategist at Strategas Securities. “No doubt the team is talented, so I’m curious how much AUM these funds bring in the first few months.”

Single-stock ETFs are risky business

Latest News

Five-person Raymond James team jumps to Janney in Maryland
Five-person Raymond James team jumps to Janney in Maryland

The group led by a 37-year industry veteran brings $470 million in assets to the Philadelphia-based broker dealer.

$20B Merit looks to next phase as Constellation takes minority stake
$20B Merit looks to next phase as Constellation takes minority stake

The Atlanta, Georgia-based national wealth firm revealed its new PE partner as prior backers Wealth Partners Capital Group and HGGC’s Aspire Holdings exited their investments.

$350M father-son duo hops from Osaic to Equitable Advisors
$350M father-son duo hops from Osaic to Equitable Advisors

The latest departures in Ohio mark another setback for the hybrid RIA, which is looking to "expanding its presence across all models and segments of the wealth management industry.”

Fresh off HPS acquisition, BlackRock inks deal for $7.3B ElmTree Funds
Fresh off HPS acquisition, BlackRock inks deal for $7.3B ElmTree Funds

The St. Louis-based real estate investment firm gives the asset management giant a valuable access point to the roughly $1 trillion net lease market.

SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees
SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees

Eliseo Prisno, a former Merrill advisor, allegedly collected unapproved fees from Filipino clients by secretly accessing their accounts at two separate brokerages.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.