The global financial service firm Morgan Stanley recently reported that they will cease on selling mutual fund offerings from Vanguard’s, which is the world’s biggest and lending and investment company. As of Monday, the firm’s clients won’t be able to sell any new mutual funds from Vanguard. This is one of the steps the firm uses to cut its mutual fund offerings.
The decision to cut the mutual fund offerings by 25% to 2,300 was announced last month, according to Morgan Stanley’s spokeswoman Christy Jockle on an email, the settlement is to eliminate less popular and underperforming funds and that Vanguard’s fund makes up just a small percentage of its client’s assets in mutual funds.
Further Clarification on MS, Vanguard
There will no longer be any new mutual funds from Vanguard, but according to recent reports Morgan Stanley will continue to offer Vanguard’s exchange-traded funds. The firm is also not forcing any of their clients to sell or liquidate their Vanguard mutual funds, and their clients can also add more money to with their existing Vanguard investment till the first quarter of 2018.
Vanguard’s net flow for the past 12 months was at $342 billion and the majority of them falling to into its exchange-traded funds and passively managed index funds. According to Vanguards spokesperson Emily Farrell, it was very “unfortunate” that the firm has to drop its mutual funds. On the other hand, Vanguard’s ETF’s will continue in the same manner and will probably attract more attention as usual. Farrell ended saying that "We will definitely continue to see growth."
The firm houses 15,000 brokers, and just after entering 2017, they have already axed their mutual-fund offerings; this, according to the firm is an act of compliance with the Labor Department’s fiduciary rule requiring brokers to act in the best interest of retirement savers. According to Ben Phillips of Casey Quirk, "the large distributors in the mutual fund world are centralizing their powers as gatekeepers and using it."
Analysts on Vanguard, Morgan Stanley Debacle
According to analyst Matt Levine, “If you enjoy buying Vanguard investments, you will probably want to take your business elsewhere, but fortunately there are lots of investing stores that sell Vanguard products. (Or you could just shop online. That's what I do, for investments and everything else that I buy; a lot of my money is in Vanguard funds, but it would never have occurred to me to walk into a retail broker's office to buy them.)”
Michael Wong of Morningstar said that "Vanguard, among the fund world, is a household name, so I would assume there would be some client demand for it," More analysts are theorizing that the move from Morgan Stanley means that it is actually denying the investment company any shelf space, which then translates to the asset manager to never has and never will pay for distributions.
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