Morgan Stanley Seeks to Convert Nearly $10B of Muni Funds Into ETFs
Morgan Stanley Investment Management plans to seek shareholder approval to convert eight municipal bond mutual funds holding nearly $10 billion into exchange-traded funds, substantially expanding its lineup of actively managed municipal ETFs.
The mutual funds’ boards of trustees approved the proposed reorganizations, which remain subject to shareholder votes and other closing conditions. Seven funds would convert into newly created ETFs, while the Eaton Vance National Limited Maturity Municipal Income Fund would merge into the existing Eaton Vance Short Duration Municipal Income ETF, which trades under the ticker EVSM.
The proposed lineup would include national, California and New York municipal strategies, along with ultra-short, short-duration, high-yield and broader municipal-opportunities funds.
“The appetite for actively managed municipal ETFs is growing,” said Ally Wallace, global head of ETFs at Morgan Stanley Investment Management. She said the conversions would give investors access to strategies spanning the municipal yield curve and credit spectrum through a more transparent and accessible structure.
All eight mutual funds carry four- or five-star Morningstar ratings and have operating histories exceeding 15 years, according to Morgan Stanley. The funds represented nearly $10 billion in combined assets under management as of Aug. 31.
Morgan Stanley previously converted five fixed-income mutual funds into ETFs. Eaton Vance Total Return Bond ETF grew from $363 million at its March 2024 conversion to more than $6 billion as of Aug. 31, 2026. EVSM, which also converted in March 2024, more than tripled its assets.
Craig Brandon, co-head of municipal investments, cited elevated yields, favorable supply-and-demand conditions and solid credit fundamentals as supportive factors for the market.
Morgan Stanley launched its ETF platform in 2023. It has since grown to more than $16 billion across 22 ETFs and exchange-traded products, including five Calvert ETFs, three Parametric ETFs, 11 Eaton Vance fixed-income ETFs and three Morgan Stanley digital-asset products.