Latest Morgan Stanley ETF Offers Equity Strategy

The actively managed fund has a net expense ratio of 0.29%. Its goal is to offer long-term capital appreciation for its investors. 

“This latest ETF strategy combines Parametric’s industry-leading capabilities in options-based strategies and direct indexing to offer US large-cap equity exposure plus additional upside potential,” noted Thomas Lee, co-president and chief investment officer at Parametric. “We are pleased to add to the MSIM ETF platform and meet client demand for our investment expertise in a vehicle that offers daily liquidity at a lower cost.”

The strategy behind PEPS utilizes a multifaceted approach. First, the fund curates a base portfolio of equities, mostly using companies within the Solactive GBS United States 500 Index. Companies within this Solactive index are weighed by market cap. 

Right now, mega-cap tech stocks such as Nvidia hold the lion’s share in the S&P 500. Utilizing a market cap-weighted index can prove highly beneficial for long-term returns.

Parametric’s options-based strategy then bolsters returns from the equity portfolio. While the equity portfolio builds long-term value, PEPS also sells out-of-the-money call option contracts on the S&P 500 Index. 

With the large-cap equities serving as a ballast, the call options from PEPS can foster additional income. By focusing on two different methods of gaining value from the S&P 500, PEPS can help maximize potential returns from large-caps.

A risk management strategy further protracts the potential gains from Parametric’s equity portfolio and options. PEPS will buy put options on the S&P 500 Index in order to hedge against potential large-cap losses.

As such, PEPS can be an excellent choice for investors seeking equity upside while remaining vigilant of risk. The fund’s active management team further buoys this security, by helping maneuver the portfolio to respond to economic news and market trends.  

“MSIM’s ETF platform continues to expand by introducing differentiated strategies that address the range of investor needs for accessing market exposures within an ETF structure,” added Brian Weinstein, head of global markets at Morgan Stanley Investment Management. “We are pleased with the strong growth to over $3.3 billion in ETF assets from both institutional and retail investors in less than two years and remain focused on building a comprehensive platform that reflects our distinct capabilities across asset classes.”

Within less than two weeks of the fund’s initial launch, PEPS has seen resounding demand from investors. Already, the fund has seen well over $20 million in inflows since November 8.

For more news, information, and analysis, visit The ETF Yield Channel.