Global Emerging Markets Equity Strategy
Global Emerging Markets Equity Strategy

Global Emerging Markets Equity Strategy

 
 
 
Summary

The Global Emerging Markets Equity Strategy seeks attractive long-term, risk-adjusted returns by investing in emerging market equities. To help achieve its objective, the Strategy combines top-down country allocation with bottom-up stock selection and disciplined risk management.

2-3%
Target Alpha
40-60%
Turnover Range
3-5%
Expected Tracking Error
1998
Inception Date
 
 
Investment Approach
Philosophy

The Global Emerging Markets Equity team bases its investment philosophy on proprietary research, which shows that both country-level and stock-specific factors can drive risks and returns in emerging markets. As a result, the team seeks to add value by integrating top-down country allocation and bottom-up stock selection with a growth bias.

The team believes that in the long term, the dynamics of emerging markets are beneficial to the earnings of selective growth companies. Rather than focusing on short-term cyclical bubbles, the team takes a thematic approach to investing to identify longer-term trends not fully appreciated by the market. As often as possible, the team takes contrarian positions. This allows them to develop sound reasons for why consensus may overlook or ignore elements of a country or a stock where positive change may yet occur.

 

 
Differentiators
Emerging market experience

Morgan Stanley Investment Management is a pioneer in emerging markets investing and has a demonstrated expertise and commitment through all market cycles. The firm began analyzing emerging markets in 1984 and investing in the asset class in 1986.

Top-down and bottom-up analyses

The team believes its integration of country allocation with stock selection helps drive their competitive performance.

A growth style

Country allocation is based on original research that determines which countries could produce higher economic growth rates, make the most rapid productivity gains and deliver the necessary changes in corporate governance, transparency and institution-building to succeed. The team makes distinctions at the country level and takes high-conviction country overweights and underweights in the portfolio.

 
 
 
Investment Process
1
Integrated Process

The team follows a disciplined investment process that integrates top-down country allocation with bottom-up security selection.

2
Country Allocation

The team analyzes emerging market countries to identify improving fundamentals and compelling catalysts. The team overweights countries where improving macroeconomic, social and political fundamentals may not yet be fully reflected in market valuations and sentiment.

3
Stock Selection

The team's thorough bottom-up process ensures they focus on companies exhibiting an identifiable source of growth, quality management, a strong business model with competitive advantages, a healthy balance sheet and good free cash flow generation.

4
Risk Management

The team believes the best way to minimize the systematic risk inherent in the portfolio is to understand fully the environment and securities they are investing in. At the country level, the team continually evaluates factors that may impact the environment for financial assets, as well as political and social factors. At the stock level, the team’s bottom-up fundamental process is integral to understanding the companies in which they invest. 

 
 
Portfolio Managers
Head of Emerging Markets and Chief Global Strategist
23 years industry experience
Managing Director
22 years industry experience
Managing Director
21 years industry experience
Managing Director
22 years industry experience
Managing Director
22 years industry experience
 
 
Insights
Macro Insight
8 Trends for 2017 as Globalization Goes into Reverse
Mar 01, 2017
The globalization trends that once drove economic growth and markets are in retreat. Ruchir Sharma looks at the key themes that are emerging as protectionism rises.
 
 
 
 

RISK CONSIDERATIONS  

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. Accordingly, you can lose money investing in this strategy. Please be aware that this strategy may be subject to certain additional risks. In general, equities securities’ values also fluctuate in response to activities specific to a company. Investments in foreign markets entail special risks such as currency, political, economic, market and liquidity risks. The risks of investing in emerging market countries are greater than the risks generally associated with investments in foreign developed countries. Derivative instruments can be illiquid, may disproportionately increase losses and may have a potentially large negative impact on the portfolio’s performance. Illiquid securitiesmay be more difficult to sell and value than publicly traded securities (liquidity risk).

 

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

Alpha is the excess return or value added (positive or negative) of the portfolio’s return relative to the return of the benchmark.

Tracking error is the standard deviation of the difference between the portfolio and the benchmark returns. 

Annual turnover measures the percentage of securities within the portfolio that changed during the most recent fiscal year.

OTHER CONSIDERATIONS

The MSCI Emerging Markets Net Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance of emerging 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 MSCI Emerging Markets Net Index currently consists of 23 emerging market country indices. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends.

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

The tracking error, target alpha and turnover range 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.

1422701 Exp. 2/28/2017

 

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