Global Sustainable Real Estate Securities Strategy

Global Sustainable Real Estate Securities Strategy

Global Sustainable Real Estate Securities Strategy

 
 
Summary

The Global Sustainable Real Estate Securities Strategy seeks to provide competitive total returns by utilizing proprietary research to invest in a portfolio of Calvert eligible global real estate securities determined to have the best forward total return potential based upon relative valuation and ESG considerations.

 
 
Investment Approach
Investment Philosophy and Process

The investment process utilizes internal proprietary research to assess real estate specific factors, broader equity factors, as well as ESG factors in order to calculate appropriate valuation metrics as part of a disciplined, bottom-up, fundamentally-driven investment methodology. Top-down considerations are also incorporated into the portfolio construction process, and the Strategy seeks to achieve exposure across regions, countries and/or sectors and integrate forecasted fundamental inflections, macroeconomic considerations, geopolitical and country risk assessments, among other factors. Risk integration is a primary focus in the portfolio construction process and common factor exposures and beta are closely monitored. The selection of investments is guided by The Calvert Principles for Responsible Investment, which provide a framework for considering ESG factors and the investment team will conduct targeted and thematic company engagement to drive positive change while seeking to create value for investors.

The investment philosophy and portfolio construction process is focused on four distinct pillars, including relative valuation, ESG Integration, risk integration and high conviction position sizing.

  1. Appreciation of relative valuation: Proprietary valuation tool ranks each security in universe on both net asset value and earnings multiple standardized for future growth. The importance of each metric varies by property sector in the final determination of relative value rank.
  2. ESG Integration: Investments guided by the Calvert Principles. Company engagement to drive positive change, improve sustainability and enhancing long-term value creation.
  3. Integration of risk analysis: Assessment of common factor exposure is important in portfolio construction and we are looking to optimize risk contribution from idiosyncratic factors as opposed to macro components. The team is focused on alpha contribution versus beta to limit downside and maximize upside capture.
  4. High conviction position sizing: Each security in the portfolio should have relative value support and a fully vetted investment thesis / identification of critical factors; capital is precious and each security is expected to meaningfully contribute; Focus on active share is important for portfolio construction.
 
Differentiators
  • Strategy differentiated by combining Calvert Research and Management’s 40+ years of experience in responsible investing with MSIM’s listed real estate expertise
  • Investment team works collaboratively with Calvert to construct a responsible portfolio that optimizes for sustainability and total return
  • Calvert Principles for Responsible Investment help guide the ESG research conducted with the ultimate goal of identifying those key performance indicators that are financially material to the value of listed real estate companies
  • Investment team conducts engagements, with the ultimate purposes of effecting positive change and increasing shareholder value
 
 
 
 
Portfolio Manager  
Laurel Durkay
Head of Global Listed Real Assets
22 years industry experience
 
 
 
 

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 investors 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, investors 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 marketsentail special risks such as currency, political, economic, market and liquidity risks.  The risks of investing in emerging market countries are greater than the risks generally associated with investments in foreign developed countries.  Real estate investments, including 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.

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.

DEFINITIONS

Price-to-net-asset-value ratio (P/NAV) shows a company’s share price to the net asset value per share.

Property capitalization rate is the rate of return on a real estate investment property based on the expected income that the property will generate.

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 FTSE EPRA/NAREIT Developed Index is designed to track the performance of listed real estate companies and REITS worldwide. By making the index constituents free-float adjusted, liquidity, size and revenue screened, the series is suitable for use as the basis for investment products, such as derivatives and Exchange Traded Funds (ETFs).

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.  

 

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