Global Multi-Asset Income Strategy

Global Multi-Asset Income Strategy

Global Multi-Asset Income Strategy

 
 
Summary

The Global Multi-Asset Income Strategy provides an alternate approach to income generation in an environment where the prospect of rising rates could challenge traditional income-generating asset classes. The strategy seeks to generate income through a combination of core global equity and fixed income securities, high yielding investments and an option-writing overlay.

5%
Typical Target Yield1
<5-6%
Typical Target Volatility1
 
 
Investment Approach
Philosophy

Low current yields and the prospect of rising interest rates are challenging traditional methods used to meet income targets. By providing a nontraditional, diversified approach to income generation, our Global Multi-Asset Income Strategy represents an evolution in the search for income by expanding the typical investment universe, seeking to generate income through a strategic combination of core equity and fixed income securities, high yielding investments and an option-writing enhancement strategy. As a result, yield can be generated with less sensitivity to rising rates, helping answer today’s need for a balanced trade-off between risk, return, and attractive income.

 

 
Differentiators
Flexible, Tactical Approach to Income Generation

The team invests tactically across a broad multi-asset universe, limiting exposure to overvalued assets or assets where the risk contribution outweighs the yield potential. 

Pursuing Income as Part of Total Return

Combines an income-generating strategy with the GMA team's long-standing approach to global macro, thematic, multi-asset investing.

Less Sensitivity to Rates

Option strategy can offer investors potential for enhanced yield with less sensitivity to changes in rates.

 
Investment Process

 

The Global Multi Asset Income Strategy builds upon the existing investment approach used in our Global Tactical Asset Allocation and Absolute Return Strategies. The Strategy offers yield-seeking investors access to an investment approach focusing on opportunities arising from macroeconomic changes and structural transformations that have not yet been discounted in valuations. The team’s investment process seeks to identify attractive risk/reward opportunities based on three primary criteria: valuation, fundamental dynamics, and sentiment. The team believes that these three tools are most powerful when used in combination. The team invests in opportunities at the asset class, country, sector and thematic levels, rather than concentrating on individual security selection.

In contrast to traditional methods used to meet income targets, our flexible, tactical approach to generating yields across a broad multi-asset universe allows portfolios to generate income while also pursuing total returns. We aim to generate approximately one third of the Strategy’s income from core holdings in equity and fixed income securities, one third from high yielding investments such as high yield bonds, emerging market debt, REITs and infrastructure equities, and one third from an option writing overlay which enhances yield primarily through writing covered call options.

The description of the call option strategy should not be considered a solicitation for options, but rather a description of the fund’s investment process.   See Risk Considerations for risks of option strategy.

 

 

The weights and the number of holdings represent typical ranges and are not a maximum number. The portfolio may exceed this from time to time due to market conditions and outstanding trades.

This information represents how the investment team generally applies its investment process under normal market conditions. The team implements positions either directly by purchasing securities or through the use of derivatives.

 
 
 
Portfolio Managers  
Cyril Moulle-Berteaux
Head of Global Multi-Asset Team
30 years industry experience
Sergei Parmenov
Managing Director
25 years industry experience
Mark Bavoso
Managing Director
38 years industry experience
 
 
 
 

1 There is no assurance that these targets will be attained.

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 and that the value of portfolio shares may therefore be less than what you paid for them. Market values can change daily due to economic and other events (e.g. natural disasters, health crises, terrorism, conflicts and social unrest) that affect markets, countries, companies or governments. It is difficult to predict the timing, duration, and potential adverse effects (e.g. portfolio liquidity) of events. Accordingly, you can lose money investing in this portfolio. Please be aware that this portfolio 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 risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries. 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 a rising interest-rate environment, bond prices may fall and may result in periods of volatility and increased portfolio redemptions. In a declining interest-rate environment, the portfolio may generate less income. Longer-term securities may be more sensitive to interest rate changes. High yield securities (“junk bonds”) are lower rated securities that may have a higher degree of credit and liquidity risk. Mortgage- and asset-backed securities (MBS and ABS) are sensitive to early prepayment risk and a higher risk of default and may be hard to value and difficult to sell (liquidity risk). They are also subject to credit, market and interest rate risks. Certain U.S. government securities purchased by the Portfolio, such as those issued by Fannie Mae and Freddie Mac, are not backed by the full faith and credit of the United States. It is possible that these issuers will not have the funds to meet their payment obligations in the future. Real estate investment trusts are subject to risks similar to those associated with the direct ownership of real estate and they are sensitive to such factors as management skills and changes in tax laws. Derivative instruments can be illiquid, may disproportionately increase losses and may have a potentially large negative impact on the Portfolio’s performance. Illiquid securities may be more difficult to sell and value than publicly traded securities (liquidity risk). By investing in investment company securities, the portfolio is subject to the underlying risks of that investment company's portfolio securities. In addition to the Portfolio's fees and expenses, the Portfolio generally would bear its share of the investment company's fees and expenses. 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. 

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. 

A separately managed account may not be appropriate 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.

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.

DEFINITIONS

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

The Global Multi-Asset Benchmark is comprised of 30% MSCI All-Country World Net Index, 50% Barclays Global Aggregate Index, and 20% high-yielding investments (5% Barclays The Global Multi-Asset Benchmark 30% MSCI All-Country World Net Index, 50% Barclays Global Aggregate Index, and 20% high-yielding investments (5% Barclays Global High Yield Index, 5% JPMorgan EMBI Global Index, 5% FTSE /NAREIT Developed Total Return Index, and 5% Dow Jones Brookfield Global Infrastructure Index). All index returns are in EUR.

OTHER CONSIDERATIONS

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

Morgan Stanley is a full-service securities firm engaged in a wide range of financial services including, for example, securities trading and brokerage activities, investment banking, research and analysis, financing and financial-advisory services.

 

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