MFS Investment Eyes ETF Market Entry: A Strategic Move

Know more about a strategic move of MFS investment as it eyes ETF market entry

100-year-old MFS Investment Management, which launched the first mutual fund and is now the largest fund provider in terms of assets under management, has filed a registration statement with the SEC on Monday to list its first ETFs and make its entry into the ETF Market.

According to the filing, MFS, which has not previously listed ETFs, plans to launch five active ETFs of its well-known mutual fund strategies. MFS's initial suite of ETFs would include MFS Active Value, MFS Active Growth, MFS Active International, MFS Active Core plus bond, and MFS Active Intermediate bond.

MFS first declared its intention to introduce ETFs in November of last year. An MFS spokesperson said the company has been "exploring the potential of ETFs" for several years.

Regarding the Possibilities of ETFs, Mutual funds have been considered a means of protecting assets as ETFs gain a competitive edge over them in terms of costs and liquidity. According to Morningstar, active exchange-traded funds (ETFs) have experienced a significant increase in popularity since 2018, with an annualized growth rate of over 30%.

According to an MFS spokesperson, "We're beginning to see evidence of a long-term client appetite for actively managed, transparent ETFs." The firm expects the funds to be available at the end of 2024 or the beginning of 2025.

While MFS' active ETF suite is likely to entice financial advisors and retail investors who are looking for cheaper versions of their core mutual fund products, MFS is relatively late to the ETF party, which has been dominating the investment world in recent years.

The ETF industry launched 520 funds in 2023 and had US assets under management (AUM) of nearly $9 billion at the end of Q1 2024.

The competition for new assets can be driven by fees, experience, and a company's distribution network. But legacy asset managers can succeed. Morgan Stanley, another traditional mutual fund provider that launched its first ETF just over a year ago, has gained US$2 billion in assets.

The mark of 100 years is completed this year since MFS launched the world's first open-ended mutual fund, MIT, in March of 1924. Since then, MFS has grown its assets to $630 billion across a portfolio that includes mutual funds, small market accounts (SMA), and collective investment trusts (CIT). According to MFS, it also played a role in the development of the first investment company law, the 1940 Investment Company Act, which Congress proposed.

According to a company spokesperson, MFS does not plan to transform any of its mutual funds into exchange-traded funds (ETFs).