Decades After Coining 'ETF,' Morgan Stanley Is Finally Launching Its Own

While the potential funds would be the first modern-day ETFs for Morgan Stanley, the firm has a long history with the industry. The bank was home to some of the world’s first ETFs in the 1990s, and was where Bob Tull, then a vice president at the bank, and a team of lawyers came up with the term “exchange-traded fund.”

The bank’s influence on the industry didn’t stop there. In 1996, Morgan Stanley was granted regulatory approval to launch 17 ETFs known as World Equity Benchmarks (WEBS), with Barclays Plc as the fund manager. Barclays later bought WEBS and rebranded the products as “iShares,” and the business was sold to BlackRock in 2009.

Thanks largely to iShares, BlackRock is now the biggest ETF issuer in the world — underscoring the challenge for Morgan Stanley. There are now almost 3,000 U.S. funds, and while launches are booming, most assets reside with products that are more than five years old.

The applications land at a rocky moment for environmental, social and governance minded funds. The ESG category has raked in roughly $4.5 billion so far in 2022, a massive slowdown after two straight years of more than $30 billion in inflows a year, Bloomberg data show.

“I’m surprised they went the ESG route, just given how much the investment community has seemingly cooled on ESG prospects,” said Todd Sohn, an ETF strategist at Strategas Securities. “No doubt the team is talented, so I’m curious how much AUM these funds bring in the first few months.”

(Photo: Victor J. Blue/Bloomberg)