Ignites on New MS Ultra-Short
Ignites posted an article, "Morgan Stanley's Ultra-Short Aims to Eat Money Funds' Lunch." It says, "Morgan Stanley Investment Management has launched its Ultra-Short Income Portfolio, which the firm is marketing as an alternative to money market funds, as those products are expected to see big asset shifts in coming months.... In addition, when the SEC reforms are in effect, prime funds will have to manage to shorter duration targets and maintain greater liquidity, which will likely cause yields to decrease, Jonas Kolk, CIO for global liquidity and one of the fund's two portfolio managers, tells Ignites. Morgan Stanley's ultra-short fund may "fill a void" in this new environment by providing a return that is similar to what prime funds have historically delivered but probably will not be able to muster once the reforms take effect, says Kolk.... Morgan Stanley's new fund is an "old-style money fund," says Peter Crane, CEO of Crane Data, referring to the fact that it has a maximum weighted average maturity of 90 days. The SEC's 2010 reforms lowered the required maximum 90-day WAM to a 60-day WAM. Conservative ultra-short funds are an emerging subset within the broader ultra-short category, and Morgan Stanley's new offering is among the first of its kind, says Crane. Crane Data has launched a conservative ultra-short bond fund index that contains 18 products, but the company may further segment this group because of substantial differences among products within it, says Crane. "We would argue that there are nowhere near 18 competitor funds that have the same type of conservative investment standards that we do," says Morgan Stanley's Kolk. The fund's conservative approach is a "tremendous marketing tool," he says, noting that Fitch has given it a triple-A rating. `State Street and Deutsche have similar products in registration, says Crane. Many firms are waiting to see how existing conservative ultra-short funds perform and whether they attract assets before moving ahead with their own rollouts, he says. "There are some out there that think these are going to be more popular than prime institutional money market funds," he says. Rising interest rates could also spur more conservative ultra-short funds to come to market, says Sarah Bush, head of Morningstar's fixed-income manager research analyst team. The 18 funds that make up Crane Data's Conservative Ultra-Short Index have returned 0.26% year-to-date through March, 0.43% for the one-year period, 0.40% for the three-year period and 0.54% for the five-year period. The group represents $26.6 billion in total assets. The broader category of ultra-short bond funds represents $71.5 billion, Morningstar data shows.... Fidelity's Conservative Income Fund, launched in 2011, is among the biggest of the so-called conservative ultra-short funds in Crane Data's index. That fund represented more than $4 billion in assets as of the end of March, according to Crane Data. Among the new launches in the subcategory of ultra-shorts is Invesco's Conservative Income Fund, which went live in July 2014 and has $83 million in assets, according to Crane Data."
