Morgan Stanley’s closure of its remaining six smart beta ETFs on its FundLogic platform has left its European offering in limbo with currently no products in the market.

The U.S. asset management giant shut its six regionally divided smart beta ETFs after bleeding over 90% assets across the range 2023 but has not officially shut up shop on the continent despite housing no products on the platform.

Over in the U.S., Morgan Stanley has a 15-strong range of ETFs debuted under three separate brands, Calvert, Eaton Vance and Parametric, with combined assets under management of $2.5bn, according to data from Bloomberg.

The range of Calvert ETFs was set to launch in Europe this year but has yet to emerge, with the firm’s global head of ETFs Anthony Rochte previously outlining plans to create a global ETF platform across asset classes and jurisdictions.

However, the closure of its smart beta range has instead thrown the future of its European business into question, underscoring the need for issuers to adopt a seamless distribution strategy to succeed in the European ETF market.

Distribution issues in the spotlight

Debbie Fuhr, managing partner and founder of ETFGI, agreed that Morgan Stanley’s downfall of its European ETF business lay in its lack of strategy surrounding distribution for its ETF business in the US and subsequently Europe.

Fuhr said Morgan Stanley’s ETF closures illustrate the “tale” of ETFs, which is that you need to have a very strong sales, marketing and distribution plan to succeed.

“The FundLogic platform does not have the recognition that Morgan Stanley does, therefore it does not come with established distribution, advisors and institutional investors that are using these type of products,” Fuhr said.

Henry Jim, ETF analyst, at Bloomberg Intelligence, said that the success of Morgan Stanley’s ETF lineup in the U.S. is “mixed at best”, which points to struggles within their distribution efforts that need to be ironed out before they can focus on Europe.

Why did the ETFs close?

The closures may have hinged on institutional clients pulling large amounts of money from the ETFs after they failed to generate significant revenues, Jim said.

“It will be my guess they had a few institutional clients invested in these products and who may have changed their minds or their change mandates,” he added.

The ETF's poor revenue generation would have caused institutional investors to look elsewhere, according to Jim.

“They were generating under €1m euros a year, with the largest contributor being the US product at €400,000,” he said.