Paul Mazzilli, director of Morgan Stanleys ETF research team, said the selected ETFs are the larger, more liquid funds with more than $75 million in assets that have traded for more than one year.
Mazzilli said the research team would tend to give an "equal weight" rating to the broader market funds and discuss issues involving tax efficiency and fund structure. The funds with a more narrow scope, he said, present a much greater opportunity for research and new information. A few "underweight" examples include iShares DJ US Telecom Sector Fund, iShares DJ US Consumer non-Cyclical Sector Fund and Financial Select Sector SPDR Fund.
The firm currently rates S&P Mid Cap 400 Depositary Receipts and iShares S&P Smal lCap 600 Index Fund as a favorable "overweight."
The Nasdaq-100 Index fund, however, is not faring so well under Morgan Stanley's rating system. Mazzilli's team has branded it an "underweight." He added: "We still think valuations are rich. At some point, it's going to have a big run, but we don't think it has turned the corner."
