Global Balanced Income Strategy
Global Balanced Income Strategy

Global Balanced Income Strategy


The Global Balanced Income (GBI) Strategy seeks to provide attractive, consistent returns – a combination of capital appreciation and income – while actively managing portfolio risk, defined as volatility. With a stated income target of 6% per annum, the investment team manage the Strategy to a volatility target of 4-10% per annum. The Strategy develops tactical insights on the global markets and implements them in a disciplined, quantitative framework, targeting optimal allocation for the best risk-adjusted returns. In addition, the team seeks to generate additional income by replacing a portion of the portfolio’s equity exposure with sold put options in major equity indices.

Target Income
Target Volatility
Investment Approach

The team believes that the ability to generate attractive income and capital growth in a consistent manner relies heavily on the prevailing macroeconomic environment. This may present a challenging backdrop for investors, forced to search across a diverse set of asset classes in order to achieve their desired income targets, while at the same time managing their portfolio risk effectively. The team believes the GBI Strategy offers an attractive way of managing these requirements, with its innovative approach seeking to offer a compelling balance of regular income and closely monitored volatility. Building on their existing capabilities as global multi-asset investors, but with a portion of the portfolio’s equity exposure replaced with sold put options, the team believes they can achieve roughly the same total portfolio risk and return levels, but with the addition of income.

Compelling Income Target

The team’s innovative approach seeks to produce an attractive and consistent stream of income and capital growth.

Unique Approach to Income Generation

The team believes that the use of sold put options can achieve roughly the same total portfolio risk and return as using only equities, with the benefit of potentially offering income generation benefits. 

Actively Managed Total Portfolio Risk

The team seeks to provide an attractive return while actively managing total portfolio risk, with a volatility target of 4-10%. 

Investment Process
Risk Profile

All GBI mandates are customisable to help meet client objectives regarding targeted risk, investment restrictions, and other requirements. Once the portfolio’s volatility target has been determined, the team dynamically manages a broad asset mix to help meet that target.

Tactical Positioning

Employing its successful top-down research process combining fundamental and quantitative analysis, the team develops tactical insights, which in turn are used to determine preferences within each asset class. 

Quantitative Implementation

The team’s quantitative implementation takes advantage of the tactical insights in a risk-controlled framework. The team translates tactical positions into expected returns, using quantitative techniques to construct the portfolio. Its disciplined risk management ensures that the expected total portfolio risk is consistent with the agreed risk constraints. 

Income Generation

The team seeks to enhance income by replacing a portion of the portfolio’s allocation to equity with sold at-the-money, 1 month put options, aiming to maintain the target equity allocation and overall risk profile. As the put seller, the portfolio receives a premium from the option sale, providing income. At the same time, the team invests the equivalent of the notional value of all put contracts in short-term, interest-bearing instruments. The team actively manages the sold put options in order not to compromise the portfolio’s risk/return objectives. 

Please refer to the Risk Characteristics Associated with Selling Put Options disclaimer below. 

Portfolio Managers
Managing Director
37 years industry experience
Executive Director
11 years industry experience
Market Outlook
Secular Stagnation: R.I.P.
Jan 31, 2018
The dramatic market correction in February confirmed the surprises we predicted in inflation and volatility. We assess what this might mean for the rest of 2018.
Market Outlook
2018: Expect the Unexpected
Dec 31, 2017
Three possible surprises for investors are on our radar for 2018: a monetary policy surprise; an inflation surprise; and a volatility surprise.
Market Outlook
The Third Arrow: Governance
Nov 30, 2017
Behind the scenes, Japan’s corporate governance reform has been hitting the mark, leading to higher Return on Equity. Europe’s governance scores have also improved, while the U.S. shows some notable exceptions.


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. There is the risk that the Adviser’s asset allocation methodology and assumptions regarding the Underlying Portfolios may be incorrect in light of actual market conditions and the Portfolio may not achieve its investment objective. Share prices also tend to be volatile and there is a significant possibility of loss. Concentration in a single region may make the portfolio more volatile than one that invests globally. The portfolio’s investments in commodity-linked notes involve substantial risks, including risk of loss of a significant portion of their principal value. In addition to commodity risk, they may be subject to additional special risks, such as risk of loss of interest and principal, lack of secondary market and risk of greater volatility, that do not affect traditional equity and debt securities. 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. The risks of investing in emerging market countries are greater than the risks generally associated with investments in foreign developed countries. In general, equity securities’ values also fluctuate in response to activities specific to a company. Fixed-income securities are subject to the ability of an issuer to make timely principal and interest payments (credit risk), changes in interest rates (interest-rate risk), the creditworthiness of the issuer and general market liquidity (market risk). In the current rising interest-rate environment, bond prices may fall and may result in periods of volatility and increased portfolio redemptions. Longer-term securities may be more sensitive to interest rate changes. In a declining interest-rate environment, the portfolio may generate less income. 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. Option writing strategy. Writing call options involves the risk that the Portfolio may be required to sell the underlying security or instrument (or settle in cash an amount of equal value) at a disadvantageous price or below the market price of such underlying security or instrument, at the time the option is exercised. As the writer of a call option, the Portfolio forgoes, during the option’s life, the opportunity to profit from increases in the market value of the underlying security or instrument covering the option above the sum of the premium and the exercise price, but retains the risk of loss should the price of the underlying security or instrument decline. Additionally, the Portfolio’s call option writing strategy may not fully protect it against declines in the value of the market. There are special risks associated with uncovered option writing which expose the Portfolio to potentially significant loss.

Risk Characteristics Associated with Selling Put Options: The team seeks to structure put option holdings of the portfolio in a manner that actual exposure to rising and falling equity markets is equal to a target level consistent with the desired portfolio’s risk profile. Nonetheless, in times of rising volatility the Strategy’s actual equity exposure may differ meaningfully from targeted levels due to the associated tail risk of these instruments. In a rapidly rising equity market, sold put options could lead to lower equity exposure than intended, so could negatively impact potential gains. In a rapidly falling equity market, sold puts could lead to higher equity exposure than intended, so could increase the level of potential losses. In both scenarios, the Fund would continue to collect premium from selling the put options.

The team uses position limits to help control the risks associated with sold put options. The team also aims to manage volatility risk from sold puts by diversifying their underlying equity regional exposures, generally selling shorter-term put options with a time to maturity of less than two months and managing the timing of put option trades. By benefiting from these measures the team believes that underperformance in volatile markets will generally be offset by potential outperformance in calmer markets.

The description of the option strategy should not be considered a solicitation for options, but rather a description of the Strategy's investment process. See Risk Considerations for the risks of investing in options. 


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.


At-the-Money  is a situation in which an option’s strike price is identical to the price of the underlying security.

An Interest-Bearing Instrument is any financial instrument that earns interest, such as a bond, certificate of deposit, or money market fund.

Notional Value is the total value of a leveraged position’s assets.

An Option is a financial derivative that represents a contract sold by one party to another party. The contract offers the buyer the right, but not the obligation, to buy or sell  a security or other financial asset at an agreed-upon price during a certain period of time or on a specific date.

The Premium is the total cost of an option.

Put Option is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time.

Strike Price is the price at which a specific derivative contract can be exercised. For put options, the strike price is the price at which shares can be sold.

Volatility is a statistical measure of the dispersion of returns for a given security or market index.


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 target income and target volatility 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. 

1422931 Exp. 02/28/2017


It is important that users read the Terms of Use before proceeding as it explains certain legal and regulatory restrictions applicable to the dissemination of information pertaining to Morgan Stanley Investment Management's investment products.

The services described on this website may not be available in all jurisdictions or to all persons. For further details, please see our Terms of Use.

Not FDIC Insured—Offer No Bank Guarantee—May Lose Value
Not Insured By Any Federal Government Agency—Not A Deposit

Privacy & Cookies    •    Terms of Use

©  Morgan Stanley. All rights reserved.

Morgan Stanley Distribution, Inc. Member FINRA/SIPC.