International Resilience Strategy

International Resilience Strategy

International Resilience Strategy

 
 
Summary

The Morgan Stanley International Resilience Strategy is a concentrated portfolio of high quality, predominantly non-U.S. companies, featuring hard-to-replicate intangible assets including brands, networks and licences. The investment team uses bottom-up fundamental analysis to invest in high quality companies at reasonable valuations that can sustain their high returns on operating capital over the long term. Analysis of financially material ESG risks and opportunities and active, portfolio manager-led engagement are core parts of the investment process. The strategy seeks to generate attractive long-term returns with reduced downside participation in challenging markets.

 
 
Investment Approach
Philosophy

The investment team believes that companies that demonstrate resilience—businesses that can adapt, innovate and grow while safeguarding their people, existing assets and brand equity—should be better positioned to compound shareholder wealth over the long term. In International Resilience, the team only invests in compounders: high quality companies with sustainably high returns on operating capital and growth potential. Investing in compounders requires a long-term approach and a focus on minimising the risk of permanent loss of capital rather than chasing upside.

 
Differentiators
A portfolio of high quality compounders

A concentrated portfolio of companies selected by an investment team with a proven track record in identifying well-managed high quality businesses with resilient earnings. These include IT companies offering must-have software and services, life sciences and health care equipment firms providing indispensable products, and world-renowned consumer brand franchises. The team also finds capital light, high return businesses in more niche industries, such as professional services in industrials and payments in financials.

Managing the risks that matter

Preserving capital is key to the ability to compound money over time. With this focus on minimising the risk of permanent loss of capital rather than chasing upside, the team expects International Resilience to exhibit an asymmetric performance profile over time – delivering attractive long-term returns and reduced downside participation during challenging market environments, a hallmark of the team’s longstanding global compounder strategies.

A long-standing history of active investing

With over 25 years investing in quality companies, the experienced and well-resourced International Equity team uses their time-tested investment process and stock-selection criteria to manage the International Resilience strategy.

 
 
 
Investment Process
How Quality Works–the Power of Compounding
 
How We Identify Compounders
1
Identify High Return Companies
  • High and unlevered ROOCE
  • High gross margins (pricing power)
  • Capital-light business models driving FCF generation
  • Strong balance sheet
2
Make Sure Returns are Sustainable
  • Ability to remain relevant through powerful intangible assets such as brands, sustaining high barriers to entry
  • Returns sustainable against material threats, including Environmental or Social factors
  • Dominant market shares protecting against new entrants
  • Stable sales – often repeat business driving recurring revenues
  • Steady organic growth and geographic spread
3
Confirm management's commitment to sustaining returns
  • Focus on return on capital rather than sales or EPS growth
  • Capital discipline
  • Commitment to innovation and investment in franchises
  • Review management incentives
  • Sound Governance structure
  • Engagement on material issues or opportunities where relevant,including ESG factors
4
Valuation
  • A focus on free cash flow, not accounting numbers
  • FCF yield, DCF, EV/NOPAT
 
 
 
 
Investment Team  
William Lock
William Lock
Head of International Equity Team
32 years industry experience
Bruno Paulson
Bruno Paulson
Managing Director
30 years industry experience
Nic Sochovsky
Nic Sochovsky
Managing Director
26 years industry experience
Marcus Watson
Marcus Watson
Managing Director
16 years industry experience
Alex Gabriele
Alex Gabriele
Managing Director
15 years industry experience
Richard Perrott
Richard Perrott
Executive Director
18 years industry experience
Isabelle Mast
Isabelle Mast
Executive Director
19 years industry experience
Anton Kryachok
Anton Kryachok
Executive Director
14 years industry experience
Marte Borhaug
Marte Borhaug
Head of ESG
14 years industry experience
Vladimir Demine
Vladimir A. Demine
Head of ESG Research
23 years industry experience
 

Team members may be subject to change at any time without notice. The investment team currently has 15 members; information on additional team members can be found on MSIM.com.

 
 
 
 
 

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