Portfolio Solutions: Liquid Alpha Capture Strategy
Portfolio Solutions: Liquid Alpha Capture Strategy

Portfolio Solutions: Liquid Alpha Capture Strategy

 
 
 
Summary

Seeks to capture alpha and deliver its benefits to investors in a liquid and cost-efficient manner by investing in what we believe are the most promising stock holdings of a select group of top-performing active managers. We also actively manage several hedging strategies in an effort to mitigate equity market risk.

 
 
Investment Approach
Philosophy

The team's investment philosophy is grounded upon the following core beliefs:

(1) active management returns consist of a combination of manager skill ("alpha"), market exposure ("beta") and illiquidity premium ("liquidity");

(2) alpha is available from multiple sources and provides the most attractive component of active returns;

(3) it is possible to capture alpha cheaply and efficiently from security selection and systematic alpha strategies; and

(4) combining multiple sources of alpha can yield a robust absolute return portfolio.

 
Differentiators
Focus on Absolute Returns

Seeks to provide investors with exposure to high quality alpha sources that may have the potential to generate returns in both up and down markets.

Cost-efficiency

Lower cost means of accessing what we believe are the best ideas of top managers.

Daily Liquidity

Investing in alpha-oriented strategies on terms similar to those available for traditional asset classes.

 
 
 
Investment Process
1
Performance Analysis

Close examination of the performance of a broad set of active managers, seeking to identify those that have demonstrated a consistent ability to generate a high degree of alpha over a significant period of time.

2
Strategy and Holdings Analysis

Rigorous bottom-up analysis of the publicly available holdings data of top-performing managers to develop a series of investment strategies that mimic the managers' investment approach. 

3
Portfolio Construction

Direct purchase of the stocks that the team believes represent the best ideas of the best managers.

4
Portfolio Management

Ongoing review and replacement of the managers that the strategy focuses on in an effort to ensure that the most consistent alpha generators are represented; continuous refinement of the investment strategies; regular rebalancing and stop-loss measures to both manage risk and capitalize on short- to medium-term opportunities.

 
 
Investment Professionals  
Managing Director
19 years industry experience
Co-Head and CIO of the Solutions & Multi-Asset Group
20 years industry experience
 
 
 
 

Alternative investments are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are suitable only for long-term investors willing to forego liquidity and put capital at risk for an indefinite period of time. Alternative investments are typically highly illiquid – there is no secondary market for private funds, and there may be restrictions on redemptions or assigning or otherwise transferring investments into private funds. Alternative investment funds often engage in leverage and other speculative practices that may increase volatility and risk of loss. Alternative investments typically have higher fees and expenses than other investment vehicles, and such fees and expenses will lower returns achieved by investors.

This is prepared for sophisticated investors who are capable of understanding the risks associated with the investments described herein and may not be appropriate for you.  The information presented represents how the portfolio management team generally implements its investment process under normal market conditions.

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.  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. 

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.

Diversification does not protect you against a loss in a particular market; however it allows you to spread that risk across various asset classes.  Past performance is no guarantee of future results.

Real estate values are affected by many factors including interest rates and property tax rates, zoning laws, changes in supply and demand, and in the local, regional and national economies.

In the ordinary course of its business, Morgan Stanley engages in a broad spectrum of activities including, among others, financial advisory services, investment banking, asset management activities and sponsoring and managing private investment funds. In engaging in these activities, the interest of Morgan Stanley may conflict with the interests of clients.

Funds of funds often have a higher fee structure than single manager funds as a result of the additional layer of fees. Alternative investment funds are often unregulated, are not subject to the same regulatory requirements as mutual funds, and are not required to provide periodic pricing or valuation information to investors. The investment strategies described in the preceding pages may not be suitable for your specific circumstances; accordingly, you should consult your own tax, legal or other advisors, at both the outset of any transaction and on an ongoing basis, to determine such suitability.

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.

No investment should be made without proper consideration of the risks and advice from your tax, accounting, legal or other advisors as you deem appropriate. 

 

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