In a filing for ETF Operational Relief with the Securities and Exchange Commission on January 29, Morgan Stanley IM said it was pursuing “multi-class structure” open-ended products, which would see the firm add an ETF share class to its existing mutual funds.
Morgan Stanley IM is now the fifth firm to apply for similar relief, following the most recent applications from Dimensional Fund Advisors and F/m Investments in August 2023, and Fidelity in October. All current applications remain pending.
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In the filing, Morgan Stanley referenced the SEC’s approval of the Vanguard Group’s move in 2000 to offer the its portfolio range, and how this was extended over the years to allow the ETF giant to include domestically focused funds and in 2007, bond index funds.
Collectively, Morgan Stanley IM referred to this as the “‘ Vanguard Orders'” and said that because of these exemptions, “Vanguard has become one of the major sponsors of index-based ETFs, with more than $2trn in assets invested through exchange-traded classes, representing almost 30% of all ETF assets in the United States”.
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In its application, Morgan Stanely IM will said its ETFs will be available to a “variety” of “long-term shareholders”, including “direct retail investors, clients represented by independent financial advisors, broker-dealers, employer-sponsored retirement plans or other intermediaries (‘financial intermediaries’), and institutional investors”.
In the filing, the firm said the funds would “pursue distinct investment objectives and strategies” and will be “chosen where the adviser believes the multi-class structure is in the best interest of the ETF class and mutual fund class individually, and the fund as a whole”.
