Morgan Stanley Investment Management’s active senior loan ETF is a compelling offering in the current environment.
Investors have increasingly looked to senior loan ETFs in recent history instead of high yield bonds. A senior loan ETF can potentially provide an attractive income stream without the same interest-rate sensitivity as high yield corporate bonds.
The Eaton Vance Floating-Rate ETF (EVLN ) is actively managed, seeking to provide a high level of current income through a portfolio comprising floating-rate credit investments. The fund combines MSIM’s bottom-up approach with the additional tax benefits and intraday liquidity provided by the ETF structure.
“The senior loan market can often be inefficient, which is why some advisors turn to active management. These managers have a team of analysts sorting through the universe to find investment ideas,” said Todd Rosenbluth, head of research at VettaFi.
MSIM’s investment team, dedicated exclusively to loan management, manages the active senior loan ETF. They notably provide the same approach to credit management and portfolio construction as they do with mutual funds.
The majority of EVLN’s holdings will be the floating-rate corporate term loans at the center of the team’s investment capability. Additionally, supporting allocations to high yield bonds and collateralized loan obligation debt tranches will broaden the opportunity set.
Launched about on February 8, 2024, EVLN has $53 million in assets under management.
Eaton Vance’s Active Senior Loan ETF Charges Less Than Category Peers
Importantly, active management needn’t be costly. EVLN charges less than many of the largest funds in the senior loan ETF segment.
The fund charges 60 basis points, significantly less than two well-known category peers: the SPDR Blackstone Senior Loan ETF (SRLN ) and the First Trust Senior Loan Fund (FTSL ).
SRLN and FTSL, both actively managed, charge 70 basis points and 87 basis points, respectively.
Finally, while the Invesco Senior Loan ETF (BKLN ) is passively managed, it’s worth highlighting as the largest fund in the senior loan ETF category. Notably, at 65 basis points, the passive ETF charges more than EVLN.
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