Morgan Stanley Wealth Management announced today that it has launched a new manager analysis screening and scoring process for fixed income developed by the Firm’s Global Investment Manager Analysis team (GIMA).
Known as Adverse Active Alpha for fixed income, GIMA believes this process, which extends the methodology from Morgan Stanley’s patented Adverse Active Alpha equity process, can help it better analyze fixed income managers and may increase the odds of selecting those with the potential to excel in the future.
“As the ‘adverse’ denotes, one of the keys to the process is finding fixed income managers that have been able to outperform their peer groups in environments that have been unfavorable for active manager relative performance,” said Matthew Rizzo, Morgan Stanley Wealth Management Strategist. “We believe that managers that performed well when conditions were most difficult and were able to do so with a degree of consistency may be more likely to possess investment skill, as opposed to managers that performed well primarily when conditions were in active managers’ favor.”
The active component of the process looks for managers that run portfolios that are truly differentiated from their benchmarks. By combining the adverse and active components together, the Adverse Active Alpha tool is able to derive a pool of fixed income managers with greater potential for outperformance.
“With the addition of the fixed income Adverse Active Alpha process to the manager selection tool box, Morgan Stanley Wealth Management further extends its offering in manager selection across both equity and fixed income products, which is part of our ongoing efforts to enhance investment results for our financial advisors and their clients,” noted Paul Ricciardelli, Managing Director, Head of Manager Solutions, Co-Head of GIMA.
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This material has been prepared for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (hereafter "Morgan Stanley" or “the Firm”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor or Private Wealth Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
Morgan Stanley Smith Barney LLC offers investment program services through a variety of investment programs, which are opened pursuant to written client agreements. Each program offers investment managers, funds and features that are not available in other programs; conversely, some investment managers, funds or investment strategies may be available in more than one program. Morgan Stanley’s investment advisory programs may require a minimum asset level and, depending on your specific investment objectives and financial position, may not be suitable for every investor.
Investing in the markets entails the risk of market volatility. Fixed Income investing entails credit risks and interest rate risks. When interest rates rise, bond prices generally fall.
Adverse Active Alpha. While highly ranked managers performed well as a group in the Adverse Active Alpha model back tests, not all of the managers will outperform. In addition, highly ranked managers can have differing risk profiles that might not be suitable for all investors. Morgan Stanley’s view is that Adverse Active Alpha is a good starting point and should be used in conjunction with other information. Morgan Stanley Wealth Management’s qualitative and quantitative investment manager due diligence process are equally important factors for investors when considering managers for use through an investment advisory program. Factors including but not limited to, manager turnover and changes to investment process can partially or fully negate a positive Adverse Active Alpha ranking.
ADVERSE ACTIVE ALPHA is a registered service mark of Morgan Stanley and/or its affiliates. U.S. Pat. No. 8,756,098 applies to the Adverse Active Alpha system and/or methodology.
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