Applied Global Concentrated ESG Equity Strategy

Applied Global Concentrated ESG Equity Strategy

Applied Global Concentrated ESG Equity Strategy

 
 
 
Summary

By investing in a relatively small number of global companies, the Applied Global Concentrated ESG Equity Strategy seeks to drive consistent excess returns regardless of style or regional market leadership. Using a flexible approach that combines the best of Fundamental and Quantitative investing, the strategy aims to provide a highly active global equity portfolio of select companies that focus on prioritizing sustainability issues that are most material to their business and relevant to their stakeholders.The team also employs a socially conscious overlay to screen out direct investments in companies closely associated with tobacco, gambling, pornography, alcohol and pork production.

 
 
Investment Approach
Philosophy

Broad market factors can drive majority of returns

Historically, 65% of a manager’s relative performance is determined by their style, risk and geographic bias relative to their benchmark. By remaining flexible, we can tilt the portfolio towards styles, regions or sectors we believe have the greatest likelihood of producing excess returns.

Stock selection can be additive to alpha generation

The remaining 35% has come from a manager's stock selection.  Therefore, company-specific analysis can help generate additional contribution to portfolio's overall return.

Material ESG issues can affect returns

Research has demonstrated that investing in companies that prioritize ESG issues that are material the the company's core business practices for a company's particular sectors can add to a manager's ability to deliver positive results.1

 
Differentiators
MATERIAL ESG ISSUES CAN AFFECT RETURNS

Research has demonstrated that investing in companies that prioritize ESG issues that are material to the company's core business practices for a company's particular sector adds to a manager's ability to deliver positive results.

UNCONSTRAINED BY STYLE

The portfolio is positioned to gain exposure to broad market styles (value, growth, quality) we believe are in the early stages of outperforming and will drive returns in the current market environment.

STOCK-SPECIFIC RESEARCH ALSO ADDS VALUE

We employ comprehensive fundamental research to find companies that have the potential to outperform within their style/sector and that have the potential to lead to superior stock selection.

FOCUS ON RISK MANAGEMENT

Highly concentrated strategies can be successful, but managing risk is essential. 

AN OVERLAY OF HUMAN JUDGMENT

Portfolio managers’ experience and judgment serves as an overlay throughout the investment process and portfolio construction.

 
Investment Process - Two Engines to Produce Results

 

 
 

Source: Morningstar, 2015 Rolling 18-month R-squared for Global Equity Managers Time Series Regression. Information as of December 31, 2015.

Past performance is not indicative of future results. For illustrative purposes only and is not meant to depict the performance of any investment.

 
 
 
Portfolio Managers  
Andrew Slimmon
Head of Applied Equity Advisors Team
34 years industry experience
Phillip Kim
Executive Director
17 years industry experience
 
 
 
 

1 Aaron Yoon (Kellogg Business School), Mozaffar Khan (University of Minnesota) and George Serafeim (Harvard Business School), the authors of “Corporate Sustainability: First Evidence on Materiality.”

 

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 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, equities securities’ values also fluctuate in response to activities specific to a company. Stocks of small-and medium-capitalization companies entail special risks, such as limited product lines, markets and financial resources, and greater market volatility than securities of larger, more established companies. Investments in foreign markets entail special risks such as currency, political, economic, market and liquidity risks. Illiquid securities may be more difficult to sell and value than publicly traded securities (liquidity risk). Non-diversified portfolios often invest in a more limited number of issuers. As such, changes in the financial condition or market value of a single issuer may cause greater volatility. ESG Strategies that incorporate impact investing and/or Environmental, Social and Governance (ESG) factors could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. As a result, there is no assurance ESG strategies could result in more favorable investment performance.

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 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.

OTHER CONSIDERATIONS

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 World Total Return (Net) Index is a free float adjusted market capitalization weighted index that is designed to measure the global equity market performance of developed markets. The term "free float" represents the portion of shares outstanding that are deemed to be available for purchase in the public equity markets by investors. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends.

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

Morgan Stanley Investment Management is the asset management division of Morgan Stanley.

 

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.


Privacy & Cookies    •    Terms of Use

©  Morgan Stanley. All rights reserved.