Applied Global Concentrated Equity Strategy
Applied Global Concentrated Equity Strategy

Applied Global Concentrated Equity Strategy

 
 
 
Summary

By investing in a relatively small number of global companies, the portfolio seeks to outperform the benchmark regardless of which investment style – value or growth – is currently in favor. Their flexible approach combines quantitative models with stock-specific research to identify 15-20 global companies in with attractive valuation, above-average appreciation potential and competitive dividend yields.

>95%
Typical active share
15-20
Typical number of holdings
 
 
Investment Approach
Philosophy

Broad market factors can drive majority of returns

By remaining flexible, we can tilt the portfolio towards styles, regions or sectors we believe have the greatest likelihood of producing excess returns.

Stock selection can be additive to alpha generation

Company-specific analysis can help generate additional contribution to portfolio's overall return.

High active share may be the key to outperformance

By limiting the number of position, we run a high active share strategy.

 
Differentiators
Unconstrained style

Portfolio is positioned to gain exposure to factors the team believes can drive returns in the current market environment.

High Active Share

A small number of high-conviction holdings to bolster excess return potential.

High-conviction ideas

Alpha from idiosyncratic (stock-specific) risk is sought by conducting research on individual stocks, customized to each company and its specific industry.

Relentless focus on risk management

Every part of the investment process is oriented toward taking calculated risks and managing those risks over time.

 

 
 
 
Investment Process
1
Determined dominant

Using proprietary quantitative models, team forecasts those factors it believes will dominate markets over the next 6‐12 months.

2
Screen stocks

Stocks are ranked by their relative exposure to desired factors, which narrows the universe to the top quintile (20%) of stocks in each region.

3
Risk Decomposition

To further refine the pool, each high‐scoring stock undergoes risk decomposition analysis to assess its effect on desired and undesired exposures.

4
Conduct research

Stocks are analyzed individually, based on the idiosyncratic opportunities they offer.

5
Final Portfolio

Portfolio of high-conviction stocks is constructed. Stock weightings are determined by a stock’s exposure to desired factors, the confidence level of its idiosyncratic opportunity and its contribution to reducing intra-stock correlations within the portfolio.1

This represents how the portfolio management team generally implements its process under normal market conditions.

1The Global Concentrated Equity portfolio typically has 15-20 positions. Weights and the number of securities provided are a typical range, not a maximum number. The portfolio may exceed this from time to time due to market conditions and outstanding trades.

 
 
Portfolio Managers
Head of Applied Equity Advisors Team
30 years industry experience
Executive Director
13 years industry experience
 
 
Insights
Investment Insight
Market Implications of the First 100 Days: What’s Next?
Apr 26, 2017
Morgan Stanley Investment Management’s senior investment leaders discuss how the President’s policy agenda is affecting their outlook on global equity, fixed income and listed infrastructure markets.
Market Outlook
Applied Equity Advisors Monthly Commentary
Sep 30, 2017
Andrew Slimmon from the Applied Equity Advisor’s Team discusses his thoughts and views in the latest commentary for September 2017
Market Outlook
Slimmon featured in U.S. News & World Report
Mar 31, 2017
Don't Bet Against a Good Year for Equities - In this article he explains that while it might be tough to make near-term advances, 2017 could end up being a big year for equities.
 
 
 
 

RISK CONSIDERATIONS  

Diversification does not protect you against a loss in a particular market; however it allows you to spread that risk across various asset classes.

There is no assurance that a Portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the Portfolio will decline and may therefore be less than what you paid for them. Accordingly, you can lose money investing in this Portfolio. Please be aware that this Portfolio may be subject to certain additional risks. In general, equities securities’ values also fluctuate in response to activities specific to a company. Stocks of small-and medium-capitalizationcompanies entail special risks, such as limited product lines, markets and financial resources, and greater market volatility than securities of larger, more established companies. Investments in foreign markets entail special risks such as currency, political, economic, market and liquidity risks. Illiquid securitiesmay be more difficult to sell and value than publicly traded securities (liquidity risk). Non-diversified portfolios often invest in a more limited number of issuers. As such, changes in the financial condition or market value of a single issuer may cause greater volatility

 

This communication is only intended for and will be only distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations.

There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. Past performance is no guarantee of future results.

A separately managed account may not be suitable for all investors. Separate accounts managed according to the Strategy include a number of securities and will not necessarily track the performance of any index. Please consider the investment objectives, risks and fees of the Strategy carefully before investing. A minimum asset level is required. For important information about the investment manager, please refer to Form ADV Part 2.

Any views and opinions provided are those of the portfolio management team and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. Furthermore, the views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring. The views expressed do not reflect the opinions of all portfolio managers at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

All information provided has been prepared solely for information purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.

DEFINITIONS

Active share is the fraction of the portfolio or fund that is invested differently than its benchmark as of the last day of the reporting period. A portfolio with a high degree of Active Share does not assure a portfolio's/fund’s relative outperformance.

OTHER CONSIDERATIONS

The indexes are unmanaged and do not include any expenses, fees or sales charges. It is not possible to invest directly in an index. Any index referred to herein is the intellectual property (including registered trademarks) of the applicable licensor. Any product based on an index is in no way sponsored, endorsed, sold or promoted by the applicable licensor and it shall not have any liability with respect thereto.

The MSCI World Total Return (Net) Index is a free float adjusted market capitalization weighted index that is designed to measure the global equity market performance of developed markets. The term "free float" represents the portion of shares outstanding that are deemed to be available for purchase in the public equity markets by investors. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends.

The information presented represents how the portfolio management team generally implements its investment process under normal market conditions.

The typical active share and the number of holdings represent typical ranges and are not a maximum number. The portfolio may exceed these from time to time due to market conditions and outstanding trades. 

Morgan Stanley Investment Management is the asset management division of Morgan Stanley.

 

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