Morgan Stanley plans first mutual fund to ETF conversions

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Morgan Stanley has filed to convert two mutual funds to exchange traded funds, marking its first application to make such a switch since it launched its first ETFs early this year.

The company plans to refashion its $553mn Core Plus Fixed Income Portfolio as the Eaton Vance Total Return Bond ETF and its $188mn Short Duration Municipal Income Portfolio as the Eaton Vance Short Duration Municipal Income ETF, according to disclosures filed with the Securities and Exchange Commission.

The change is expected to take place on December 1, pending a shareholder vote, the disclosures say.

Morgan Stanley acquired Eaton Vance and its affiliates, including Calvert Research and Management, and Parametric Portfolio Associates in 2021.

Morgan Stanley declined to comment.

Once the conversions go through, the Total Return Bond ETF plans to charge a unitary fee of 32 basis points. Overall fees for the mutual fund, which is offered in institutional shares as well as Class I, Class A, Class L, Class C and Class R6 share classes, range from 37 bps to 152 bps.

The Short Duration Municipal Income ETF will carry a 19 bps unitary fee, filings show.

Including other fees and waivers, the mutual fund’s Class IR shares cost 25 bps, and its institutional shares and Class A shares cost 35 bps.

The Total Return Bond ETF will have an identical strategy to the Core Plus Fixed Income Portfolio, the filing says.

The short-duration product will have a “substantially similar” investment objective, and the changes are “not expected to result in or reflect any material difference in the way in which [the ETF] will be managed compared to the way in which [the mutual fund] is currently managed”, the filing notes.

The Core Plus Fixed Income Portfolio recorded $115mn in net outflows over the year that ended August 31, according to Morningstar Direct.

The Short Duration Municipal Income Fund collected $46mn in net inflows over the 12-month period.

Morgan Stanley launched its first batch of ETFs in February. All six of the company’s existing ETFs are branded under the Calvert name.

Combined, the funds — four passive ETFs and two actively managed ETFs — had $264mn in assets as of August 31, according to Morningstar’s database.

Since those products were debuted, Morgan Stanley has filed applications with the SEC for three Eaton Vance-branded ETFs and one from Parametric.

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