MSIM Expands $4.7 Billion ETF Platform with Eaton Vance High Income Municipal Strategy
Morgan Stanley Investment Management (“MSIM”) has announced the launch of its latest exchange-traded fund (ETF), Eaton Vance High Income Municipal (Ticker: “EVYM”), a high-yield municipal bond strategy. The introduction of EVYM marks another milestone in MSIM’s ongoing expansion of its ETF platform, which has witnessed remarkable growth since its inception. Since launching its first ETFs in 2023, MSIM’s ETF platform has rapidly scaled to $4.7 billion in total assets, encompassing 17 different strategies across multiple asset classes and investment themes. This latest ETF is the eighth actively managed fixed-income strategy introduced by MSIM and is now listed on the Nasdaq stock exchange.
Growth and Market Reception of MSIM’s ETF Platform
The MSIM ETF platform has quickly gained traction among both institutional and retail investors. “The MSIM ETF platform continues to strongly resonate with both institutional and retail investors, as evidenced by growth to $4.7 billion in assets since its inception,” said Brian Weinstein, Head of Global Markets at MSIM. “We have seen significant demand for our active fixed-income ETFs, with over $600 million in asset flows since the beginning of the year. Our latest product, EVYM, enhances our ability to meet client demand across the full spectrum of active fixed-income investments. We are pleased to be able to meet our clients’ needs for a broad range of ETF strategies and remain focused on building a comprehensive platform that makes use of MSIM’s distinct capabilities.”
The expansion of MSIM’s ETF platform underscores the firm’s commitment to providing innovative and diversified investment solutions. The firm’s ETFs cater to various investor preferences, ranging from tax-efficient municipal bond strategies to equity and options-based strategies, ensuring a broad appeal in today’s dynamic investment landscape.
Investment Objectives and Strategy of EVYM
EVYM is designed to provide investors with high current income while maintaining an important tax advantage. Specifically, the fund seeks to generate income exempt from regular federal income tax by investing at least 80% of its net assets in municipal bonds and obligations, whose interest payments are not subject to federal income taxation. This tax-exempt structure makes EVYM an attractive option for investors looking to optimize after-tax returns, particularly in a rising interest rate environment or for those in higher tax brackets.
High-yield municipal bonds often provide higher returns than traditional municipal bonds, though they may carry greater credit risk. By offering a diversified portfolio of municipal securities, EVYM aims to strike a balance between income generation and risk management. The fund’s active management approach enables it to respond dynamically to market changes, leveraging MSIM’s expertise in fixed-income investing to optimize risk-adjusted returns.
Expert Insights on EVYM’s Launch
Commenting on the new ETF, William Delahunty, Managing Director and Municipals Portfolio Manager at MSIM, expressed confidence in the firm’s ability to deliver superior municipal investment solutions. “With this latest product, we are pleased to be able to provide access to our deep experience in the municipals space and differentiated investment approach for new and existing clients,” he stated. “EVYM brings together our team’s extensive experience and knowledge in the Municipals space with the in-demand ETF structure and reflects investors’ strong preference for tax-efficiencies, custom fixed-income exposures, and lower-cost vehicles.”
Delahunty’s remarks highlight the importance of expertise in municipal bond investing, a sector that requires careful analysis of credit risk, tax implications, and market conditions. By integrating Eaton Vance’s established municipal bond expertise with the efficiency and liquidity benefits of an ETF, MSIM aims to offer an attractive investment vehicle for income-focused investors.
MSIM’s Expanding ETF Suite and Market Positioning
MSIM’s ETF platform is composed of a diverse set of products designed to cater to various investor needs. The platform currently includes 17 ETFs, categorized into three distinct branding segments:
- Eaton Vance-Branded Fixed Income Strategies – A total of eight actively managed fixed-income ETFs, including EVYM, focused on municipal bonds and other fixed-income opportunities.
- Parametric-Branded Equity and Options-Based Strategies – Three ETFs utilizing factor-based and options-enhanced investment methodologies.
- Calvert-Branded ETFs – Six ETFs focusing on sustainable and responsible investment themes, aligning with Calvert’s long-standing commitment to ESG principles.
Since its launch in early 2023, MSIM’s ETF business has grown significantly, reaching $4.7 billion in assets under management (AUM). This rapid growth signals strong investor confidence in MSIM’s ETF offerings, particularly in actively managed fixed-income strategies, which have attracted over $600 million in net inflows since the beginning of the year.
The Appeal of Active Fixed Income ETFs
The growing demand for actively managed fixed-income ETFs reflects a broader trend in the investment industry. Traditional passive ETFs track specific indexes, providing broad market exposure with minimal cost. However, active fixed-income ETFs like EVYM offer a more strategic approach, allowing portfolio managers to make discretionary decisions based on market conditions, credit risk, and interest rate movements. This flexibility is particularly valuable in the municipal bond market, where credit quality, liquidity, and tax treatment vary widely among issuers.
Investors are increasingly recognizing the benefits of active management in fixed-income investing, as evidenced by the strong inflows into MSIM’s active fixed-income ETFs. In an environment of economic uncertainty and shifting interest rates, active management can play a crucial role in optimizing portfolio performance and managing downside risk.
Why Investors Should Consider EVYM
For investors seeking tax-advantaged income with potential for higher yields, EVYM presents a compelling option. Here are a few key reasons why EVYM may be an attractive addition to an investment portfolio:
- Tax Efficiency: The fund’s focus on municipal bonds provides income that is exempt from federal income tax, enhancing after-tax returns.
- High Yield Potential: As a high-yield municipal strategy, EVYM targets bonds that offer greater income opportunities compared to traditional municipal bond funds.
- Active Management: The fund benefits from MSIM’s extensive research capabilities and expertise in municipal bond investing, ensuring that investments are selected and adjusted to optimize risk-adjusted returns.
- ETF Structure Advantages: Compared to traditional mutual funds, ETFs offer greater liquidity, transparency, and potential cost savings for investors.
