Developing Opportunity
Developing Opportunity

Developing Opportunity

 
 
 
Summary

Morgan Stanley Developing Opportunity seeks long-term capital appreciation by investing primarily in high quality companies located or operating in developing or emerging market countries, with capitalizations within the range of companies in the MSCI Emerging Markets Net Index. To achieve its objective, the investment team typically favors companies it believes have sustainable competitive advantages that can be monetized through growth. The investment process integrates analysis of sustainability with respect to disruptive change, financial strength, environmental and social externalities and governance (also referred to as ESG).

 
 
Investment Approach
Philosophy

Our investment philosophy is simple: Warren Buffett investment principles applied to growing companies.1 We believe that by applying a price discipline to investments in high quality companies, strictly defined as those with what we consider competitive advantages and long-term growth that creates value, we can best capture opportunities and manage risk for clients.

 
Differentiators
Culture

The investment team’s culture is shaped by the cultivation of core values that are cultivated and reinforced in many ways: intellectual curiosity and flexibility, perspective, self-awareness and partnership.

Reading Network

As part of Counterpoint Global, the Global Opportunity team has access to a reading network that includes more than 150 investor and non-investor participants at Morgan Stanley. This allows the team to leverage the distributed knowledge of the firm and encourages cross-disciplinary thinking. Each week the team circulates articles, essays and thought pieces from a wide range of sources outside mainstream Wall Street in order to help enhance its knowledge and make informed investment decisions.

Distinguishing Characteristics

–Our incentives foster long-term alignment with clients.

–Our disruptive change research helps find big ideas for portfolios.

–Our core values of intellectual curiosity and flexibility, perspective, self-awareness and partnership promote a  sustainable and repeatable investment process.

–Our investment philosophy is simple: Warren Buffett investment principles applied to growing companies.5

 
 
 
Investment Process
1
Idea generation

Comes from screening, contact networks, pattern recognition, disruptive change research and our extensive reading.

2
Quality Assessment

When we formulate our investment thesis on the quality of a company, we ask three key questions to determine the sustainability of  competitive advantage and how it can be monetized through growth:

- Is the company a disruptor or is it insulated from disruptive change?

- Does the company demonstrate financial strength with high returns on invested capital, high margins, strong cash conversion, low capital  intensity and low leverage?

- Are there environmental or social externalities not borne by the company, or governance and accounting risks  that may alter the investment thesis?

3
Valuation

Focuses on the ratio of price to value derived from the key value drivers pricing, units, margin and multiple that determine the present value of free cash flow generation over a five-year time horizon.

4
Risk Management

We define risk in absolute terms: risk is losing money. We believe that idiosyncratic risk can be reduced by addressing what matters at the company level. We manage valuation risk by not paying a price that exceeds our estimate of intrinsic value. We manage sustainability risk by analyzing the threat of disruption, financial strength and ESG externalities. We manage fundamental risk of deteriorating competitive advantage and growth opportunities. Portfolio risks are mitigated by reducing correlated factor exposures with the support of monthly reports from portfolio attribution and risk teams.

5
Portfolio Construction

We buy when the quality is high and the price is below our estimate of intrinsic value. We weight the portfolio based on low price to value, high certainty of value drivers and low correlation between ideas. The result of our bottom-up investment process is a benchmark agnostic, highly differentiated portfolio concentrated in our highest conviction ideas.

 
 
Investor  
Kristian Heugh
Managing Director
19 years industry experience
 
 
 
 

1 The team applies what they believe to be investment principles similar to those of Warren Buffett. No representation is being made that the team’s investment results will be similar to those produced by investment portfolio’s managed by Warren Buffett.

Risk management implies an effort to monitor risk, but should not be confused with and does not imply low risk.

RISK CONSIDERATIONS

Diversification does not protect you against a loss in a particular market; however it allows you to spread that risk across various asset classes. 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, equities securities’ values also fluctuate in response to activities specific to a company. Investments in foreign markets entail special risks such as currency, political, economic, market and liquidity risks. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries. Derivative instruments may disproportionately increase losses and have a significant impact on performance. They also may be subject to counterparty, liquidity, valuation, correlation and market risks. Focused Investing. To the extent that the Portfolio invests in a limited number of issuers, the Portfolio will be more susceptible to negative events affecting those issuers and a decline in the value of a particular instrument may cause the Portfolio’s overall value to decline to a greater degree than if the Portfolio were invested more widely. The Fund may invest in A-shares listed and traded through Stock Connect, or on such other stock exchanges in China which participate in Stock Connect. Trading through Stock Connect is subject to a number of restrictions that may affect the Fund's investments and returns. Moreover, Stock Connect A-shares generally may not be sold, purchased or otherwise transferred other than through Stock Connect in accordance with applicable rules. The Stock Connect program  may be subject to further interpretation and guidance. Future developments regarding the program may restrict or adversely affect the Fund's investments or returns.

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 investment 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.

This material is a general communication which is not impartial and all information provided is for informational and educational purposes only and should not be deemed as a recommendation. The information herein does not contend to address the financial objectives, situation or specific needs of any individual investor.

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 Emerging Markets Net Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI EM Net Index assumes the reinvestment of dividends after the deduction of withholding tax and approximates the minimum possible dividend re-investment, whereas the MSCI EM Gross Index assumes the maximum possible dividend reinvestment. The benchmark is used for comparative purposes only. 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.

 

Es importante que los usuarios lean las Condiciones de uso antes de proceder, ya que explican ciertas restricciones legales y reglamentarias aplicables a la difusión de la información relativa a los productos de inversión de Morgan Stanley Investment Management.

Los servicios descritos en este sitio web pueden no estar disponibles en todas las jurisdicciones o para todas las personas. Para obtener más información, consulte nuestras Condiciones de uso.


Privacidad    •    Condiciones de uso

©  Morgan Stanley. Reservados todos los derechos.