Morgan Stanley

Morgan Stanley Wealth Management Awarded Patent for Innovative Manager Research/Scoring Tool

Jul 18, 2014

New York —


Morgan Stanley Wealth Management announced today that it has received a patent from the United States Patent and Trademark Office for a manager research screening and scoring tool developed by the Firm’s Consulting Group Investment Advisor Research team (CG IAR).

Known as the Adverse Active AlphaSM Manager Ranking Model, CG IAR believes this tool can help it better analyze equity managers and increase the odds of selecting those with the potential to excel in the future.

Matthew Rizzo, Head of CG IAR Investment Strategy and Content, noted that while past performance of a manager doesn’t guarantee how they will perform in the future, the model emerged from extensive internal and external research1, indicating that active equity managers historically outperformed their benchmark when they:

Constructed portfolios that consistently looked different than the relevant index;

Exhibited moderate to low tracking error over time; and

Have performed well during periods when the majority of managers underperformed.

“Our innovation was to combine the Active components (managers who tend to differ from the index and have low tracking error) with an Adverse component (have exceled during periods when most managers lagged),” said Paul Ricciardelli, Head of CG IAR.  He explained that this approach is designed to derive a pool of managers with higher alpha-generating potential than when these components are treated as separate entities.

“Innovative approaches such as this are part of our ongoing efforts to enhance investment results for Morgan Stanley’s financial advisors and their clients,” added James Tracy, Director of Consulting Group Wealth Advisory Solutions.

Morgan Stanley Wealth Management, a global leader, provides access to a wide range of products and services to individuals, businesses and institutions, including brokerage and investment advisory services, financial and wealth planning, banking services, annuities and insurance, retirement and trust services.

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1Petajisto, Antti, “Active Share and Mutual Fund Performance,” Financial Analysts Journal, Volume 69, Number 4, 73-93, July 2013, and Cremers, Martijn, and Petajisto, Antti, “How Active Is Your Fund Manager? A New Measure That Predicts Performance,” Review of Financial Studies, 22(9), 3329-3365, September 2009.

Media Relations Contact: Christy Jockle, 914.225.6827

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