Morgan Stanley launches active floating-rate loans ETF

Feb 12th, 2024 | By | Category: Fixed Income

Morgan Stanley Investment Management (MSIM) has introduced a new actively managed fixed income ETF, carrying the ‘Eaton Vance‘ brand, which invests broadly across the floating-rate debt market.

Andrew Sveen, Chairman of Fixed Income and Head of Floating-Rate Loans at Eaton Vance.

Andrew Sveen, Chairman of Fixed Income and Head of Floating-Rate Loans.

The Eaton Vance Floating-Rate ETF (EVLN US) has been listed on NYSE Arca with an expense ratio of 0.60%.

Floating-rate bonds offer coupons that adjust to reflect changes in interest rates. Compared to traditional bonds which pay fixed coupons, this feature makes floating-rate securities far less susceptible to losing value when interest rates increase.

The new fund, which seeks to deliver high current income with a secondary objective of capital appreciation, is managed by Andrew Sveen, Chairman of Fixed Income and Head of Floating-Rate Loans; Ralph Hinckley, Managing Director; Jake Lemle, Managing Director; and Brandon Matsui, Executive Director. Collectively, the four team members have 95 years of industry experience.

The ETF invests primarily in senior loans but may also allocate to collateralized loan obligations (CLOs) as well as a range of different junior loans, often selecting securities rated below investment grade.

When analyzing securities, Eaton Vance considers factors including the issuer’s financial strength, operational history, responsiveness to economic shifts, management effectiveness, debt maturity profile, financing needs, interest coverage, earnings potential, ESG profile, and the valuation of anticipated cash flows.

The strategy encompasses systematic risk management to balance income and growth potential with capital preservation.

Anthony Rochte, Global of Head of ETFs at MSIM, commented: “We are pleased to expand MSIM’s ETF Platform with EVLN and continue to deepen our offering with strategies that reflect our differentiated investment capabilities and client-focused approach. A pioneer in senior loan investment management, the industry-leading team established its loan platform thirty-five years ago and today manages over $30 billion in client assets globally. This strategy makes use of that deep loan market expertise and the in-demand ETF structure to meet the needs of a broader range of income clients.”

Andrew Sveen added: “EVLN delivers our longstanding approach to loan investing in a tradable format. The strategy combines our time-tested bottom-up approach with the additional tax benefits and intra-day liquidity that the ETF structure provides.”

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