Global Equity Allocation Strategy
Global Equity Allocation Strategy

Global Equity Allocation Strategy

 
 
 
Summary

The Morgan Stanley Global Equity Allocation (GEA) Strategy seeks long-term capital appreciation by investing primarily in global equity securities. This Strategy consists of developed, global and opportunistic emerging markets equities and employs a top-down decision-making process based on rigorous analysis of region, country, sector and industry fundamentals, valuations, and sentiment to achieve its objective.

1999
Strategy Inception
0-15%
Emerging Markets
0-3%
Cash
 
 
Investment Approach
Philosophy

The Active International Allocation (AIA) Team believes that the key determination of successful investment in global equity markets is the choice of region, country and/or sectors, and industry. They believe an active top-down approach can consistently add value by overweighting regions, countries, sectors and industries, which have positive dynamics, unrecognized value, and supportive technical factors. The team’s goal is to overweight markets and sectors where it believes there is positive fundamental change that has not yet been discounted by the market.

The team’s approach emphasizes these macro decisions rather than thousands of individual securities. It believes that macro investment factors can be just as potent as bottom-up investment factors and seeks to exploit the fact that most money managers look at stocks and analyze individual corporate managements. Though this method can be attractive, the team thinks that corporate managements and stocks will be impacted by economic growth, policy decision-makers and overall moves in investor sentiment. This perspective offers clients a diversified way of investing—not just a diversified portfolio.

 
Differentiators
A diversified way of investing—not just a diversified portfolio

Complementing the more widely available bottom-up, core investment capabilities, the top-down approach of the GEA investment program focuses on adding value by overweighting regions, countries, sectors and industries which the team believes have positive dynamics, unrecognized value and supportive technical factors.

Long tenure of product and investment team

Lead Portfolio Manager, Ann Thivierge, has been managing the AIA strategy since 1995, and joined Morgan Stanley in 1986.

Rigorous, flexible and continuously evolving quantitative and qualitative analyses

The team has enhanced the measurement of valuation and fundamental analysis across regions, countries, sectors and industries. For example, they added factors to compare and analyze profitability and operating leverage, and developed factors that allow them to describe quality of earnings and balance sheet health. They also added various factors that help to describe the differences in fundamental macro operating environments across countries and regions. The enhanced framework readily allows the team to highlight opportunities to be further analyzed through fundamental research.

 
 
 
Investment Process
1
Fundamentals

The catalyst for market performance can be marginal changes in economic, corporate and political environments. The AIA team gains market insight by visiting countries, meeting with central bankers, government officials, strategists, and economists, and analyzing both internal and external research to form investment opinions. Filtering through information, analyzing and monitoring macroeconomic cycles, political and social dynamics, business and regulatory environments, earnings and corporate trends are key determinants in the formation of investment decisions. In addition, the critical factors in the team’s fundamental country and sector analyses are the outlook for economic growth, interest rates, corporate earnings and monetary and fiscal policy. In particular, the team searches for incremental shifts in policy or the operating environment, which they believe will impact profitability.

2
Valuations

Valuations are the core of the team’s decision-making process as the team invests in undervalued countries and sectors. The team analyzes and monitors relative and absolute valuation relative to long-term historical data across asset classes, regions, countries and sectors. The team then ranks the markets and sectors/industries on relative attractiveness and consistently examines ranking changes.

3
Sentiment

Overall market sentiment of particular countries and sectors/industries can be an important indicator of risk and return. The team consistently monitors global investor sentiment indicators, global fund manager asset allocation and equity positioning, and cross- and intra-asset global portfolio flows. At extremes, sentiment indicators can sometimes be useful contrarian indicators or a signal to increase or reduce portfolio positions. The team prefers to be contrarian but has a healthy respect for momentum.

4
Portfolio Implementation

To implement investment decisions, the team builds baskets of stocks selected by a risk model, which does not factor in bottom-up analysis of names and is designed to broadly track country or sector/industry performance. The team invests in a diversified selection of stocks in the country, sector or industry.

 
 
Portfolio Managers
Managing Director
22 years industry experience
Managing Director
18 years industry experience
Executive Director
12 years industry experience
 
 
 
 

RISK CONSIDERATIONS  

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

Past performance is not a guarantee of future performance. There can be no assurance that the Strategy will achieve its investment objectives. Portfolios are subject to market risk, which is the possibility that the value of the investments and the income from them can go down as well as up and an investor may not get back the amount invested. Accordingly, you can lose money investing in this strategy. Please be aware that this strategy may be subject to certain additional risks. In general, equity securities’ values also fluctuate in response to activities specific to a company. Investments in foreign markets entail special risks such as currency, political, economic, and market risks. The use of futures includes the possible imperfect correlation between the price of futures contracts and movements in the prices of the securities being hedged, and the possible absence of a liquid secondary market for any particular investment. The risks of investing in emerging market countries are greater than the risks generally associated with investments in foreign developed countries. Currency fluctuations could erase investment gains or add to investment losses. Derivative instruments can be illiquid, may disproportionately increase losses and may have a potentially large negative impact on the portfolio’s performance. Share prices also tend to be volatile and there is a significant possibility of loss. When investing in value securities, the market may not have the same value assessment as the manager, and, therefore, the performance of the securities may decline. Concentration in a single region may make the portfolio more volatile than one that invests globally. The use of leverage may increase volatility in the Portfolio. Stocks of small-capitalization companies carry special risks, such as limited product lines, markets and financial resources, and greater market volatility than securities of larger, more established companies.

 

From June 2003 to March 31, 2017, the strategy was managed by Ann Thivierge. From March 31, 2017 to June 30, 2017 the strategy was co-managed by Ann Thivierge, Munib Madni, Jitania Kandhari, and Ben Rozin.

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.

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 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 index does not include any expenses, fees or sales charges, which would lower performance. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index.

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

The weights provided 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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