Strategies

Atlanta Capital High Quality Small Cap

Strategy Inception

April 1992

Asset Class

US Equity

Quick Facts

Benchmark

Russell 2000® Index

Top

Overview

Overview
Investment Approach
Investment Process
Portfolio Managers
Insights

Overview

The High Quality Small Cap strategy is guided by a fundamental core approach that seeks to invest in small-cap companies in strong financial condition with equities priced below our fair value estimate.

Differentiators

The Power of Compounding

We defined risk as losing client capital. How you perform in down markets has an outsized impact on your total return. By focusing on a small group of high quality companies with consistent and stable earnings growth, we seek to perform well in rising market, and to protect in declining markets. Over a full market cycle, this should allow us to outperform our benchmark with lower volatility and market risk. The real secret to long-term investing success is not what you make, it’s what you keep.

The Desire to be Different

The only way you can beat a benchmark is if you are willing to be different from it. Our high quality investment process is designed to do just that. We seek to build a focused portfolio of high quality companies where position and sector weights are a byproduct of stock-specific conviction. Our investment process is also designed to take advantage of a much longer investment time horizons. As a result, our portfolio will typically have a very high active share versus our benchmark with very low levels of turnover versus our peers.

Established Team that is Invested

Our strategies have been continuously managed by our stable and experienced investment team. A significant amount of the team’s compensation is tied directly to the long-term success of our clients. And while we do not require it, all the members of the investment team have substantial personal investments in our products.

Investment Approach

We seek to invest in high quality companies with a demonstrated history of consistent growth and earnings stability. The portfolio is managed with a fundamental, bottom–up investment process, looking for businesses with innovative models, quality management, strong free cash flow, and high returns on invested capital. Historically, this process has produced a diversified portfolio that exhibits solid up-market capture, minimized participation in declining markets, reduced volatility, and high active share.

Investment Process

Construct a focused, diversified portfolio with a focus on companies with a demonstrated history of consistent growth and stability in earnings, strong free cash flow, and high returns on invested capital.

Emphasize companies with management teams that have proven records of effective capital allocation and incentive structures that are aligned with shareholders.

Calculate fair value by evaluating a company's historical valuation ranges and private market value.

Sell a company if a more compelling investment opportunity materializes, there is a change in the investment thesis, or valuation becomes excessive.

Portfolio Managers

Team Insights

IMPORTANT INFORMATION

Risk Considerations:

Equity: The value of investments held by the Strategy may increase or decrease in response to economic, and financial events (whether real, expected or perceived) in the U.S. and global markets. The value of equity securities is sensitive to stock market volatility. Investments in small- and medium- capitalization companies tend to be more volatile and less liquid than those of larger, more established, companies.

Investors should be aware that this strategy may be subject to additional risks, which should be carefully considered prior to any investment decision.

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 have your clients 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 managers, please have your clients refer to Form ADV Part 2.

The views and opinions and/or analysis expressed are those of the author or the investment team as of the date of preparation of this material and are subject to change at any time without notice 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, after the date of publication. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) and its subsidiaries and affiliates (collectively “the Firm”), and may not be reflected in all the strategies and products that the Firm offers.

This material has been prepared on the basis of publicly available information, internally developed data and other third-party sources believed to be reliable. However, no assurances are provided regarding the reliability of such information and the Firm has not sought to independently verify information taken from public and third-party sources.

This material is a general communication, which is not impartial and all information provided has been prepared solely for informational and educational 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.

The Russell 2000® Index is an index that measures the performance of the 2,000 smallest companies in the Russell 3000 Index.

DISTRIBUTION

This material is only intended for and will only be distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations.

Atlanta Capital is part of Morgan Stanley Investment Management. Morgan Stanley Investment Management is the asset management division of Morgan Stanley.