When the Exchange conference starts on Monday, advisors will have a new active floating rate bond ETF to learn about. It’s one that’s backed by a firm with a rich heritage in the investment style.
Morgan Stanley Investment Management (MSIM) entered the ETF industry just over a year ago. The launch of the MSIM ETF platform was a key event. We believe the firm has extensive expertise across various brands that can be leveraged to support advisor objectives.
“We’re building a multibrand ETF business focused on active management,” explained Anthony Rochte, global head of ETFs for MSIM. “We are excited to further add the strength of Eaton Vance to the lineup.”
Meet EVLN, the Newest MSIM ETF
This effort continues as the Eaton Vance Floating Rate ETF (EVLN) begins trading today. EVLN plans to invest senior floating-rate loans of domestic and foreign borrowers, debt tranches of collateralized loan obligations and other floating-rating debt.
While the ETF is new, Eaton Vance has managed floating rate strategies for 30 years, including offering mutual funds with long track records. MSIM’s dedicated 40-plus-person team of loan analysts help make bottom-up decisions, while the portfolio managers make top-down systematic allocations.
Eaton Vance’s Expertise
The Eaton Vance Floating-Rate Fund (EIBLX) earns a four-star rating from Morningstar. The fund’s 3.8% annualized total return over 10 years exceeded the bank loan category average by more than 40 basis points. The fund also recently sported an 8.9% 30-day SEC yield, and assets were primarily invested in B-rated securities.
Meanwhile, the Eaton Vance Floating-Rate Advantage (EIFAX) earns a five-star rating. The fund’s 10-year total return of 4.4% was even stronger, aided by leverage.
“The Fed is nervous about cutting rates too quickly, so it’s OK to take on credit risk,” explained Andrew Sveen, chairman of fixed income and head of floating rate loans at MSIM.
VettaFi believes the strong active management record in the bank loan category is reflective of Eaton Vance’s expertise. However, after years of being only available to mutual fund investors, MSIM is bringing its approach to those more ETF-minded.
What Makes EVLN Different
“This is not a clone strategy to the existing mutual funds,” noted Sveen, “The ETF will have more flexibility in adding bonds and CLOs, which will provide enhanced liquidity.”
EVLN’s net expense ratio is 0.60%. There are other actively managed senior loan ETFs, including the First Trust Senior Loan Fund (FTSL) and the SPDR Blackstone Senior Loan ETF (SRLN). FTSL and SRLN charge net expense ratios of 0.86% and 0.70%, respectively.
We have seen strong demand for active ETFs in recent years as asset management firms like MSIM bring some of their best ideas into the ETF industry.
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