Key Points
- Morgan Stanley is conducting due diligence to include spot Bitcoin ETF products on its brokerage platform.
- The bank’s Europe Opportunity Fund has updated its language to permit investment in spot Bitcoin ETFs.
Morgan Stanley, a prominent Wall Street banking institution, is in the process of conducting due diligence to incorporate spot Bitcoin ETF products into its brokerage platform. This move comes in the wake of last month’s approval by the US Securities and Exchange Commission.
In a recent update, Morgan Stanley’s Europe Opportunity Fund has revised its language to allow investment in spot Bitcoin ETFs. As per a form N-1A submitted on Tuesday, the fund could seek exposure to spot Bitcoin ETFs, provided these investments do not exceed 25% of the fund’s assets. Despite its primary focus on investing in European companies, the fund has previously held shares of the Grayscale Bitcoin Trust (GBTC).
Precautionary Measure or Growth Strategy?
According to Eric Balchunas, a senior ETF analyst at Bloomberg, the fund might have included this disclosure language as a safeguard should it gain exposure to Bitcoin ETFs.
Morgan Stanley is recognized for its leadership in alternative investments and the private market sector, boasting assets under management surpassing $150 billion. It was among the first major US banks to offer wealthy clients access to Bitcoin funds in 2021. In its first-quarter earnings call in April 2021, the bank confirmed it was offering its wealth management clients exposure to Bitcoin through two external crypto funds.
Balchunas pointed out that the Morgan Stanley fund has seen minimal inflows in recent years. While its performance has been satisfactory, it has not kept pace with the S&P 500. As a result, Balchunas suggested that this move could potentially be part of a growth strategy.
The Bloomberg strategist also expressed doubt about the extent of exposure, suggesting it would likely not exceed 2% of the fund’s assets. He cited the Appleseed mutual fund’s allocation of 1.1% to bitcoin as a plausible benchmark.
Balchunas also emphasized the stringent regulations that govern mutual funds under the 1940 act, which mandate thorough disclosures. This is why mutual funds are often the first to disclose any type of Bitcoin exposure.
Lastly, while Bitcoin exposure may not suit every niche fund, most fund managers would likely seek the option to access these new ETFs.
