Morgan Stanley's ETF Platform Surpasses $10 Billion: A Strategic Play in Active and Systematic ETFs

Morgan Stanley's ETF platform has emerged as a formidable force in the exchange-traded fund (ETF) landscape, surpassing $10 billion in AUM as of December 2025. This milestone underscores the firm's strategic focus on active and systematic ETFs, which are increasingly appealing to investors seeking diversification, risk management, and tailored exposure to evolving market dynamics. For investors, the platform's rapid growth-from six strategies in 2023 to 18 products by mid-2025-reflects a commitment to innovation and adaptability, positioning Morgan Stanley as a key player in the next phase of ETF evolution.

Strategic Expansion: Active and Systematic ETFs as a Differentiator

Morgan Stanley's ETF platform has prioritized active management and systematic strategies, areas where traditional passive ETFs often fall short. The firm's lineup includes 11 actively managed fixed income ETFs, five Calvert-branded ESG ETFs, and three Parametric-branded ETFs, alongside 10 Eaton Vance-branded fixed income products. These offerings cater to a spectrum of investor preferences, from income-focused strategies to ESG-aligned portfolios. Notably, the Parametric Equity Plus ETF (PEPS), launched in November 2025, exemplifies the platform's innovation. PEPS combines a core equity portfolio of U.S. large-cap stocks with an options-based strategy that sells out-of-the-money call options on the S&P 500 and buys put options to hedge downside risk. This systematic approach aims to enhance returns while mitigating volatility, a compelling feature for risk-conscious investors.

The platform's success is further bolstered by its ability to attract capital rapidly. PEPS garnered over $20 million in inflows at launch, highlighting strong demand for strategies that blend active management with structured risk controls. Such innovations align with broader market trends, as investors increasingly seek solutions that balance growth potential with downside protection-a need amplified by macroeconomic uncertainties and rising interest rates.

Diversification and ESG: Broadening Access to Niche Strategies

Morgan Stanley's ETF platform emphasizes diversification across asset classes, geographies, and investment themes. By mid-2025, the platform had expanded to include derivative income, hedged equity, and responsible investing strategies, offering investors tools to navigate fragmented markets. For example, the Calvert-branded ETFs integrate ESG principles, addressing the growing demand for sustainable investing without compromising on performance. Meanwhile, the Eaton Vance Income Opportunities ETF, converted from a mutual fund in 2025, provides access to high-yield fixed income opportunities, a critical component for portfolios seeking income in a low-yield environment.

This diversification is not merely thematic but structural. The platform's systematic liquid alternatives, such as those leveraging alternative risk premia (ARP), offer exposure to factors like size, value, and momentum through rules-based strategies. These products enable investors to access diversifying returns without relying solely on manager skill, a key advantage in volatile markets. By isolating specific risk factors, ARP strategies can complement traditional equity and bond holdings, enhancing portfolio resilience.

Beyond diversification, Morgan Stanley's ETF platform distinguishes itself through tax-aware strategies and customizable solutions. The Parametric Custom Active platform, for instance, integrates tax-loss harvesting with active management, tailoring strategies to investor preferences such as sector exposure and risk budgets. This approach is particularly valuable for affluent investors, who prioritize after-tax returns and seek to minimize capital gains liabilities. Similarly, the firm's systematic liquid alternatives provide cost-effective access to alpha-generating strategies, with daily liquidity that traditional alternatives often lack.

These innovations align with Morgan Stanley's broader market outlook. The firm projects that U.S. equities will outperform global peers in 2026, driven by AI-related capital spending and supportive policy conditions. With the S&P 500 forecasted to reach 7,800 by year-end 2026-a 18% gain from current levels-investors may benefit from exposure to strategies that capitalize on domestic growth while hedging against global risks.

Conclusion: A Compelling Case for Portfolio Inclusion

Morgan Stanley's ETF platform has not only achieved a $10 billion AUM milestone but also demonstrated a clear strategic vision: to offer investors a suite of active, systematic, and diversified solutions. From tax-optimized SMAs to ARP-driven alternatives, the platform addresses modern portfolio challenges with sophistication and scalability. For investors seeking to enhance returns, manage risk, and align with emerging trends like ESG and AI-driven growth, MSIM ETFs present a compelling addition to diversified portfolios. As the firm continues to expand its product lineup and refine its strategies, the platform's focus on innovation and investor-centric design positions it as a key player in the evolving ETF ecosystem.