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Morgan Stanley’s Increasing Exposure in ETFs

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Leverage and flexibility

Morgan Stanley’s (MS) stock has appreciated by 24% CAGR (compound annual growth rate) over the past three years. The company has also rewarded its unitholders with regular dividends fetching 1%–2% yields during the same period.

The company is more than 80% owned by pension funds, corporates, and institutions.

ETFs (exchange-traded funds) focusing on investment bankers and financials have increased their exposure in diversified financial service companies like Morgan Stanley (MS), Goldman Sachs Group (GS), and Bank of America Corporation (BAC). So far, ETFs have shown a general preference for companies like Morgan Stanley over alternative asset managers like The Blackstone Group (BX) and Carlyle Group (CG).

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Sector-specific options

Major ETFs that have exposure in Morgan Stanley’s stock—ETFs that focus on financials, asset management, brokerages, and investment bankers—include the Financial Sector Select SPDR (XLF), the Vanguard Financials ETF (VFH), the iShares US Broker-Dealers ETF (IAI), and the iShares Dow Jones US Financial Services ETF (IYG).

Broker-dealer ETFs have allocated the highest portion of capital in Morgan Stanley’s stock.

Other major ETFs that have deployed funds in the Morgan Stanley’s stock include the SPDR S&P 500 (SPY), the iShares Core S&P 500 ETF (IVV), the iShares Russell 1000 Value ETF (IWD), the iShares S&P US Preferred Stock Index Fund ETF (PFF), and the iShares S&P 500 Value ETF (IVE).

Financial institutions and ETFs are betting on the Morgan Stanley’s business model mainly due to the increased diversification of the company’s product offerings.

Morgan Stanley’s diversification through wealth management, banking, trading, and advisory services can offer boosts to earnings amid the changing interest rates, volatility, and growth scenarios across the US and the world.

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