Eurozone Equity Alpha Strategy
Eurozone Equity Alpha Strategy

Eurozone Equity Alpha Strategy


The Eurozone Equity Alpha Strategy is a concentrated, actively managed strategy that invests in undervalued stocks listed on stock exchanges in the eurozone. This Strategy seeks to generate long-term capital appreciation by investing in high-quality companies with sustainable competitive advantages, strong cash-flow generation, and high returns on investment. To help achieve this objective, the Strategy employs disciplined, fundamental analysis to identify those companies that trade at a discount to their long-term intrinsic value.


Typical Turnover
Typical Number of Holdings
Typical Tracking Error
Investment Approach

The investment team believes that while markets are generally efficient, pricing anomalies exist and can be exploited. The team believes that in the long run, a stock’s price will ultimately converge with a company’s intrinsic value, but in the short term, the market may overreact to good or bad news, resulting in price movements that may not necessarily reflect a company’s fundamentals.

In the team’s view, however, an attractive share price alone is not sufficient rationale for investment. The team also focuses on companies with strong and sustainable returns on capital and equity, as they believe this will help generate superior long-term returns for investors. In particular, the team seeks companies with high-quality businesses, strong management track records and potential catalysts to help realize the stock’s intrinsic value.


Strong European credentials

The team brings more than 100 years of combined experience managing European equities, leading to a deeper understanding of local markets and the cultural and political differences across and between different European countries.

Dynamic process

The team’s flexible, style-agnostic approach enables alpha generation through the market cycle. They have a long-term view that helps them to focus on structural changes, while their process of “intelligent screening” identifies the best stocks and builds conviction-driven, concentrated portfolios.

Proven track record

The key members of the European Equity team offer a compelling performance track record of delivering consistent high alpha, while minimizing tracking error.

Investment Process
Filtering and screening

The team screens a universe of approximately 300 stocks using various proprietary and external screens, with a focus on profitability and balance sheet metrics (i.e., free cash-flow yield, ROCE, ROE and net debt/EBITDA valuations), mean reversion, and absolute and relative valuations. The result is approximately 150 investment candidates that display attractive valuations, strong cash-flow generation and high returns on investment. 


The team uses both internal and external research to evaluate a company’s business model, capital requirements, industry structure, management quality/track record in generating and reinvesting cash flow, and product competitiveness. As part of this analysis, the team considers economic conditions and industry trends, which may influence a stock’s long-term potential. 

Fundamental analysis

After the initial two stages, the team narrows down the universe to approximately 70-100 stocks and then conducts in-depth fundamental analysis on forecasts and financials—including discounted cash flow analysis—to determine what they believe to be a company’s "fair value." This analysis is supplemented by regular meetings with company management. 

Portfolio Managers
Matthew Leeman
Head of European Equity Team
27 years industry experience
Riccardo Bindi
Executive Director
27 years industry experience
Jonathan Day
Executive Director
24 years industry experience
Jaymeen Patel
Executive Director
18 years industry experience


Past performance is not a guarantee of future performance. 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. There can be no assurance that the strategy will achieve its investment objectives.

Investments may be in a variety of currencies and therefore changes in rates of exchange between currencies may cause the value of investments to decrease or increase. Furthermore, the value of investments may be adversely affected by fluctuations in exchange rates between the investor’s reference currency and the base currency of the investments.

For investments in emerging markets, the volatility and risk to your capital may be greater due to potential price volatility, political and/or economic risks.

Securities of small capitalization companies: these securities involve greater risk and the markets for such securities may be more volatile and less liquid.

Strategies that specialize in a particular region or market sector are more risky than those which hold a very broad spread of investments. Where strategy concentration is in one sector it is subject to greater risk and volatility than other strategies that are more diversified and its value may be more substantially affected by economic events in a particular industry.

Investments in derivative instruments carry certain inherent risks such as the risk of counter party default and before investing you should ensure you fully understand these risks. Use of leverage may also magnify losses as well as gains to the extent that leverage is employed.


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.


Discounted cash flow is a valuation method that is used to evaluate investment potential by using future free cash flow projections and discounting them to arrive at a present value.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)is essentially net income with interest, taxes, depreciation, and amortization added back to it, and can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions.

Free cash flow yield is a financial ratio that measures a company's operating free cash flow minus its capital expenditures per share and dividing by its price per share. Free cash flow yield ratio is calculated by using the underlying securities of the fund.

Net debt is a measure of a company's ability to repay all debt if it were called immediately. It is calculated by adding short-term and long-term debt and subtracting all cash and cash equivalents.

Return On Capital Employed (ROCE) is a ratio indicating the efficiency and profitability of a company’s capital. Calculated as: earnings before interest and taxes/total assets less current liabilities.

Return On Equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.


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 EMU (European Economic and Monetary Union) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of countries within EMU.

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

The weights, tracking error typical yield duration, and the number of issuers 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. 


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