Morgan Stanley Investment Management is doubling down on ESG and social money market funds. The manager filed a Prospectus Supplement to launch CastleOak Share Classes for its Morgan Stanley Institutional Liquidity Funds. The filing, which includes new classes for the MSILF US Government and MSILF ESG Money Market Portfolios, tells us, "CastleOak Shares of the Fund are only available to clients of CastleOak Securities, L.P. ... who at the time of initial purchase make a minimum purchase of $5 million. You may not be subject to these minimum investment requirement under certain circumstances." The new CastleOak Shares will have a charged expense ratio of 0.20% after waivers. (Note: See below for more on our Bond Fund Symposium, which takes place online today and tomorrow afternoon (1-4pm). Attendees may access materials via our BFS'21 Download Center.)
CastleOak Securities, which also runs a private-label version of State Street's Fund Connect portal, Money Fund Access, is listed among the Federal Home Loan Bank's D&I (diversity and inclusion) Dealer Group. This list also includes: Academy Securities, Blaylock Van, Loop Capital Markets, MFR Securities, Mischler Financial Group and Stern Brothers. Once these go live, Morgan Stanley's CastleOak shares will join BlackRock's Mischler, JPMAM's Academy, Invesco's Cavu and Goldman's Drexel Hamilton shares as co-branded, D&I broker distributed options for investors.
Morgan Stanley's filing makes it the first fund group to take all three approaches to ESG and Social MMFs -- an ESG Prime MMF, a Social Govt MMF, and share classes distributed via diverse dealers. The firm recently entered the "social" Government space. (See our Feb. 25 News, "Wells Fargo Sells Asset Management Unit; Morgan Stanley Gets Social.") An earlier Prospectus filing for the $9.9 billion Morgan Stanley Institutional Liquidity Funds Government Securities Portfolio (MUIXX) tells us, "The Adviser will generally seek to place purchase orders for the Fund with broker-dealers that are owned by minorities, women, disabled persons, veterans and members of other recognized diversity and inclusion groups and will place the majority of the aggregate dollar volume of the Fund's purchase orders for government agency securities obtained via auction or window through such broker-dealers, subject in each case to the Adviser's duty to seek best execution for the Fund's orders."
Though the new CastleOak share class is a "social" offering, this latest filing also includes Morgan Stanley's ESG criteria, which explains, "The Fund's investment process incorporates information about ESG issues via an integrated approach within the Adviser's fundamental investment analysis framework.... The Adviser has proprietary ESG-scoring methodologies that explicitly consider the risks and opportunities ESG factors pose to money market instruments. By combining third-party ESG data with proprietary views, the Adviser creates unique scoring methodologies that it applies to issuers.... The Fund may invest in green commercial paper ... issued by companies that would otherwise be subject to fossil fuel exclusions so long as the Adviser has determined that the proceeds will not be used to finance fossil fuel generation capabilities. In analyzing whether an issuer meets any of the criteria described above, the Adviser may rely upon, among other things, information provided by an independent third party."
It continues, "After applying the above exclusion screens, the Adviser calculates proprietary ESG scores for the remaining issuers based on a number of variables, such as environmental, social, governance, controversy and ESG momentum factors. The Adviser then sets minimum ESG score thresholds. Only issuers with an ESG score above a minimum threshold will be considered for investment by the Fund, thus eliminating those issuers with the lowest ESG performance. The Adviser's minimum ESG score thresholds may be adjusted from time to time, provided that a subset of issuers are always excluded by ESG factors."
Crane Data currently tracks 16 Social, ESG or Veteran MMFs with $43.2 billion (as of 2/28/21). Social or "Impact" MMFs (all Govt MMFs) total $28.4 billion and include: Federated Hermes Govt Ob Tax-M IS (GOTXX, $7.3B), Dreyfus Govt Sec Cash Instit (DIPXX, $4.4B), Goldman Sachs FS Fed Instr Inst (FIRXX, $3.6B), Morgan Stanley Inst Liq Govt Sec Inst (MUIXX, $9.9B) and Northern Instit Govt Select Williams Cap (WCGXX, $3.1B). Veteran-Affiliated MMF Share Classes total $5.5B and include: Goldman Sachs FS Govt Drexel Hamilton (VETXX, $2.2B), JPMorgan 100% US Trs MM Academy (JACXX, $1M), JPMorgan Prime MM Academy (JPAXX, $911M), JPMorgan US Govt MM Academy (JGAXX, $2.3B) and JPMorgan US Trs Plus MM Academy (JPCXX, $1M); ESG MMFs (All Prime) total $9.3B and include: BlackRock LEAF Direct (LEDXX, $1.3B), BlackRock Wealth LEAF Inv (PINXX, $2.4B), DWS ESG Liquidity Inst (ESGXX, $335M), Morgan Stanley Inst Liq ESG MMP I (MPUXX, $3.7B), State Street ESG Liq Res Prem (ELRXX, $1.1B) and UBS Select ESG Prime Inst Fund (SGIXX, $431M). (Several other funds are pending or just went live, including: HSBC ESG Prime, BlackRock's Mischler shares and Invesco's Cavu shares.)
For more on ESG and "Social" MMFs, see these Crane Data News pieces: "JP Morgan Launches "Empower" Share Class to Support Minority Banks" (2/24/21); "MFI Awards for Top Funds of 2020; More on Cavu Securities, ESG MMFs" (1/20/21); "Invesco Files for Cavu Secs Class" (12/18/20); "ESG and Social MMF Update: Mischler News, Green Deposits, Reg Debate" (12/4/20); "Academy Launches Treasury MMFs" (10/22/20); "Goldman Launches Social Class; Tiedemann Adds FICA; CS Green ABCP" (1/24/20); "Mischler Financial Joins "Impact" or Social Money Market Investing Wave" (12/5/19); and "Dreyfus Launches "Impact" or Diversity Government Money Market Fund" (11/21/19).
In other news, we hope you'll join us for Crane's Bond Fund Symposium (Online), which takes place this afternoon and tomorrow (3/25-26) from 1-4pm. Bond Fund Symposium offers a concentrated and affordable educational experience for bond fund and fixed-income professionals with a focus on the ultra-short sector of the market. Registrations are $250. See the agenda and details here. Portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of bond funds and fixed-income investing will benefit from our comprehensive program. Recorded sessions and PowerPoints will be available for attendees and subscribers via our "Bond Fund Symposium 2021 Download Center. (Many have already been posted.)
Finally, we've officially pushed back the dates for our big show, Money Fund Symposium, which is now scheduled for Sept. 21-23, 2021 in Philadelphia. After shutting down in-person conferences for over a year, Crane Data is excited to host live events once again. We hope and expect that most travel restrictions will be lifted by fall, but of course stay tuned. Crane's Money Fund Symposium will take place at The Philadelphia Loews Hotel. The preliminary agenda is available and registrations are now being taken. (We'll refund or credit any cancellations for any reason.)
Visit the MF Symposium website for more details. Registration is $750, and discounted hotel reservations are available. We hope you'll join us for today's BFS online and in person for MFS in Philadelphia! We'd like to encourage attendees, speakers and sponsors to register and make hotel reservations early, but we of course understand if you need to wait for travel restrictions to ease. E-mail us at info@cranedata.com to request the full brochure.
