Morgan Stanley (NYSE:MS) announced today that it has licensed a new quantitative index called StyleSelect on MSCI Europe. This new index is a dynamic basket of stocks developed by Morgan Stanley to capture an attractive combination of style properties relative to the broad European market. Such properties are modelled by Morgan Stanley using MSCI’s Value and Growth enhanced style classification system. The quantitative methodology is developed by the Quantitative and Derivative Strategies (QDS) group at Morgan Stanley. Applying this quantitative screen to the MSCI Europe Index, MSCI then calculates this custom index and rebalances it quarterly.
The aim of this index is to provide investors access to a disciplined and transparent quantitative stock selection process determined by Morgan Stanley, or an active strategy in a passive shell,” said Yazid Sharaiha, Global Head of Quantitative and Derivative Strategies at Morgan Stanley. “Morgan Stanley’s stock selection is based on companies according to their value and growth attractiveness, and is subject to strict sector representation and diversification criteria, and turnover control.
“StyleSelect on MSCI Europe forms an innovative underlyer for our new suite of structured products,” said Nick Tranter, Head of European Derivative Sales at Morgan Stanley. “This new offering is driven by investor demand and will help both our institutional and retail clients find alternative methods to enhance alpha.” Alpha here refers to both absolute returns and relative returns compared with a market benchmark.
“We are delighted Morgan Stanley has chosen us as their preferred supplier for this customized index,” added David Brierwood, Chief Operating Officer of MSCI Barra. “This index customization further reinforces the breadth and depth of index customizations that we can offer our clients - from simple geographic or sector modifications to complex screening using client-defined criteria. We have seen considerable growth in this area as investors look for more targeted or specialized investment opportunities and benchmarks that are more representative of their investment set.”
The index currently comprises 80 names from the MSCI Europe universe and exhibits close tracking with the broad-market. Its historical tracking risk is approximately 3% per annum. It is differentiated from existing fundamental indices and other stock-screen based indices, which typically exhibit sector and other concentrated style biases.
Price level of StyleSelect is available on Bloomberg at MSQISSEU Index <GO>.
For more information about StyleSelect please contact Yazid Sharaiha +44 20 7425 6045 or Wallace Yu +44 20 7425 4955 at the QDS group.
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