In the latest episode of “ETF 360,” VettaFi head of research Todd Rosenbluth spoke to Brian Ellis, CFA, Executive Director at Morgan Stanley Investment Management. The two discussed the launch of the first Morgan Stanley ETFs, a suite of six funds that includes the Calvert Ultra-Short Investment Grade ETF (CVSB).
Asked why they kicked off their entrance into the ETF world with a short duration fixed income product, Ellis said, “One of the reasons that we’re leading with a short duration fixed income product in CVSB is really the opportunity we see today in the current market environment. Yields are very compelling.” He also noted that the current shape of the yield curve allows for short duration products to earn similar yield to their more risky counterparts further out in the yield curve. “Its really an attractive spot on the yield curve right now.”
Setting itself apart from other similar products, CVSB has an ESG focus. “Investment performance and managing risk is our primary goal,” Ellis said, noting that the integration of research from dedicated ESG analysts helps Morgan Stanley better understand of the issuers that they invest in.
Explaining why active management is used for CVSB, Ellis offered, “Active management does work very well in fixed income. We think this is especially true for short duration strategies.”
Short duration could be an effective play for some time, Ellis argued, noting that even if the Fed is nearing the end of its hiking cycle, yields at the front of the curve are likely to remain elevated. “We also think the uncertainty and volatility in the macro environment will persist for some time,” he added. This, in turn, makes higher quality investment grade sectors more likely to stand out.
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