On Monday, Morgan Stanley Investment Management added two new ETFs to their extensive fund portfolio. The Eaton Vance Total Return Bond ETF (NYSE Arca: EVTR) and the Eaton Vance Short Duration Municipal Income ETF (NYSE Arca: EVSM) were both converted from existing mutual funds into the ETF wrapper. The funds represent the first such conversions from the issuer.
“We are really energized by the growth of our platform over the past 14 months and will continue to deepen the platform with products that meet our clients demand for our actively managed investment approach in the ETF wrapper. Given our deep history and leadership in the asset class, we are especially pleased to enhance our active fixed income ETF offering with the conversions of the two mutual funds,” Morgan Stanley Investment Management global head of ETFs Anthony Rochte said.
EVTR possesses a net expense ratio of 0.32%. Seeking total return, the fund invests the majority of net assets into fixed-income securities. The fund aims to invest in a varied mix of securities. These include corporate, municipal, U.S. government, and asset-backed securities, among others.
“EVTR looks to be a best ideas portfolio tapping into the various, experienced fixed income teams at Eaton Vance. Recently the multi-sector fund has favored securitized debt over corporate bonds, while mixing in some Treasuries,” VettaFi head of research Todd Rosenbluth noted.
Meanwhile, EVSM aims to provide investors with tax-exempt current income. With a net expense ratio of 0.19%, the majority of the fund’s assets are in municipal securities. These securities are exempt from federal income tax.
“EVSM is a less interest rate sensitive version of the Eaton Vance Intermediate Municipal Income ETF (EVIM). With the Federal Reserve likely holding rates relatively steady in 2024, a short-term product will make sense to many,” Rosenbluth added.
Morgan Stanley ETFs’ Established Strategies
Prior to converting into ETFs, the original funds for both EVTR and EVSM had a four-star rating from Morningstar. EVTR’s original mutual fund, MSIFT Core Plus Fixed Income Portfolio, had a ten-year track record in the top decile. Meanwhile, EVSM’s original mutual fund, the MSIFT Short Duration Municipal Income Portfolio, was in the top third of its category over five years.
Both EVSM and EVTR are actively managed, leaning into Morgan Stanley’s extensive history of active management strategies. Currently, Morgan Stanley has 14 ETFs listed in the United States. Its largest fund, the Calvert US Large-Cap Core Responsible Index ETF (CVLC), oversees roughly $286 million in assets under management.
“In 2023 and thus far in 2024, advisors have been embracing actively managed fixed income ETFs. Through Eaton Vance, Morgan Stanley has a leading fixed income manager with a proven track record of performance success. It’s great to see them leverage this with an expansion of their lineup. With the conversion of these funds and the success of others, Morgan Stanley Investment Management has over $1 billion in assets despite launching first products in early 2023,” Rosenbluth said.
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