Morgan Stanley Investment Management plans to convert eight municipal bond mutual funds with nearly $10 billion in assets into ETFs, subject to shareholder approval.

Seven funds would become newly created actively managed ETFs, while one would be reorganised into the existing Eaton Vance Short Duration Municipal Income ETF (NYSE:EVSM).

The move would expand MSIM’s municipal ETF lineup across different durations and income profiles. It follows the firm’s earlier fixed-income mutual fund conversions. Eaton Vance Total Return Bond ETF (NYSE:EVTR), for instance, grew from $363 million to more than $6 billion in assets after its March 2024 conversion, according to Morgan Stanley.

QUICK CONTEXT: Active Management Moves Into Muni ETFs

Municipal bond ETFs have become a growing part of the fixed-income ETF market, giving investors access to portfolios of tax-exempt municipal debt through the ETF structure. Morgan Stanley’s planned conversions would bring eight established municipal strategies, each with at least 15 years of performance history, into that wrapper.

The proposed lineup would cover national municipal bonds as well as California and New York markets, alongside ultra-short, short-duration and high-yield municipal strategies. That gives Morgan Stanley a broader municipal ETF offering without building every strategy from scratch as a new fund.

The move also highlights the broader shift of traditional mutual-fund strategies into ETFs. Morgan Stanley said its ETF and ETP platform, launched in 2023, has grown to more than $16 billion across 22 products.

Photo: Shutterstock