A press release entitled, "Morgan Stanley Investment Management and CastleOak Securities, L.P. Debut New Share Class," tells us, "Morgan Stanley Investment Management ('MSIM') and CastleOak Securities, L.P. ('CastleOak'), an industry-leading, minority-owned, boutique investment bank are pleased to announce an expansion of their long-standing partnership by debuting two new co-branded share class offerings that provide clients an expanded menu of short-term cash investment services. As clients increasingly look to maximize their social impact, these two new products provide a solution that brings together CastleOak's strong institutional relationships and Morgan Stanley's unparalleled investment experience." (For more on the MS CastleOak Shares, see our recent Crane Data News: Morgan Stanley's Wachs, Crane Talk ESG, Social Money Funds on Webinar (5/4/21), and Morgan Stanley Files for CastleOak Shares; Bond Fund Symposium Today (3/25/21).)
It continues, "CastleOak shares of the Morgan Stanley Institutional Liquidity Funds Government (ticker COSXX) and ESG Money Market Fund Portfolios (ticker OAKXX) are now available, enabling clients to help meet their primary cash investment goals of principle preservation and liquidity, while supporting their Diversity & Inclusion (D&I) efforts in a transparent and meaningful way."
David R. Jones, President & CEO of CastleOak Securities, L.P., comments, "Morgan Stanley Investment Management has been an outstanding partner.... The Morgan Stanley team recognized the expertise, experience, and relationships of an independent investment bank like ours. Launching these new share classes gives our clients yet another way to meet their ESG goals without compromising the standards they expect when choosing where to put their money to work." The release also says, "The addition of new share classes underscores CastleOak's ongoing efforts to expand its Money Fund Access web-based liquidity solutions platform."
Morgan Stanley's Fred McMullen adds, "This partnership is a unique opportunity for Morgan Stanley Investment Management to team up with a best-in-class firm like CastleOak to deliver treasury management solutions that can help companies advance their D&I objectives.... We are proud to be working together on this exciting product offering."
In related news, State Street Global Advisors' Will Goldthwait spoke yesterday at the 2021 New England AFP Annual Conference," and briefly discussed ESG and D&I in money market funds during a presentation. When asked, "Is ESG here to stay?" Goldthwait responds, "Yeah, without a doubt it is. There's no question in my mind. I think the way it's in cash right now will change.... I'm not alone in saying this [but] ESG ultimately is going to be something that just is part of your overall investment process."
He tells us, "I think cash is a great example of how this is happening. We use a proprietary R-factor score, what we call the responsibility factor, and we have that score on all of the credits on our credit approved list. Now, the R-factor doesn't cover 100 percent of the credits, but for all of our credits on that credit approved list that have an R-factor score, that goes into our decision-making process, even if it's a non-ESG fund. We can see that score, we're looking at it, and we're trying to reward those companies that have higher R-factor scores. So, in a way, even though we only have one ESG fund in the U.S. right now that's up and running, we are looking at that R-factor across our entire investment process.... So, I think that's the evolution of ESG in cash."
Goldthwait continues, "We've been managing ESG portfolios since 1985 in the equity space, and the fixed income space since 1995. And typically, what that is, is exclusionary methods. You take a certain sector with certain companies and you exclude them from the portfolio and you set up an index that has those credits or those sectors excluded, and then that's what you benchmark against.... Now what we're seeing is a tilt. So rather than an exclusionary basis, there's a tilt towards those that have higher ESG scores, or in our case higher R-factor scores. There's no reason that we can't apply that across our entire cash strategy."
He says to the NEAFP, "The other thing I'll mention regarding D&I and minority broker-dealers is, we're looking very hard at this. We had already been trading with minority broker-dealers.... So we're just increasing those efforts, and we're just trying to spread that across all of our Government and Treasury [MMF] strategies. [We're] looking hard at those trade volumes, looking hard at those metrics and applying that really across all of our strategies."
Finally, Goldthwait adds, "Now, we have to be thoughtful about that. Right? I mean, as everyone knows, Government funds are huge, they're billions and billions and billions of dollars. So you can't take a smaller broker-dealer and overwhelm them with huge tickets. You have to be very thoughtful and considerate and sort of help them grow, and that's what we're committed to doing. We want to see that part of the broker-dealer community grow and we want to try to help them do that." (Note: The New England AFP online conference continues today, and ICI's 2021 Virtual General Membership Meeting also starts today.)
For more on ESG and "Social" MMFs, see also: Northern Renames Diversity Shares Siebert Williams; Safened Platform (4/20/21); JP Morgan Launches "Empower" Share Class to Support Minority Banks (2/24/21); Invesco Files for Cavu Secs Class (12/18/20); ESG and Social MMF Update: Mischler News, Green Deposits, Reg Debate (12/4/20); Goldman Launches Social Class; Tiedemann Adds FICA; CS Green ABCP (1/24/20); Mischler Financial Joins "Impact" or Social Money Market Investing Wave (12/6/19); and Dreyfus Launches "Impact" or Diversity Government Money Market Fund (11/21/19).
